SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
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, 2018
Safety. Honor. Commitment. These are the values that guide how the 14,80014,600 employees of Phillips 66 conduct business every day as they work to fulfill our mission to provide energy and improve lives. We are also guided by our four pillars of sustainability: operational excellence,with record setting and industry leading safety and environmental commitment, social responsibility and economic performance.
Our commitment to shareholder engagement. We value the perspectives our shareholders provide by participating at our annual meeting and engaging in conversations with us throughout the year. In 2016,2017, we invitedmet with shareholders representing approximatelynearly half of our shares outstanding to discuss governance, compensation and other topics of interest to our shareholders. In response, shareholdersoutstanding. We were provided valuable feedback that was shared with the full Board, which considered that feedback in its decision making process.Board. As a result of these discussions, management is resubmitting a proposal asking shareholders to declassify the Board adopted aso that our directors will be elected annually. For additional information regarding the feedback we heard through our engagement efforts and actions taken in response, please refer to SHAREHOLDER AND COMMUNITY ENGAGEMENT of the attached proxy access bylaw earlier this year. The valuable input we receive from shareholders is very important to the Board and we look forward to continuing our dialogue in the coming year.
Growing shareholder distributions. We understand the importance of growing shareholder distributions in the form of share repurchases and dividends. In 2016, we increased the dividend by 13 percent and returned $2.3 billion of capital to shareholders through dividends and share repurchases.
statement.
We.
Sincerely,
Chairman of the Board and
Chief Executive Officer
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Phillips 66 supports educational programs that contributeFounded in 1917 as the Roxana Petroleum Company, the plant on the banks of the Mississippi River helped give rise to the vibrancytown itself. It also produced fuel for U.S. forces during World War II, winning accolades from the Army and resilience of communities. RecognizingNavy. Today, as a joint venture with Cenovus, the refinery has a more than $7 billion economic impact annually on the region, according to a study by Southern Illinois University at Edwardsville.
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One way we demonstrate that support is our participation with the MIND Research Institute, a nonprofit organization that develops visually based software to enhance learning and brings visual math instruction and game-based learning to local schools. MIND's signature ST Math program, game-based instructional software for K-12, is designed to boost math comprehension and proficiency through visual learning. With this program, we aim to instill a love of math in students and develop tomorrow's problem solvers.
Since 2014, Phillips 66 has contributed $2.5last 20 years, employees have given more than $5 million to the InstituteUnited Way alone. And last year, they used Phillips 66 Volunteer Grants to access more than $113,000 in funds for the organizations where they volunteer. The refinery’s most recent act of philanthropy: A playground for children of all abilities and sponsoreda nod to the ST Math programPhillips 66 values of safety, honor and commitment.
Among the children sitting in classrooms today are tomorrow's energy industry leaders. That's why Phillips 66 is investing in STEM education. We believe that this partnership will help us fuel students' interest in science, technology, engineering and math, while preparing them for the future.
| NOTICE OF OF SHAREHOLDERS | |
77024 You can vote if you were a shareholder of record on March 12, 2018. Shareholders as of the Record Date are invited to attend the annual meeting. Our following methods. 28, 2018. Code of Business Ethics and Conduct Other Benefits and Perquisites Your Company CODE OF BUSINESS ETHICS AND CONDUCT its development and implementation. In this oversight role, the Board of Directors is responsible for satisfying itself that the risk management processes designed and implemented by the Company’s management are functioning as intended, and that necessary steps are taken to foster a culture of risk-adjusted decision making throughout the organization. family NON-EMPLOYEE DIRECTOR COMPENSATION. The following Directors Whose Terms Expire at the 2019 Annual Meeting 2011. Audit Fees(1) Audit-Related Fees(2) Tax Fees(3) All Other Fees Total One or more representatives of Ernst & Young are expected to be present at the Annual Meeting. The representatives will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions from 2017. This Compensation Discussion and Analysis details our executive compensation programs for The following table summarizes the principal elements of compensation programs. Name Greg Garland Robert Herman Paula Johnson Kevin Mitchell Tim Taylor All NEOs received base salary increases effective March 1, Variable Cash Incentive Program Based on actual Company performance, the Compensation Committee determined that a payout of Combined TRR Combined LWCR Process Safety Rate Environmental Events Asset Availability Combined Operating Excellence Adjusted Controllable Costs METRIC Adjusted EBITDA Operating Excellence Adjusted Controllable Costs High-Performing Organization Total Corporate Payout The Compensation Committee has the authority to adjust our NEOs’ individual VCIP payouts by +/–50 percent of the formula-based target payout. The Compensation Committee may apply an individual performance adjustment to reflect project-based accomplishments that drove or detracted from shareholder value or for market-based considerations to more closely align the payout with shareholder returns. This flexibility allows us to reflect our unique business strategy and portfolio of assets as well as differentiate individual executive performance. The Compensation Committee made adjustments to individual Greg Garland Robert Herman Paula Johnson Kevin Mitchell Tim Taylor Restricted Stock Units NAME Greg Garland Robert Herman Paula Johnson Kevin Mitchell Tim Taylor previously: Comprehensive Security Program Personal Use of Company Aircraft EXECUTIVE LEVEL will, in fact, be fully deductible. engagements, and 44 percent related to surety bonds. ” 2017. 