UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement | |||
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
☒ | Definitive Proxy Statement | |||
☐ | Definitive Additional Materials | |||
☐ | Soliciting Material under §240.14a-12 | |||
The Williams Companies, Inc. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
☒ | No fee required. | |||
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
1) | Title of each class of securities to which transaction applies:
| |||
| ||||
2) | Aggregate number of securities to which transaction applies:
| |||
| ||||
3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| ||||
4) | Proposed maximum aggregate value of transaction:
| |||
| ||||
5) | Total fee paid:
| |||
| ||||
☐ | Fee paid previously with preliminary materials. | |||
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
1) | Amount Previously Paid:
| |||
| ||||
2) | Form, Schedule or Registration Statement No.:
| |||
| ||||
3) | Filing Party:
| |||
| ||||
4) | Date Filed:
| |||
|
|
PROXY STATEMENT 2019
Notice of Annual Meeting of Stockholders | |
Williams connects the best supplies to the best markets as highlighted by bringing the 1.7 Bcf/d Atlantic Sunrise project online in October 2018 to deliver marcellus supplies as far south as Alabama (photo left); by bringing the 475 MMcf/d Gulf Connector Project online in early 2019 to provide service to two LNG export facilities (photo right); and by the 2018 joint-venture acquisition of a growing gathering and processing asset base in the DJ Basin now called Rocky Mountain Midstream and operated by Williams.
From Your Chairman
March 28, 2019
Fellow Stockholders:
As Chairman of the Williams Board of Directors, I am pleased to extend to you the official notice of our 2019 Annual Meeting of Stockholders.
This years meeting will be held on May 9, 2019. You are invited to vote your shares and listen to a report from management on Williams operations. There will also be an opportunity to ask questions. | ||
Stephen W. Bergstrom Chairman of the Board |
The notice of the annual meeting and proxy statement accompanying this letter provides information about the matters to be considered and acted upon at the annual meeting. This year we have adopted the notice and access model to deliver our proxy materials to our stockholders. |
If you cannot attend the annual meeting in person, it is still important that your shares be represented and voted at the annual meeting. You are urged to read the proxy statement and, whether or not you plan to attend the annual meeting, to promptly submit a proxy by telephone, Internet or, if you received a printed version of these proxy materials, by completing and signing a proxy card. Instructions on how to vote are explained in Questions and Answers About the Annual Meeting and Voting section.
I look forward to seeing you at this years meeting.
Sincerely,
Stephen W. Bergstrom
Chairman of the Board
The Williams Companies, Inc. 2019 Proxy Statement
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
|
Notice of the 2019 Annual Meeting of Stockholders
Date, Time, and Place
Thursday, May 9, 2019 at 2:00 p.m. CDT
Williams Resource Center Theater, One Williams Center, Tulsa, Oklahoma 74172
Record Date
Close of business on March 11, 2019. Stockholders of record at such time will be entitled to receive notice of and to vote at the annual meeting.
Agenda
| Elect the 12 director nominees identified in this proxy statement; |
| Ratify the appointment of Ernst & Young LLP as our independent auditors for 2019; |
| Conduct an advisory vote to approve executive compensation; and |
| Transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof. |
Voting
Even if you intend to be present at the annual meeting, please promptly vote by proxy in one of the following ways so that your shares of common stock may be represented and voted at the annual meeting:
| Call the toll-free telephone number; |
| Vote via the Internet; or |
| If you received a printed version of these proxy materials, mark, sign, date, and return the enclosed proxy card in the enclosed postage-paid envelope. |
For instructions on voting, please see Questions and Answers About the Annual Meeting and Voting section of this proxy statement, refer to the Notice of Internet Availability of Proxy Materials you received in the mail or, if you received a printed version of these proxy materials by mail, on the enclosed proxy card.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 9, 2019: This proxy statement and our 2018 Annual Report, which includes a copy of our annual report on Form 10-K, are available at www.edocumentview.com/wmb.
The Board unanimously recommends that you vote FOR the election of each of the Boards director nominees, FOR the ratification of the appointment of Ernst & Young LLP as our independent auditors for 2019, and FOR the advisory approval of the Companys executive compensation.
Please refer to the proxy statement for the 2019 annual meeting for more information, including a detailed explanation of the matters being submitted to a vote of the stockholders.
By Order of the Board of Directors,
Joshua H. De Rienzis
Corporate Secretary
March 28, 2019
The Williams Companies, Inc. 2019 Proxy Statement
Proxy Statement
We are providing this proxy statement as part of a solicitation by the Board of Directors (the Board) for use at our 2019 annual meeting of stockholders and at any adjournment or postponement thereof. We will hold the meeting in the Williams Resource Center Theater, One Williams Center, Tulsa, Oklahoma 74172 on Thursday, May 9, 2019, at 2:00 p.m., Central Daylight Time. We expect to mail to stockholders or otherwise make available this proxy statement and accompanying proxy card beginning on March 28, 2019.
Unless the context otherwise requires, all references in this proxy statement to Williams, the Company, we, us, and our refer to The Williams Companies, Inc. and its consolidated subsidiaries.
1 | ||||
6 | ||||
6 | ||||
10 | ||||
13 | ||||
19 | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
33 | |||
35 | ||||
35 | ||||
36 | ||||
38 | ||||
40 | ||||
40 | ||||
41 | ||||
42 | ||||
42 | ||||
42 | ||||
42 | ||||
43 | ||||
45 | ||||
45 | ||||
45 | ||||
49 | ||||
51 | ||||
52 | ||||
54 | ||||
55 |
The Williams Companies, Inc. 2019 Proxy Statement i
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT ON EXECUTIVE COMPENSATION |
56 | |||
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
56 | |||
57 | ||||
57 | ||||
59 | ||||
60 | ||||
61 | ||||
61 | ||||
62 | ||||
62 | ||||
63 | ||||
63 | ||||
63 | ||||
66 | ||||
69 | ||||
70 | ||||
71 | ||||
72 | ||||
73 | ||||
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS |
74 | |||
76 | ||||
77 | ||||
77 |
The Williams Companies, Inc. 2019 Proxy Statement ii
Q&A ABOUT THE ANNUAL MEETING & VOTING
|
The Williams Companies, Inc. 2019 Proxy Statement 2
Q&A ABOUT THE ANNUAL MEETING & VOTING
|
The Williams Companies, Inc. 2019 Proxy Statement 3
Q&A ABOUT THE ANNUAL MEETING & VOTING
|
The Williams Companies, Inc. 2019 Proxy Statement 4
Q&A ABOUT THE ANNUAL MEETING & VOTING
|
The Williams Companies, Inc. 2019 Proxy Statement 5
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Corporate Governance and Board Matters
General
Our Board believes that strong corporate governance is critical to achieving our performance goals and to maintaining the trust and confidence of investors, employees, customers, business partners, regulatory agencies, and other stakeholders.
Corporate Governance Guidelines
Our Corporate Governance Guidelines provide a framework for the governance of Williams as a whole and also address the operation, structure, and practice of the Board and its committees. The Corporate Governance Guidelines can be found in the Corporate Governance section of our website. The Nominating and Governance Committee reviews these guidelines at least annually and recommends changes to the Board as necessary.
Strategic Planning
During the year, the Board meets with management to discuss and approve strategic plans, financial goals, capital spending, and other factors critical to successful performance. The Board also reviews the Companys long-term strategic planning at least once annually and monitors the implementation of such strategic plan throughout the year. During Board meetings, directors review key issues and financial performance. In 2018, the Board met privately with the CEO and met in executive session at each regular Board meeting and additionally as required. Further, the CEO communicates regularly with the Board regarding the implementation of the Companys strategic and financial plans.
Board/Committee/Director Evaluations
The Board and each of its committees charters provide for annual evaluations and self-assessments. The process for conducting such evaluations is reviewed annually by the Nominating and Governance Committee and is based on general trends and feedback on the prior years evaluations. In addition, the Corporate Governance Guidelines and the Nominating and Governance Committee charter provide that individual directors shall be evaluated as necessary.
Chief Executive Officer Evaluation and Management Succession
The Board and the CEO annually discuss and collaborate to set the CEOs performance goals and objectives. The Board meets annually in executive session to assess the CEOs performance. The Board, in conjunction with the Compensation and Management Development Committee, maintains a process for planning orderly succession for the CEO and other executive officer positions and oversees executive officer development.
Board Leadership Structure
Pursuant to our By-laws and Corporate Governance Guidelines, the positions of Chairman of the Board and CEO may be held by the same or different persons. The Board believes that having an independent Chairman of the Board is the most appropriate leadership structure for the Board at this time. However, it has the flexibility to revise this structure in the future based upon the Boards periodic assessment and review of the Companys needs and leadership. In this regard, Alan S. Armstrong currently serves as President and CEO of Williams and Stephen W. Bergstrom serves as Chairman of the Board. The Board believes that having an independent Chairman aids in the Boards oversight of management and promotes communications among the Board, the CEO, and other senior management. In addition, having a separate Chairman of the Board and CEO allows Mr. Armstrong to focus on his responsibilities in managing the Company.
The Williams Companies, Inc. 2019 Proxy Statement 6
CORPORATE GOVERNANCE AND BOARD MATTERS
|
The responsibilities of the Chairman of the Board include: (1) presiding over meetings of the Board and executive sessions of the independent directors; (2) overseeing the planning of the annual Board calendar and, in consultation with the CEO, scheduling and setting the agendas for meetings of the Board and its committees; (3) overseeing the appropriate flow of information to the Board; (4) acting as liaison between the independent directors and management; (5) assisting the Chairs of the various Board committees in preparing agendas for committee meetings; (6) chairing the Companys annual meeting of stockholders; and (7) performing other functions and responsibilities referred to in the Corporate Governance Guidelines or requested by the Board from time to time.
Board Oversight of Williams Risk Management Processes
The Board has oversight responsibility with regard to assessment of the major risks inherent in our business and reviews managements efforts to address and mitigate such risks. These risks include strategic, regulatory, compliance, operational, financial, reputational, and cybersecurity risks, among others. The Board reviews risk in the context of discussions, question and answer sessions and management team reports at each regular Board meeting. The Board also evaluates the risks inherent in significant transactions. While the Board is ultimately responsible for risk oversight at our company, the committees of the Board assist it in fulfilling its oversight responsibilities by considering the risks within their respective areas of expertise. For example, the Audit Committee assists the Board in fulfilling its risk oversight responsibilities relating to risks involving financial reporting and related internal controls. As part of this process, the Audit Committee meets periodically with management to review, discuss, and provide oversight with respect to our processes and controls to assess, monitor, manage, and mitigate potential significant risk exposures relating to the integrity of the Companys financial statements and related compliance with legal and regulatory requirements. In providing such oversight, the Audit Committee may also discuss such processes and controls with our internal and independent auditors. The Compensation and Management Development Committee likewise assists the Board in fulfilling its risk oversight responsibilities with respect to the management of risks associated with compensation program design by reviewing whether there are risks that are reasonably likely to have a material adverse effect on us, as well as risks relating to management development and retention. The Nominating and Governance Committee assists the Board with oversight of risk management relating to corporate governance, Board organization, and membership. The Environmental, Health and Safety Committee assists the Board with oversight of risk management relating to environmental, health, and safety matters, including oversight of managements safety-related policies and procedures. The Board receives reports on all significant committee activities at each regular Board meeting. Certain risks, such as cybersecurity, are deemed to be of such importance to the enterprise that oversight is addressed by the full Board. In addition, risk management is incorporated in the Companys strategic planning process, which is periodically reviewed by the Board. The Board has determined it is important to have directors with strategy development and risk management experience, and many of our directors have such experience.
Management plays an important role in implementing the processes and procedures designed to mitigate risk and assisting the Board in the exercise of its oversight function. For example, we have a Chief Compliance Officer who oversees our corporate ethics and compliance program (including Federal Energy Regulatory Commission compliance), our Code of Business Conduct training, and compliance with Company policies, standards, and procedures. Our Chief Compliance Officer and the General Counsel report on an as needed basis to the Audit Committee regarding Code of Business Conduct matters and calls to our ethics hotline related to accounting and auditing concerns, and throughout the year to the Nominating and Governance Committee regarding all other Code of Business Conduct concerns and calls to our ethics hotline. At least annually, our Chief Compliance Officer and General Counsel meet with the Nominating and Governance Committee to review the effectiveness of the Companys corporate ethics and compliance program. Management also periodically engages in a review of the critical risks to the Company and establishes and implements policies and procedures to address and mitigate such risks. For instance, we have a Chief Information Officer who assesses our information security and oversees our enterprise-wide cybersecurity risk management program. Such program includes, among other elements, mandatory cybersecurity training for our employees and third parties who may have access to our systems, the maintaining of industrial control systems which meet or exceed industry cybersecurity standards, the ongoing
The Williams Companies, Inc. 2019 Proxy Statement 7
CORPORATE GOVERNANCE AND BOARD MATTERS
|
evaluation of the threat landscape and, as needed, the engagement of independent, third party experts. The Chief Information Officer also annually meets with the Board to present a cybersecurity update, including an analysis of our cybersecurity programs strengths, weaknesses, opportunities, and cyber threats to the Company.
Executive Sessions of Non-Employee Directors
Non-employee directors meet without management present at each regularly scheduled Board meeting. Additional meetings may be called by the Chairman in his discretion or at the request of the Board.
Director Independence
Our Corporate Governance Guidelines require that all members of the Board, except our Chief Executive Officer, be independent directors as defined by the rules of the NYSE. Our Corporate Governance Guidelines also require that the Board annually make a determination regarding the independence of each of our directors. In evaluating independence, the NYSEs rules require that the Board affirmatively determine that a director has no material relationship with the Company either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. Certain relationship and transactional standards, including specified dollar and percentage threshold amounts, are also set forth in the NYSEs independence rules which, if exceeded, would disqualify a director from being independent. Prior to making a recommendation to the Board, our Nominating and Governance Committee considers relationships, which, while not constituting related party transactions in which a director had a direct or indirect material interest, nonetheless involved transactions between the Company and a company with which a director is affiliated, whether through employment status or by virtue of serving as a director. Included in the Committees review were the following transactions, which occurred in the ordinary course of business. All matters described below fall below the relevant thresholds for independence as set forth in the NYSEs rules:
Director | Matters Considered | |
Stephen W. Bergstrom |
Ordinary course business transactions with American Midstream Partners L.P. | |
Nancy K. Buese |
Ordinary course business transactions with Newmont Mining Corporation | |
Stephen I. Chazen |
Ordinary course business transactions with Ecolab USA, Inc. | |
Charles I. Cogut |
Ordinary course business transactions with Air Products & Chemicals, Inc. | |
Kathleen B. Cooper |
Ordinary course business transactions with Deutsche Bank Trust Corporation | |
Vicki L. Fuller |
Ordinary course business transactions with Fidelity Investments, Inc. | |
Peter A. Ragauss |
Ordinary course business transactions with Apache Corp. | |
William H. Spence |
Ordinary course business transactions with PPL Corporation |
Based on the evaluations performed and recommendations made by the Nominating and Governance Committee, in February 2019, the Board affirmatively determined that each of Mr. Bergstrom, Ms. Buese, Mr. Chazen, Mr. Cogut, Dr. Cooper, Mr. Creel, Ms. Fuller, Mr. Ragauss, Mr. Sheffield, Mr. Smith, and Mr. Spence are independent as defined by the NYSEs rules. Ms. Janice D. Stoney, a former director who retired upon the 2018 Annual Meeting of Stockholders, was previously determined by the Board to be independent during her tenure of 2018 service. Mr. Armstrong, the current President and Chief Executive Officer and a director, is not independent, because of his role as an executive officer of the Company.
In addition to the NYSEs independence requirements generally applicable to directors, all members of our Audit Committee and Compensation and Management Development Committee must meet heightened independence standards imposed by the NYSE and the SEC. Based on evaluations performed and recommendations made by the Nominating and Governance Committee, in February 2019, the Board determined that all members of our Audit Committee and Compensation and Management Development Committee satisfy the heightened independence requirements imposed by the NYSE and the SEC applicable to members of such committees.
The Williams Companies, Inc. 2019 Proxy Statement 8
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Transactions with Related Persons
The Board has adopted written policies and procedures with respect to related person transactions. Any proposed related person transaction involving a member of the Board must be reviewed and approved by the full Board. The Nominating and Governance Committee reviews proposed transactions with any other related persons, promoters, and certain control persons that are required to be disclosed in our filings with the SEC. If it is impractical to convene a Nominating and Governance Committee meeting before a related person transaction occurs, the Chair of the committee may review the transaction alone.
No director may participate in any review, consideration, or approval of any related person transaction with respect to which such director or any of his or her immediate family members is the related person. The Nominating and Governance Committee or its chair, or the Board, as the case may be, in good faith, may approve only those related person transactions that are in, or not inconsistent with, Williams best interests and the best interests of our stockholders. In conducting a review of whether a transaction is in, or is not inconsistent with the best interest of Williams and its stockholders, the Nominating and Governance Committee or its chair, or the Board, as the case may be, will consider the benefits of the transaction to the Company, the availability of other sources for comparable products or services, the terms of the transaction, the terms available to unrelated third parties and to employees generally, and the nature of the relationship between the Company and the related party, among other things. There were no transactions that required review or approval by the Nominating and Governance Committee or the full Board in 2018.
Outside Board Service
Our Corporate Governance Guidelines limit the service of our Board members on publicly held companies and investment company boards to no more than four (including our Board), provided that our CEO is limited to service on one non-affiliated public company board.
Majority Vote Standard
Our Board has adopted a majority vote standard for the election of directors in uncontested elections. Each of our directors has executed an irrevocable resignation that will become effective if he or she fails to receive a majority of the votes cast in an uncontested election and the Board accepts such resignation. If a director fails to receive the required votes for election, the Nominating and Governance Committee will act on an expedited basis to determine whether to accept the resignation. The Nominating and Governance Committee will then submit its recommendation for consideration by the Board. The Board will act on the recommendation and publicly disclose its decision within 90 days from the date of the certification of the election results. The Board expects the director whose tendered resignation is under consideration to abstain from participating in any decision regarding that resignation. The Nominating and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a directors tendered resignation. If the Board accepts a directors resignation, the Nominating and Governance Committee will recommend to the Board whether to fill such vacancy or reduce the size of the Board.
