The company’s incentive share units give the recipient a rightper unit or elect to receive
the cash
equalpayment for all units to
be exercised. The choice of which vesting period to use will be at the
amount by which the market pricediscretion of the
company’s common shares atcompany. Effective May 1, 2008, the
time ofrestricted stock unit plan was further amended to set out which amendments in the future will require shareholder approval, and which amendments will only require director approval and to set an exercise
exceedsprice based on the
issue price of the units. These units were granted prior to 2002. The issue price of the units granted to executives was the closingweighted average price of the company’s shares on the
Toronto Stock Exchangeexercise date and the four consecutive trading days immediately prior to the exercise date. Shareholder approval for these changes was received on May 1, 2008.In respect of restricted stock units granted in 2008:
to the chairman, president and chief executive officer:
50 percent of each grant is exercisable on the fifth anniversary of the date of grant; and
the balance is exercisable on the later of the tenth anniversary of the date of grant date. Incentive shareor the date of retirement; and
to all other senior executives:
50 percent of each grant is exercisable on the third anniversary of the date of grant; and
the balance is exercisable on the seventh anniversary of the date of grant.
The long vesting periods, which are longer than those in use by many other companies, reinforce the company’s focus on growing shareholder value over the long term by subjecting a large percentage of executive compensation and the personal net worth of senior executives to the long term return on the company’s stock realized by shareholders. The vesting period for restricted stock unit awards is not subject to acceleration, except in the case of death.
Forfeiture Risk
Restricted stock units are eligible for exercise upsubject to 10 years from issuance.forfeiture if:
A recipient retires or terminates employment with the company. The company has indicated its intention not to forfeit restricted stock units of employees who retire at age 65. In other circumstances, where a recipient retires or terminates employment, the company may determine that restricted stock units shall not be forfeited.
During employment or during the period of 24 months after the termination of employment, the recipient, without the consent of the company, engaged in any business that was in competition with the company or otherwise engaged in any activity that was detrimental to the company.
Deferred Share Units
In 1998, an additional form of long-term incentive compensation (“deferred share units”) was made available to nonemployee directors (as described on pages 50 through 51) and to selected executives and nonemployee directors whose decisions are considered to have a direct effect on the long term financial performance of the company. TheyThe selected executives can elect to receive all or part of their cash bonus compensation in the form of such units. The number of units granted to an executive is determined by dividing the amount of the executive’s bonus elected to be received as deferred share units by the average of the closing prices of the company’s shares on the Toronto Stock Exchange for the five consecutive trading days (“average closing price”) immediately prior to the date that the bonus would have been paid to the executive. Additional units will be granted to recipients of these units, in respect of unexercised units, based on the cash dividend payable on the company shares divided by the average closing price immediately prior to the payment date for that dividend and multiplying the resulting number by the number of deferred share units held by the recipient.
An executive may not exercise these units until after termination of employment with the company and must exercise the units no later than December 31 of the year following termination of employment with the company. The units held must all be exercised on the same date. On the date of exercise, the cash value to be received for the units will be determined by multiplying the number of units exercised by the average closing price immediately prior to the date of exercise. In 2007,2008, no executive elected to receive deferred share units.
The deferred share unit plan was amended on November 20, 2008 to provide that for U.S. taxpayers, subject to the United States Internal Revenue Code, Section 409A, for units earned after December 31, 2004, the exercise date must not be later than five months after the date of termination of employment and the date for the cash payment from the plan will be six months after the date of termination of employment.
Retirement Benefits
Named executive officers participate in the same pension plan, including supplemental retirement income provisions, as other employees. B.H. March, R.L. Broiles and C.W. Erickson participate in the Exxon Mobil Corporation pension plans (both tax-qualified and nonqualified).
Pension Plan Benefits
The following table sets forth the estimated annual benefits that would be payable to each named executive officer of the company upon retirement under the company’s pension plan and supplemental retirement income provisions and Exxon Mobil Corporation’s tax qualified and non-qualified pension plans, and the change in the accrued obligation for each named executive officer of the company in 2008.