2019. $4,087,219. Greg Garland Robert Herman Paula Johnson Kevin Mitchell Tim Taylor Greg Garland Robert Herman Paula Johnson Kevin Mitchell Tim Taylor 2017. Greg Garland Robert Herman Paula Johnson Kevin Mitchell Tim Taylor 2017 Greg Garland Robert Herman Paula Johnson Kevin Mitchell Tim Taylor 2017 The following table provides information on nonqualified deferred compensation as of December 31, Equity term. level. level. CICSP benefits consist of cash severance payments and acceleration of equity awards. Greg Garland Severance Payment Accelerated Equity(1) Life Insurance TOTAL Robert Herman Severance Payment Accelerated Equity(1) Life Insurance TOTAL Paula Johnson Severance Payment Accelerated Equity(1) Life Insurance TOTAL Kevin Mitchell Severance Payment Accelerated Equity(1) Life Insurance TOTAL Tim Taylor Severance Payment Accelerated Equity(1) Life Insurance TOTAL directors. Lead Director Audit and Finance Committee Human Resources and Compensation Committee All Other Committees The total annual cash compensation is payable in monthly cash installments. Directors may elect, on an annual basis, to receive all or part of their cash compensation in unrestricted stock or in RSUs (such unrestricted stock or RSUs are issued on the last business day of the month valued using the average of the high and low prices of Phillips 66 common stock as reported on the NYSE on such date), or to have the amount credited to the Other Compensation Gary K. Adams J. Brian Ferguson William R. Loomis, Jr. John E. Lowe Harold W. McGraw III Denise L. Ramos Glenn F. Tilton Victoria J. Tschinkel Marna C. Whittington Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Mr. Garland Ms. Johnson Mr. Mitchell Mr. Taylor Mr. Herman Mr. Adams Mr. Ferguson Mr. Loomis Mr. Lowe Mr. McGraw(3) Ms. Ramos Mr. Tilton Ms. Tschinkel(4) Dr. Whittington Directors and Executive Officers as a Group (16 Persons) meeting. envelope. How do I vote if I hold my stock through a Phillips 66 employee benefit plan? envelope. 8, 2018. The contact information for our Corporate Secretary may be found under COMMUNICATIONS WITH OUR BOARD. meeting. 2018. What if I return my proxy but ” the proposal regarding the declassification of the Board of Directors. results of the shareholder vote. The policy also provides that inspectors of election must be independent and cannot be employees of the Company. Occasionally, shareholders provide written comments on their proxy card that may be forwarded to management. Net Income Plus: Provision for income taxes Net interest expense Depreciation and amortization (D&A) EBITDA Adjustments: EBITDA attributable to noncontrolling interests Proportional share of selected equity affiliates income taxes Proportional share of selected equity affiliates net interest Proportional share of selected equity affiliates D&A Impairments by equity affiliates Pending claims and settlements Equity affiliate ownership restructuring Recognition of deferred logistics commitments Railcar lease residual value deficiencies and related costs Certain tax impacts Adjusted EBITDA PSP ROCE Numerator Net Income After-tax interest expense GAAP ROCE earnings Adjustments* PSP ROCE earnings Denominator GAAP average capital employed** In-process capital Cash adjustment PSP average capital employed PSP ROCE (percent) GAAP ROCE (percent) Operating expenses Selling, general and administrative expenses Adjustments: Certain employee benefits Asset disposition impacts Foreign currency and utility price impacts Adjusted controllable costs 3, 2017
9, 2018 at 9:00 A.M. Central Daylight TimeMarriott WestchaseMemorial City2900 Briarpark Drive945 Gessner Road
Houston, Texas 77042
(281) 501-4300Directorsdirectors named in this proxy statement2.Company'sCompany’s independent registered public accounting firm for fiscal year 201720183.4.10, 2017.20162017 Annual Report to Shareholders accompanies, but is not part of, these proxy materials.Proxy VotingVote Right AwayShareholders as of the Record Date are invitedYour vote is very important to attend the annual meeting. Whether or notus and to our business. Even if you plan to attend our Annual Meeting in person, please vote in advanceright away using any of the meeting by using one of the methods described in this proxy statement. BY INTERNET USING YOUR COMPUTER BY TELEPHONE BY MAILING YOUR PROXY CARD ![[MISSING IMAGE: icon_laptop.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_laptop.jpg){kind=icon}
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and send by mail in the enclosed postage-paid envelope 22, 2017.
Corporate Secretary Page Page 3 86 868Summary of Board Committees 10Director Independence 10Shareholder and Community Engagement 10Sustainability 11Communications with the Board 11Director Meeting Attendance 12Board's Risk Oversight 12 6 6 8 8 11 13 Related Party Transactions 13Board and Committee Evaluations 14Nominating Processes of the Nominating and Governance Committee 14PROPOSAL 1:ELECTION OF DIRECTORS
15 16 17 2423 2625 25 26 27Peer Group Comparisons 29 30 37Executive Compensation Governance 39 41 4042 4244 43Summary Compensation Table 43Grants of Plan-Based Awards 45 45 47 4648 4749 4850 4951 50522017 PROXY STATEMENT 120172018 PROXY STATEMENTPage references are supplied to help you find further information in this proxy statement. Throughout the proxy statement, we may refer to Phillips 66 as the "Company," "we"“Company,” “we” or "our."“our.” For more complete information regarding the Company's 2016Company’s 2017 performance, please review the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016.If you are a beneficial owner and do not give your broker instructions on how to vote your shares, the broker will return the proxy card to us without voting on proposals not considered "routine." This is known as a broker non-vote. Only the ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2017 is considered to be a routine matter. Your broker may not vote on any non-routine matters without instructions from you.Attend Our 2017 Annual Meeting of ShareholdersThe Annual Meeting is open to all shareholders of Phillips 66, and each shareholder may bring one guest. You will need an admission ticket or proof of stock ownership to attend the meeting. Additional information regarding attending the meeting can be found underAbout the Annual Meeting beginning on page 57.Date and Time:9:00 a.m. (CDT) on Wednesday, May 3, 2017Location:Houston Marriott Westchase2900 Briarpark DriveHouston, Texas 77042(713) 978-7400Record Date:March 10, 2017Proposals Requiring Your Vote MOREINFORMATIONBOARDRECOMMENDATIONVOTES REQUIRED FORAPPROVAL PROPOSAL 1Election of DirectorsPage 15FOR each NomineeMajority of votes castPROPOSAL 2Ratification of the Appointment of Ernst & Young LLPPage 23FORMajority of votes presentPROPOSAL 3Advisory Approval of ExecutiveCompensationPage 25FORMajority of votes present Vote Right AwayYour vote is very important to us and to our business. Even if you plan to attend our Annual Meeting in person, please read this proxy statement carefully and vote right away using any of the following methods. In all cases, have your proxy card or voting instruction card in hand and follow the instructions.BY INTERNET USING YOUR COMPUTERBY TELEPHONEBY MAILING YOUR PROXY CARD
