Hess Executive Comp 2011
|Sector||Oil and Gas|
|Resolved Clause Summary||Executive compensation linked to ESG|
|Status||Withdrawn; Company will address|
RESOLVED: The shareholders of Hess Corporation 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 Hess’s long-term financial growth.
An important element of senior executive compensation is incentive compensation, including both annual cash bonuses and long-term incentive awards. These awards are the predominant form of compensation for Hess senior executives. According to last year’s proxy statement, total incentive compensation (bonuses and long- term pay) was 89% of the Chairman and CEO’s total compensation and 78%-88% of the total compensation for
the other four senior executives in that year.
Considering the significance that incentive pay plays in Hess’s overall 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 can 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 incorporating metrics that promote sustainable value creation and reduce negative environmental impacts.
Hess’s compensation policy mentions only one such metric (safety) as a factor that may affect annual cash bonuses; there is no reference to any such metrics in determining long-term incentive pay. In our view incentive compensation should focus more broadly on non-financial metrics.
We believe that the need for a broader policy is highlighted by BP’s 2010 Deepwater Horizon oil spill, which caused significant losses to BP shareholders, as well as to the environment, communities and businesses that otherwise may have had little contact with BP.
We thus agree with the comments in Hess’s 2009 Corporate Social Responsibility Report where Chairman and CEO John B. Hess stated that “significant improvements in deepwater drilling standards and oil response are required” and that “we and our industry need to do all we can to learn from this disaster and to take the necessary precautions to ensure such a tragedy never happens again.”
This facet of operations is an important element of achieving what Mr. Hess called “our strategy of sustainable growth.” Revenues from Hess’s deepwater drilling operations accounted for 11% of revenues in 2009. In addition, Hess recorded an average of 128 oil spills annually from 2007-09.
Integrating sustainability factors into senior executive incentive compensation is a way to address sustainability concerns. We note that guidance in determining the appropriate factors is available from various sources, including the Global Reporting Institute (www.globalreporting.org), which focuses on six broad areas (direct economic impacts, environmental, labor practices, human rights, society, and product responsibility).
We urge you to vote FOR this proposal.