| | | | | | | | | | | | | | |
| | | | | | | |
| Name | | Number of years credited service December 31, 2008 (#) | | Annual benefits payable ($) | | Accrued
obligation
at start of
year ($) (5) | | Compensatory
change ($) (6) | | Non-compensatory
change ($) (7) | | Accrued
obligation
at year end ($) (8) |
| | | At year end (3) | | At age
65 (4) | | | | |
B.H. March(1) | | – | | – | | – | | – | | – | | – | | – |
P.A. Smith(2) | | 28.9 | | 365,100 | | 482,800 | | 3,624,900 | | (13,100) | | (573,100) | | 3,038,700 |
R.L. Broiles(1) | | – | | – | | – | | – | | – | | – | | – |
C.W. Erickson(1) | | – | | – | | – | | – | | – | | – | | – |
S.M. Smith(2) | | 27.1 | | 308,200 | | 464,800 | | 2,752,100 | | 350,200 | | (591,900) | | 2,510,400 |
T.J. Hearn (2) (9) (retired from the company on
March 31, 2008) | | 41.6 | | 97,200 | | 97,200 | | 24,482,600 | | 124,200 | | (23,586,200) | | 1,020,600 |
| (1) | Member of the Exxon Mobil Corporation pension plans, including tax qualified and non-qualified plans. As of December 31, 2008, B.H. March had 28.5 years of credited service, R.L. Broiles had 29.6 years and C.W. Erickson had 27.5 years. All amounts referenced were converted from U.S. dollars to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (2) | Member of the company pension plan as supplemented by payments from the company. |
| (3) | For members of the company pension plan, the annual benefits include the amount of the accrued annual lifetime pension from the company’s registered pension plan and supplemented by payments from the company. For members of the Exxon Mobil Corporation pension plans, the annual benefits include the accrued annual lifetime pension from the Exxon Mobil Corporation tax qualified plan and the accrued annual amount calculated under the Exxon Mobil Corporation non-qualified plan. Non-qualified plan benefits are payable only as a lump sum equivalent upon retirement. For B.H. March, this value was $379,281, for R.L. Broiles, this value was $331,911 and for C.W. Erickson, this value was $311,141. |
| (4) | For members of the company pension plan, the annual benefits include the amount of the accrued annual lifetime pension from the company’s registered pension plan and supplemented by payments from the company that would be earned to age 65 assuming final average earnings as at December 31, 2008. For members of the Exxon Mobil Corporation pension plan, the annual benefits include the annual lifetime pension from Exxon Mobil Corporation’s tax qualified plan and the annual amount calculated under the Exxon Mobil Corporation non-qualified plans that would be earned to age 65 assuming final average earnings as at December 31, 2008. Non-qualified plan benefits are payable only as a lump sum equivalent upon retirement. For B.H. March, this value was $550,374, for R.L. Broiles, this value was $486,517 and for C.W. Erickson, this value was $493,350. |
| (5) | For members of the company’s pension plan, the “Accrued obligation at start of year” is defined for purposes of Financial Accounting Standard 87 (FAS 87) and is calculated based on earnings eligible for pension as described on page 43 and Yearly Maximum Pensionable Earnings (YMPE) as defined by the Canada Revenue Agency, projected to retirement and pro-rated on service to the date of valuation, December 31, 2007. The calculations assume that the Canada Pension Plan offset is based on the annual maximum benefit at retirement and the Old Age Security (OAS) offset is based on the OAS benefit in the fourth quarter of 2007 projected to retirement. For members of the Exxon Mobil Corporation pension plans, the “Accrued obligation at start of year” is defined for purposes of FAS 87 and is calculated based on earnings eligible for pension as described on page 43. The calculations assume that the U.S. Social Security offset against the Exxon Mobil Corporation qualified plan benefit is calculated on the basis of the Social Security law in effect as of year end 2007. For B.H. March, this value was $2,448,424, for R.L. Broiles, this value was $2,295,189 and for C.W. Erickson, this value was $1,793,459. |
| (6) | The value for “Compensatory change” includes service cost for 2008. Service cost for 2008 is calculated by using the individual’s additional pensionable service in 2008 and the actual salary and bonus received in 2008 as described on page 43. There were no plan amendments in 2008 that affected these benefits. The service cost is calculated on a basis that is consistent with FAS 87 and with the valuation that was performed as at that date for accounting purposes for the plan as a whole. For B.H. March, this value was $611,774, for R.L. Broiles, this value was $254,286 and for C.W. Erickson, this value was $234,192. |
| (7) | The value for “Non-compensatory change” includes impact of experience not related to earnings, benefit payments and change in measurement assumptions. With respect to the company pension plan, the discount rate used to determine the accrued obligation at the end of 2008 increased to 7.50 percent, up from 5.75 percent at the end of 2007, thereby causing the Non-compensatory change to be negative. For members of the Exxon Mobil Corporation pension plans, the value for “Non-compensatory change” includes the impact of experience not related to earnings or service. This includes the effect of interest, based on a discount rate of 6.25 percent in each year, and operation of the plan’s rules for converting annuities to lump sums upon retirement. For B.H. March, this value was $355,560, for R.L. Broiles, this value was $296,220 and for C.W. Erickson, this value was $73,612. |
| (8) | For members of the company’s pension plan, the “Accrued obligation at year end” is defined for purposes of FAS 87 and is calculated based on earnings eligible for pension as described on page 43 and YMPE, projected to retirement and pro-rated on service to the date of valuation, December 31, 2008. The calculations assume that the Canada Pension Plan offset is based on the annual maximum benefit at retirement and the OAS offset is based on the OAS benefit in the fourth quarter of 2008 projected to retirement. For members of the Exxon Mobil Corporation pension plans, the “Accrued obligation at year end” is defined for purposes of FAS 87 and is calculated based on earnings eligible for pension as described on page 43. The calculations assume that the U.S. Social Security offset against the Exxon Mobil Corporation qualified plan benefit is calculated on the basis of the Social Security law in effect as of year end 2008. For B.H. March, this value was $3,415,757, for R.L. Broiles, this value was $2,845,696 and for C.W. Erickson, this value was $2,101,262. |
