Halliburton Co. shareholders have rejected for the first time an executive compensation plan that management had touted to line up with company returns and retain key employees.
In a tally at the annual shareholder meeting, close to 364 million votes were opposed to the nonbinding advisory item, and nearly 270 million were in favor of the proposed plan, according to a filing with the Securities and Exchange Commission.
“We are disappointed that our advisory resolution on executive compensation did not pass this year, but look forward to continuing our active engagement with our stockholders concerning our compensation program and other matters,” management said in response.
“Our board of directors has structured our program to align executive compensation with the creation of shareholder returns, which have exceeded our peers over the last one-, three- and five-year periods and to attract, motivate, and retain executives, which is especially important during a CEO transition period. This is the first time our annual executive compensation proposal has not passed.”
Executive Chairman Dave Lesar retired last year as CEO, and Jeff Miller was appointed to succeed him. Lesar is stepping down from all duties at the end of this year.
In the proxy statement to shareholders issued earlier this year to detail the compensation plan, Halliburton said as Miller and Lesar transitioned into their responsibilities, “the board recognized the need to keep our management team focused and stable, especially given that other oilfield services companies have aggressively recruited our named executive officers (NEO) and other executives in the past.
“In fact, over 25 of our former executives have departed to become CEOs and/or senior executives of other oilfield services companies.”
Among the key executives no longer with Halliburton is Mark McCollum, who last year became CEO of Weatherford International plc.
The board said it had “entered into new employment agreements with our NEOs that contain more restrictive noncompete and nonsolicitation provisions and provide restricted stock grants to ensure the NEOs continued service to the company.”
The updated employment agreements include a list of oilfield service companies and geographies in which current executives may not work for a specific period.
For example, Miller’s new noncompete agreement was doubled to four years. Lesar, who did not have a noncompete agreement, had his contract renegotiated and he now has a four-year noncompete agreement. Jim Brown, president of western hemisphere operations, has a three-year noncompete agreement; he previously did not have one.
Halliburton had received 66% approval for the 2017 compensation plan, which it said at the time was “lower than we would have preferred,” according to the proxy.