Visit 24/7www.proxyvote.comDial toll-free 24/7(800) 690-6903Cast your ballot, sign your proxy cardand send by mail in the enclosed postage-paid envelopeIf you hold your Phillips 66 stock in a brokerage account (that is, in "street name"), your ability to vote by telephone or over the Internet depends on your broker's voting process. Please follow the directions on your proxy card or voting instruction card carefully. If you plan to vote in person at the Annual Meeting and you hold your Phillips 66 stock in street name, you must obtain a proxy from your broker and bring that proxy to the meeting.2017 PROXY STATEMENT 3If you hold your stock through a Phillips 66 employee benefit plan, please see page 58 for information about voting.Visit 24/7www.phillips66.comReview and download this proxy statement and our Annual Report.Sign up for electronic delivery of future Annual Meeting materials to save money and reduce the impact on the environment at www.proxyvote.com.Midstream, Chemicals, Refining,midstream, chemicals, refining, and Marketingmarketing and Specialtiesspecialties businesses, the Company processes, transports, stores and markets fuels and products globally. Our industry is vitally important to the globalworld-wide economy. Fossil fuels, particularly oil and natural gas, are the world'sworld’s primary energy source and are expected to remain so for decades to come. These sources are abundant and reliable, affordable and efficient. Phillips 66's mission66’s vision is to provide energy and improve lives through operating excellence, delivering energy safely, efficiently and sustainably. We improve lives by responsibly providing energy products that are essential for a high standard of living and health throughout the world.Ourperformanceresults in 2016 demonstrated the resiliency of2017. We continued our diversified portfolio in a volatile market. We create value by focusingfocus on operating excellence, enhancingwith a record low safety rate. We also enhanced returns in our Refining business and executingexecuted on our Midstream and Chemicals businesses’ growth programs. Our balance sheet is strong, and we maintain a disciplined approach to capital allocation. The graph below showsIn 2017, we increased our total shareholder return (TSR) since May 2012 compareddividend by 11% and returned nearly $3 billion to the S&P 100 Indexshareholders through dividends and our performance peer group, which is detailed inPeer Group Comparisons—Performance Peer Group in theCompensation Discussion and Analysis.
4 2017 PROXY STATEMENTPROXY SUMMARYSince the Company's inception in May 2012, our strategic priorities have remained unchanged. The following graphic summarizes highlights of our performance during 20162017 and for the three years ended December 31, 2017, as measured by our compensation program performance targets, which are discussed in theCOMPENSATION DISCUSSION AND ANALYSIS.Compensation DiscussionOperating Excellence—Drives focus on safety, asset availability and Analysisenvironmental stewardship..
Summary In 2017, we exceeded our targets in every metric of Governance Best PracticesEarlier this year,operating excellence. Our combined workforce recordable injury rate was 0.14, which averages to one injury per every 1.4 million hours worked, and we had the lowest number of reportable environmental events in responseCompany history.feedbackbuild leadership capabilities and maximize the performance of our people in 2017. Approximately 25 percent of our employees were in locations impacted by Hurricane Harvey, yet almost all assets were operating by mid-September 2017.received fromwere able to manage while absorbing company growth.shareholders,target for the year.Board adopted a proxy access bylaw, whichTSR was 55.1 percent, ranking 7th out of 16 peers (including the S&P 100 Index).included amongevaluated on both an absolute and relative basis. For the three-year performance period ending in 2017, our corporate governance best practices summarized below:BEST PRACTICES ✓ Majority voting for Directors✓ Provide 3%/3 year/20% proxy access right✓ Robust shareholder engagement program covering large percentage of outstanding shares and proxy advisory firms✓ Substantial majority of independent Directors✓ Independent Lead Director with clearly defined responsibilities✓ IndependentYour Board Committees✓ Executive sessions of independent Directors✓ Stock ownership guidelines✓ Prohibition on pledging and hedging of our stock✓ Clawback policy✓ Regular Board and Committee self-evaluations✓ Risk oversight by the full Board and Committees✓ Company does not have a poison pill Board Diversity and IndependenceCompany'sCompany’s ongoing organizational commitment to diversity. In addition, theThe Nominating and Governance2017 PROXY STATEMENT 5PROXY SUMMARYCommittee, which we may also refer to as the Nominating Committee seeks Board members who possess the highest personal and professional ethics, integrity and values, and are committed to representing the long-term interests of the Company'sCompany’s shareholders. The Nominating Committee regularly reviews theCompany'sCompany’s businesses to ensure the Board reflects a range of talents, ages, skills, experiences, diversity, and expertise, particularly in the areas of accounting and finance, management, domestic and international markets, leadership, environment, and energy-related industries, sufficient to provide sound and prudent guidance with respect to the Company'sCompany’s strategic and operational objectives. The charts below highlight the diversity and independence of our ten-member Board of Directors.