| (9) | T.J. Hearn retired on March 31, 2008. At retirement, T.J. Hearn was provided the standard election option to receive his supplemental retirement income as a monthly annuity or a lump sum. T.J. Hearn exercised his option to receive the benefit as a lump sum. The change in non-compensatory obligation was adjusted accordingly. |
The registered pension plan and supplemental retirement income provisions provide an annual benefit of 1.6 percent of earnings per each year of service with respect to the named executive officers, with an offset for government benefits. Earnings, for this purpose, include average base salary during the last 36 consecutive months of service prior to retirement or the highest consecutive three calendar years of earnings in the last 10 years of service prior to retirement and the average annual bonus for the highest three of the last five years prior to retirement for eligible executives, but do not include long-term compensation, including restricted stock units. By limiting inclusion of bonuses in pensionable earnings to those granted in the five years prior to retirement, there is a strong motivation for executives to continue to perform at a high level. Annual bonus includes the cash amounts that are paid at grant, any cash amount deferred as described on pages 39 through 40 and the value of any earnings bonus units received, as described on pages 39 through 40. The aggregate maximum settlement value that could be paid for earnings bonus units is included in the employee’s final three year average earnings for the year of grant of such units. The portion of annual bonus deferred, and the value of earnings bonus units, are not intended to be at risk and, therefore, are included for pension purposes in the year of grant rather than the year of payment. An employee may also elect to forego three of the six percent of the company’s contributions to the savings plan under one of the options of that plan (except for B.H. March, R.L. Broiles and C.W. Erickson), to receive additional pension value equal to 0.4 percent of the employee’s “final three year average earnings”, multiplied by the employee’s years of service, while foregoing such company contributions. In addition to the pension payable under the plan, the company has paid and may continue to pay a supplemental retirement income to employees who have earned a pension in excess of the maximum pension under the Income Tax Act.
The remuneration used to determine the payments on retirement to the individuals named in the summary compensation table on page 47 corresponds generally to the salary, bonus and earnings bonus units received in the current year, as described in the previous paragraph. As of February 13, 2009, the number of completed years of service with Imperial Oil Limited used to determine payments on retirement was 29 for P.A. Smith and 27 for S.M. Smith. T.J. Hearn retired from the company on March 31, 2008 with 41 completed years of service.
B.H. March, R.L. Broiles and C.W. Erickson are not members of the company’s pension plan, but are members of Exxon Mobil Corporation’s pension plans. Under those plans, B.H. March has 28 years of credited service, R.L. Broiles has 29 years of credited service and C.W. Erickson has 27 years of credited service. Their respective pensions are payable in U.S. dollars. Pay for the purpose of the pension calculation is based on final average base salary over the highest 36 consecutive months in the 10 years of service prior to retirement, and the average annual bonus for the three highest grants out of the last five grants prior to retirement.
Savings Plan Benefits
The company maintains a savings plan into which career employees with more than one year of service may contribute between one and 30 percent of normal earnings. The company provides equal matching contributions to a maximum of six percent when an employee participates in the pre-1998 historic 1.6 percent defined-benefit pension arrangement. The current version of the historic 1.6 percent defined benefit plan has been in place since 1976; predecessor plans have been in place since 1919. All named executive officers are members of the historic 1.6 percent plan, except for B.H. March, R.L. Broiles and C.W. Erickson who participate in the Exxon Mobil Corporation savings plan and tax qualified and non-qualified pension plans. An employee may also elect to forego three of the six percent of the company’s contributions to the savings plan to receive additional pension value equal to 0.4 percent of the employee’s “final three year average earnings”, multiplied by the employee’s years of service, while foregoing such company contributions (except for B.H. March, R.L. Broiles and C.W. Erickson). T.J. Hearn elected to forego three of the six percent of the company’s contribution to the savings plan in order to receive this additional pension value.
Employee and company contributions can be allocated in any combination to a non-registered (tax-paid) account or a registered (tax-deferred) group retirement savings plan (RRSP) account, subject in the latter case to contribution limits under the Income Tax Act.
Available investment options include cash savings, a money market mutual fund, a suite of four index-based mutual funds and company shares. Company matching contributions must be allocated to company shares initially, and remain in that investment for a minimum of 24 months, after which they can be redeemed in favour of the other investment options.
During employment, withdrawals are only permitted from employee contributions and investment earnings within the tax-paid account, to a maximum of three withdrawals per year. Assets in the RRSP account, and company contributions to the tax-paid account, may only be withdrawn upon retirement or termination of employment, reinforcing the company’s long-term approach to total compensation. Income Tax regulations require RRSP’s to be closed by the end of the year in which the individual reaches age 71.