Director Attendance at Annual Meeting of Stockholders
We have a policy that all Board members are expected to attend our annual meeting of stockholders. All Board members attended the 2018 annual meeting of stockholders.
Stockholder Engagement
Williams is committed to ongoing, constructive and meaningful engagement with our stockholders. During 2018, members of our executive management team attended nine investor conferences, engaged in six non-deal roadshows where they met with existing and potential stockholders, and hosted our annual analyst day. Presentations from these meetings and conferences are usually posted on the Investor page of our website. Our Board also periodically meets with representatives of our large investors at our Board meetings who present their
The Williams Companies, Inc. 2019 Proxy Statement 9
CORPORATE GOVERNANCE AND BOARD MATTERS
|
perspectives on the Company and the industry. Investors occasionally travel to our headquarters and meet with our management. We also regularly engage with investors who request information about our environmental, social and governance (ESG) programs. These various engagements allow us to receive in-person feedback concerning our operational, financial and strategic results, as well as ESG factors deemed important to stockholders. In addition, we host a quarterly earnings call during which our executive management team responds to analyst questions regarding both historical results and forward-looking information. Transcripts of our quarterly earnings calls, including the question and answer sessions, are posted to our website. In addition to the required reports which we file with the SEC, we make publicly available on our website earnings analyst packages, investor presentations and other reports with supplementary financial and operational information, as well as ESG-related information. In addition to having a dedicated Investor Relations group which receives and responds to stockholder telephone calls and other communications, we also provide a means for stockholders to communicate directly with our Board, as provided under Communications with Directors below.
Communications with Directors
Any stockholder or other interested party may communicate with our directors, individually or as a group, by contacting our Corporate Secretary or the Chairman of the Board. The contact information is maintained through the Investors page of our website at www.williams.com.
The current contact information is as follows:
The Williams Companies, Inc. |
The Williams Companies, Inc. | |
One Williams Center, MD 49 |
One Williams Center, MD 47 | |
Tulsa, Oklahoma 74172 |
Tulsa, Oklahoma 74172 | |
Attn: Chairman of the Board |
Attn: Corporate Secretary |
Communications will be forwarded to the relevant director(s) except for solicitations or other matters not related to the Company.
Code of Ethics
We have adopted a code of ethics specific to the CEO, Chief Financial Officer, and Chief Accounting Officer, which was filed with the SEC as Exhibit 14 to our annual report on Form 10-K for the year ended December 31, 2003. In addition, we have adopted a code of business conduct that is applicable to all employees and directors.
How to Obtain Copies of our Governance-Related Documents
The following documents are available through the Investors page of our website at www.williams.com:
| Corporate Governance Guidelines; |
| Code of Ethics for Senior Officers; |
| Williams Code of Business Conduct; and |
| Charters for the Audit Committee, the Compensation and Management Development Committee, the Nominating and Governance Committee, and the Environmental, Health and Safety Committee. |
If you want to receive these documents in print, please send a written request to our Corporate Secretary at The Williams Companies, Inc., One Williams Center, MD 47, Tulsa, Oklahoma 74172.
Environmental, Social and Governance (ESG) Matters
In 2018 the Company took significant steps to enhance its ESG policies and practices. Oversight for the Companys ESG efforts resides with the Board and its various committees. In particular, the Nominating and Governance Committee has responsibility for ensuring that the Board, its respective committees, and management are devoting adequate attention to ESG matters. It accomplishes this task through placing directors on committees
The Williams Companies, Inc. 2019 Proxy Statement 10
CORPORATE GOVERNANCE AND BOARD MATTERS
|
where their experience can be most effectively utilized, by reviewing and developing committee charters, through Board and committee evaluations, and by receiving periodic management reports on ESG topics. In turn, the various Board committees have oversight for the Companys ESG program based upon their respective areas of expertise and responsibility. These responsibilities are described in detail below and elsewhere in this proxy statement, but examples include the following. The Environmental, Health and Safety Committee has oversight for environmental and safety matters, and ensuring the proper focus and resources are being devoted by management to these areas. The Compensation and Management Development Committee addresses social issues such as management diversity and ensuring the Company has a pay for performance culture. The Nominating and Governance Committee has direct responsibility for governance matters, such as director selection, in addition to its broader ESG oversight responsibility.
The Companys ESG philosophy is to focus its efforts on areas that are significant to the long-term sustainability of its business. We believe this focus will best serve all stakeholders, including stockholders, employees, and the communities where we do business. In furtherance of this philosophy, in 2018, the Company enhanced several aspects of its ESG programs and expects to further enhance its disclosures in 2019. For example, in 2018 the Company significantly increased the disclosures on its Corporate Social Responsibility website, https://csr.williams.com/, to provide additional metrics and statistics on various environmental and social matters. In addition, during 2018 we engaged an outside vendor to assist us with an enterprise-wide materiality assessment to determine which ESG topics have the most impact to the Company. The Company will focus on the areas deemed material as those should be of the most interest to stockholders. We also added two new highly qualified directors, bringing additional perspectives to the Board. In early 2019, we continued to enhance our ESG programs by forming internal steering and execution teams to focus on sustainability reporting regarding such ESG topics. Those teams are charged with developing an ongoing reporting process which will enhance our transparency to stakeholders by culminating in a publicly-available sustainability report, which the Company expects to issue later this year. As discussed below and elsewhere in this proxy statement, we already have many standards, structures and initiatives that address ESG matters. Accordingly, we view the preparation of a sustainability report concerning our ESG efforts to be an evolution of the initiatives we have already undertaken and an opportunity to identify areas for further focus. The following describes certain facets of our ESG program:
Environmental, Health & Safety
| Our Board level Environmental, Health and Safety (EH&S) Committee is charged with oversight of EH&S matters and is committed to keeping Williams operating safely, reliably and in a way that avoids, minimizes and helps mitigate environmental impact. |
| Our EH&S Policy requires not only that we meet or exceed applicable EH&S laws and regulations, but also facilitates a full and open discussion to address responsible standards and practices where laws and regulations do not exist. |
| We have developed the Williams Integrated Management System which defines how we manage and reduce physical risk to our assets, the environment, and people. |
| We have a Pipeline Integrity Management Plan that identifies additional safety procedures that we implement on liquid and gas transmission pipelines where a pipeline spill might have significant adverse impacts. |
| While designing, constructing, and operating our pipeline system, we demonstrate our commitment to protecting environmentally and culturally sensitive areas by: |
| conducting environmental assessments and archaeological surveys; |
| using environmentally sensitive construction techniques; |
| siting pipelines along existing rights of way, roadways, or utility corridors if feasible; |
| maintaining an open dialogue with neighboring communities; and |
| conducting our operations in a manner that protects human health and the environment. |
The Williams Companies, Inc. 2019 Proxy Statement 11
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Social
| We position ourselves as an employer of choice by offering industry competitive compensation including a comprehensive benefits package to provide for the health and welfare and retirement needs of our employees. |
| We have policies and standards demonstrating respect for the dignity of the individual: |
| Our Code of Business Conduct provides a comprehensive resource governing ethical concerns, employee privacy and workplace matters, legal compliance, and other matters. |
| Our Equal Employment Opportunity Policy commits us to fairly treating all employees and candidates, without regard to characteristics having no bearing on job performance. |
| Our Prohibition of Workplace Discrimination and Harassment Policy addresses many forms of unwanted attention including sexual harassment. |
| Our Human Rights Policy Statement commits us to respect principles aimed at promoting, protecting, and supporting all internationally recognized human rights and to avoid complicity in human rights abuses. |
| We capture critical metrics regarding workplace/human capital management, as well as other metrics and investments, in the Performance Data Table available on the Corporate Social Responsibility tab of our website. |
| Our Community Relations Team implements our community giving strategy including our matching gifts program, which matches employee, board member, and retiree contributions to eligible non-profit organizations, and the homegrown giving grants program, in which grants are made to any eligible non-profit organization in communities where Williams employees are involved. |
Governance
We fervently believe in good corporate governance. Please see our disclosures in Corporate Governance and Board Matters Corporate Governance above.
The Williams Companies, Inc. 2019 Proxy Statement 12
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Board and Committee Structure and Meetings
Board Meetings
Board members actively participate in Board and committee meetings. Generally, materials are distributed one week in advance of each regular Board meeting so that members can be prepared for the discussion.
The full Board met ten times in 2018. Each director attended at least 75 percent of the aggregate of the Board and applicable committee meetings held in 2018.
Board Committees
The Board has four standing committees: Audit, Compensation and Management Development, Nominating and Governance, and Environmental, Health and Safety. Each standing committee has a charter adopted by the Board. The committees report to the full Board at each regular Board meeting. The Board elects each committees members and chair annually. Each committee has authority to retain, approve fees for, and terminate advisors as it deems necessary to assist in the fulfillment of its responsibilities. The chart below shows the current composition of the committees and the number of committee meetings held in 2018.
Director |
Audit |
Compensation & Management |
Nominating & Governance |
Environmental, | ||||||||||||||||
Alan S. Armstrong
|
||||||||||||||||||||
Stephen W. Bergstrom (Chairman of the Board) |
|
|
||||||||||||||||||
Nancy K. Buese |
|
| ||||||||||||||||||
Stephen I. Chazen |
|
|
||||||||||||||||||
Charles I. Cogut |
|
|
||||||||||||||||||
Kathleen B. Cooper |
|
|
||||||||||||||||||
Michael A. Creel |
|
| ||||||||||||||||||
Vicki L. Fuller |
|
|
||||||||||||||||||
Peter A. Ragauss |
|
|
||||||||||||||||||
Scott D. Sheffield |
|
| ||||||||||||||||||
Murray D. Smith |
|
| ||||||||||||||||||
William H. Spence |
|
| ||||||||||||||||||
Number of meetings in 2018 |
8 |
4 |
4 |
4 |
Committee Chair
Committee Member
The Williams Companies, Inc. 2019 Proxy Statement 13
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Responsibilities | ||||
The Board has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee: | ||||
appoints, evaluates, and approves the compensation of our independent registered public accounting firm;
assists the Board in fulfilling its responsibilities for generally overseeing Williams financial reporting processes and the audit of Williams financial statements, including the integrity of Williams financial statements, Williams compliance with legal and regulatory requirements, and risk assessment and risk management;
reviews the qualifications and independence of the independent registered public accounting firm;
reviews the performance of Williams internal audit function and the independent registered public accounting firm;
reviews Williams earnings releases;
oversees investigations into complaints concerning financial matters;
reviews with the General Counsel, and/or the Chief Compliance Officer as needed, any actual and alleged violations of the Companys Code of Business Conduct;
reviews annually its charter and performance; and
prepares the Audit Committee report for inclusion in the annual proxy statement.
Independence Requirements
The Board has determined that Stephen I. Chazen, Charles I. Cogut, Michael A. Creel, Vicki L. Fuller, Peter A. Ragauss, and William H. Spence, comprising all current members of the Audit Committee, meet the heightened independence requirements under the NYSEs rules for persons serving on audit committees.
Financial Literacy, Experts
the Board has determined that all the members of the Audit Committee are financially literate as defined by the NYSE rules.
in addition, the Board has determined that all members of the Audit Committee, except for Charles I. Cogut, qualify as audit committee financial experts as defined by the SEC.
no member of the Audit Committee may serve on more than three public company audit committees (including the Companys Audit Committee), unless the Board determines that such simultaneous service would not impair the ability of such member to effectively serve. As of this date, no member of the Audit Committee is serving on more than three public company audit committees. |
The Williams Companies, Inc. 2019 Proxy Statement 14
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Responsibilities
The Environmental, Health and Safety Committee:
| ||||
oversees, considers, and evaluates environmental, health and safety matters (EHS Matters) and engages directly with the Companys management and its advisors, who will from time-to-time provide reports, analyses, and other information as may be requested by the committee;
provides oversight for the Companys environmental, health and safety practices, including processes to ensure compliance with applicable legal and regulatory requirements and evaluation of ways to address EHS Matters as part of the Companys business operations and strategy;
oversees managements monitoring and enforcement of the Companys policies to protect the health and safety of employees, contractors, customers, the public, and the environment;
reviews, monitors, and reports to the Board on the performance and activities of the Company related to EHS Matters;
to the extent deemed advisable by the committee, engages independent advisors to serve the committees needs;
makes recommendations to the Board regarding actions to be taken with respect to EHS Matters; and
reviews annually its charter and performance.
|
The Williams Companies, Inc. 2019 Proxy Statement 15
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Responsibilities | ||||
The Compensation and Management Development Committee: | ||||
approves executive compensation philosophy, policies, and programs that align the interests of our executive officers with those of our stockholders;
oversees the material risks associated with compensation structure, policies, and programs;
assesses the results of the advisory votes on executive compensation;
recommends to the Board equity-based compensation plans;
recommends to the Board cash-based incentive compensation plans for the NEOs and other executives;
sets corporate goals and objectives for compensation for the NEOs and other executives;
evaluates the NEOs and certain other executives performance in light of those goals and objectives;
approves the NEOs and certain other executives compensation, including salary, incentive compensation, equity-based compensation, and any other remuneration;
reviews annually succession plans relating to the CEO and other executive officer positions, including plans to develop diverse candidates for leadership roles;
approves, amends, modifies, or terminates, in its settlor (non-fiduciary) capacity, the terms of any benefit plan that does not require stockholder approval;
reviews and discusses with management and, based on the review and discussions, recommends to the Board the Compensation Discussion and Analysis required by the SEC for inclusion in the annual proxy statement and annual report on Form 10-K;
reviews annually and recommends to the Board the appropriate compensation of non-employee directors;
develops, reviews, recommends for Board approval, and then monitors the directors and executive officers compliance with, Williams stock ownership policy;
reviews and recommends for Board approval the terms of Williams change-in-control program;
assesses any potential conflicts of interest raised by the compensation consultants retained by management or the Committee and assesses the independence of any Compensation and Management Development Committee advisor; and
reviews annually its charter and performance.
Independence Requirements
The Board has determined that all members of the Compensation and Management Development Committee meet the heightened independence requirements under the NYSEs rules for persons serving on compensation committees.
Independent Executive Compensation Advisor
The Compensation and Management Development Committee has selected and retained Frederic W. Cook & Co., an independent executive compensation consulting firm, to provide competitive market data and advice related to the CEOs compensation level and incentive design; review and evaluate management-developed market data and recommendations on compensation levels, incentive mix, and incentive design for NEOs and certain other executives (excluding the CEO); develop the selection criteria and recommend comparator companies for executive compensation and performance comparisons; provide information on executive compensation trends and their implications to Williams; and provide competitive market data and advice on non-employee director compensation.
The Compensation and Management Development Committee evaluates the independence of Frederic W. Cook & Co., including consideration of the factors specified in Rule 10C-1 under the Exchange Act and the NYSEs rules to ensure that the advisors maintain objectivity and independence when rendering advice to the Committee. Frederic W. Cook & Co. does not provide any additional services to Williams. The compensation consultant reports to the Compensation and Management Development Committee and is independent of management. The Compensation and Management Development Committee has determined that the services Frederic W. Cook & Co. provides to the Committee do not create a conflict of interest.
|
The Williams Companies, Inc. 2019 Proxy Statement 16
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Responsibilities | ||||
The Nominating and Governance Committee: | ||||
develops and recommends to the Board director qualifications;
identifies and recommends to the Board director candidates;
reviews candidates recommended or nominated by stockholders;
recommends to the Board the individual, or individuals, to be the Chairman of the Board and the CEO;
reviews the CEOs recommendations for individuals to be officers;
monitors significant developments in the regulation and practice of corporate governance;
provides oversight and guidance with regard to environmental, social, and governance (ESG) matters;
reviews the size, structure, and composition of the Board and its committees and recommends to the Board any changes;
conducts a preliminary review of director independence and the financial literacy and expertise of the Audit Committee members;
recommends assignments to the Board committees;
oversees and assists the Board in the review of the Boards performance and reviews its own performance;
reviews annually each standing committees charter, the Corporate Governance Guidelines, and the Williams Code of Business Conduct;
oversees and reviews risks relating to Williams ethics and compliance programs and annually reviews Williams policies and procedures regarding compliance with the Code of Business Conduct;
reviews annually the implementation and effectiveness of the Companys ethics and compliance program with the General Counsel and/or the Chief Compliance Officer, as applicable;
reviews transactions between Williams and related parties;
reviews stockholder proposals and correspondence and recommends responses to such proposals or correspondence when necessary;
reviews our directors current service and requests to serve on boards of other companies; and
reviews the performance of individual directors as necessary.
|
Consideration of Nominees
The Nominating and Governance Committee is responsible for developing and recommending to the Board qualifications and criteria for assessing Board membership candidates and identifying Board membership candidates. The process for selecting a director nominee starts with a preliminary assessment of each candidate based upon his or her resume and other biographical and background information, and his/her willingness to serve. The Nominating and Governance Committee considers prior performance and contributions for any director nominee who currently or previously has served as a member of the Board. A candidates qualifications are then evaluated against the criteria set forth in Proposal 1 Election of Directors, as well as the specific needs of Williams at the time. Qualified new candidates are interviewed by the Chairman of the Board and the Chair of the Nominating and Governance Committee. Candidates may then meet with other members of the Board and senior management. At the conclusion of this process, the Nominating and Governance Committee may recommend, and the Board act, to appoint the candidate to the Board and recommend him or her for election by our stockholders at the next annual meeting. The Nominating and Governance Committee may source candidates through outside search firms when necessary and uses the same process to evaluate all candidates regardless of the source of the nomination.
The Williams Companies, Inc. 2019 Proxy Statement 17
CORPORATE GOVERNANCE AND BOARD MATTERS
|
Stockholder Recommendation of Nominees
The Nominating and Governance Committee will consider written recommendations from stockholders for director nominations. If you wish to recommend a candidate for consideration of the Nominating and Governance Committee, please forward the candidates name and a detailed description of the candidates qualifications, a document indicating the candidates willingness to serve, and evidence that you own Williams stock to: The Williams Companies, Inc., One Williams Center, MD 47, Tulsa, Oklahoma 74172, Attn: Corporate Secretary. A stockholder wishing to nominate a director candidate for election at the annual meeting of stockholders must comply with the notice and other requirements described above under the question May I propose actions for consideration at the 2020 annual meeting of stockholders?.