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RECOMMENDATION
FOR APPROVAL PROPOSAL 1 Election of Directors FOR each Nominee Majority of votes cast PROPOSAL 2 Ratification of the Appointment of Ernst & Young LLP FOR Majority of votes present PROPOSAL 3 Advisory Approval of Executive Compensation FOR Majority of votes present PROPOSAL 4 Management Proposal Regarding the Annual Election of Directors FOR 80% of Voting Stock Effortinvited shareholdersproactively sought feedback from our shareholders. Over 90% of our offers to engage were accepted, representing approximatelynearly half of our shares outstanding, to discuss topics of interestrelated to our shareholders. In response, shareholders provided valuable feedback that was shared with the full Board, which considered that feedback in its decision making process. Topics discussed included ourbusiness strategy and performance; corporateperformance, Board composition and oversight, as well as governance matters;and progress of our executive compensation programs; and environmental and social concerns. initiatives.discussions,engagements, we recently adopted a proxy access bylaw giving shareholders holding at least 3 percenthave decided to again seek shareholder approval of our shares for at least 3 years the right to include in the proxy statement director nominees for up to 20 percent of the Board (but not less than two nominees). In addition, we encouraged shareholders at the last two annual meetings to approve a management proposal to eliminate our classified board structure and permit all directors to be elected annually. Unfortunately,More information about the proposal did not receivetopics discussed and the required vote to passactions we have taken can be found in either year. We consulted with our proxy solicitor, who advised us, based on its analysisSHAREHOLDER AND COMMUNITY ENGAGEMENT.our shareholder base, that the proposal would likely not be successful this year. We also discussed this topic with our largest investors and they conveyed understanding for this conclusion. Therefore, weGovernance Best Practicesnot resubmitting the proposal at the Annual Meeting, but will continue to discuss this matter and others with our investors to ensure they have a meaningful voice in our boardroom.In addition, the Human Resources and Compensation Committee, which we refer to as the Compensation Committee, values these discussions and encourages shareholders to provide comments about our executive compensation programs. Based on the overwhelmingly positive result of our 2016 say-on-pay vote (95% support), as well as the feedback received during ongoing shareholder engagement meetings, we believe our shareholders approve of our executive compensation program and recognize its link to our business strategy. Nevertheless, we continue to evaluate our compensation program in light ofsummarized below. Our Board regularly reviews evolving corporate governance best practices, to ensure alignment with shareholder interests.6 2017 PROXY STATEMENTPROXY SUMMARYSummary of Compensation Best PracticesIn conjunction with our corporate strategy, executive compensation philosophy and shareholder feedback, the following best practices are reflected in our executive compensation programs: WE DO ...WE DO NOT ... Target Named Executive Officer (NEO) compensation to be performance basedindependent directors✗ Provide excise tax gross-ups to our NEOs under our CICSP✓ Link NEO compensation to shareholder value creation by having a significant portion of compensation at risk✗ Reprice stock options without shareholder approval✓ Apply multiple performance metrics aligned with our corporate strategy to measure our performance✗ Price stock options below grant date fair market value✓ Cap maximum payouts (number of shares) under our equity programs✗ Allow share recycling for stock options Employ a "double trigger" for severance benefitsequity awards underhedging of our Key Employee Change in Control Severance Plan (CICSP)stock✗ Have evergreen provisions in our active equity plans✓ Include absolute and relative metrics in our Long-Term Incentive (LTI) programs✗ Allow hedging or pledging of Phillips 66 stock, or trading Phillips 66 stock outside of approved windows✓ Maintain stock ownership guidelines for executives—Chief Executive Officer (CEO) 6x base salary; other NEOs 3-5x base salary✗ Pay dividends during the performance period on Performance Share Program (PSP) targets✓ Balance, monitor and manage compensation risk through regular assessments and robust clawback provisions✗ Allow transfer of equity awards (except in the case of death)✓ Have extended vesting periods on stock awards, with a minimum one-year vesting period required for stock and stock option awards✗ Provide separate supplemental executive retirement benefits for individual NEOs✓ Intend to qualify compensation payments for deductibility under Internal Revenue Code (IRC) Section 162(m)✗ Maintain individual change-in-control agreements✓ Maintain a fully independent Compensation Committee✗ Have an employment agreement with the CEO✓ Retain an independent compensation consultant✗ Have excessive perquisites✓ Hold a Say-on-Pay vote annually2017 PROXY STATEMENT 7 22, 2017,28, 2018, in connection with the solicitation by the Board of Directors of Phillips 66 of proxies to be voted at the 20172018 Annual Meeting of Shareholders on May 3, 2017.The Nominating Committeewhich we may also refer to as the Board, annually review the Company's governance structure to take into account changes in Securitiesoversees and Exchange Commission (SEC) and New York Stock Exchange (NYSE) rules, as well as current best practices. Our Corporate Governance Guidelines, posted on the "Investors" section of the Company's website under the "Governance" caption and available in print upon request (seeAvailable Information on page 61), address the following matters, among others:•director qualifications•director responsibilities•committees of the Board•director access to officers, employees and independent advisors•performance evaluations of the Board•director orientation and continuing education•director compensation•Chief Executive Officer (CEO) evaluation and succession planningChairman and CEO RolesAlthough the Board of Directors has the authority to separate the positions of Chairman and CEO if it deems appropriate, the Board believes it iscounsels management in the bestlong-term interest of the Company's shareholders to combine them. Doing so enables one person to guide the Board in setting priorities for the Company and in addressing the risks and challenges the Company faces. The Board of Directors believes that, while its non-employee Directors bring a diversity of skills and perspectives to the Board, the Company's CEO, by virtue of his day-to-day involvement in managing the Company, currently is best suited to serve as Chairman and perform this unified role.The Board of Directors believes that no single organizational model is the most effective in all circumstances. As a consequence, the Board periodically considers whether the offices of Chairman and CEO should continue to be combined and who should serve in such capacities. The Board also periodically reexamines its corporate governance policies and leadership structure to ensure that they continueour shareholders. We continuously strive to meet the Company's needs. As partour vision of this review, the Board rotated committee chairsproviding energy and committee membership in 2016. The decision to rotate committee positions was not taken lightly given the benefits that can come from continuity and the expertiseimproving lives, guided by our four pillars of members. The Nominating Committee, however, believed that rotating committee positions would be beneficial, providing fresh perspectives and enhancing Directors' familiarity with different aspects of the Company's business while maintaining subject matter expertise on all committees.8 2017 PROXY STATEMENT