Named Executive Officer Compensation
Compensation Decision Making Process and Considerations
Benchmarking
In addition to the assessment of business performance, individual performance and level of responsibility, the executive resources committee relies on market comparisons to a group of 25 major Canadian companies with revenues in excess of $1 billion a year. Canadian companies are selected on the basis of being large in scope and complexity, capital intensive and proven sustainability. The 25 companies benchmarked are as follows:
| | | | |
Comparator Companies - Named Executive Officers |
| Agrium Inc. | | EnCana Corporation | | Procter & Gamble Inc. |
| BCE Inc. | | General Electric Canada | | Royal Bank of Canada |
| BP Canada Energy Company | | Husky Energy Inc. | | Shell Canada Limited |
| Canadian Tire Corporation Limited | | IBM Canada Ltd. | | Suncor Energy Inc. |
| Chevron Canada Limited | | Irving Oil Limited | | Talisman Energy Inc. |
| Canadian Natural Resources Limited | | Lafarge Canada Inc. | | TransCanada Corporation |
| ConocoPhillips Canada | | Nexen Inc. | | Vale Inco Limited |
| Canadian Pacific Railway Limited | | Nova Chemicals Corporation | | |
| Enbridge Inc. | | Petro-Canada | | |
The company is a national employer drawing from a wide range of disciplines. It is important to understand its competitive position relative to a variety of oil and non-oil employers. Annual market comparisons, based on survey data, are prepared by independent external compensation consultant, Towers Perrin, with additional analysis and recommendation provided by the company’s internal compensation advisors. Consistent with the executive resources committee’s practice of using well-informed judgment rather than formulae to determine executive compensation, the committee does not target any specific percentile among comparator companies to align compensation. Rather, on a case-by-case basis, depending on the scope of market coverage represented by a particular comparison, total compensation (excluding perquisites) is targeted to a range between the mid-point and the upper quartile of comparable employers, reflecting the company’s emphasis on quality management. This approach applies to salaries and the annual bonus.
As a secondary source of data, the company also considers a comparison with Exxon Mobil Corporation, when it determines the annual bonus program. For the restricted stock unit program, the executive resources committee also reviews a summary of data for a subset of the comparator companies provided by the same external consultant above, in order to assist in assessing total value of long-term compensation grants. This approach provides the company with the ability to better respond to changing business conditions, manage salaries based on a career orientation, minimize potential for automatic increasing of salaries, which could occur with an inflexible and narrow target among benchmarked companies, and finally to differentiate salaries based on performance and experience levels among executives.
The elements of the ExxonMobil compensation program, that include salary and annual bonus and equity (long-term) compensation considerations for B.H. March, R.L. Broiles and C.W. Erickson, are similar to those of the company. The data used for long-term compensation determination for B.H. March is as described above, as he received Imperial Oil Limited restricted stock units in 2008. The executive resources committee reviews and approves recommendations for each named executive officer prior to implementation. B.H. March’s compensation determination is described in more detail on pages 45 through 46.
2008 Named Executive Officer Compensation Assessment
When determining the annual compensation for the named executive officers, the executive resources committee has reflected on the following business performance result indicators in its determination of 2008 salary and incentive compensation.
Business Performance Results for Consideration
The operating and financial performance measurements listed below and the company’s continued maintenance of sound business controls and a strong corporate governance environment formed the basis for the salary and incentive award decisions made by the executive resources committee in 2008. The executive resources committee considered the results over multiple years, in recognition of the long-term nature of the company’s business.
Total shareholder return of about -24 percent. Ten-year annual average of about 19 percent.
StartingRecord earnings of $3.9 billion. Five-year annual average earnings of $3.0 billion.
Strong results in 1999,the areas of safety, health, and environment.
Industry-leading return on average capital employed of 45 percent, with an average of 30 percent since the beginning of 2000.
$330 million distributed to shareholders as dividends in 2008.
$2.2 billion distributed to shareholders through the share purchase program in 2008 and $15 billion since 1995.
Effective business controls and corporate governance.
Performance Assessment Considerations
The above results form the context in which the committee assesses the individual performance of each senior executive, taking into account experience and level of responsibility.
Annually, the chairman, president and chief executive officer reviews the performance of the senior executives in achieving business results and individual development needs.
The same long-term business strategies noted on page 37 and results on page 45 are key elements in the assessment of the chairman, president and chief executive officer’s performance by the executive resources committee.
The performance of all named executive officers is also assessed by the board of directors throughout the year during specific business reviews and board committee meetings that provide reports on strategy development; operating and financial results; safety, health, and environmental results; business controls; and other areas pertinent to the general performance of the company.
