Marathon Oil Executive Comp 2011
|Company||Marathon Oil Corporation|
|Sector||Oil and Gas|
|Resolved Clause Summary||Executive compensation linked to ESG|
|Status||Withdrawn; Company will address|
RESOLVED: The shareholders of Marathon Oil (“Marathon” 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 the long-term financial growth of the Company.
An important element of senior executive compensation is incentive compensation, including both annual cash bonuses and long-term incentive awards (such as performance units). These awards are the predominant form of compensation for Marathon’s senior executives. According to last year’s proxy statement, total variable compensation (bonuses and long-term pay) was intended to be 87% of the CEO’s total compensation and 81% of the total compensation of the other four senior executives in that year.
Considering the significance that incentive compensation plays in Marathon’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.
Marathon’s compensation policy appears to include only one such metric for annual cash bonuses, i.e., OSHA’s “recordable incident rate,” and no such metrics for long-term incentive pay. In our view incentive compensation should focus more broadly on non-financial metrics.
In Marathon’s 2009 Corporate Social Responsibility Report CEO Clarence P. Cazelot, Jr. stated “Increasingly, Marathon’s operational success depends on addressing stakeholder concerns related to non-financial issues.” We agree and believe that sustainability considerations are particularly significant for an oil company such as Marathon. The risks associated with oil exploration and production were demonstrated by BP’s 2010 Deepwater Horizon oil spill, which caused significant losses to BP shareholders, as well as the environment and communities and businesses that otherwise may have had little direct contact with BP. Other hazards can do significant damage as well.
Marathon’s 2009 CSR Report noted that the number of Marathon’s oil spills in 2009 was roughly double the number of spills in each of the three prior years. The volume of oil spilled in 2009 declined from a high in 2008, but the 2009 volume was still higher than in each year from 2005 to 2007.
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.