•CORPORATE GOVERNANCE OF THE COMPANYIndependent Director LeadershipThestrong governance practices to ensure that an appropriate balance of power exists between the non-employee Directors and management, including:•appointing a Lead Director•requiring a substantial majority of independent directors•having only independent directors serve on the Audit and Finance Committee, which we may also refer to as the Audit Committee; the Compensation Committee; and the Nominating Committee•holding executive sessions of the non-employee Directors at each Board meeting•having only independent directors evaluate the CEO's performance annually and approve the CEO's payGlenn Tilton has served as our Lead Director since February 2016. In appointing a Lead Director, the Board of Directors considered it useful and appropriate to designate an independent Director to serve in a lead capacity to coordinate the activities of the non-employee Directors and to perform such other duties and responsibilities as the Board of Directors may determine. Specifically, those duties include:•advising the Chairman on an appropriate schedule of Board meetings, seeking to ensure that the non-employee Directors can perform their duties responsibly without interfering with operations•providing the Chairman with input on the preparation of the agenda for each Board meeting and assuring that there is sufficient time for discussion of all agenda items•advising the Chairman on the quality, quantity and timeliness of the flow of information from management to the non-employee Directors in order that they may perform their duties effectively and responsibly, including specifically requesting certain materials be provided to the Board•recommending to the Chairman the retention of consultants who report directly to the Board of Directors•interviewing all board candidates and making nomination recommendations to the Nominating Committee and the Board of Directors•assisting the Board of Directors and Company officers in assuring compliance with and implementation of the Corporate Governance Guidelines•ensuring that he or she or another appropriate Director is available for engagement with shareholders when warranted•having the authority to call meetings of the non-employee Directors, as well as to develop the agenda for and moderate any such meetings and executive sessions of the non-employee Directors•acting as principal liaison between the non-employee Directors and the Chairman on sensitive issues•participating with the Compensation Committee in the periodic discussion of CEO performance•ensuring the Board of Directors conducts an annual self-assessment and meeting with the CEO to discuss the results of the annual self-assessment•working with the Nominating Committee to recommend the membership of the various Board committees, as well as selection of the committee chairsThe Board of Directors believes that its current structure and processes encourage its non-employee Directors to be actively involved in guiding its work. The chairs of the Board's committees review their respective agendas and committee materials in advance of each meeting, communicating directly with other Directors and members of management as each deems appropriate. Moreover, each Director is free to suggest agenda items and to raise matters at Board and committee meetings that are not on the agenda.Our Corporate Governance Guidelines require that the non-employee Directors meet in executive session at every Board meeting and, when there are non-employee Directors who are not independent, that the independent Directors meet in executive session at least annually. The Lead Director presides at such executive sessions. Each executive session may include discussionsestablish a common set of among other things, (1) the performance of the Chairman and the CEO, (2) matters concerning the2017 PROXY STATEMENT 9CORPORATE GOVERNANCE OF THE COMPANYrelationship of the Board of Directors with the members of senior management, and (3) such other matters as the non-employee Directors deem appropriate. No formal action of the Board of Directors is taken at these meetings, although the non-employee Directors may subsequently recommend matters for consideration by the full Board. The Board of Directors may invite guest attendees to make presentations, respond to questions, or provide counsel on specific matters within their areas of expertise.Effective October 2016, based upon the recommendation of the Nominating Committee, the membership of the Board committees was revised as set forth below.MR.ADAMSMR.FERGUSONMR.GARLANDMR.LOOMISMR.LOWEMR.MCGRAWMS.RAMOSMR.TILTONMS.TSCHINKELDR.WHITTINGTON Audit and FinanceX*XXXXExecutiveXX*XXXXHuman Resources and CompensationXXXX*Nominating and GovernanceXX*XXPublic PolicyXXXX*XXXXX *Committee ChairThe charters for our Audit Committee, Executive Committee, Compensation Committee, Nominating Committee, and Public Policy Committee can be found in the "Investors" section on the Phillips 66 website under the "Governance" caption. Shareholders may also request printed copies of these charters by following the instructions located under the captionAvailable Information on page 61.The Corporate Governance Guidelines also contain director independence standards, which are consistent with the standards set forth in the NYSE listing standards,expectations to assist the Board of Directorsand its committees in determining the independence of the Company's Directors.performing their duties. The Board of Directors has determined that each Director, except Mr. Garland, meets the standards regarding independence set forth in theGuidelines are reviewed at least annually, and updates are made as necessary to reflect changing regulatory requirements, evolving best practices and input from shareholders and other stakeholders.and is free of any material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). Mr. Garland is not considered independent because he is an executive officer of the Company. In making independence determinations, the Board of Directors specifically considered the fact that manyCharters of our Directors are directors, current or retired officers or shareholdersBoard’s committees, our By-Laws, and our Code of companies with which we conduct business. In addition, some of our Directors serve as employees of, or consultants to, companies that do business with Phillips 66Business Ethics and its affiliates (as further described inRelated Party Transactions on page 13). Finally, some of our Directors may purchase retail products (such as gasoline, fuel additives or lubricants) from the Company. In all cases, it was determined that the nature of the business conducted and the interest of the Director by virtue of such position were immaterial both to the Company and to such Director. SHAREHOLDER AND COMMUNITY ENGAGEMENTThe Company's values embrace shareholder engagement as an important tenet of good governance. We value the views of our shareholders and believe that positive dialogue builds informed relationships that promote transparency and accountability. Although the Lead Director or other members of the Board are available to participate in meetings with shareholders as appropriate, management has the principal responsibility for shareholder communication. As part of our annual engagement efforts in 2016, we invited shareholders representing approximately half of our shares outstanding, and other interested parties, to discuss matters of interest to them. Topics discussed included our strategy and performance; corporate governance matters; our executive compensation programs; and environmental and social concerns. The valuable feedback received was then shared with the full Board, which considered the feedback in its decision making process. As a direct result of these discussions, we adopted a proxy access bylaw giving shareholders holding at least 3 percent of our shares for at least 3 years the right to include in the proxy statement director nominees for up to 20 percent of the Board (but not less than two nominees). In addition, we encouraged shareholders at the last two annual meetings to approve a10 2017 PROXY STATEMENTCORPORATE GOVERNANCE OF THE COMPANYcharter amendment that would eliminate the classified board structure and permit all directors to be elected annually. Unfortunately, the proposal did not receive the required vote to pass in either year. We consulted with our proxy solicitor, who advised us, based on its analysis of our shareholder base, that the proposal would likely not be successful this year. We also discussed this topic with our largest investors and they conveyed understanding for this conclusion. Therefore, we are not resubmitting the proposal at the Annual Meeting, but will continue to assess the proposal and its potential for adoption in the future.We also believe that engagement and good governance involve participating in political or public policy activities that advance the Company's goals, are consistent with Company values and improve the communities where we work and live. A number of federal, state and local laws govern corporate involvement in such activities, and we maintain policies and procedures to comply with these laws. The Public Policy Committee is responsible for overseeing our political and public policy work and related activities about which it receives regular reports. Additional