The executive resources committee does not use quantitative targets or formulae to assess executive performance or determine compensation. The executive resources committee does not assign weights to the factors considered. Formula-based performance assessments and compensation typically require emphasis on two or three business metrics. For the company to be an industry leader and effectively manage the technical complexity and integrated scope of its operations, most senior executives must advance multiple strategies and objectives in parallel, versus emphasizing one or two at the expense of others that require equal attention.
Senior executives and officers are expected to perform at the highest level or they are replaced. If it is determined that another executive is ready and would make a stronger contribution than one of the current incumbents, a replacement plan is implemented.
2008 CEO Compensation Assessment
B.H. March was elected chairman, president and chief executive officer of the company on April 1, 2008. Mr. March is a 29-year veteran of ExxonMobil, including service with heritage Mobil Corporation before the merger with Exxon Corporation on November 30, 1999. Mr. March has extensive operating and management experience in the oil and gas business, including assignments in multiple locations in the United States, as well as experience working in London and Brussels. His level of salary was determined by the executive resources committee based on his individual performance and to align with that of his peers in ExxonMobil. It was also the objective of the executive resources committee to ensure appropriate internal alignment with senior management in the company. The committee also approved a salary increase of $35,000 U.S. to $485,000 U.S., effective January 1, 2009.
Mr. March’s 2008 annual bonus was based on his performance as assessed by the executive resources committee since his assignment to the position of chairman, president and chief executive officer. His long-term incentive award was paid in the form of company restricted stock units, not ExxonMobil restricted stock, to reinforce alignment of his interests with that of the company’s shareholders. His company restricted stock units are subject to vesting periods longer than those applied by most companies conducting business in Canada. Fifty percent of the restricted stock units awarded vest in five years and the other 50 percent vest on the later of 10 years from the date of grant or the date of retirement. The purpose of these long vesting periods is to reinforce the long investment lead times in the business and to link a substantial portion of Mr. March’s net worth to the performance of the company. During these vesting periods, the awards are subject to risk of forfeiture based on detrimental activity, or if Mr. March should leave the company before normal retirement.
The executive resources committee has determined that the overall compensation of Mr. March is appropriate based on the company’s financial and operating performance and their assessment of his effectiveness in leading the organization. Key factors considered by the committee in determining his overall compensation level include continuing progress on advancing key strategic interests, financial results, safety metrics, environmental performance, government relations, productivity, cost effectiveness and asset management. The committee’s decisions reflect judgment, taking all factors into consideration, rather than the application of formulas or targets. The higher level of
pay for Mr. March, compared to the other named executive officers reflects his greater level of responsibility, including his ultimate responsibility for the performance of the company, and oversight of the other senior executives.
Pay Awarded to Other Named Executive Officers
Within the context of the compensation program structure and performance assessment processes described above, the value of 2008 incentive awards and salary adjustments align with:
performance of the company;
long-term strategic plan of the business; and
annual compensation of comparator companies.
The executive resources committee’s decisions reflect judgment taking all factors into consideration, rather than application of formulae or targets. The executive resources committee approved the individual elements of compensation and the total compensation as shown in the summary compensation table on page 47.
Independent Consultant
In fulfilling its responsibilities during 2008, the executive resources committee retained one independent consultant to assist in determining compensation for senior executives. Towers Perrin provided an independent assessment of competitive chief executive officer compensation and of market data for long-term incentive compensation levels for senior executives to assist in the committee’s assessment and decision-making on elements of compensation for B.H. March, as well as an assessment of the portion of senior executives pay attributable to long-term equity. Towers Perrin was not retained to provide any other compensation determinations or advice for the company or committee in determining the compensation of the chief executive officer or long-term incentive compensation levels for senior executives.
Performance Graph
The following graph shows changes over the past 10 years in the value of $100 invested in (1) Imperial Oil Limited common shares, (2) the S&P/TSX Composite Index, and (3) the S&P/TSX Equity Energy Index. The S&P/TSX Equity Energy Index is made up of share performance data for 37 oil and gas companies including integrated oil companies, oil and gas producers and oil and gas service companies.
The year-end values in the graph represent appreciation in share price and the value of dividends paid and reinvested. The calculations exclude trading commissions and taxes. Total shareholder returns from each investment, whether measured in dollars or percent, can be calculated from the year-end investment values shown beneath the graph.
During the past 10 years, the company’s cumulative total shareholder return was about 582 percent, for an average annual return of about 19 percent. During that same 10-year period, the company’s compensation (which compensation excludes the compensatory change in pension value) of its named executive officers increased by 223 percent for an average annual increase of eight percent.
(1) From 2002 to 2004, the S&P/TSX Composite Energy Index was used. Prior to 2002, the S&P/TSX Energy Index was used.
