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Cabot Oil & Gas Executive Comp 2012

RESOLVED: The shareholders of Cabot Oil & Gas Corporation (“Cabot” or the “Company”) ask the board of directors to adopt a policy that incentive compensation for senior executives should include a range of non-financial measures based on sustainability principles and reducing any negative environmental impacts related to Company operations. For purposes of this resolution, “sustainability” refers to the methods by which environmental, social and economic considerations are integrated into long-term corporate strategy.
As shareholders, we support executive compensation policies that motivate and reward senior executives for actions that contribute to a company’s long-term growth.
An important element of senior executive compensation is incentive compensation, including both annual cash bonuses and long-term incentive awards. At-risk pay is the predominant form of compensation for Cabot’s senior executives. According to last year’s proxy statement, such pay comprised 67% to 89% of the total compensation for the five most senior executives that year.
Considering the significance of incentive pay in Cabot’s compensation policies, we believe it is important for the board of directors to ensure that compensation incentives are aligned with business strategies for creating sustainable, long-term shareholder value and mitigating risks that could have a detrimental impact on value creation. Accordingly, we believe the board should consider and disclose a variety of factors in determining incentive pay, including metrics that promote sustainable value creation and reduce negative environmental impacts.
Although Cabot’s board has a Safety and Environmental Affairs Committee, the 2010 proxy does not indicate that safety and environmental factors enter into the board’s deliberations on executive compensation. Indeed, that proxy statement indicates that at-risk compensation focuses on financial and operating goals and total shareholder return. In contrast, approximately two-thirds of the 42 energy firms in the S&P 500 index reference non-financial factors, such as environmental performance and worker safety, in their 2010 proxies.
We believe that the need for a greater emphasis on sustainability factors in incentive pay is illustrated by BP’s 2010 Deepwater Horizon oil spill, where a single incident caused significant losses to shareholders.
We believe that Cabot’s operations are vulnerable to environmental risks, as illustrated by the recent history of regulatory action, fines, and disruptions to its business operations due to environmental incidents. We note the statement in Cabot’s 2010 annual report that its transition zone and shallow-water areas of the Gulf Coast are “ecologically sensitive.” Moreover, various spills, leaks and water contamination involving Cabot’s Dimock gas wells led to a 2010 consent decree with the State of Pennsylvania under which the Company agreed to cap three wells and pay fines. One media report described the settlement as “among the most punitive in Pennsylvania’s history.” Later that year Cabot entered into a superseding global settlement with the State under which Cabot would pay $4.2 million to certain affected households, plus $500,000 to cover the State’s costs in pursuing the matter, and would remediate two wells.
We urge you to vote FOR this proposal.