The Williams Companies, Inc. 2019 Proxy Statement 18
PROPOSAL 1
|
PROPOSAL 1 ELECTION OF DIRECTORS
The Board unanimously recommends a vote FOR the election of the directors named in Proposal 1.
Our restated certificate of incorporation provides that the Board must consist of between five and 17 members, with the actual number of directors at any time to be determined by the Board. Our Board is declassified; therefore, each director nominee is considered for a term expiring at the Companys next annual meeting. Unless otherwise instructed, the individuals designated by the Board as proxies intend to vote to elect Messrs. Armstrong, Bergstrom, Chazen, Cogut, Creel, Ragauss, Sheffield, Smith, and Spence, Mesdames Buese and Fuller, and Dr. Cooper. Should any of these nominees become unable for any reason to stand for election as a director, the designated proxies will vote to elect another nominee recommended by the Nominating and Governance Committee. Alternatively, the Board may choose to reduce its size.
Director and Nominee Experience and Qualifications
At each of its regularly scheduled meetings, in satisfaction of our Corporate Governance Guidelines, the Nominating and Governance Committee evaluates the composition of the Board to assess the skills and experience that are currently represented on the Board, as well as the skills and experience that the Board will find valuable in the future, given the Companys current situation and strategic plans. While the Nominating and Governance Committee does not have a formal diversity policy, it seeks a variety of occupational and personal backgrounds on the Board in order to obtain a range of viewpoints and perspectives and to enhance the diversity of the Board in such areas as geography, race, gender, ethnicity, and age, and annually assesses the diversity of the Board as part of the director selection and nomination process. This assessment enables the Board to update (if necessary) the skills and experience it seeks in the Board as a whole, and in individual directors, as the Companys needs evolve and change over time. For Board membership, the Nominating and Governance Committee considers the appropriate balance of experience, skills, and characteristics that best suits the needs of the Company and our stockholders. The Committee develops long-term Board succession plans to ensure that the appropriate balance is maintained.
The minimum qualifications and attributes that the Nominating and Governance Committee believes a director nominee must possess include:
| an understanding of business and financial affairs and the complexities of a business organization; |
| genuine interest in Williams and in representing all of its stockholders; |
| a willingness and ability to spend the time required to function effectively as a director; |
| an open-minded approach and the resolve to make independent decisions on matters presented for consideration; |
| a reputation for honesty and integrity beyond question; |
| independence as defined by the NYSE and qualifications otherwise required in accordance with applicable law or regulation; |
| strong intellectual capital, performance enhancing ideas, and strong networks that contribute to stockholder value; |
| ability to enhance decision-making process by bringing respected knowledge, understanding of rigorous analysis, and constructive engagement; and |
| demonstrated seasoned judgment for decisions involving broad and multi-faceted issues. |
The Williams Companies, Inc. 2019 Proxy Statement 19
PROPOSAL 1
|
In evaluating the director nominees and in reviewing the qualifications and experience of the directors continuing in office, the Nominating and Governance Committee considered a variety of factors. These include each nominees independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include past performance on the Board. Among other things, the Board has determined that it is important to have individuals on the Board with the following skills, experiences, and characteristics:
Energy Industry |
Public Policy and Government | |
Executive Leadership |
Strategy Development and Risk Management | |
Financial and Accounting |
Operating | |
Corporate Governance |
Environmental | |
Securities and Capital Markets |
Diversity | |
Engineering and Construction |
Information Technology (including cybersecurity) | |
Legal |
| Marketplace Knowledge (knowledge of the marketplace and political and regulatory environments relevant to the energy sector in the locations where we operate currently or plan to in the future) |
Set forth below and on the following pages is certain information related to the nominees, individually and in the aggregate.
The Williams Companies, Inc. 2019 Proxy Statement 20
PROPOSAL 1
|
ALAN S. ARMSTRONG
Director since 2011 |
Alan S. Armstrong, 56, has served as a director and President and Chief Executive Officer of the Company since 2011. During his tenure, Williams has expanded its reach, currently touching about 30 percent of all U.S. natural gas volumes, through gathering, processing, transportation, and storage services. In addition, Mr. Armstrong also served as Chairman of the Board and Chief Executive Officer of the general partner of Williams Partners L.P. (WPZ), the master limited partnership that, prior to its 2018 merger with Williams, owned most of Williams gas pipeline and domestic midstream assets. Prior to being named as Williams CEO, Mr. Armstrong led the Companys North American midstream and olefins businesses as Senior Vice President Midstream. Previously, Mr. Armstrong served as Vice President of Gathering and Processing from 1999 to 2002; Vice President of Commercial Development from 1998 to 1999; Vice President of Retail Energy Services from 1997 to 1998; and Director of Commercial Operations for the companys midstream business in the Gulf Coast region from 1995 to 1997. He joined Williams in 1986 as an engineer. Mr. Armstrong serves on the Board of Directors of BOK Financial Corporation and the American Petroleum Institute, as a member of the National Petroleum Council, and as a former board member of Access Midstream Partners, GP, LLC. Mr. Armstrong also serves on the boards of several education-focused organizations including the University of Oklahoma College of Engineering and Junior Achievement, USA. Mr. Armstrong is also a member of the boards of The Williams Foundation and Philbrook Museum of Art, and is a trustee for The University of Oklahoma Foundation. Mr. Armstrong graduated from the University of Oklahoma in 1985 with a bachelors degree in civil engineering.
As Chief Executive Officer and President of Williams, former Chairman of the Board and Chief Executive Officer of the general partner of WPZ and due to his various senior leadership roles at Williams, Mr. Armstrongs experience and attributes include: energy industry, executive leadership, engineering and construction, strategy development and risk management, operating, environmental, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Engineering and Construction
Strategy Development and Risk Management
Operating
Environmental
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 21
PROPOSAL 1
|
STEPHEN W. BERGSTROM
Director since 2016 Chairman of the Board
Committees Compensation and Management Development
Nominating and Governance
|
Stephen W. Bergstrom, 61, has served as a director of the Company since 2016. Mr. Bergstrom has more than 35 years of experience in the energy and utility sectors. He is a director on the Board of American Midstream Partners GP, LLC, a natural gas gathering, processing and transporting company, and from 2013 to 2015, he served as President and Chief Executive Officer and Executive Chairman of the board of directors of American Midstream Partners general partner. Mr. Bergstrom acted as an exclusive consultant to ArcLight Capital Partners, an energy-focused investment firm, from 2003 to 2015, assisting ArcLight in connection with its energy investments. From 1986 to 2002, Mr. Bergstrom served in several leadership roles for Natural Gas Clearinghouse, which became Dynegy Inc., a major electric utility company. Mr. Bergstrom acted in various capacities at Dynegy, ultimately serving as President and Chief Operating Officer. Mr. Bergstrom began his career with Transco Energy Company, Inc. in 1980. Mr. Bergstrom earned a Bachelor of Science in Industrial Administration from Iowa State University.
As former President and Chief Executive Officer of the American Midstream Partners general partner, former exclusive consultant to ArcLight Capital Partners and due to his various leadership roles for Natural Gas Clearinghouse, Mr. Bergstroms experience and attributes include: energy industry, executive leadership, engineering and construction, strategy development and risk management, operating, environmental, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Engineering and Construction
Strategy Development and Risk Management
Operating
Environmental
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 22
PROPOSAL 1
|
NANCY K. BUESE
Director since 2018
Committees Compensation and Management Development
Environmental, Health and Safety |
Nancy K. Buese, 49, has served as a director of the Company since 2018. Ms. Buese came to the Company with more than 25 years of experience in finance leadership roles. Ms. Buese currently serves as Executive Vice President and Chief Financial Officer of Newmont Mining Corporation, one of the worlds largest gold producers with assets or operations on five continents. Before joining Newmont in 2016, Ms. Buese served as Executive Vice President and Chief Financial Officer of MPLX, a publicly traded energy company formed by Marathon Petroleum Corporation. Prior to MPLXs acquisition of MarkWest Energy Partners in 2015, Ms. Buese served for eleven years as Executive Vice President and Chief Financial Officer of MarkWest Energy Partners. Prior to that, Ms. Buese worked in public accounting for twelve years, and is a former Partner with Ernst & Young. From 2009 through 2017, Ms. Buese served on the Board of Directors of UMB Financial Corporation. Ms. Buese earned her degree in Accounting and Business Administration from University of Kansas and is a Certified Public Accountant.
Bringing decades of accounting, financial, and executive experience to the Williams Board, and having held senior financial positions at Newmont Mining Corporation, MPLX and MarkWest Energy Partners. Ms. Bueses experience and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, marketplace knowledge, diversity and information technology. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Financial and Accounting
Securities and Capital Markets
Marketplace Knowledge
Diversity
Information Technology |
The Williams Companies, Inc. 2019 Proxy Statement 23
PROPOSAL 1
|
STEPHEN I. CHAZEN
Director since 2016
Committees Audit
Nominating and Governance |
Stephen I. Chazen, 72, has served as a director of the Company since 2016. Currently, he is the President, Chief Executive Officer, and Chairman of Magnolia Oil & Gas Corporation, a publicly-traded exploration and production company. Mr. Chazen retired as Chief Executive Officer of Occidental Petroleum Corporation, an oil and gas exploration and production and chemical company, in April 2016, and served on Occidentals Board of Directors from May 2010 through May 2017. During his tenure as Chief Executive Officer, Mr. Chazen recommended and implemented the companys acquisition and divestiture strategy, which transformed Occidental into a major oil and gas company. He previously served as President of Occidental Petroleum from 2007 to 2015; Chief Operating Officer from 2010 to 2011; and Chief Financial Officer from 2007 to 2010. Prior to being named President and Chief Financial Officer, Mr. Chazen was Chief Financial Officer and Senior Executive Vice President from 2004 to 2007; Chief Financial Officer and Executive Vice President-Corporate Development from 1999 to 2004; and Executive Vice President-Corporate Development from 1994 to 1999. Before joining Occidental, Mr. Chazen was a Managing Director in Corporate Finance and Mergers and Acquisitions at Merrill Lynch. Mr. Chazen is also a director of Ecolab Inc. where his service will conclude in May 2019. Mr. Chazen is a former Chairman of the American Petroleum Institute. Mr. Chazen holds a Ph.D. in Geology from Michigan State University, a masters degree in Finance from the University of Houston and a bachelors degree in Geology from Rutgers College.
Mr. Chazen brings to the Williams Board decades of executive leadership experience in the oil and gas industry, as well as significant mergers and acquisition and valuation expertise. Mr. Chazens experience and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, strategy development and risk management, operating, environmental, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Financial and Accounting
Securities and Capital Markets
Strategy Development and Risk Management
Operating
Environmental
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 24
PROPOSAL 1
|
CHARLES I. COGUT
Director since 2016
Committees Audit
Nominating and Governance |
Charles I. Cogut, 72, has served as a director of the Company since 2016. Mr. Cogut is a retired partner at Simpson Thacher & Bartlett LLP (STB), where for many years he led the firms mergers and acquisitions and private equity practices, with a specialty in domestic, international and cross-border mergers and acquisitions, the representation of special committees of boards of directors, and buyouts and other corporate transactions. Mr. Cogut regularly advised boards of directors with respect to corporate governance matters and fiduciary responsibilities. Mr. Cogut joined STB in 1973; served as a partner from 1980 through 2012; and served as senior mergers and acquisitions counsel from 2013 through 2016. Mr. Cogut has been a member of the Board of Directors of Air Products and Chemicals, Inc. since 2015 and was a member of the Board of Directors of Patheon N.V. in 2017 prior to its sale. Mr. Cogut received his J.D. in 1973 from the University of Pennsylvania Law School after graduating summa cum laude from Lehigh University in 1969. He is a member of the Board of Overseers of the University of Pennsylvania Law School and Co-Chair of the Board of Advisors of the Universitys Institute for Law and Economics. He also serves as a vice chairman of the Board of Trustees and is a member of the Executive Committee of Cold Spring Harbor Laboratory.
Mr. Cogut brings to the Williams Board decades of legal and corporate experience, as well as significant mergers and acquisition and valuation expertise. Mr. Coguts experience and attributes include: corporate governance, securities and capital markets, and legal. |
BOARD QUALIFICATIONS
Corporate Governance
Securities and Capital Markets
Legal |
The Williams Companies, Inc. 2019 Proxy Statement 25
PROPOSAL 1
|
KATHLEEN B. COOPER
Director since 2006
Committees Compensation and Management Development
Nominating and Governance (Chair) |
Kathleen B. Cooper, 74, has served as a director of the Company since 2006. Currently President of Cooper Strategies International LLC, Dr. Cooper previously served as Under Secretary for Economic Affairs of the U.S. Department of Commerce from 2001 to 2005. Prior to this role, she spent ten years as Chief Economist of the Exxon Mobil Corporation, advising senior management on the global business environment and energy markets and playing a leadership role in the planning process. Dr. Cooper also serves as a director of Deutsche Bank Trust Corporation and Deutsche Bank Trust Company of the Americas, subsidiaries of Deutsche Bank AG, and was a founding director of Texas Security Bank from 2008 to 2010. Earlier in her career, she was Executive Vice President and Chief Economist of Security Pacific National Bank and Chief Economist of the United Banks of Colorado. Currently a Senior Fellow of the Tower Center for Political Studies at Southern Methodist University, Dr. Coopers academic experience includes two years as Dean of the College of Business Administration at the University of North Texas. She holds a Ph.D. degree in economics from the University of Colorado. Dr. Cooper also has chaired the National Bureau of Economic Research in Cambridge, Massachusetts, among many professional and non-profit organizations for which she has served in leadership roles.
As former Under Secretary for Economic Affairs at the U. S. Department of Commerce, former executive of both a Fortune 500 energy company and banking organization, and former academic dean, Dr. Coopers experience and attributes include: energy industry, executive leadership, financial and accounting, corporate governance, public policy and government, and diversity. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Financial and Accounting
Corporate Governance
Public Policy and Government
Diversity |
The Williams Companies, Inc. 2019 Proxy Statement 26
PROPOSAL 1
|
MICHAEL A. CREEL
Director since 2016
Committees Audit
Environmental, Health and Safety |
Michael A. Creel, 65, has served as a director of the Company since 2016. Mr. Creel is an executive with 39 years of energy experience, including 12 years on large public company boards. Mr. Creel previously served as a Director and Chief Executive Officer of Enterprise Products Partners L.P. from 2010 until his retirement in 2015. Earlier, he served in positions of increasing responsibility with the company since 1999. He was also group vice chairman at EPCO, Inc., and Executive Vice President and Chief Financial Officer at Duncan Energy Partners L.P., a company engaged in natural gas liquids transportation, fractionation, marketing and storage, and petrochemical product transportation, gathering and marketing. He was also President and Chief Executive Officer at the general partner of Enterprise GP Holdings L.P. and held a number of executive management positions with Shell affiliate Tejas Energy and NorAm Energy Corp. Mr. Creel is a graduate of McNeese State University in Lake Charles, Louisiana, where he earned a bachelors degree in accounting, and is a Certified Public Accountant.
Mr. Creel brings to the Williams Board decades of executive leadership experience in the energy industry, as well as significant financial expertise. Mr. Creels experience and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, strategy development and risk management, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Financial and Accounting
Securities and Capital Markets
Strategy Development and Risk Management
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 27
PROPOSAL 1
|
VICKI L. FULLER
Director since 2018
Committees Audit
Nominating and Governance |
Vicki L. Fuller, 61, has served as a director of the Company since 2018. Ms. Fuller joined the Williams Board after retirement from the New York State Common Retirement Fund (NYSCRF) where she served as Chief Investment Officer beginning in August 2012. The fund is the third largest public pension fund in the nation and holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. Prior to joining NYSCRF, Ms. Fuller spent 27 years in leadership positions at AllianceBernstein Holding L.P., which has approximately $500 billion in assets under management. She joined the company in 1993 from the Equitable Capital Management Corporation, which was acquired by Alliance Capital Management LP (in 2000, the company became AllianceBernstein LP after the company acquired Sanford C. Bernstein). In 2018, Ms. Fuller was appointed to the Board of Trustees for Fidelity Equity and High Income Funds. Ms. Fuller, who was inducted into the National Association of Securities Professionals Wall Street Hall of Fame, was named to Chief Investment Officer Magazines Power 100 and received the Urban Technology Centers Corporate Leadership Award. She has also been named one of the most powerful African Americans on Wall Street by Black Enterprise.
Ms. Fuller brings significant executive leadership, investment and corporate experience to the Williams Board. Ms. Fullers experience and attributes include: executive leadership, public policy and government, securities and capital markets, financial and accounting, and diversity. |
BOARD QUALIFICATIONS
Executive Leadership
Public Policy and Government
Securities and Capital Markets
Financial and Accounting
Diversity |
The Williams Companies, Inc. 2019 Proxy Statement 28
PROPOSAL 1
|
PETER A. RAGAUSS
Director since 2016
Committees Audit (Chair)
Nominating and Governance |
Peter A. Ragauss, 61, has served as a director of the Company since 2016. Mr. Ragauss retired from Baker Hughes, an oilfield services company, in November 2014, after serving eight years as Senior Vice President and Chief Financial Officer. He joined the Board of Directors of Apache Corporation in December 2014. From 2003 to 2006, prior to joining Baker Hughes, Mr. Ragauss was Controller, Refining and Marketing, for BP Plc. From 2000 to 2003, he was Chief Executive Officer for Air BP. From 1998 to 2000, he was assistant to group chief executive for BP Amoco. He was Vice President of Finance and Portfolio Management for Amoco Energy International when Amoco Corporation merged with BP in 1998. Earlier in his career, from 1996 to 1998, Mr. Ragauss served as Vice President of Finance for El Paso Energy International. He held positions of increasing responsibility at Tenneco Inc. from 1993 to 1996 and Kidder, Peabody & Co. Incorporated from 1987 to 1993. Mr. Ragauss holds a masters degree from Harvard Business School and bachelors degree in Mechanical Engineering from Michigan State University.