information about our involvement in political or public policy activities is available on our website.Phillips 66 is dedicated to meeting the world's energy needs responsibly, efficiently and sustainably. For us, sustainability means manufacturing and delivering affordable, clean products in a safe and environmentally sound manner. Our sustainability efforts are built on four pillars: operational excellence, environmental commitment, social responsibility and economic performance.More than one-third of our U.S. refineries have earned the U.S. Environmental Protection Agency ENERGY STAR® Award, which recognizes their top-quartile energy efficiency performance. In addition, 25 of our sites have received Voluntary Protection Program (VPP) certification for their strong safety records and comprehensive safety and health management systems.Our commitment to excellence compels us to invest in environmental projects and sustaining capital to improve our operations. The results are industry-leading practices and improved environmental performance. We invested more than $5.4 billion in refining environmental projects and improvements from 2003 through 2015. During that time, we reduced SOx emissions by 90 percent, NOx emissions by 55 percent and particulate matter by 57 percent.Phillips 66 is investing in its future by conducting research to manage water consumption, improve energy efficiency and provide technology to change the future of power generation. We seek solutions for tomorrow's energy needs, from opportunities to blend biofuels into clean products to co-founding forward-looking think tanks, such as the Fuels Institute. Phillips 66 is one of the few energy companies with a state-of-the-art Research Center. We have more than 350 scientists and engineers in Bartlesville, Oklahoma, conducting research to enhance the safety and reliability of our operations and to develop future air, water and energy solutions.Additional information regarding our commitment to sustainability, including our Sustainability Highlights Brochure,Conduct can be found on the Company’s website in the “Investors” section, under the “Corporate Governance” caption. We also publish a Sustainability sectionReport, which presents our sustainability efforts and provides data, as well as programs and projects that demonstrate how we fulfill our vision of our website.To support shareholder engagement,providing energy and improving lives. The Sustainability Report can be found on the Company maintains a process for shareholders and interested parties to communicate with the Board of Directors. Shareholders and interested parties may communicate with the Board of Directors by contacting our Corporate Secretary, Paula A. Johnson, as provided below:Mailing Address:Corporate SecretaryPhillips 66P.O. Box 4428Houston, TX 77210Phone Number:(281) 293-6600Internet:"Investors" section of the Company's website (www.phillips66.com) under the "Governance" captionRelevant communications are distributed to the Board of Directors or to any individual Director or Directors, as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Board has requested that2017 PROXY STATEMENT 11CORPORATE GOVERNANCE OF THE COMPANYcertain items unrelated to its duties and responsibilities not be distributed, such as: business solicitations or advertisements; junk mail and mass mailings; new product suggestions; product complaints; product inquiries; résumés and other forms of job inquiries; spam; and surveys. In addition, material that is considered hostile, threatening, illegal or similarly unsuitable will be excluded. Any communication that is filtered out is made available to any non-employee Director upon request.Recognizing that director attendance at the Company's Annual Meeting can provide the Company's shareholders with an opportunity to communicate with the Directors about issues affecting the Company, the Company actively encourages our Directors to attend the Annual Meeting of Shareholders. All of our Directors attended the 2016 Annual Meeting of Shareholders.The Board of Directors met six times in 2016. Each Director attended at least 75 percent of the aggregate of:•the total number of meetings of the Board held in 2016 during his or her tenure, and•the total number of full-committee meetings held in 2016 by all committees of the Board on which he or she served.The Company's management is responsible for the day-to-day conduct of our businesses and operations, including management of risks the Company faces. To fulfill this responsibility, our management has established an enterprise risk management program designed to identify and facilitate management of the significant and diverse risks facing the Company and the approaches to mitigate such risks. The Board of Directors has broad oversight responsibility over the Company's enterprise risk management program and receives management updates on its development and implementation. In this oversight role, the Board of Directors is responsible for satisfying itself that the risk management processes designed and implemented by the Company's management are functioning as intended, and that necessary steps are taken to foster a culture of risk-adjusted decision making throughout the organization.In executing its responsibilities, the Board of Directors has delegated to individual committees certain elements of this oversight function, while retaining oversight responsibility for strategic risks. In this context, the Board of Directors delegated authority to the Audit Committee to facilitate coordination among the Board's committees with respect to oversight of the Company's risk management programs. Accordingly, the Audit Committee regularly receives updates on the enterprise risk management program and discusses the Company's risk assessment and risk management policies to ensure that our risk management programs are functioning properly.The Board of Directors, either directly or through its committees, exercises its oversight function with respect to all material risks to the Company, which are identified and discussed in the Company's public filings with the SEC. The Board of Directors12 2017 PROXY STATEMENTCORPORATE GOVERNANCE OF THE COMPANYreceives regular updates from its committees on individual areas of risk falling within each committee's area of oversight and expertise, as outlined below:
Phillips 66 hasfor Directors and Employees designed to help resolve ethical issues in an increasingly complex global business environment. Our Code of Business Ethicsprovide guidance on how to act legally and Conduct applies to all directors and employees, including the CEO and the Chief Financial Officer.ethically while performing work for Phillips 66. Our Code of Business Ethics and Conduct covers topics including, but not limited to, conflicts of interest, insider trading, competition and fair dealing, discrimination and harassment, confidentiality, payments to government personnel, anti-boycott laws, U.S. embargoes and sanctions, compliance procedures and employee complaint procedures. OurAll of our directors and employees, including our Chief Executive Officer (CEO), Chief Financial Officer (CFO), and other senior finance personnel, are subject to compliance with the Code of Business Ethics and ConductConduct.postedavailable on our website."feedback we received.Investors" section later in this proxy statement."“Sustainability” section, seeks to provide a comprehensive resource for interested parties to learn about our sustainability policies and programs, with links to a suite of Company information, including policies, positions, educational information, and other reports.
ADAMS
FERGUSON
GARLAND
LOOMIS
LOWE
MCGRAW
RAMOS
TILTON
TSCHINKEL
WHITTINGTON Experience (Skills and Qualifications) Public Company CEO ✔ ✔ ✔ ✔ ✔ Financial Reporting ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Industry ✔ ✔ ✔ ✔ ✔ ✔ ✔ Global ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Environmental ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Risk Management ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Demographic/Background Independent Yes Yes No Yes Yes Yes Yes Yes Yes Yes Gender Male Male Male Male Male Male Female Male Female Female Tenure (years) 1.4 5.9 5.9 5.9 5.9 5.9 1.4 5.9 5.9 5.8 Age (years) 67 63 60 69 59 69 61 69 70 70 "RELATED PARTY TRANSACTIONS). Additionally, some of our directors may purchase retail products (such as gasoline, fuel additives or lubricants) from the Company. In all cases, it was determined that the nature of the business conducted and the interest of the director by virtue of such position were immaterial both to the Company and to the director.