Summary Compensation Table for Named Executive Officers
The following table shows the compensation for the chairman, president and chief executive officer; the senior vice-president, finance and administration, and treasurer and the three other most highly compensated executive officers of the company who were serving as at the end of 2008. The table includes information on T.J. Hearn, who also served as chairman and chief executive officer from January 1, 2008 to March 31, 2008, inclusive. This information includes the Canadian dollar value of base salaries, cash bonus awards and units of other long-term incentive compensation and certain other compensation.
| | | | | | | | | | | | | | | | | | |
Name and Principal Position at the end of 2008 | | Year | | Salary ($) | | Share-
Based
Awards ($)
(2) | | Option-
Based
Awards
($)(3) | | Non-Equity Incentive Plan
Compensation ($) | | Pension
Value ($) (6) | | All Other
Compensation
($) (7) | | Total
Compensation
($) (8) |
| | | | | | | | | Annual
Incentive
Plans (4) | | Long-term
Incentive
Plans (5) | | | |
B.H. March (1) President (January 1- March 31) Chairman, president and chief executive officer (April 1-December 31) | | 2008 | | 479,700 | | 1,584,780 | | - | | 286,114 | | 207,870 | | 611,774 | | 821,511 | | 3,991,749 |
P.A. Smith Senior vice-president, finance and administration, and treasurer | | 2008 | | 420,833 | | 702,720 | | - | | 177,128 | | 181,125 | | (13,100) | | 135,187 | | 1,603,893 |
R.L Broiles (1) Senior vice-president, resources division | | 2008 | | 398,418 | | 915,918 | | - | | 186,443 | | 169,494 | | 254,286 | | 506,051 | | 2,430,610 |
C.W. Erickson (1) Vice-president and general manager, refining and supply | | 2008 | | 394,864 | | 999,183 | | - | | 196,144 | | 187,147 | | 234,192 | | 413,604 | | 2,425,134 |
S.M. Smith Vice-president and general manager, fuels marketing | | 2008 | | 374,000 | | 1,006,500 | | - | | 197,899 | | 162,675 | | 350,200 | | 117,394 | | 2,208,668 |
T.J. Hearn Chairman and chief executive officer (January 1-March 31) | | 2008 | | 300,000 | | - | | - | | - | | 999,900 | | 124,200 | | 719,049 | | 2,143,149 |
| (1) | B.H. March, R.L. Broiles and C.W. Erickson have been on a loan assignment from Exxon Mobil Corporation since January 1, 2008, July 1, 2005 and June 1, 2007 respectively. Their compensation is paid directly by ExxonMobil Corporation in U.S. dollars, but is disclosed in Canadian dollars. They also receive employee benefits under Exxon Mobil Corporation’s employee benefit plans, and not under the company’s employee benefit plans. The company reimburses Exxon Mobil Corporation for the compensation paid and employee benefits provided to them. All amounts paid to B.H. March, R.L. Broiles and C.W. Erickson in U.S. dollars were converted to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (2) | The grant date fair value equals the number of restricted stock units multiplied by the closing price of the company’s shares on the date of grant. The closing price of the company’s shares on the grant date was $36.60, which is the same as the accounting fair value for the restricted stock units on the date of grant. The company chose this method of valuation as it believes it results in the most accurate representation of fair value. For R.L. Broiles and C.W. Erickson, who received ExxonMobil restricted stock units, values are based on the closing price of Exxon Mobil Corporation shares on the date of grant ($78.11 U.S.), multiplied by the number of units granted. This amount was converted to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (3) | The company has not granted stock options since 2002. The stock option plan is described on pages 49 through 50. |
| (4) | The amounts listed in “Annual Incentive Plans” column for each named executive officer represent their 2008 cash bonus. Any part of bonus elected to be received as deferred share units would be excluded, although no named executive officers so elected. |
| (5) | The amounts listed in “Long-term Incentive Plans” column for the named executive officer represents their earnings bonus units granted in 2007 and paid out in 2008. The plan is described on pages 39 through 40. B.H. March, R.L. Broiles and C.W. Erickson received earnings bonus units under ExxonMobil’s program, which is similar to the company’s plan. They also received pay outs in 2008 for earnings bonus units granted in 2007. These amounts were converted to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (6) | “Pension Value” is the compensatory change in pensions as of December 31, 2008, as set out in the pension plan benefits table on page 42. |
| (7) | Amounts under “All Other Compensation”, consist of dividend equivalent payments on restricted stock units granted, interest paid in respect of deferred payments of bonuses and earnings bonus units, expatriate allowances, tax reimbursements, company savings |
| plans contributions, other compensation and cost of perquisites including club memberships, earned benefit allowance (for T.J. Hearn, P.A. Smith and S.M. Smith only), any costs associated with the personal use of the company aircraft, parking and security. There is no tax assistance from the company for taxes related to personal use of the company aircraft. In 2008, only T.J. Hearn had interest paid in respect of deferred payments of bonuses and earnings bonus units which was $260,336. The earned benefits allowance in 2008 was $50,000 for T.J. Hearn, $30,000 for P.A. Smith and $25,000 for S.M. Smith. For each named executive officer, except B.H. March and T.J. Hearn, the aggregate value of perquisites received was not greater than $50,000. For B.H. March, the total value of perquisites was $58,898, which total includes club memberships valued at $41,974. For T.J. Hearn, the total value of perquisites was $67,862, which total includes an earned benefit allowance of $50,000. The 2008 annual vacation allowance payment of $120,000 for T.J. Hearn is also included under “All Other Compensation”. While already factored into valuation of share based awards, it is noted that in 2008, the actual dividend equivalent payments made were $70,550 for P.A. Smith, $56,124 for S.M. Smith and $261,470 for T.J. Hearn. For B.H. March, R.L. Broiles and C.W. Erickson, the dividend equivalent payments on restricted stock granted by Exxon Mobil Corporation in previous years were $83,028 for B.H. March, $80,137 for R.L. Broiles and $77,617 for C.W. Erickson. These amounts were converted to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (8) | “Total Compensation” for 2008 consists of the total dollar value of “Salary”, “Share-Based Awards”, “Option-Based Awards”, “Non-Equity Incentive Plan Compensation”, “Pension Value” and “All Other Compensation”. |
Outstanding share-based awards and option-based awards for named executive officers
The following table sets forth all share-based and option-based awards outstanding as at December 31, 2008 for each of the named executive officers of the company.