Bringing a wealth of accounting, financial, and executive experience to the Williams Board, and having held senior positions including Chief Executive Officer, Chief Financial Officer, Controller, and Vice President of Finance, Mr. Ragauss experience and attributes include: energy industry, executive leadership, financial and accounting, securities and capital markets, information technology, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Financial and Accounting
Securities and Capital Markets
Information Technology
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 29
PROPOSAL 1
|
SCOTT D. SHEFFIELD
Director since 2016
Committees Compensation and Management Development (Chair)
Environmental, Health and Safety |
Scott D. Sheffield, 66, has served as a director of the Company since 2016. Since February 2019, Mr. Sheffield has served as Chief Executive Officer of Pioneer Natural Resources Company, a large domestic upstream oil and gas company. Mr. Sheffield also served as Chief Executive Officer of the company from August 1997 through December 2016. From August 1999 until February 2019, Mr. Sheffield served as Pioneer Natural Resources Chairman of the Board of Directors. He was President of the company from August 1997 to November 2004. Mr. Sheffield was the Chairman of the Board of Directors and Chief Executive Officer of Parker & Parsley Petroleum Company, a predecessor company of Pioneer Natural Resources Company, from January 1989 until August 1997. Mr. Sheffield joined Parker & Parsley as a petroleum engineer in 1979; was promoted to Vice President of Engineering in 1981; was elected President and a director in 1985; and became Parker & Parsleys Chairman of the Board and Chief Executive Officer in 1989. Mr. Sheffield served as a director of Santos Limited, an Australian exploration and production company, from 2014 through 2017. He previously served as a director from 1996 to 2004 on the board of Evergreen Resources, Inc., an independent natural gas energy company. Mr. Sheffield is a distinguished graduate of The University of Texas with a Bachelor of Science degree in Petroleum Engineering.
With more than 40 years of experience in the energy industry, including his position as Chief Executive Officer and Chairman of the Board of Pioneer Natural Resources and his former service as a director of Santos Limited, Mr. Sheffields experience and attributes include: energy industry, executive leadership, engineering and construction, strategic development and risk management, operating, environmental, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Engineering and Construction
Strategy Development and Risk Management
Operating
Environmental
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 30
PROPOSAL 1
|
MURRAY D. SMITH
Director since 2012
Committees Compensation and Management Development
Environmental, Health and Safety (Chair) |
Murray D. Smith, 69, has served as a director of the Company since 2012. Mr. Smith is currently president of Murray D. Smith and Associates, an energy consulting firm. Previously, he held various positions in the Canadian government. As an elected member of the Legislative Assembly of Alberta, Canada, Mr. Smith served in four different Cabinet portfolios between 1993 and 2004. As Minister of Energy of Alberta from 2001 to 2004, Mr. Smith oversaw the transformation of the electricity sector into a competitive wholesale generation market and initiated the largest industrial tax reduction in the Provinces history. Mr. Smith served as Representative of the Province of Alberta to the United States of America in Washington, D.C., from 2005 to 2007. Prior to becoming an elected official, Mr. Smith was an independent businessman, owning a number of Alberta-based energy services companies. Currently, he is a director of Surge Energy Inc., a publicly-traded oil and gas company with operations throughout Alberta and Saskatchewan.
As a former member of the Legislative Assembly of Alberta, Canada, diplomat, and now an energy consultant, Mr. Smiths experience and attributes include: energy industry, public policy and government, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Public Policy and Government
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 31
PROPOSAL 1
|
WILLIAM H. SPENCE
Director since 2016
Committees Audit
Environmental, Health and Safety |
William H. Spence, 62, has served as a director of the Company since 2016. Mr. Spence is Chairman, President and Chief Executive Officer of PPL Corporation, one of the largest investor-owned utility companies in the United States. The PPL family of companies, with assets of more than $40 billion, delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom. Mr. Spence was named President and Chief Executive Officer in 2011 and Chairman in 2012. Previously, he had 19 years of service with Pepco Holdings, Inc., where he held a number of senior management positions. Mr. Spence serves on the boards of numerous industry organizations including those dealing with research, cyber and physical security, the environment, and electric reliability. He also serves on several non-profit community organizations that focus on community education, health, and human services. Mr. Spence earned a bachelors degree in petroleum and natural gas engineering from Pennsylvania State University and a masters degree in business administration from Bentley College. Mr. Spence also is a graduate of the Executive Development Program at the University of Pennsylvanias Wharton School and the Nuclear Technology Program of the Massachusetts Institute of Technology.
As Chairman, President and Chief Executive Officer of PPL Corporation, former Executive Vice President and Chief Operating Officer of PPL Corporation, and due to his several senior management positions with Pepco Holdings, Inc., Mr. Spences experience and attributes include: energy industry, executive leadership, engineering and construction, financial and accounting, strategy development and risk management, operating, environmental, information technology, and marketplace knowledge. |
BOARD QUALIFICATIONS
Energy Industry
Executive Leadership
Engineering and Construction
Financial and Accounting
Strategy Development and Risk Management
Operating
Environmental
Information Technology
Marketplace Knowledge |
The Williams Companies, Inc. 2019 Proxy Statement 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to us concerning beneficial owners of more than five percent of our common stock. Unless otherwise indicated, the persons named have sole voting and investment power with respect to the shares listed.
Title of Class | Name and Address of Beneficial Owner |
Number of Shares of Common Stock |
Percent of Class (3) | |||
Common Stock |
BlackRock, Inc. (1) 55 East 52nd Street, New York, |
136,747,118 |
11.3% | |||
Common Stock |
The Vanguard Group (2) 100 Vanguard Boulevard, Malvern, Pennsylvania 19355 |
96,306,536 |
8.0% |
(1) | According to a Schedule 13G/A filed with the SEC on February 11, 2019, BlackRock, Inc., an investment management corporation, may beneficially own the shares of common stock listed in the table above. The 13G/A indicates that BlackRock, Inc. may have sole voting power over 127,146,463 shares of our common stock and sole dispositive power over 136,747,118 shares of our common stock. |
(2) | According to a Schedule 13G/A filed with the SEC on February 11, 2019, The Vanguard Group, an investment advisor, may beneficially own the shares of common stock listed in the table above. The Vanguard 13G/A indicates that The Vanguard Group may have sole voting power over 1,633,248 shares of our common stock, sole dispositive power over 94,384,472 shares of our common stock, shared voting power over 546,195 shares of our common stock, and shared dispositive power over 1,922,064 shares of our common stock. |
(3) | Ownership percentage is reported based on 1,211,737,037 shares of common stock outstanding on February 28, 2019. |
The Williams Companies, Inc. 2019 Proxy Statement 33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
The following table sets forth, as of February 28, 2019, the number of shares of our common stock beneficially owned by each of our directors and nominees for directors, by the NEOs, and by all directors and executive officers as a group.
Name of Beneficial Owner |
Shares of Williams Common Stock Owned Directly or Indirectly |
Williams Shares Underlying Stock Options (1) |
Williams Shares Underlying RSUs (2) |
Total Shares Beneficially Owned |
Percent of Class (3) | ||||||||||||||||||||
Alan S. Armstrong (4) |
578,982 |
1,292,476 |
229,052 |
2,100,510 |
* | ||||||||||||||||||||
Stephen W. Bergstrom |
17,750 |
|
32,108 |
49,858 |
* | ||||||||||||||||||||
Nancy K. Buese |
|
|
6,352 |
6,352 |
* | ||||||||||||||||||||
Stephen I. Chazen |
23,428 |
|
12,432 |
35,860 |
* | ||||||||||||||||||||
Charles I. Cogut |
1,000 |
|
14,867 |
15,867 |
* | ||||||||||||||||||||
Kathleen B. Cooper |
26,090 |
|
12,432 |
38,522 |
* | ||||||||||||||||||||
Michael A. Creel (5) |
32,225 |
|
12,432 |
44,657 |
* | ||||||||||||||||||||
Vicki L. Fuller |
|
|
5,641 |
5,641 |
* | ||||||||||||||||||||
Peter A. Ragauss |
3,428 |
|
12,432 |
15,860 |
* | ||||||||||||||||||||
Scott D. Sheffield |
4,144 |
|
12,432 |
16,576 |
* | ||||||||||||||||||||
Murray D. Smith (6) |
19,998 |
|
31,201 |
51,199 |
* | ||||||||||||||||||||
William H. Spence |
|
|
17,038 |
17,038 |
* | ||||||||||||||||||||
John D. Chandler (7) |
10,112 |
26,676 |
|
36,788 |
* | ||||||||||||||||||||
James E. Scheel |
28,632 |
255,421 |
|
284,053 |
* | ||||||||||||||||||||
Micheal G. Dunn |
5,247 |
63,288 |
|
68,535 |
* | ||||||||||||||||||||
Chad J. Zamarin |
2,500 |
26,676 |
|
29,176 |
* | ||||||||||||||||||||
All directors and executive officers as a group (22 persons) |
862,251 |
1,927,953 |
414,160 |
3,204,364 |
* |
* | Less than 1% |
(1) | The SEC deems a person to have beneficial ownership of all shares that the person has the right to acquire within 60 days. Amounts reflect shares that may be acquired upon the exercise of stock options granted under Williams equity plan that are currently exercisable, will become exercisable, or would become exercisable upon the voluntary retirement of such person, within 60 days of February 28, 2019. |
(2) | The SEC deems a person to have beneficial ownership of all shares that the person has the right to acquire within 60 days. Amounts reflect shares that would be acquired upon the vesting of restricted stock units (RSUs) granted under Williams current or previous equity plans that will vest or that would vest upon the voluntary retirement of such person, within 60 days of February 28, 2019. RSUs have no voting or investment power. |
(3) | Ownership percentage is reported based on 1,211,737,037 shares of common stock outstanding on February 28, 2019, plus, as to the holder thereof only and no other person, the number of shares (if any) that the person has the right to acquire as of February 28, 2019, or within 60 days from that date, through the exercise of all options and other rights. |
(4) | Includes 34,264 shares held in the Alan and Shelly Armstrong Family Foundation dated December 16, 2015, Alan S. and Shelly S. Armstrong, Trustees. |
(5) | Includes 17,500 shares held in the B and B Living Trust dated February 2, 2012, Michael A. and Kathy R. Creel, Trustees. |
(6) | Includes 10,150 shares held by Murray D. Smith and Associates Limited. |
(7) | Includes 10,000 shares held by John D. Chandler Family Investments dated September 30, 2016, John D. and Barbara A. Chandler, Trustees. |
The Williams Companies, Inc. 2019 Proxy Statement 34
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
|
COMPENSATION DISCUSSION AND ANALYSIS
|
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Companys directors and certain of its officers to file reports of their ownership of Williams common stock and of changes in such ownership with the SEC. Directors, executive officers, and greater than 10 percent stockholders are required by SEC rules to furnish to us copies of all Section 16(a) reports that they file, and regulations require that Williams identify in this proxy statement any person subject to this requirement who failed to file any such report on a timely basis. Based solely on a review of reports furnished to us, or written representations from reporting persons that all reportable transactions were reported, we believe that with respect to the fiscal year ended December 31, 2018, all of our directors, executive officers and our greater than 10 percent stockholders timely filed all reports they were required to file under Section 16(a).
Compensation Discussion and Analysis
The Compensation Discussion and Analysis (CD&A) provides a detailed description of the objectives and principles of Williams executive compensation programs. It explains how compensation decisions are linked to performance as compared to the Companys strategic goals and stockholder interests. Generally, Williams executive compensation programs apply to all officers; however, this CD&A focuses on the Named Executive Officers (NEOs) for the Company for the 2018 fiscal year. The Companys NEOs for the 2018 fiscal year are Mr. Armstrong, Mr. Dunn, Mr. Zamarin, Mr. Chandler and Mr. Scheel:
Alan S. Armstrong President and Chief Executive Officer |
Micheal G. Dunn EVP, Chief Operating Officer |
Chad J. Zamarin SVP, Corporate Strategic Development |
John D. Chandler SVP, Chief Financial Officer |
James E. Scheel SVP, Northeast Gathering & Processing |
We seek stockholder support on our executive compensation pay programs annually. In 2018, our stockholders supported our programs with 97.46 percent for votes. In considering this positive response, along with our analysis of the competitive market, we have not made any material changes to the overall structure of our executive compensation program.
The Williams Companies, Inc. 2019 Proxy Statement 35
COMPENSATION DISCUSSION AND ANALYSIS
|
Our Commitment to Pay for Performance
Pay for Performance
We design our compensation programs to support our commitment to performance. In 2018, at target, 79 percent or more of a NEOs compensation is variable based on our company performance.
Pay for Performance Equity Annual Incentive Program Performance-based RSUs Time-based RSUs Stock Options cash At target, 79 percent or more of NEO compensation is linked to performance
The Summary Compensation Table provides SEC required disclosures for the 2016, 2017, and 2018 calendar years. These disclosures require the reporting of accounting based grant date fair values for all stock-based compensation. These values remain fixed in Summary Compensation Table disclosures and are not adjusted to reflect how the Companys business and/or stock price performance actually impact the value of stock awards earned by our NEOs. To supplement the SEC required disclosure, the following chart compares the accounting grant date fair value of stock based awards for Mr. Armstrong in 2016, 2017, and 2018 as shown in the Summary Compensation Table to the realizable value as of December 31, 2018 at a stock price of $22.05. The realizable value shown for stock options includes the intrinsic value for each award on this date. The realizable value shown for time-based restricted stock unit (RSU) awards includes accrued cash dividend equivalents on this date. Its important to note that since the 2015 performance-based awards, which were scheduled to vest in 2018, did not meet the minimum performance requirements, the awards were cancelled and Mr. Armstrong did not receive any value or shares from these awards. At the time of the 2015 grant, the performance-based RSU awards represented 55 percent of Mr. Armstrongs total equity award and approximately 38 percent of his targeted total annual compensation. The 2016 award, which vested in 2019, distributed 31.8 percent of the targeted number of RSUs awarded in 2016. In the following chart, the 2017 and 2018 performance-based RSU awards are shown at target as the actual performance is not known until the end of the applicable performance period. The Annual Incentive Program (AIP) award displays the target value compared to the actual award earned for the calendar year.
In order to demonstrate how the design of our executive pay program is aligned with the experience of our stockholders, the chart also includes the Companys annualized total shareholder return (TSR) associated with 2016, 2017, and 2018 performance-based RSU awards at December 31, 2018. As shown in the chart, Mr. Armstrongs realizable incentive pay for the past three years ending December 31, 2018, is in aggregate, less than 67 percent of what was targeted for his short-term and long-term incentive pay. The Compensation and Management Development Committee (Committee) believes it is important to demonstrate this correlation between executive pay and Company performance.
The Williams Companies, Inc. 2019 Proxy Statement 36
COMPENSATION DISCUSSION AND ANALYSIS
|
CEO Target Incentive Pay Compared to Realizable Incentive Pay
2016 2017 2018 $10,000,000 Target Incentive Pay AIP $1,400,000 $1,890,000 $1,443,750 $1,853,755 $1,487,500 $2,028,654 $0 $1,270,144 $0 $8,937,789 $6,373,390 $2,869,830 $1,278,662 $6,002,246 $1,590,001 $1,279,544 $3,830,750 $964,136 $4,026,872 $4,590,143 $3,065,193 $1,437,499 $1,439,225 $1,499,999 $1,150,003 $0 $1,248,860 $7,818,252 $4,293,362 $8,219,481 Performance- Based Awards Time-Based Awards Stock Option Awards Total Incentive Pay 5.8% (45.1%) (6.1%) (27.0%) (11.6%) (28.7%) Annualized TSR for associated performance-based grant as of 12/31/2018 Percent difference between Realizable Incentive Pay and Target Incentive Pay 2016 2017 2018 Target Incentive Pay Target Incentive Pay Realizable Incentive Pay Realizable Incentive Pay Realizable Incentive Pay $8,000,000 $6,000,000 $4,000,000 $2,000,000 0 $7,818,252 $4,293,362 $8,219,481 $6,002,246 $8,937,789 $6,373,390
Note: Target Incentive Pay includes the grant date value of the equity awards as valued in the Summary Compensation Table plus the AIP value at target performance.
Long-term Incentives
Annual equity awards provide the most significant differentiation in pay and performance in our executive compensation program. We use equity awards to align compensation with the long-term interests of our stockholders. Equity awards consist of performance-based RSUs, time-based RSUs, and stock options. The largest component of a NEOs long-term incentive award is performance-based RSUs. In 2016, both relative and absolute TSR were used to determine the actual number of units that will be distributed to a NEO upon vesting. The 2017 performance-based RSU awards utilize relative TSR to determine performance and the actual number of units that will vest. In 2018 and 2019, the performance-based RSU awards utilize both relative TSR and return on capital employed (ROCE) to measure performance and the actual number of units that will vest. The performance-based RSUs awarded in 2014 for the performance period 2014 through 2016, which were scheduled
The Williams Companies, Inc. 2019 Proxy Statement 37
COMPENSATION DISCUSSION AND ANALYSIS
|
to vest in early 2017, and the performance-based RSUs awarded in 2015 for the performance period 2015 through 2017, which were scheduled to vest in early 2018, did not meet the minimum performance requirements. These awards were cancelled and Mr. Armstrong and the other NEOs did not receive any value or shares from these awards. The combined grant date fair value of these performance-based awards were disclosed in prior Summary Compensation Tables as $5,213,205. The 2016 performance-based RSUs, which vested in 2019, earned 31.8 percent of the targeted number of RSUs award. Over the last four consecutive years, the vesting performance-based RSUs earned 3.5 percent, 0 percent, 0 percent, and 31.8 percent of the originally awarded performance-based RSUs. We also consider stock options to be performance-based compensation. Stock options only provide value to the extent that the Companys stock price has increased above the grant price. All three equity vehicles incent Company performance and most importantly align to the experience of the stockholder.