ADAMS
FERGUSON
GARLAND
LOOMIS
LOWE
MCGRAW
RAMOS
TILTON
TSCHINKEL
WHITTINGTON Audit and Finance Chair X X X X Executive X Chair X X X X Human Resources and Compensation X X X Chair Nominating and Governance X Chair X X Public Policy X X X Chair X X X X X our Code of Business Ethics and Conductthese charters by following the instructions located under AVAILABLE INFORMATION.captionAvailable InformationBoard
William R. Loomis, Jr.
John E. Lowe
Denise L. Ramos
Victoria J. Tschinkel
J. Brian Ferguson
William R. Loomis, Jr.
John E. Lowe
Glenn F. Tilton
Marna C. Whittington
Gary K. Adams
Harold W. McGraw III
Glenn F. Tilton
J. Brian Ferguson
Denise L. Ramos
Marna C. Whittington
Gary K. Adams
J. Brian Ferguson
William R. Loomis, Jr.
Harold W. McGraw III
Denise L. Ramos
Glenn F. Tilton
Victoria J. Tschinkel
Marna C. Whittington page 61.bring to the attention of the General Counsel and, in the case of Directors, the Chair of the Nominating Committeereport any transactions or in the case of executive officers, the Chair of the Audit Committee, any transaction or relationship that arises and of which she or he becomes awarerelationships that reasonably could be expected to constitute a related party transaction. Any suchThe transaction or relationship is reviewed by the Company'sCompany’s management and the appropriate committee of the Board Committee to ensure that it does not constitute a conflict of interest and is reported appropriately. appropriately disclosed.of our directorsdirector and the Company (andand its subsidiaries) and makessubsidiaries in making recommendations to the Board regarding the continued independence of each Board member.director. In 2016,2017, there were no related party transactions in which the Company (oror a subsidiary)subsidiary was a participant and in which any director, or executive officer, (oror any of their immediate2017 PROXY STATEMENT 13CORPORATE GOVERNANCE OF THE COMPANYmembers)members had a direct or indirect material interest. BOARD AND COMMITTEE EVALUATIONSEach committee performsannual self-assessment, andaggregate purchase price of approximately $3.3 billion. The purchase price for the Nominating Committee and Lead Director oversee an annual self-assessmentshares was based on the volume weighted average price of our common stock on the NYSE on the date of the Board,agreement, which includes an evaluation surveyclosed on February 14, 2018.individual discussions betweeninterested parties to communicate with non-employee directors. Shareholders and interested parties may communicate with the Lead Director and each other Director. A summary of the results of each committee's self-assessment is presented to the committee and discussed in executive session. The Lead Director presents a summary of the results of the Board evaluation to the Board in executive session. Any matters requiring further action are identified and action plans developed to address the matter. NOMINATING PROCESSES OFTHE NOMINATING AND GOVERNANCE COMMITTEEThe Nominating Committee consists of four non-employee Directors, all of whom are independent under NYSE listing standards anddirectors by contacting our Corporate Governance Guidelines. The Nominating Committee identifies, considers and recommends director candidatesSecretary, Paula A. Johnson, as provided below: Mailing Address: Corporate Secretary
Phillips 66
P.O. Box 421959
Houston, TX 77242-1959 Phone Number: (281) 293-6600 Internet: “Investors” section of the Company’s website (www.phillips66.com) under the “Corporate Governance” caption withor to any individual director or directors, as appropriate, depending on the goalfacts and circumstances outlined in the communication. In that regard, the Board has requested that certain items unrelated to its duties and responsibilities not be distributed, such as: business solicitations or advertisements; junk mail and mass mailings; new product suggestions; product complaints; product inquiries; résumés and other forms of creating a balance of knowledge, experiencejob inquiries; spam; and diversity. Generally, the Nominating Committee identifies candidates through the use of a search firm or the business and organizational contacts of the directors and management. Our By-Laws permit shareholders to nominate candidates for director election at a shareholders meeting whether or not such nominee is submitted to and evaluated by the Nominating Committee. Shareholders who wish to submit nominees for election at an annual or special meeting of shareholders should follow the procedures described underSubmission of Future Shareholder Proposals on page 61. The Nominating Committee will consider director candidates recommended by shareholders. If a shareholder wishes to recommend a candidate for nomination by the Nominating Committee, he or she should follow the same procedures referred to above for nominations to be made directly by the shareholder.surveys. In addition, the shareholder should provide such other information deemed relevantmaterial that is considered hostile, threatening, illegal or similarly unsuitable will be excluded. Any communication that is filtered out is made available to the Nominating Committee's evaluation. Candidates recommended by the Company's shareholders are evaluated on the same basis as candidates recommended by the Company's directors, CEO, other executive officers, third-party search firms or other sources.any non-employee director upon request.14 2017ContentsDirectorsdirectors are divided into three classes, which are to be as nearly equal in size as possible, with one class being elected each year. The Board of Directors has set the current number of Directorsdirectors at ten, with two classes of three Directorsdirectors each and one class of four Directors.directors. Any director vacancies created between annual shareholder meetings (such as by a current director'sdirector’s death, resignation or removal for cause or an increase in the number of directors) may be filled by a majority vote of the remaining directors then in office. Any director appointed in this manner would hold office for a term expiring at the annual meeting of shareholders at which the term of office of the class to which he or she has been appointed expires. If a vacancy resulted from an action of our shareholders, only our shareholders would be entitled to elect a successor.Directors,directors, please see the the discussion beginning on page 53.20172018 Annual Meeting
for a three-year term endingThree-Year Term Ending at the 20202021 Annual Meeting"FOR"“FOR” EACH OF THE FOLLOWING DIRECTOR NOMINEES. William R. Loomis, Jr.![[MISSING IMAGE: ph_brian-ferguson02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_brian-ferguson02.jpg)
