SUMMARY OF CHEVRON INCENTIVE PLAN AWARD CRITERIA
EX-10.5 2 cvx12312014ex105cipformula.htm EXHIBIT 10.5 CVX 12.31.2014 EX 10.5 CIP Formula
Exhibit 10.5
SUMMARY OF CHEVRON INCENTIVE PLAN AWARD CRITERIA
The Chevron Incentive Plan (CIP) is designed to recognize annual performance achievements. Annual operating and financial results figure prominently into this assessment, along with demonstrated progress on key business initiatives. Individual leadership is also recognized through this award. The award is delivered as an annual cash bonus based on a percentage of each participant’s base salary. Participants include Chevron’s named executive officers (NEOs). The CIP award calculation is consistent for all CIP-eligible Chevron employees, with the award target varying by pay grade. The award is calculated as follows:
Base Salary | X | CIP Award Target | X | Corporate Performance Rating | X | Individual Performance Modifier |
CIP Award Target. Before the beginning of each performance year, the Management Compensation Committee (MCC) establishes a CIP Award Target for each NEO, which is based on a percentage of the NEO’s base salary. The MCC sets target awards based on the median award of our Oil Industry Peer Group (Anadarko Petroleum, BP, ConocoPhillips, Devon Energy, Exxon Mobil, Hess, Marathon Oil, Marathon Petroleum, Occidental Petroleum, Phillips 66, Royal Dutch Shell, Tesoro and Valero Energy). All individuals in the same salary grade have the same target, which provides internal equity and consistency.
Corporate Performance Rating. After the end of the performance year, the MCC sets the Corporate Performance Rating. This rating reflects the MCC’s overall assessment of the Company’s performance for that year, based on a range of measures used to evaluate performance against plan in four broad categories: financial; health, environment and safety; operating performance; milestones and commercial. The MCC has discretion on weighting the categories and on weighting the measures within each category. Performance is viewed across multiple parameters (absolute results; results versus plan; results versus Oil Industry Peer Group and/or general industry; performance trends over time) and distinctions are made between the controllable and noncontrollable aspects of the measures. With these measures as the foundation, the MCC exercises its discretion in setting the Corporate Performance Rating. The minimum Corporate Performance Rating is zero and the maximum is 200 percent.
Individual Performance Modifier. The MCC also takes into account individual performance. This is largely a personal leadership dimension, recognizing the individual effort and initiative expended and demonstrated progress on key business initiatives during the course of the year. The MCC uses its judgment in analyzing the individual performance of each NEO, his or her enterprise and business segment leadership, and how the business units reporting to the NEO performed. Chevron’s chief executive officer makes recommendations to the MCC as to the Individual Performance Modifier of each of our other NEOs.
Additional information concerning the CIP and annual CIP awards for each of Chevron’s NEOs can be found in Chevron’s annual Proxy Statement.