Annual Incentive Program
Our performance-based cash compensation is paid under our AIP which is based on the Companys business and safety performance and the NEOs individual performance. Under this program, cash compensation reflects annual business performance in 2018 and is based on weighted measures of distributable cash flow, controllable costs, and safety performance.
On August 10, 2018, Williams completed its acquisition of Williams Partners L.P. (WPZ). Williams acquired all of the outstanding common units of WPZ it did not previously own. The transaction re-established Williams as a simplified C-Corp with investment-grade credit.
In October 2018, Williams placed the Atlantic Sunrise project into full service. Backed by long-term shipper commitments, the project increased the design capacity of the Transco pipeline, the largest-volume natural gas pipeline system in the United States, by 1,700 thousand dekatherms per day (Mdth/d) (approximately 12 percent). In the process, the project further strengthened and extended the bi-directional flow of the Transco system, directly connecting Marcellus gas supplies with markets as far south as Alabama. Greenfield construction on the Pennsylvania portion of the project began in September 2017. The project featured the installation of 186 miles of greenfield pipe, 12 miles of pipe looping, 2.5 miles of pipe replacement, two new compressor stations and compressor station modifications in five states. Throughout the permitting and construction process, Williams worked closely with permitting agencies to minimize environmental and stakeholder impacts, making modifications to more than half of the original pipeline route. In addition, Williams worked with local stakeholders to provide an additional $2.5 million for environmental conservation projects located within the project area.
During first-quarter 2018, the remaining facilities that comprise Williams Susquehanna Supply Hub Expansion were fully commissioned. The project added two new compression facilities with an additional 49,000 horsepower and 59 miles of 12-to 24-inch pipeline, and increased gathering capacity, allowing a certain producer to fulfill its commitment to deliver 850 Mdth/d to our Atlantic Sunrise development.
In March 2018, Williams placed Phase 2 of the Garden State Expansion project into service. This project expanded Transcos existing natural gas transmission system to provide incremental firm transportation capacity from Station 210 in New Jersey to a new interconnection on Williams Trenton Woodbury Lateral in New Jersey. Phase 1 of the project was placed into service in September 2017, and together, Phases 1 and 2 increased capacity by 180 Mdth/d.
In September 2018, Williams was recognized by the International Association for Public Participation (IAP2-USA) for its work in engaging with and collaborating with the public and other stakeholders during the planning phase of the Atlantic Sunrise project. The IAP2 is an international federation of professionals in 26 countries working to advance the practice of public participation. Williams received the prestigious Core Values Award, in addition to being named the 2018 Project of the Year at an awards ceremony in Victoria, British Columbia. During the
The Williams Companies, Inc. 2019 Proxy Statement 38
COMPENSATION DISCUSSION AND ANALYSIS
|
planning phase of the nearly 200-mile Atlantic Sunrise pipeline project, Williams collaborated with landowners and other stakeholders to adopt approximately 400 changes affecting more than half of the originally-designed greenfield pipeline route. The company used public meetings, contact with local officials, community leaders and affected landowners to identify and attempt to resolve issues or concerns prior to submitting its federal certificate permit application. IAP2 judges said Williams work on Atlantic Sunrise helped raise the bar in the field of public engagement, setting a new standard for the pipeline industry.
During third-quarter 2018, our joint-venture, Rocky Mountain Midstream (RMM), purchased a natural gas and oil gathering and natural gas processing business in Colorados Denver-Julesburg basin. Williams initial economic ownership was 40 percent which has since increased to 50 percent (as of December 31, 2018) based on additional capital contributions made since the initial purchase. Williams is the operator of RMM, which includes sites with permitting underway for greater than 1 billion cubic feet per day (Bcf/d) of gas processing.
In October 2018, Williams completed the sale of assets and equity comprising its previous Four Corners Area business in New Mexico and Colorado for $1.125 billion in cash.
In November 2018, Williams completed the sale of certain pipeline systems located in the Gulf Coast area to Easton Energy LLC for $177 million in cash.
In December 2018, Williams entered into a joint-venture partnership with Brazos Midstream in the Delaware Basin. Williams contributed the majority of its existing Delaware Basin assets in the West segment and $27 million in cash to the partnership in exchange for a 15 percent interest. Williams partner operates the partnership, which consists of approximately 725 miles of gas gathering pipelines, 260 million cubic feet per day (MMcf/d) of natural gas processing, 75 miles of crude oil gathering pipelines, and 75 thousand barrels of oil storage. The partnership anticipates processing capacity in the Delaware Basin to reach 460 MMcf/d and will be supported by over 500,000 acres of long-term dedications from major and independent oil and gas producers.
In January 2019, Williams placed its Gulf Connector Project into full service expanding the Transco pipelines delivery capacity by 475 Mdth/d and providing incremental firm transportation capacity to directly serve two global LNG export facilities.
Earlier this year, Williams Transco pipeline delivered a record amount of natural gas on its Transco interstate gas pipeline. The nations largest-volume natural gas transmission system, Transco delivered a record-breaking 15.68 million dekatherms (MMdth) on January 21, 2019. The new peak-day mark surpasses the previous high that was set on January 5, 2018. The Transco system, which stretches from South Texas to New York City, also established a new three-day market area delivery record, averaging 15.30 MMdth from January 30 to February 1, 2019. The natural gas delivery records were made possible thanks to additional firm transportation capacity created by multiple fully-contracted Transco expansions completed in 2018 and early 2019 (Gulf Connector, Atlantic Sunrise, and Garden State Phase II). Together, these expansions added more than 2.3 MMdth of firm transportation capacity to the existing pipeline system.
Williams was named the #1 Midstream Company for 2018 by S&P Global Platts, a leading provider of energy and commodities information.
The Williams Companies, Inc. 2019 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
|
The accompanying chart compares Williams cumulative TSR on our common stock (assuming reinvestment of dividends) to the cumulative total return of the S&P 500 Stock Index and the median of the comparator companies used to measure relative TSR performance in our 2018 performance-based RSU awards. For more details on our comparator company group, see the CD&A section titled Determining Our Comparator Group. The graph below assumes an initial investment of $100 at the beginning of the period on December 31, 2015.
The Williams Companies, Inc. S&P 500 Index 2018 Comparator Company Group Median $100.00 $100.00 $100.00 2015 $111.79 $127.79 $143.83 $128.47 $130.14 $135.53 $130.14 $102.94 $116.30 2016 2017 2018 3 Year Total Stockholder Return $70 $90 $110 $130 $150 $50
Objective of Our Compensation Programs
The role of compensation is to attract and retain the talent needed to increase stockholder value and to help our businesses meet or exceed financial and operational performance goals. Our compensation programs objectives are to reward our NEOs and employees for successfully implementing our strategy to grow our business and create long-term stockholder value. To that end, in 2018 we used relative TSR and ROCE to measure long-term performance and we used distributable cash flow, controllable costs and a safety metric to measure annual performance. We believe using separate long-term and annual metrics to incent and pay NEOs helps ensure that we make business decisions aligned with the long-term interests of our stockholders.
The Williams Companies, Inc. 2019 Proxy Statement 40
COMPENSATION DISCUSSION AND ANALYSIS
|
Our pay philosophy throughout the entire organization is to pay for performance, be competitive in the marketplace, and consider the value a job provides to the Company. Our compensation programs reward NEOs not just for accomplishing goals, but also for how those goals are pursued. The principles of our pay philosophy influence the design and administration of our pay programs. Decisions about how we pay NEOs are based on these principles. The Committee uses several types of pay that are linked to both our long-term and short-term performance in the executive compensation programs. Included are long-term incentives, annual cash incentives, base pay, and benefits. The chart below illustrates the linkage between the types of pay we use and our pay principles.
Pay Principles |
Long-term |
Annual Cash |
Base Pay |
Benefits | ||||
Pay should reinforce business objectives and values. | 🌑 | 🌑 | 🌑 | |||||
A significant portion of a NEOs total pay should be variable based on performance. | 🌑 | 🌑 | ||||||
Incentive pay should balance long-term, intermediate, and short-term performance. | 🌑 | 🌑 | ||||||
Incentives should align interest of NEOs with stockholders. | 🌑 | 🌑 | ||||||
Pay should foster a culture of collaboration with shared focus and commitment to our Company. | 🌑 | 🌑 | ||||||
Incentives should enforce the value of safety within our Company. | 🌑 | |||||||
Pay opportunities should be competitive. | 🌑 | 🌑 | 🌑 | 🌑 | ||||
A portion of pay should be provided to compensate for the core activities required for performing in the role. | 🌑 | 🌑 |
The Williams Companies, Inc. 2019 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS
|
Our Commitment to Pay for Performance
Roles in the Compensation Recommendation and Decision Process Role of Board of Directors Reviews CEO Performance (evaluations, CEO self-assessment, and company performance) Approves Board of Directors pay Role of Committee Seeks input from Independent consultant Engages Independent consultant on comparator groups and Board of Director and CEO pay Determines CEO and NEO pay Recommends Board of Directors Pay Role of CEO Reviews NEO Performance Reviews Competitive market information Recommends NEO pay, including base pay adjustments, AIP, LTI and any other Compensation No role in setting compensation for his/her role Role of Independent Consultant Assists Committee in discussions and decisions regarding NEO compensation Provides Competitive market data for CEO Develops comparator group, with input from Committee and Management Role of Management Human Resources provides CEO with data from comparator group proxies Human Resources provides CEO with pay information from various compensation surveys
Determining Our Comparator Group
Companies in our executive compensation benchmarking comparator group have a range of revenues, assets, market capitalization, and enterprise value. Business consolidation and unique operating models create some challenges in identifying comparator companies. Accordingly, we take a broad view of comparability to include organizations that are similar to Williams. This results in compensation that is appropriately scaled and reflects comparable complexities in business operations. We typically aim for a comparator group of 15 to 20 companies so our comparisons will be valid. The 2018 comparator group includes 16 companies which comprised a mix of both direct business competitors and companies with whom we compete for talent. Since 2017, the Committee also established a smaller targeted comparator company group for the purposes of measuring relative TSR related to our performance-based RSU awards. The selected companies are more aligned with our specific segment of the energy industry.
How We Use Our Comparator Group
We refer to publicly available information to analyze our comparator companies practices including how pay is divided among long-term incentives, annual incentives, base pay, and other forms of compensation. This allows the Committee to ensure competitiveness and appropriateness of proposed compensation packages. When setting pay, the Committee uses market median information of our comparator group, as opposed to market averages, to ensure that the impact of any unusual events that may occur at one or two companies during any particular year is diminished from the analysis. If an event is particularly unusual and surrounded by unique circumstances, the data is completely removed from the assessment. The smaller targeted comparator company group is used solely for the purposes of measuring relative TSR related to our 2017, 2018, and 2019 performance-based RSU awards.
The Williams Companies, Inc. 2019 Proxy Statement 42
COMPENSATION DISCUSSION AND ANALYSIS
|
The following table shows the range of our 2018 executive compensation benchmarking comparator companies revenues, assets, market capitalization*, and enterprise value as originally reported for 2017 (dollars in millions):
Comparator Company | Ticker | Revenue | Total Assets | Market Capitalization |
Enterprise Value | |||||||||||||
CenterPoint Energy Inc. |
CNP |
$ |
9,614 |
|
$ |
22,736 |
|
$ |
12,224 |
|
$ |
19,844 |
| |||||
Cheniere Energy Inc. |
LNG |
$ |
5,601 |
|
$ |
27,906 |
|
$ |
12,792 |
|
$ |
40,410 |
| |||||
Devon Energy Corp |
DVN |
$ |
13,949 |
|
$ |
30,241 |
|
$ |
21,735 |
|
$ |
34,318 |
| |||||
Dominion Resources Inc. |
D |
$ |
12,586 |
|
$ |
76,585 |
|
$ |
52,284 |
|
$ |
91,716 |
| |||||
Enbridge Inc. (in U.S. dollars) |
ENB |
$ |
34,212 |
|
$ |
129,395 |
|
$ |
66,517 |
|
$ |
133,661 |
| |||||
Enterprise Products Partners |
EPD |
$ |
29,242 |
|
$ |
54,418 |
|
$ |
57,291 |
|
$ |
82,079 |
| |||||
EOG Resources |
EOG |
$ |
11,280 |
|
$ |
29,833 |
|
$ |
62,424 |
|
$ |
67,976 |
| |||||
Magellan Midstream Partners, L.P. |
MMP |
$ |
2,508 |
|
$ |
7,394 |
|
$ |
16,176 |
|
$ |
20,525 |
| |||||
Marathon Petroleum Corp |
MPC |
$ |
66,969 |
|
$ |
49,047 |
|
$ |
32,066 |
|
$ |
49,796 |
| |||||
ONEOK Inc. |
OKE |
$ |
12,174 |
|
$ |
16,846 |
|
$ |
20,776 |
|
$ |
30,035 |
| |||||
Phillips 66 |
PSX |
$ |
89,547 |
|
$ |
54,371 |
|
$ |
50,805 |
|
$ |
60,139 |
| |||||
Pioneer Natural Resources |
PXD |
$ |
5,368 |
|
$ |
17,003 |
|
$ |
29,417 |
|
$ |
30,040 |
| |||||
Sempra Energy Corp. |
SRE |
$ |
11,207 |
|
$ |
50,454 |
|
$ |
26,837 |
|
$ |
48,355 |
| |||||
Southern Co. |
SO |
$ |
23,031 |
|
$ |
111,005 |
|
$ |
48,047 |
|
$ |
98,395 |
| |||||
Targa Resources Corp. |
TRGP |
$ |
8,815 |
|
$ |
14,389 |
|
$ |
10,535 |
|
$ |
16,661 |
| |||||
TransCanada Corp. (in U.S. dollars) |
TRP |
$ |
10,368 |
|
$ |
68,732 |
|
$ |
43,027 |
|
$ |
81,547 |
| |||||
75th percentile |
$ |
24,584 |
|
$ |
57,997 |
|
$ |
51,174 |
|
$ |
81,680 |
| ||||||
50th percentile |
$ |
11,727 |
|
$ |
39,644 |
|
$ |
30,742 |
|
$ |
49,075 |
| ||||||
25th percentile
|
$ |
9,414 |
|
$ |
21,303 |
|
$ |
19,626 |
|
$ |
30,039 |
| ||||||
Williams |
WMB |
|
$8,031 |
|
$ |
46,352 |
|
$ |
25,185 |
|
$ |
51,740 |
| |||||
Percent rank |
|
18% |
|
|
52% |
|
|
38% |
|
|
55% |
|
* | The December 31, 2017 market capitalization only includes Williams (WMB) value, and therefore does not include Williams Partners L.P. (WPZ) value. |
A separate comparator company group is used to specifically measure relative TSR as it pertains to the 2017, 2018 and 2019 performance-based RSU awards:
Enbridge |
Kinder Morgan |
Targa Resources | ||
Energy Transfer Equity |
ONEOK |
TransCanada | ||
Enterprise Products |
Plains All American Pipeline
|
Western Gas Partners
|
The Committee determined the same 16 companies listed in the table above will be used to benchmark compensation practices and pay decisions in 2019.
During the first quarter of the year, the Committee completes a review to ensure we are paying competitively, equitably, and in a way that encourages and rewards performance.
The Williams Companies, Inc. 2019 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS
|
The compensation data of our comparator group, disclosed primarily in proxy statements, is the primary market data we use when benchmarking the competitive pay of our NEOs. Aggregate market data obtained from recognized third-party executive compensation survey companies is used to supplement and validate comparator group market data.
Although the Committee reviews relevant data as it determines compensation packages, other considerations are taken into account. Because market data alone does not reflect the strategic competitive value of various roles within our Company, internal pay equity is also considered when making pay decisions. Other considerations when making pay decisions for the NEOs include individual experience, sustained performance, historical pay, realized and realizable pay over three years, tally sheets that include annual pay and benefit amounts, wealth accumulated over the past five years, and the total aggregate value of the NEOs equity awards and holdings. |
Multiple internal and
|
When setting pay, we determine a target pay mix (distribution of pay among base pay, short-term incentives, long-term incentives, and other forms of compensation) for the NEOs. Consistent with our pay-for-performance philosophy, the actual amounts paid, excluding benefits, are determined based on Company and individual performance. Because performance is a factor, the target versus actual pay mix will vary, specifically as it relates to the annual cash incentives and long-term incentives.
CEO 2018 Total Compensation at Target Pay Mix |
NEO (Excluding CEO) 2018 Total Compensation at Target Pay Mix | |||
The Williams Companies, Inc. 2019 Proxy Statement 44
COMPENSATION DISCUSSION AND ANALYSIS
|
How We Determine the Amount for Each Type of Pay
Base pay, annual cash incentives, and long-term incentives accomplish different objectives. The table below illustrates a summary of the primary objectives associated with each component of pay listed in the order of most significant to the NEOs total compensation. The table is followed by specific details regarding each pay component.
Type of Pay & Form Performance Period (years) Objectives Fixed Base pay (cash) Compensates for carrying out the duties of the job Recognizes individual experiences, skills, and sustained performance Provides attraction and retention Incents the accomplishment of annual business Goals Aligns interests of executives to our stockholders Provides attraction and retention Short-term incentive: Annual cash incentive 1 Incents the accomplishment of long-term sustainable business goals Aligns interests of executives to our stockholders Promotes ownership in the Company Provides attraction and retention Long-term incentive: Performance-based RSUs 3 Long-term incentive: Time-based RSUs 3 Long-term incentive: Stock options Up to 10 At Risk
Base pay compensates the NEOs for carrying out the duties of their jobs and serves as the foundation of our pay program. Most other major components of pay are set based on a relationship to base pay, including long-term and annual incentives, as well as retirement benefits.
Base pay for the NEOs, including the CEO, is set considering the market median, with potential individual variation from the median due to experience, skills, and sustained performance of the individual as part of our pay-for-performance philosophy. Performance is measured in two ways: through the Right Results obtained in the Right Way. Right Results considers the NEOs success in attaining their annual goals, operational and/or functional area strategies, and personal development plans. Right Way reflects the NEOs behavior as exhibited through our organizational, operational, and people leadership competencies.