| | | | | | | | | | | | | | | | | | | | | | |
| | | Option-based Awards | | | | Share-based Awards |
Name | | Number of
securities
underlying
unexercised
options (#) (4) | | | | Option
exercise
price ($) | | | | Option
Expiration Date | | | | Value of
unexercised
in-the-money
options ($) | | | | Number of
shares or
units of
shares
that have
not vested (#) (5) | | | | Market or payout
value of share-
based awards
that have not
vested ($) (5) |
B.H. March(1) | | - | | | | - | | | | - | | | | - | | | | 43,300 | | | | 1,774,867 |
P.A. Smith | | 75,000 | | | | 15.50 | | | | April 29, 2012 | | | | 1,911,750 | | | | 181,850 | | | | 7,454,032 |
R.L. Broiles(2) | | - | | | | - | | | | - | | | | - | | | | - | | | | - |
C.W. Erickson(3) | | - | | | | - | | | | - | | | | - | | | | - | | | | - |
S.M. Smith | | - | | | | - | | | | - | | | | - | | | | 158,900 | | | | 6,513,311 |
T.J. Hearn (retired from the company on March 31, 2008) | | 150,000 | | | | 15.50 | | | | April 29, 2012 | | | | 3,823,500 | | | | 618,200 | | | | 25,340,018 |
| (1) | In 2001 and previous years, B.H. March participated in Exxon Mobil Corporation’s stock option plan. Under that plan, B. H. March held options to acquire 44,758 Exxon Mobil Corporation shares, of which all options were exercisable. The value of B.H. March’s exercisable options was $2,154,332 as at December 31, 2008, based on the closing price of Exxon Mobil Corporation common shares of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. B.H. March was granted restricted stock units in 2008 under the company’s plan. With respect to previous years, B.H. March participated in Exxon Mobil Corporation’s restricted stock plan, which is similar to the company’s restricted stock unit plan. Under that plan, B. H. March held 44,750 restricted shares whose value on December 31, 2008 was $4,374,752 based on a closing price for Exxon Mobil Corporation shares on December 31, 2008 of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. |
| (2) | In 2001 and previous years, R.L. Broiles participated in Exxon Mobil Corporation’s stock option plan. Under that plan, R.L. Broiles held options to acquire 56,398 Exxon Mobil Corporation shares, of which all options were exercisable. The value of R.L. Broiles’ exercisable options was $2,687,938 as at December 31, 2008, based on the closing price of Exxon Mobil Corporation common shares of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. R.L. Broiles participates in Exxon Mobil Corporation’s restricted stock plan, which is similar to the company’s restricted stock unit plan. Under that plan, R.L. Broiles held 54,000 restricted shares whose value on December 31, 2008 was $5,279,030 based on a closing price for Exxon Mobil Corporation shares on December 31, 2008 of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. |
| (3) | In 2001 and previous years, C.W. Erickson participated in Exxon Mobil Corporation’s stock option plan. Under that plan, C.W. Erickson held options to acquire 14,825 Exxon Mobil Corporation shares, of which all options were exercisable. The value of C.W. Erickson’s exercisable options was $690,437 as at December 31, 2008, based on the closing price of Exxon Mobil Corporation common shares of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. C.W. Erickson participates in Exxon Mobil Corporation’s restricted stock plan, which is similar to the company’s restricted stock unit plan. Under that plan, C.W. Erickson holds 53,475 restricted shares whose value on December 31, 2008 was $5,227,706 based on a closing price for Exxon Mobil Corporation shares on December 31, 2008 of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. |
| (4) | Represents the number of shares underlying options and three times the number of stock options granted in 2002 before the three-for-one share split in May 2006 and still held by the employee. |
| (5) | Represents the total of the restricted stock units received in 2006, 2007 and 2008 after the three-for-one share split in May 2006, plus three times the number of restricted stock units received before the share split and still held by the employee. The value is based on the closing price of the company’s shares on December 31, 2008 of $40.99. |
Incentive plan awards for named executive officers– value vested or earned during the year
The following table sets forth the value of the incentive plan awards that vested for each named executive officer of the company for the year.