As previously mentioned in the Our Commitment to Pay for Performance section, we pay annual cash incentives to encourage and reward our NEOs for making decisions that improve our annual operating performance through our Annual Incentive Program (AIP). The objectives of our AIP are to:
| Offer sufficient incentive compensation to motivate management to put forth extra effort, take prudent risks, and make effective decisions to maximize stockholder value; |
The Williams Companies, Inc. 2019 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS
|
| Motivate and incent management to choose strategies and investments that maximize long-term stockholder value; |
| Provide sufficient total compensation to retain management; and |
| Limit the cost of compensation to levels that will maximize the return of current stockholders without compromising the other objectives. |
NEOs AIP business performance is based on enterprise results of these business metrics in relation to established targets. We only use enterprise-level performance metrics for our NEOs in order to promote teamwork and collaboration by creating a shared goal for the overall Company performance. Our business performance targets are established utilizing the annual financial plan. Goals related to ROCE growth and operating margin improvement are considered when establishing the financial plan. Our incentive program allows the Committee to make adjustments to these business performance metrics to reflect certain business events. When determining which adjustments are appropriate, we are guided by the principle that incentive payments should not result in unearned windfalls or impose undue penalties. In other words, we make adjustments to ensure NEOs are not rewarded for positive results they did not facilitate nor are they penalized for certain unusual circumstances outside their control.
Management regularly reviews with the Committee a supplemental scorecard reflecting earnings before interest, tax, depreciation, and amortization (EBITDA), maintenance capital expenditures, distributable cash flow, ROCE, and Williams stock price performance to provide updates regarding the Companys performance as well as to ensure alignment between these measures and the AIPs business performance metrics. This scorecard provides the Committee with additional data to assist in determining final AIP awards.
The Committees independent compensation consultant annually compares our relative performance on various measures, including TSR and earnings per share with our comparator group of companies. The Committee also uses this analysis to validate the reasonableness of our AIP results.
How We Set the 2018 AIP Goals.
CEO, CFO, and NEOs CEO, CFO, and NEOs Committee Establish business and financial goals Operational /Functional Leaders Corporate Planning Create specific business and financial goals Consolidate into Enterprise business and financial goals Finalize Enterprise business and financial plan Establish AIP goals and recommend to the Committee Reviews and makes any necessary adjustments to set AIP goals Monitors Progress through the year
The Williams Companies, Inc. 2019 Proxy Statement 46
COMPENSATION DISCUSSION AND ANALYSIS
|
The AIP Calculation. The 2018 AIP is based on the weighted measures of WPZ distributable cash flow, controllable costs, and a safety metric. Each metric is directly aligned with our business strategy to operationally grow the business, operate safely in everything we do, and continue to align with our dividend growth strategy.
50% WPZ Distributable Cash Flow Cash generated Enables us to create value for our stockholders by generating cash to grow our business and aligns with our dividend growth strategy Business Performance Metric & Weighting Measuring Importance Controllable Costs Operating & Maintenance (O&M) and General & Administrative (G&A) costs Encourages cost management discipline with 40% achieving our growth strategy 10% Safety Near Miss Incident Ratio Emphasizes the importance of safety leadership
For 2018, the safety metric was Near Miss to Incident Ratio.
The attainment percentage of AIP goals results in payment of annual cash incentives along a continuum between threshold and stretch levels, which corresponds to 0 percent through 200 percent of the NEOs annual cash incentive target.
2018 NEO AIP Targets. The starting point to determine annual cash incentive targets (expressed as a percentage of base pay) is competitive market information referencing the market median, which provides an idea of what other companies target to pay in annual cash incentives for similar jobs. We also consider the internal value of each job (i.e., how important the job is to executing our strategy compared to other jobs in the Company) before the target is set for the year. The annual cash incentive targets as a percentage of base pay for the NEOs in 2018 were as follows:
Position |
Target |
|||
President and Chief Executive Officer |
|
125 |
% | |
EVP, Chief Operating Officer |
|
90 |
% | |
SVP, Corporate Strategic Development |
|
75 |
% | |
SVP, Chief Financial Officer |
|
80 |
% | |
SVP, Northeast G&P |
|
70 |
% |
The Williams Companies, Inc. 2019 Proxy Statement 47
COMPENSATION DISCUSSION AND ANALYSIS
|
Determining 2018 AIP Awards. To determine the funding of the annual cash incentive, we use the following calculation for each NEO:
2018 Base Pay Received 2018 Incentive Target % 2018 Business Performance Metrics 2018 AIP Result Controllable Costs (40%) Distributable Cash Flow (50%) Safety (10%)
Based on business performance relative to the established goals, the Committee certified business performance results as follows and the 2018 AIP award payout, at 137 percent of target, was paid in March 2019.
THRESHOLD TARGET STRETCH DISTRIBUTABLE CASH FLOW $3,011 MM Target vs. $3,118 MM Actual = 1.36x Payout CONTROLLABLE COSTS $(1,970) MM Target vs. $(1,927) MM Actual = 1.22x Payout SAFETY 2.0x Payout 104% target; 136% payout 200% payout 102% target; 122% payout
Metrics | Weighting | Threshold | Target | Stretch @ 200% |
Actual | Result | Payout% | |||||||||||||||||||
Distributable Cash Flow |
50% | $ | 2,711 | $ | 3,011 | $ | 3,311 | $ | 3,118 | 136 | % | 68% | ||||||||||||||
Controllable Costs |
40% | $ | (2,170 | ) | $ | (1,970 | ) | $ | (1,770 | ) | $ | (1,927 | ) | 122 | % | 49% | ||||||||||
Safety Metric |
10% | 200 | % | 20% | ||||||||||||||||||||||
2018 AlP Business Performance % |
137% |
When the 2018 AIP targets were established, WPZ Distributable Cash Flow was a key measure associated with the business model at that time. We calculate (a) WPZ Distributable Cash Flow as: Modified EBITDA, adjusted for certain items of income or loss that we characterize as unrepresentative of our ongoing operations, less maintenance capital expenditures, less interest expense, less cash taxes, less income attributable to non-controlling interests, adjusted for certain items outside of EBITDA that we characterize as unrepresentative
The Williams Companies, Inc. 2019 Proxy Statement 48
COMPENSATION DISCUSSION AND ANALYSIS
|
of our ongoing operations; and (b) Controllable Costs as: operating and maintenance costs and selling, general and administrative costs that are under the responsibility of a cost center manager, less certain expenses that are considered less controllable (such as pension and postretirement benefit costs) or have no net impact on financial performance (such as costs that are passed directly to customers). Modified EBITDA includes our proportional ownership share of EBITDA of our equity method investees. Operating and maintenance costs, selling, general and administrative costs, and total service revenues include our proportional ownership share of such items recognized by certain equity method investees.
Individual performance, such as success toward our strategic objectives and individual goals, and successful demonstration of the Companys leadership competencies which exceeded expectations may be recognized through adjustments. Payments may also be adjusted downward if performance warrants. The Committee chose to apply an adjustment to certain NEOs. In total, the adjustments applied to NEO awards were less than two percent of the original calculated award.
To determine the value for long-term incentives granted to a NEO each year, we consider the following factors:
| The proportion of long-term incentives relative to base pay; |
| The NEOs impact on Company performance and ability to create value; |
| Long-term business objectives; |
| The market median and specific awards made to executives in similar positions within our comparator group of companies; |
| The market demand for the NEOs particular skills and experience; |
| The amount granted to other NEOs in comparable positions at the Company; |
| The NEOs demonstrated historical performance; and |
| The NEOs leadership performance. |
A summary of the long-term incentive program details for 2018 are shown in the table below. The long-term incentive mix for the CEO differs from the mix for the other NEOs. Since the CEO has more opportunity to influence our financial results, the Committee considers it appropriate that a greater percentage of his long-term incentives are directly tied to the performance of the Companys stock price.
Performance-based RSUs
|
Time-based RSUs
|
Stock Options
| ||||
CEO Equity Mix
|
55%
|
25%
|
20%
| |||
NEO Equity Mix
|
45%
|
35%
|
20%
| |||
Term
|
Three years
|
Three years
|
10 years
| |||
Frequency
|
Granted annually
|
Granted annually
|
Granted annually
| |||
Performance Criteria
|
Relative TSR and ROCE
|
Retention
|
Stock price appreciation
| |||
Vesting
|
Cliff vesting after three years
|
Cliff vesting after three years
|
Ratable vesting over three years
| |||
Payout
|
Upon vesting, shares are (0% 200%)
|
Upon vesting, shares are
|
Upon vesting, options are available to exercise
| |||
Dividends
|
No dividends
|
Dividend
equivalents
|
No dividends
|
The Williams Companies, Inc. 2019 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS
|
In 2019, we did not include stock options in our annual equity award. The performance-based RSU award increased to 60% and 50% of our CEOs and NEOs equity mix respectively.
Performance-based RSUs. Performance-based RSU awards are only earned if we attain specific pre-determined performance results. In 2016, we measured both relative TSR and absolute TSR as interdependent measures in determining the attainment level of our performance-based awards. The 2017 performance-based RSU awards utilize relative TSR while the 2018 and 2019 performance-based RSU awards utilize both relative TSR and ROCE to determine performance and the actual number of units that will vest.
2015 Performance-based RSUs. The three-year performance cycle for our 2015 performance-based RSUs was completed at the end of 2017 and was scheduled to vest in February 2018. Our relative TSR performance was below the median of our comparator company group, finishing in the third quartile. Because we did not deliver annualized absolute TSR performance of at least 7.5 percent, a payout was not earned and the awards were cancelled.
2016 Performance-based RSUs. The performance cycle for our 2016 performance-based RSUs was completed at the end of 2018 and vested in February 2019. Our relative TSR performance was in the top quartile of our comparator company group. Because we delivered an annualized absolute TSR performance of 5.8 percent, less than the threshold annualized TSR target of at least 7.5 percent, the earned payout was limited to 31.8 percent of the number of performance-based RSUs originally granted. This resulted in 68.2 percent of the original RSUs awarded being cancelled.
Time-based RSUs. We grant time-based RSUs to retain executives and to facilitate stock ownership. The use of time-based RSUs is also consistent with the practices of our comparator group of companies. Time-based RSUs accrue dividend equivalents which will be paid in cash only upon vesting of the award.
Stock Option Awards. For recipients, stock options have value only to the extent the price of our common stock is higher on the date the options are exercised than it was on the date the options were granted. Stock options are no longer part of our annual equity award mix in 2019.
Grant Practices. The Committee typically approves our annual equity grant in February of each year, shortly after the annual earnings release to ensure the market has time to absorb material information disclosed in the earnings release and reflect that information in the stock price. Our grant practices in 2016 were different than other years due to the interim operating covenants of the Energy Transfer (ETE) merger agreement which prevented us from granting equity in February. When the merger agreement was terminated in late June 2016, we moved forward with our annual equity grant in early August. We returned to our normal annual grant cycle in 2017. The grant date for off-cycle grants for individuals who are not NEOs, for reasons such as retention or new hires, is generally the first business day of the month following the approval of the grant. By using this consistent approach, we remove grant timing from the influence of the release of material information.
Mr. Chandler, Mr. Dunn, and Mr. Zamarin were each hired after our 2017 annual equity awards were granted. Mr. Dunn received performance-based RSUs, time-based RSUs, and stock options considering the proximity of his hire date to the annual grant. Mr. Chandler and Mr. Zamarin received time-based RSUs. Mr. Zamarins award, and other elements of his pay package including a $500,000 deferred cash award to be paid in 2019, were intended to address the meaningful retention that was in place with his previous employer.
The Williams Companies, Inc. 2019 Proxy Statement 50
COMPENSATION DISCUSSION AND ANALYSIS
|
Stock Ownership Guidelines. Our program provides stock ownership guidelines for each of our NEOs and our Board of Directors as shown in the table below:
Position
|
Ownership Multiple
|
As a Multiple of
|
Holding / Retention Requirement
| |||
CEO
|
6x
|
Base Pay
|
50%, after taxes, until guidelines are met
| |||
NEO
|
3x
|
Base Pay
|
50%, after taxes, until guidelines are met
| |||
Board of Directors
|
5x
|
Annual Cash Retainer
|
60% until guidelines are met
|
The Committee annually reviews the guidelines for competitiveness and alignment with best practices and monitors the NEOs progress toward compliance. WMB shares owned outright and outstanding time-based RSUs count as owned for purposes of the program. Stock options and performance-based equity are not included as owned for purposes of the program. It is important to note that the majority of NEO equity grants are in the form of performance-based RSUs and stock options. NEOs must retain 50 percent of any vested equity awards, net of taxes, until their ownership guidelines are met. Board members must retain 60 percent of distributed vested equity awards until their ownership guidelines are met. At Williams, NEOs must hold at least 50 percent of any equity transaction if they have not met their ownership guideline regardless of their time in the role.
Consistent with our philosophy to emphasize pay for performance, our NEOs receive very few perquisites or supplemental benefits. They are as follows:
| Retirement Restoration Benefits. NEOs participate in our qualified retirement program on the same terms as our other employees. We offer a retirement restoration plan to maintain a proportional level of pension benefits to our NEOs as provided to other employees. The Internal Revenue Code of 1986, as amended (Internal Revenue Code), limits qualified pension benefits based on an annual compensation limit. For 2018, the limit was $275,000. Any limitation in a NEOs pension benefit in the tax-qualified pension plan due to this limit is made up for (subject to a cap) in the unfunded retirement restoration plan. Benefits for NEOs are not enhanced and are calculated using the same benefit formula as that used to calculate benefits for all employees in the qualified pension plan. The compensation included in the retirement restoration benefit is consistent with pay considered for all employees in the qualified pension plan. Equity compensation, including RSUs and stock options, is not considered. Additionally, we do not provide a nonqualified benefit related to our qualified 401(k) defined contribution retirement plan. |
| Financial Planning Allowance. We offer financial planning to provide expertise on current tax laws to assist NEOs with personal financial planning and preparations for contingencies such as death and disability. Covered services include estate planning, tax planning, tax return preparation, wealth accumulation planning, and other personal financial planning services. In addition, by working with a financial planner, NEOs gain a better understanding of and appreciation for the programs the Company provides, which helps to maximize the retention and engagement aspects of the dollars the Company spends on these programs. |
| Personal Use of Company Aircraft. The CEO is allowed, but not required, to use the Companys private aircraft for personal travel. Our policy for all other executive officers is to discourage personal use of the aircraft, but the CEO retains discretion to permit its use when deemed appropriate, such as when the destination is not well served by commercial airlines, personal emergencies, and the aircraft is not being used for business purposes. To the extent that NEOs use the Companys private aircraft for personal travel, imputed income will be applied to the NEO, in compliance with Internal Revenue Code requirements. |
The Williams Companies, Inc. 2019 Proxy Statement 51
COMPENSATION DISCUSSION AND ANALYSIS
|
| Executive Physicals. The Committee requires annual physicals for the NEOs. Such physicals align with our wellness initiative as well as assist in mitigating risk. NEO physicals are intended to identify any health risks and medical conditions as early as possible in an effort to achieve more effective treatment and outcomes. |
| Event Center. We have a suite and club seats at certain event centers that were purchased for business purposes. If they are not being used for business purposes, we make them available to all employees, including our NEOs. This is not considered a perquisite to our NEOs because it is available to all employees. |
| Spousal Travel. When it was deemed necessary or appropriate for spouses of employees to travel for Company business purposes, we provided a tax gross-up under our company-wide policy to cover the personal tax obligations associated with spousal travel for business purposes for all employees. This tax gross-up provision has been eliminated and no longer applies to travel after August 8, 2018. |
Additional Components of our Executive Compensation Program
In addition to establishing the pay elements described above, we have adopted a number of policies to further the goals of the executive compensation program, particularly with respect to strengthening the alignment of our NEOs interests with stockholder long-term interests.
Employment Agreements. We do not have employment agreements with our NEOs.
Termination and Severance Arrangements. The Executive Severance Pay Plan includes senior executive officers, which includes NEOs other than the CEO, in order to define a consistent approach of treatment in the event of a severance event. Under the plan, NEOs are eligible to receive a discretionary payment of 1.5 to 2.0 times the sum of the NEOs base salary and target annual bonus. Any severance payment is discretionary. Considerations include the NEOs term of employment, past accomplishments, reasons for separation from the Company, and competitive market practice. The NEO can elect coverage under the Companys medical benefits plans for 18 months from the termination in the same manner and at the same cost as similarly situated active employees for up to the first 12 months. Outplacement services are provided up to a maximum amount of $25,000. A Form 8-K filed on February 20, 2017 disclosed that the Company entered into an arrangement with each NEO employed at that time, other than the CEO who is not eligible for the plan, whereby if the NEOs employment with the Company involuntarily terminated, other than for cause, on or prior to December 31, 2018, the NEO would receive a severance payment equal to two times the sum of the NEOs base salary and target annual bonus. No such payments were made to any NEO in 2018.
Change in Control Agreements. Our change in control agreements, in conjunction with the NEOs equity award agreements, provide separation benefits for our NEOs. Our program includes a double trigger for benefits and equity vesting. This means there must be a Company change in control and the NEO must experience a qualifying termination of employment prior to receiving benefits under the agreement. This practice creates security for the NEOs but does not provide an incentive for the NEO to leave the Company. Our program is designed to encourage the NEOs to focus on the best interests of stockholders by alleviating their concerns about a possible detrimental impact to their compensation and benefits under a potential change in control, not to provide compensation advantages to NEOs for executing a transaction.
Our Committee reviews our change in control benefits periodically to ensure they are consistent with competitive practice and aligned with our compensation philosophy. As part of the review, calculations are performed to determine the overall program cost to the Company if a change in control event were to occur and all covered NEOs were terminated as a result. An assessment of competitive norms, including the reasonableness of the elements of compensation received, is used to validate benefit levels for a change in control. We do not offer a tax gross-up provision in our change in control agreements but instead include a best net provision providing our NEOs with the better of their after-tax benefit capped at the safe harbor amount or their benefit paid in full,
The Williams Companies, Inc. 2019 Proxy Statement 52
COMPENSATION DISCUSSION AND ANALYSIS
|
subjecting them to possible excise tax payments. The Committee continues to believe that offering a change in control program is appropriate and critical to attracting and retaining executive talent and keeping them aligned with stockholder interests in the event of a change in control.
On February 1, 2018, our NEOs, as well as other officers with a Change in Control Agreement (Agreement), received a one-year notice informing the recipient that their current Agreement will terminate on February 1, 2019. This one year notice of termination was required under the Agreement. A revised agreement was provided and each officer signed the agreement which was effective February 2019. Among other changes to the language, the new agreement removed the Retirement Restoration Plan component from the cash severance calculation. Additionally, the new agreement changed the COBRA coverage benefit to a cash benefit.
The following chart details the benefits received if a NEO were to be terminated or resigned for a defined good reason following a change in control as well as an analysis of those benefits as it relates to the Company, stockholders, and the NEO:
Change in Control Benefit |
What does the benefit
provide to |
What does the benefit provide to | ||
Multiple of 3x base pay plus annual cash incentive at |
Encourages NEOs to remain engaged |
Financial security for the
NEO | ||
Accelerated vesting of
stock |
An incentive to stay during and after a change in control. If there is risk of |
The NEOs are kept whole if they have | ||
Up to 18 months of medical or |
This is a minimal cost to the Company that creates a competitive benefit. |
Access to health coverage. | ||
3x the previous years retirement restoration allocation |
This is a minimal cost to the Company that creates a competitive benefit. |
May allow those NEOs who are | ||
Reimbursement of legal fees to enforce benefit |
Keeps NEOs focused on the Company |
Security during an unstable period
of | ||
Outplacement assistance |
Keeps NEOs focused on supporting the transaction and less concerned about |
Assists NEOs in finding a comparable executive position. | ||
Best Net provision |
Enables the change in control |
Provides
NEOs with the better of their after-tax benefit capped at the safe |
Derivative Transactions. Our policy on securities trading applies to transactions in positions or interests whose value is based on the performance or price of our common stock. Because of the inherent potential for abuse, Williams prohibits officers, directors, and certain other employees from entering into short sales or using equivalent derivative securities in connection with Williams or its affiliates securities. Our policy on securities trading also prohibits holding Williams or its affiliates securities in a margin account or pledging them as collateral for a loan.
The Williams Companies, Inc. 2019 Proxy Statement 53
COMPENSATION DISCUSSION AND ANALYSIS
|
Although no compensation-related risk was identified as a top risk, the approach to determine if there were adverse compensation risks was similar to the process detailed in the Corporate Governance and Board Matters Corporate Governance Board Oversight of Williams Risk Management Process section of this proxy statement. After this review and analysis, it was determined we do not have material adverse compensation-related risks. Our compensation plans are effectively designed and functioning to reward positive performance and motivate NEOs and employees to behave in a manner consistent with our stockholder interests, business strategies and objectives, ethical standards, and prudent business practices, along with our Core Values and Beliefs which are the foundation on which we conduct business. Our Core Values and Beliefs can be found on our website at www.williams.com from the Our Company tab. In fact, many elements of our executive pay program serve to mitigate excessive risk taking. For example:
Target Pay Mix. The target pay mix weighting of long-term incentives, annual cash incentives, and base pay is consistent with comparator company practices and avoids placing too much value on any one element of compensation, particularly the annual cash incentive. The mix of our pay program is intended to motivate NEOs to consider the impact of decisions on stockholders in the long-, intermediate-, and short-terms.
Annual Cash Incentive. Our annual cash incentive program does not allow for unlimited payouts. Calculated cash incentive payments for NEOs cannot exceed 200 percent of target levels.
Performance-based Awards.
| Our annual cash incentive and long-term incentive programs include performance-based awards. The entire annual cash incentive award is measured against performance targets, while a significant portion of the long-term equity awards provided to NEOs is in the form of performance-based RSUs and stock options. Performance-based RSUs have no value unless we achieve pre-determined three-year performance target thresholds. |
| To drive a long-term perspective, all 2018 RSU awards vest at the end of three years rather than vesting ratably on an annual basis. Additionally, any earned cash dividend equivalents on time-based RSUs are not paid until the officer meets the vesting requirements and the award is distributed. Cash dividend equivalents are not provided on performance-based RSU awards. |
| NEOs incentive compensation performance is measured at the enterprise level rather than on a business unit level to ensure a focus on the overall success of the Company. |
Stock Ownership Guidelines. As discussed in this CD&A, all NEOs, consistent with their responsibilities to stockholders, must hold an equity interest in the Company equal to a stated multiple of their base pay.
Recoupment Policy. In the event that financial results of the Company are restated due to fraud or intentional misconduct, the Board will review any performance-based incentive payments, including payments under the AIP and performance-based RSUs, paid to executive officers, who are found by the Board to be personally responsible for the fraud or intentional misconduct that caused the need for the restatement and will, to the extent permitted by applicable law, seek recoupment from all executive officers of any amounts paid in excess of the amounts that would have been paid based on the restated financial results. In addition, the Company will take action to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 should the SEC determine and implement final rules.
Insider Trading Policy. Our insider trading policy prohibits NEOs and directors, directly or through family members or other persons or entities, from buying or selling Williams securities or engaging in any other action to take personal advantage of material nonpublic information. In addition, if during the course of working for the Company, the NEO or director learns of material nonpublic information about a competitor or a company with which Williams or an affiliate of Williams does or anticipates doing business with, he/she may not trade in that companys securities until the information becomes public or is no longer material.
The Williams Companies, Inc. 2019 Proxy Statement 54
COMPENSATION DISCUSSION AND ANALYSIS
|
We consider the impact of accounting and tax treatment when designing all aspects of pay, but the primary driver of our program design is to support our business objectives. Prior to 2018 and the implications of the tax reform legislation in late 2017, stock options and performance-based RSUs were intended to satisfy the requirements for performance-based compensation as defined in Section 162(m) of the Internal Revenue Code and are therefore considered a tax deductible expense. Time-based RSUs did not qualify as performance-based and may not be fully deductible.
The Williams Companies, Inc. 2019 Proxy Statement 55
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT ON EXECUTIVE COMPENSATION |
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
Compensation and Management Development Committee Report on Executive Compensation
We have reviewed and discussed the foregoing CD&A with management. Based on our review and discussions with management, we recommend to the Board that the CD&A be included in this proxy statement.
By the members of the Committee of the Board as of March 28, 2019:
| Stephen W. Bergstrom |
| Nancy K. Buese |
| Kathleen B. Cooper |
| Scott D. Sheffield |
| Murray D. Smith |
The Committee Report on Executive Compensation is not deemed filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by Williams under the Securities Act or the Exchange Act, except to the extent that Williams specifically incorporates such information by reference.
Compensation and Management Development Committee Interlocks and Insider Participation
During fiscal year 2018, Stephen W. Bergstrom, Nancy K. Buese, Charles I. Cogut, Kathleen B. Cooper, Scott D. Sheffield, Murray D. Smith, and Janice D. Stoney served on the Compensation and Management Development Committee. None of these Committee members has ever been an officer or employee of the Company or any of our subsidiaries, and none has an interlocking relationship requiring disclosure under applicable SEC rules.
The Williams Companies, Inc. 2019 Proxy Statement 56
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
Executive Compensation and Other Information
2018 Summary Compensation Table
The following table sets forth certain information with respect to the compensation of the NEOs earned during fiscal years 2018, 2017, and 2016:
Name and Principal
|
Year
|
Salary
|
Bonus (1)
|
Stock Awards (2)
|
Option Awards (3)
|
Non-Equity
|
Change in Earnings(5)
|
All Other
|
Total
|
|||||||||||||||||||||||||||
Alan S. Armstrong President and Chief Executive Officer
|
|
2018 |
|
$ |
1,184,615 |
|
$ |
- |
|
$ |
6,180,144 |
|
$ |
1,270,144 |
|
$ |
2,028,654 |
|
$ |
- |
|
$ |
27,818 |
|
$ |
10,691,376 |
| |||||||||
|
2017 |
|
|
1,149,615 |
|
|
- |
|
|
5,526,871 |
|
|
1,248,860 |
|
|
1,853,755 |
|
|
816,898 |
|
|
24,237 |
|
|
10,620,236 |
| ||||||||||
|
2016
|
|
|
1,120,000
|
|
|
-
|
|
|
5,268,249
|
|
|
1,150,003
|
|
|
1,890,000
|
|
|
675,156
|
|
|
24,036
|
|
|
10,127,444
|
| ||||||||||
Micheal G. Dunn EVP, Chief Operating Officer
|
|
2018 |
|
|
642,308 |
|
|
- |
|
|
2,821,494 |
|
|
599,124 |
|
|
830,000 |
|
|
168,870 |
|
|
36,277 |
|
|
5,098,072 |
| |||||||||
|
2017 |
|
|
496,154 |
|
|
- |
|
|
2,288,233 |
|
|
533,665 |
|
|
600,000 |
|
|
97,761 |
|
|
59,111 |
|
|
4,074,924 |
| ||||||||||
|
2016
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
| ||||||||||
Chad J. Zamarin SVP, Corporate Strategic Development
|
|
2018 |
|
|
537,692 |
|
|
- |
|
|
2,069,118 |
|
|
439,359 |
|
|
590,000 |
|
|
54,786 |
|
|
24,574 |
|
|
3,715,530 |
| |||||||||
|
2017 |
|
|
262,500 |
|
|
600,000 |
|
|
2,250,013 |
|
|
- |
|
|
254,000 |
|
|
- |
|
|
133,532 |
|
|
3,500,045 |
| ||||||||||
|
2016
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
| ||||||||||
John D. Chandler SVP, Chief Financial Officer
|
|
2018 |
|
|
537,692 |
|
|
- |
|
|
2,069,118 |
|
|
439,359 |
|
|
590,000 |
|
|
41,212 |
|
|
17,916 |
|
|
3,695,298 |
| |||||||||
|
2017 |
|
|
159,519 |
|
|
- |
|
|
500,008 |
|
|
- |
|
|
165,000 |
|
|
42,212 |
|
|
10,117 |
|
|
876,856 |
| ||||||||||
|
2016
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
| ||||||||||
James E. Scheel SVP, Northeast Gathering & Processing
|
|
2018 |
|
|
471,846 |
|
|
- |
|
|
1,316,681 |
|
|
279,595 |
|
|
455,000 |
|
|
- |
|
|
34,206 |
|
|
2,557,327 |
| |||||||||
|
2017 |
|
|
457,846 |
|
|
- |
|
|
2,658,770 |
|
|
291,402 |
|
|
435,000 |
|
|
250,660 |
|
|
47,864 |
|
|
4,141,542 |
| ||||||||||
|
2016
|
|
|
446,000
|
|
|
-
|
|
|
1,342,640
|
|
|
300,003
|
|
|
450,000
|
|
|
185,458
|
|
|
18,497
|
|
|
2,742,598
|
|
(1) | Bonus. Mr. Zamarin received a sign-on bonus in 2017 upon joining the Company. This award, and other elements of his pay package, were intended to address the significant retention that was in place with his previous employer. |
(2) | Stock Awards. Awards were granted under the terms of The Williams Companies, Inc. 2007 Incentive Plan (the 2007 Incentive Plan) and include time-based and performance-based RSUs. Amounts shown are the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The assumptions used to value the stock awards can be found in our Annual Report on Form 10-K for the year-ended December 31, 2018. |
The potential maximum values of the performance-based RSUs, subject to changes in performance outcomes, are as follows:
2018 Performance-based RSU Maximum Potential | ||
Alan S. Armstrong |
$9,180,286 | |
Micheal G. Dunn |
3,542,980 | |
Chad J. Zamarin |
2,598,212 | |
John D. Chandler |
2,598,212 | |
James E. Scheel |
1,653,377 |
(3) | Option Awards. Awards are granted under the terms of the 2007 Incentive Plan and include non-qualified stock options. Amounts shown are the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The assumptions used to value the option awards can be found in our Annual Report on Form 10-K for the year-ended December 31, 2018. |
(4) | Non-Equity Incentive Plan. The maximum annual incentive pool funding for NEOs is 200 percent of target. |
(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings. The amount shown is the aggregate change from December 31, 2017 to December 31, 2018 in the actuarial present value of the accrued benefit under the qualified pension and non-qualified plan. A portion of the increase in the change in present value is due to the higher |
The Williams Companies, Inc. 2019 Proxy Statement 57
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
discount rate used to measure these benefits at the end of 2018. The underlying design of these programs did not change from 2017 to 2018. Please refer to the Pension Benefits table for further details of the present value of the accrued benefit. Mr. Armstrong has a negative value of $89,689 and Mr. Scheel has a negative value of $25,027. Mr. Zamarin is an eligible participant in the plans, however he does not have the service required to be vested. |
(6) | All Other Compensation. Amounts shown represent payments made on behalf of the NEOs and include life insurance premiums, a 401(k) matching contribution, tax gross-ups on the imputed income related to spousal travel for business purposes, relocation benefits, and perquisites (if applicable). Perquisites may include financial planning services, mandated annual physical exams and personal use of the Company aircraft. If the NEO used the Company aircraft, the incremental cost method is used to calculate the value of the personal use of the Company aircraft. The incremental cost calculation includes items such as fuel, maintenance, weather and airport services, pilot meals, pilot overnight expenses, aircraft telephone, and catering. Imputed income associated with spousal travel for business purposes is grossed-up and reimbursed to the NEO for travel through August 8, 2018. The Board approved the elimination of the gross-up payment after this date. Amounts do not include arrangements that are generally available to our employees and do not discriminate in scope, terms or operations in favor of our NEOs, such as medical, dental, and disability programs. |
| Mr. Armstrong received 401(k) matching contributions in the amount of $13,215; reimbursement related to a mandated annual physical exam; imputed income on use of the Company aircraft; tax gross-up of $2,203 related to spousal travel for business purposes; and life insurance premiums. |
| Mr. Dunn received 401(k) matching contributions in the amount of $16,500; personal usage of a company aircraft in the amount of $14,073; imputed income on use of the Company aircraft; tax gross-up of $820 related to spousal travel for business purposes; and life insurance premiums. |
| Mr. Zamarin received 401(k) matching contributions in the amount of $16,500; reimbursement related to a mandated annual physical exam; imputed income on use of the Company aircraft; tax gross-up of $810 related to spousal travel for business purposes; and life insurance premiums. |
| Mr. Chandler received 401(k) matching contributions in the amount of $16,500 and life insurance premiums. |
| Mr. Scheel received 401(k) matching contributions in the amount of $16,500; reimbursement related to a mandated annual physical exam; personal usage of a company aircraft in the amount of $4,444; imputed income on use of the Company aircraft; reimbursement of financial planning services; and life insurance premiums. |
The Committee considers the compensation of CEOs from comparator companies when setting Mr. Armstrongs pay. It is the competitive norm for CEOs to be paid more than other NEOs. In addition, the Committee believes the difference in pay between the CEO and other NEOs is consistent with our compensation philosophy (summarized in the CD&A), which considers the external market and internal value of each job to the Company along with the incumbents experience and performance of the job in setting pay. The CEOs job is different from the other NEOs because the CEO has ultimate responsibility for performance results and is accountable to the Board and stockholders. Consequently, the Committee believes it is appropriate for the CEOs pay to be higher.
The Williams Companies, Inc. 2019 Proxy Statement 58
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
The following table sets forth certain information with respect to the grant of stock options, RSUs, and awards payable under the Companys annual cash incentive plan during the last fiscal year to the NEOs:
Name | Grant Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All Other Stock Awards: Number of Shares of Stock or Units(3) |
All Other Option Awards: Number of Securities Underlying Options(4) |
Exercise or Base Price of Option Awards |
Grant Date Fair Value of Stock and Option Awards |
|||||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||||||||||
Armstrong |
|
2/20/2018 |
|
$ |
- |
|
$ |
1,480,769 |
|
$ |
2,961,538 |
|
|
231,356 |
|
$ |
29.09 |
|
$ |
1,270,144 |
| |||||||||||||||||||||||
|
2/20/2018 |
|
|
- |
|
|
139,011 |
|
|
278,022 |
|
|
4,590,143 |
| ||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
54,658 |
|
|
1,590,001 |
| ||||||||||||||||||||||||||||||||||||
Dunn |
|
2/20/2018 |
|
|
- |
|
|
578,077 |
|
|
1,156,154 |
|
|
109,130 |
|
|
29.09 |
|
|
599,124 |
| |||||||||||||||||||||||
|
2/20/2018 |
|
|
- |
|
|
53,649 |
|
|
107,298 |
|
|
1,771,490 |
| ||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
36,095 |
|
|
1,050,004 |
| ||||||||||||||||||||||||||||||||||||
Zamarin |
|
2/20/2018 |
|
|
- |
|
|
403,269 |
|
|
806,538 |
|
|
80,029 |
|
|
29.09 |
|
|
439,359 |
| |||||||||||||||||||||||
|
2/20/2018 |
|
|
- |
|
|
39,343 |
|
|
78,686 |
|
|
1,299,106 |
| ||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
26,470 |
|
|
770,012 |
| ||||||||||||||||||||||||||||||||||||
Chandler |
|
2/20/2018 |
|
|
- |
|
|
430,154 |
|
|
860,308 |
|
|
80,029 |
|
|
29.09 |
|
|
439,359 |
| |||||||||||||||||||||||
|
2/20/2018 |
|
|
- |
|
|
39,343 |
|
|
78,686 |
|
|
1,299,106 |
| ||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
26,470 |
|
|
770,012 |
| ||||||||||||||||||||||||||||||||||||
Scheel |
|
2/20/2018 |
|
|
- |
|
|
330,292 |
|
|
660,584 |
|
|
50,928 |
|
|
29.09 |
|
|
279,595 |
| |||||||||||||||||||||||
|
2/20/2018 |
|
|
- |
|
|
25,036 |
|
|
50,072 |
|
|
826,689 |
| ||||||||||||||||||||||||||||||
|
2/20/2018 |
|
|
16,844 |
|
|
489,992 |
|
Note: Information provided is as of the close of market on December 31, 2018.