| | | | | | | | | | | | |
Name | | Option-based awards –
Value vested during the
year ($) | | | | Share-based awards –
Value vested during
the year ($) (4) | | | | Non-equity incentive plan
compensation – Value earned
during the year ($) (5) | | |
B.H. March(1) | | - | | | | - | | | | - | | |
P.A. Smith | | - | | | | 1,088,084 | | | | 358,253 | | |
R.L. Broiles(2) | | - | | | | - | | | | - | | |
C.W. Erickson(3) | | - | | | | - | | | | - | | |
S.M. Smith | | - | | | | 833,803 | | | | 360,574 | | |
T.J. Hearn (retired from the company on March 31, 2008) | | - | | | | 3,808,294 | | | | 999,900 | | |
| (1) | Although B.H. March received restricted stock units under the company’s plan in 2008, none of these restricted stock units have vested. In previous years B.H. March participated in Exxon Mobil Corporation’s restricted stock plan under which the grantee may receive restricted stock or restricted stock units (both of which are referred to herein as restricted stock or restricted shares), which plan is similar to the company’s restricted stock unit plan. In 2008, restrictions were removed on 5,500 restricted stock having a value as at December 31, 2008 of $537,679 based on the closing price of Exxon Mobil Corporation common shares of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. B.H. March received an annual bonus from Exxon Mobil Corporation in 2008 and participates in Exxon Mobil Corporation’s earnings bonus unit plan, which is similar to the company’s earnings bonus unit plan. B.H. March received $493,984 with respect to annual bonus awarded in 2008 and earnings bonus units granted in 2007 and paid out in 2008, which amount was paid in U.S. dollars and is converted to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (2) | R.L. Broiles participates in Exxon Mobil Corporation’s restricted stock plan under which the grantee may receive restricted stock, which plan is similar to the company’s restricted stock unit plan. In 2008, restrictions were removed on 5,500 restricted stock having a value as at December 31, 2008 of $537,679 based on the closing price of Exxon Mobil Corporation common shares of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. R.L. Broiles received an annual bonus from Exxon Mobil Corporation in 2008 and participates in Exxon Mobil Corporation’s earnings bonus unit plan, which is similar to the company’s earnings bonus unit plan. R.L. Broiles received $355,937 with respect to annual bonus awarded in 2008 and earnings bonus units granted in 2007 and paid out in 2008, which amount was paid in U.S. dollars and is converted to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (3) | C.W. Erickson participates in Exxon Mobil Corporation’s restricted stock plan under which the grantee may receive restricted stock, which plan is similar to the company’s restricted stock unit plan. In 2008, restrictions were removed on 5,500 restricted stock having a value as at December 31, 2008 of $537,679 based on the closing price of Exxon Mobil Corporation common shares of $79.83 U.S., which was converted to Canadian dollars at the noon-rate for December 31, 2008 of 1.2246 provided by the Bank of Canada. C.W. Erickson received an annual bonus from Exxon Mobil Corporation in 2008 and participates in Exxon Mobil Corporation’s earnings bonus unit plan, which is similar to the company’s earnings bonus unit plan. C.W. Erickson received $383,291 with respect to annual bonus awarded in 2008 and earnings bonus units granted in 2007 and paid out in 2008, which amount was paid in U.S. dollars and is converted to Canadian dollars at the average 2008 exchange rate of 1.066. |
| (4) | These values show restricted stock units that vested in 2008. |
| (5) | These values show annual bonus received in 2008 and earnings bonus units granted in 2007 and vesting in 2008. |
Details of Former Long-Term Incentive Compensation Plans
The following describes forms of long-term incentive compensation similarformerly used by the company. While incentive share units and stock options are no longer granted, incentive share units and stock options formerly granted continue to remain outstanding and are referenced in the foregoing tables.
Incentive Share Units
The company’s incentive share units give the recipient a right to receive cash equal to the deferred shareamount by which the market price of the company’s common shares at the time of exercise exceeds the issue price of the units. These units for executives, was made availablewere granted prior to nonemployee directors in lieu2002. The issue price of their receiving all or part of their directors’ fees. The main differences between the two plans are that all nonemployee directors are allowed to participate in the plan for nonemployee directors and that the number of units granted to a nonemployee director is determined atexecutives was the end of each calendar quarter by dividing the amountclosing price of the directors’ fees for that calendar quarter thatcompany’s shares on the nonemployee director elected to receive as deferredToronto Stock Exchange on the grant date. Incentive share units by the average closing price immediately priorare eligible for exercise up to the10 years from issuance. The last day of the calendar quarter.