(1) | Non-Equity Incentive Awards. Awards from the 2018 AIP are shown. |
| Threshold: At threshold, the 2018 AIP awards are zero. |
| Target: The amount shown is based upon a business performance attainment of 100 percent. |
| Maximum: The maximum amount the NEOs can receive is 200 percent of their AIP target. |
(2) | Represents performance-based RSUs granted in February 2018 under the 2007 Incentive Plan. Performance-based RSUs can be earned over a three year period only if the established performance target is met and the NEO is employed on the certification date, subject to certain exceptions such as the executives death, disability, or retirement. Under any circumstances, these shares will be distributed no earlier than the third anniversary of the grant other than due to a termination upon a change in control. If performance plan goals are exceeded, the NEO can receive up to 200 percent of target. If plan threshold goals are not met, the NEOs awards are cancelled in their entirety. |
(3) | Represents time-based RSUs granted under the 2007 Incentive Plan. Time-based units vest 36 months from the respective grant date. |
(4) | Represents stock options granted under the 2007 Incentive Plan. Stock options granted in 2018 become exercisable in three equal annual installments. One-third of the options vested one year from the grant date, another one-third will vest two years from the grant date, with the final one-third vesting three years from the grant date. Once vested, stock options are exercisable for a period of up to ten years from the grant date. |
The Williams Companies, Inc. 2019 Proxy Statement 59
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
The following table sets forth certain information with respect to the outstanding equity awards held by the NEOs at the end of 2018:
Option Awards |
Stock Awards |
|||||||||||||||||||||||||||||||||||||||
Name
|
Grant Date(1)
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
|
Option Exercise Price
|
Expiration Date
|
Grant Date
|
Number of Shares or Units of Stock That Have Not Vested
|
Market Value of Shares or Units of Stock That Have Not Vested
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units of Stock 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(4)
|
|||||||||||||||||||||||||||||
Armstrong |
2/20/2018 | - | 231,356 | - | $ | 29.09 | 2/20/2028 | 2/20/2018 (2) | - | - | 54,658 | $ | 1,205,209 | |||||||||||||||||||||||||||
2/21/2017 | 62,978 | 125,957 | - | 28.87 | 2/21/2027 | 2/20/2018 (3) | - | - | 139,011 | 3,065,193 | ||||||||||||||||||||||||||||||
8/4/2016 | 97,046 | 48,524 | - | 24.98 | 8/4/2026 | 2/21/2017 (2) | - | - | 51,957 | 1,145,652 | ||||||||||||||||||||||||||||||
2/23/2015 | 153,177 | - | - | 49.15 | 2/23/2025 | 2/21/2017 (3) | - | - | 130,151 | 2,869,830 | ||||||||||||||||||||||||||||||
2/24/2014 | 133,080 | - | - | 41.77 | 2/24/2024 | 8/4/2016 (2) | - | - | 57,546 | 1,268,889 | ||||||||||||||||||||||||||||||
2/25/2013 | 147,545 | - | - | 33.57 | 2/25/2023 | 8/4/2016 (3) | - | - | 137,500 | 3,031,875 | ||||||||||||||||||||||||||||||
2/27/2012 | 159,681 | - | - | 29.11 | 2/27/2022 | |||||||||||||||||||||||||||||||||||
2/24/2011 | 72,486 | - | - | 24.21 | 2/24/2021 | |||||||||||||||||||||||||||||||||||
2/23/2010 | 60,646 | - | - | 17.28 | 2/23/2020 | |||||||||||||||||||||||||||||||||||
2/23/2009
|
|
98,587
|
|
|
-
|
|
|
-
|
|
|
8.85
|
|
2/23/2019
|
|||||||||||||||||||||||||||
Dunn |
2/20/2018 | - | 109,130 | - | 29.09 | 2/20/2028 | 2/20/2018 (2) | - | - | 36,095 | 795,895 | |||||||||||||||||||||||||||||
2/27/2017 | 26,912 | 53,824 | - | 28.15 | 2/27/2027 | 2/20/2018 (3) | - | - | 53,649 | 1,182,960 | ||||||||||||||||||||||||||||||
2/27/2017 (2) | - | - | 31,083 | 685,380 | ||||||||||||||||||||||||||||||||||||
2/27/2017 (3)
|
|
-
|
|
|
-
|
|
|
45,677
|
|
|
1,007,178
|
| ||||||||||||||||||||||||||||
Zamarin |
2/20/2018 | - | 80,029 | - | 29.09 | 2/20/2028 | 2/20/2018 (2) | - | - | 26,470 | 583,664 | |||||||||||||||||||||||||||||
2/20/2018 (3) | - | - | 39,343 | 867,513 | ||||||||||||||||||||||||||||||||||||
6/26/2017 (2)
|
|
-
|
|
|
-
|
|
|
77,667
|
|
|
1,712,557
|
| ||||||||||||||||||||||||||||
Chandler |
2/20/2018 | - | 80,029 | - | 29.09 | 2/20/2028 | 2/20/2018 (2) | - | - | 26,470 | 583,664 | |||||||||||||||||||||||||||||
2/20/2018 (3) | - | - | 39,343 | 867,513 | ||||||||||||||||||||||||||||||||||||
9/5/2017 (2)
|
|
-
|
|
|
-
|
|
|
16,584
|
|
|
365,677
|
| ||||||||||||||||||||||||||||
Scheel |
2/20/2018 | - | 50,928 | - | 29.09 | 2/20/2028 | 2/20/2018 (2) | - | - | 16,844 | 371,410 | |||||||||||||||||||||||||||||
2/21/2017 | 14,695 | 29,390 | - | 28.87 | 2/21/2027 | 2/20/2018 (3) | - | - | 25,036 | 552,044 | ||||||||||||||||||||||||||||||
8/4/2016 | 25,316 | 12,659 | - | 24.98 | 8/4/2026 | 2/21/2017 (2) | - | - | 16,973 | 374,255 | ||||||||||||||||||||||||||||||
2/23/2015 | 37,295 | - | - | 49.15 | 2/23/2025 | 2/21/2017 (2) | - | - | 48,493 | 1,069,271 | ||||||||||||||||||||||||||||||
2/24/2014 | 30,418 | - | - | 41.77 | 2/24/2024 | 2/21/2017 (3) | - | - | 24,847 | 547,876 | ||||||||||||||||||||||||||||||
2/25/2013 | 43,487 | - | - | 33.57 | 2/25/2023 | 8/4/2016 (2) | - | - | 21,017 | 463,425 | ||||||||||||||||||||||||||||||
2/27/2012
|
|
59,880
|
|
|
-
|
|
|
-
|
|
|
29.11
|
|
2/27/2022
|
8/4/2016 (3)
|
|
-
|
|
|
-
|
|
|
29,348
|
|
|
647,123
|
|
Note: Information provided is as of the close of market on December 31, 2018.
Option Awards
(1) | The following table reflects the vesting schedules for associated stock option grant dates for awards that were not 100 percent vested as of December 31, 2018: |
Grant Date | Vesting Dates | |
2/20/2018 |
2/20/2019, 2/20/2020, 2/20/2021 | |
2/21/2017 |
2/21/2018, 2/21/2019, 2/21/2020 | |
8/4/2016 |
2/22/2017, 2/22/2018, 2/22/2019 |
Mr. Dunns February 27, 2017 stock option award will vest in one-third increments on February 27, 2018, February 27, 2019, and February 27, 2020.
The Williams Companies, Inc. 2019 Proxy Statement 60
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
Stock Awards
(2) | The following table reflects the vesting dates for associated time-based RSU award grant dates: |
Grant Date |
Vesting Dates | |
2/20/2018 |
2/20/2021 | |
2/21/2017 |
2/21/2020 | |
8/4/2016 |
2/22/2019 |
The August 4, 2016 award vests approximately 30 months from the grant date on February 22, 2019. Time-based RSUs normally have a 36 month vesting term. This grant practice was adjusted with the August 2016 award because the ETE merger agreement prohibited us from granting equity awards during our normal February cycle. By applying a 30 month vesting period to our August award, we were able to maintain our traditional annual vesting cycle of February each year. (See Grant Practices above.)
Mr. Chandlers September 5, 2017 time-based RSU award will fully vest in three years on September 5, 2020.
Mr. Dunns February 27, 2017 time-based RSU award will fully vest in three years on February 27, 2020.
Mr. Zamarins June 26, 2017 time-based RSU award will fully vest in three years on June 26, 2020.
(3) | All performance-based RSUs are subject to attainment of performance targets established by the Committee. These awards will vest no earlier than three years from the date of grant with the exception of the August 4, 2016 award. The August 2016 award vests approximately 30 months from the grant date on February 22, 2019. Performance-based RSUs normally have a 36 month vesting term. This grant practice was adjusted with the August 2016 award because the ETE merger agreement prohibited us from granting equity awards during our normal February cycle. By applying a 30 month vesting period to our August award, we were able to maintain our traditional annual vesting cycle of February each year. (See Grant Practices above.) The awards included on the table are outstanding as of December 31, 2018. While the full award for the 2016 performance-based RSUs are shown on the table, these awards did not meet established target level performance requirements and 31.8% of the granted awards vested and were distributed in 2019. The unearned RSUs were cancelled and returned to the Plan. |
(4) | Values are based on a closing stock price of $22.05 on December 31, 2018. |
Option Exercises and Stock Vested
The following table sets forth certain information with respect to options exercised by the NEO and stock that vested during fiscal year 2018:
Option Awards |
Stock Awards |
|||||||||||||||
Name
|
Number of Shares
|
Value Realized on
|
Number of Shares
|
Value Realized on
|
||||||||||||
Alan S. Armstrong |
|
10,000 |
|
$ |
165,750 |
|
|
29,247 |
|
$ |
840,559 |
| ||||
Micheal G. Dunn |
|
- |
|
|
- |
|
|
- |
|
|
- |
| ||||
Chad J. Zamarin |
|
- |
|
|
- |
|
|
- |
|
|
- |
| ||||
John D. Chandler |
|
- |
|
|
- |
|
|
- |
|
|
- |
| ||||
James E. Scheel |
|
- |
|
|
- |
|
|
9,969 |
|
|
286,509 |
|
The retirement plan for the Companys executives consists of two plans: the pension plan and the retirement restoration plan as described below. Together these plans generally provide the same level of benefits to our executives as the pension plan provides to all other employees of the Company. The retirement restoration plan was implemented to address the annual compensation limit of the Internal Revenue Code.
The Williams Companies, Inc. 2019 Proxy Statement 61
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
Our executives who have completed one year of service participate in our pension plan on the same terms as our other employees. Our pension plan is a noncontributory, tax qualified defined benefit plan (with a cash balance design) subject to the Employee Retirement Income Security Act of 1974, as amended.
Each year, participants earn compensation credits that are posted to their cash balance account. The annual compensation credits are equal to the sum of a percentage of eligible pay (base pay and certain bonuses) and a percentage of eligible pay greater than the social security wage base. The percentage credited is based upon the participants age as shown in the following table:
Age
|
Percentage of Eligible Pay
|
Percent of Eligible Pay Greater than the
| ||||
Less than 30 |
4.5% |
+ |
From 1% to 1.2% | |||
30-39 |
6% |
+ |
2% | |||
40-49 |
8% |
+ |
3% | |||
50 or over |
10% |
+ |
5% |
For participants who were active employees and participants under the plan on March 31, 1998 and April 1, 1998, the percentage of eligible pay is increased by 0.3 percent multiplied by the participants total years of benefit service earned as of March 31, 1998.
In addition, interest is credited to account balances quarterly at a rate determined annually in accordance with the terms of the plan.
While a lump-sum benefit is also available, the monthly annuity available to those who take normal retirement is based on the participants account balance as of the date of retirement. Normal retirement age is 65. Early retirement eligibility begins at age 55. At retirement, participants may choose to receive a single-life annuity (for single participants), a qualified joint and survivor annuity (for married participants), or they may choose one of several other forms of payment having an actuarial value equal to that of the relevant annuity.
The Internal Revenue Code limits pension benefits, based on the annual compensation limit, which can be accrued in tax-qualified defined benefit plans, such as our pension plan. The annual compensation limit in 2018 was $275,000. Any reduction in an executives pension benefit accrual due to these limits will be compensated, subject to a cap, under an unfunded top hat plan our retirement restoration plan.
The elements of compensation that are included in applying the payment and benefit formula for the retirement restoration plan are the same elements that are used, except for application of a cap, in the base pension plan for all employees. The elements of pay included in that definition are total base pay, including any overtime, base pay-reduction amounts, and cash bonus awards, if paid (unless specifically excluded under a written bonus or incentive-pay arrangement). Specifically excluded from the definition are severance pay, cost-of-living pay, housing pay, relocation pay (including mortgage interest differential), taxable and non-taxable fringe benefits, and all other extraordinary pay, including any amounts received from equity compensation awards.
With respect to bonuses, annual cash incentives are considered in determining eligible pay under the pension plan. Long-term equity compensation incentives are not considered.
The Williams Companies, Inc. 2019 Proxy Statement 62
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
The following table sets forth certain information with respect to the actuarial present value of the accrued benefit as of December 31, 2018 under the qualified pension plan and retirement restoration plan. Each NEO, with the exception of Mr. Zamarin, is fully vested in the benefits.
Name
|
Plan Name
|
Number of Years
|
Present Value of
|
Payments During
| ||||||||||||||||
Alan S. Armstrong |
Pension Plan |
|
33 |
$ |
851,472 |
|
- |
|||||||||||||
Retirement Restoration Plan |
|
33 |
|
4,126,171 |
|
- |
||||||||||||||
Micheal G. Dunn (2) |
Pension Plan |
|
16 |
|
177,465 |
|
- |
|||||||||||||
Retirement Restoration Plan |
|
16 |
|
196,548 |
|
- |
||||||||||||||
Chad J. Zamarin (3) |
Pension Plan |
|
2 |
|
45,890 |
|
- |
|||||||||||||
Retirement Restoration Plan |
|
2 |
|
116,387 |
|
- |
||||||||||||||
John D. Chandler (2) |
Pension Plan |
|
7 |
|
162,454 |
|
- |
|||||||||||||
Retirement Restoration Plan |
|
7 |
|
51,954 |
|
- |
||||||||||||||
James E. Scheel |
Pension Plan |
|
30 |
|
718,335 |
|
- |
|||||||||||||
Retirement Restoration Plan |
|
30 |
|
533,379 |
|
- |
(1) | The primary actuarial assumptions used to determine the present values include an annual interest credit to normal retirement age equal to 4.25 percent and a discount rate equal to 4.39 percent for the pension plan and a discount rate equal to 4.13 percent for the retirement restoration plan. |
(2) | As former employees, Mr. Chandler and Mr. Dunn have prior years of vesting service under the plans. |
(3) | Mr. Zamarin is an eligible participant in the plans, however he does not have the service required to be vested. |
Nonqualified Deferred Compensation
We do not provide other nonqualified deferred compensation for any of our NEOs or other employees.
We have entered into change in control agreements with each of our NEOs to facilitate continuity of management if there is a change in control of the Company.
On February 1, 2018, our NEOs, as well as other officers with a Change in Control Agreement, received a one-year notice informing the recipient that their current Agreement would terminate on February 1, 2019. This one year notice of termination is required under the Agreement. A revised agreement was provided and was effective for existing officers in February 2019. Among other changes to the language, the new agreement will remove the retirement restoration plan component from the cash severance calculation. Additionally, the new agreement will change the COBRA coverage benefit to a cash benefit.
If during the term of a change in control agreement, a change in control occurs and (i) the employment of any NEO is terminated other than for cause, disability, death, or a disqualification disaggregation, or (ii) a NEO resigns for good reason, such NEO is entitled to the following:
| Within ten business days after the termination date: |
| Accrued but unpaid base salary, accrued earned but unpaid cash incentive, accrued but unpaid paid time off, and any other amounts or benefits due but not paid (lump sum payment). |
| On the first business day following six months after the termination date: |
| Prorated annual cash incentive for the year of separation through the termination date (lump sum payment); |
The Williams Companies, Inc. 2019 Proxy Statement 63
EXECUTIVE COMPENSATION & OTHER INFORMATION
|
| A severance amount equal to three times the sum of his or her base salary and annual cash incentive amount for executive officers, as of the termination date (lump sum payment). The annual cash incentive amount is equal to his or her target percentage multiplied by his or her base salary in effect at the termination date as if performance goals were achieved at 100 percent; |
| An amount equal to three times for executive officers, the total allocations made by Williams for the NEO in the preceding calendar year under our retirement restoration plan (lump sum payment); and |
| An amount equal to the sum of the value of the unvested portion of the NEOs accounts or accrued benefits under the Companys 401(k) plan that would have otherwise been forfeited (lump sum payment). |
| Continued participation in the Companys medical benefit plans for so long as the NEO elects coverage or 18 months from the termination, whichever is less, in the same manner and at the same cost as similarly situated active employees; |
| All restrictions on stock options held by the NEO will lapse and the options will vest and become immediately exercisable; |
| All RSUs will vest and will be paid out only in accordance with the terms of the respective award agreements; |
| Continued participation in the Companys directors and officers liability insurance for six-years or any longer known applicable statute of limitations period; |
| Indemnification as set forth under the Companys By-laws; and |
| Outplacement benefits for six months at a cost not exceeding $25,000 per NEO. |
We provide a best net provision providing our NEOs with the better of their after-tax benefit capped at the safe harbor amount or their benefit paid in full, subjecting them to possible excise tax payments. If a NEOs employment is terminated for cause during the period beginning upon a change of control and continuing for two-years or until the termination of the agreement, whichever happens first, the NEO is entitled to accrued but unpaid base salary, accrued earned but unpaid cash incentive, accrued but unpaid paid time off, and any other amounts or benefits due but not paid (lump sum payment).
The agreements with our NEOs use the following definitions:
Cause means a NEOs:
| Conviction of or a plea of nolo contendere to a felony or a crime involving fraud, dishonesty, or moral turpitude; |
| Willful or reckless material misconduct in the performance of his or her duties that has an adverse effect on Williams or any of its subsidiaries or affiliates; |
| Willful or reckless violation or disregard of the Code of Business Conduct of Williams or the policies of Williams or its subsidiaries; or |
|