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Director since April 2012 ![[MISSING IMAGE: ph_harold-mcgraw02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_harold-mcgraw02.jpg)
Director since April 2012 
Mr. Loomis has been an independent financial advisor since 2009. He was a general partner and Managing DirectorLazard Freres & Co. from 1984 to 2002, the CEO of Lazard LLC from 2000 to 2001 and a Limited Managing Director of Lazard LLC from 2002 to 2004. Mr. Loomis served as a director of L Brands Inc. from 2005 to 2016.Skills and qualifications:Mr. Loomis has extensive executive experience and financial expertise, as well as substantial history as a senior strategic advisor to complex businesses and multiple executives.2017 PROXY STATEMENT 15PROPOSAL 1: Election of Directors![[MISSING IMAGE: ph_victoria-tschinkel02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_victoria-tschinkel02.jpg)
Glenn F. TiltonAge 68Director since April 2012 
Mr. Tilton served as Chairman of the Midwest of JPMorgan Chase & Co. from 2011 to June 2014. From September 2002 to October 2010, he served as Chairman, President and CEO of UAL Corporation, a holding company, and United Air Lines, Inc., an air transportation company and wholly-owned subsidiary of UAL Corporation. Mr. Tilton previously spent more than 30 years in increasingly senior roles with Texaco Inc., including Chairman and CEO in 2001. He served as Non-Executive Chairman of the Board of United Continental Holdings Inc. from 2010 to 2013 and currently serves on the boards of Abbott Laboratories and AbbVie Inc. (as lead director).Skills and qualifications:Mr. Tilton has strong management experience overseeing complex multinational businesses operating in highly regulated industries, as well as 30 years of experience in the energy industry and expertise in finance and capital markets matters.Marna C. WhittingtonAge 69Director since May 2012 
Dr. Whittington was CEO of Allianz Global Investors Capital, a diversified global investment firm, from 2002 until her retirement in January 2012. She was Chief Operating Officer of Allianz Global Investors, the parent company of Allianz Global Investors Capital, from 2001 to 2011. Prior to that, she was Managing Director and Chief Operating Officer of Morgan Stanley Asset Management. Dr. Whittington started in the investment management industry in 1992, joining Philadelphia-based Miller Anderson & Sherrerd. Previously, she was Executive Vice President and CFO of the University of Pennsylvania, from 1984 to 1992. Earlier, she served as Budget Director and, subsequently, Secretary of Finance for the State of Delaware. Dr. Whittington served on the board of Rohm & Haas Company from 1989 to 2009 and currently serves on the boards of Macy's, Inc. and Oaktree Capital Group, LLC.Skills and qualifications:Dr. Whittington has extensive knowledge of and substantial experience in financial, investment, and banking matters, and has served on compensation committees. She also provides valuable insight from her previous experience serving on the board of a chemicals company and as a statewide cabinet officer.16 2017 PROXY STATEMENTPROPOSAL 1: Election of DirectorsDirectorsdirectors will continue in office until the end of their respective terms. Included below is a listing of each continuing Director'sdirector’s name, age, tenure and qualifications.Directors Whose Terms Expire at the 2018 Annual MeetingJ. Brian FergusonAge 62Director since April 2012 
Mr. Ferguson retired as Chairman of Eastman Chemical Company (Eastman) in 2010 and as CEO of Eastman in 2009. He became the Chairman and CEO of Eastman in 2002. He served on the board of NextEra Energy Inc. from 2005 to 2013 and currently serves on the board of Owens Corning.Skills and qualifications:Mr. Ferguson has over 30 years of leadership experience in international business, industrial operations, strategic planning and capital raising strategies.Harold W. McGraw IIIAge 68Director since April 2012 
Mr. McGraw is Chairman Emeritus of S&P Global Inc. (previously McGraw Hill Financial), having served as Chairman of the Board from 1999 until 2015, as President and Chief Executive Officer from 1998 to November 2013 and as President and Chief Operating Officer starting in 1993. Mr. McGraw is the Honorary Chairman of the International Chamber of Commerce. He currently serves on the board of United Technologies Corporation.Skills and qualifications:Mr. McGraw's experience leading a large, global public company with a significant role in the financial reporting industry provides him with valuable global financial, corporate governance and operational expertise.2017 PROXY STATEMENT 17PROPOSAL 1: Election of DirectorsVictoria J. TschinkelAge 69Director since April 2012 
Ms. Tschinkel currently serves as the Vice-Chairwoman of 1000 Friends of Florida and previously was its Chairwoman. In addition, Ms. Tschinkel is a director of the National Fish and Wildlife Foundation, serving on the Gulf Benefits Committee. She served as State Director of the Florida Nature Conservancy from 2003 to 2006, was senior environmental consultant to Landers & Parsons, a Tallahassee, Florida law firm, from 1987 to 2002, and was the Secretary of the Florida Department of Environmental Regulation from 1981 to 1987.Skills and qualifications:Ms. Tschinkel's extensive environmental regulatory experience makes her well qualified to serve as a member of the Board. In addition, her relationships and experience working within the environmental community position her to advise the Board on the impact of our operations in sensitive areas. ![[MISSING IMAGE: ph_greg-garland02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_greg-garland02.jpg)
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Mr. Garland serves as Chairman and CEO of Phillips 66. He was appointed Senior Vice President, Exploration and Production-Americas for ConocoPhillips in 2010. He was previously President and CEO of Chevron Phillips Chemical Company LLC (CPChem) from 2008 to 2010, having served as Senior Vice President, Planning and Specialty Products, CPChem, from 2000 to 2008. Mr. Garland also serves on the boards of Amgen Inc. and Phillips 66 Partners GP LLC, the general partner of Phillips 66 Partners LP.Skills and qualifications:Mr. Garland's more than 35-year career with Phillips Petroleum Company, CPChem and ConocoPhillips, and as CEO of Phillips 66, makes him well qualified to serve both as a Director and as Chairman of the Board. Mr. Garland's extensive experience in the energy industry makes his service as a Director invaluable to the Company. In addition to his other skills and qualifications, Mr. Garland's role as both Chairman and CEO of Phillips 66 serves as a vital link between the Board of Directors and management, allowing the Board to perform its oversight role with the benefit of management's perspective on business and strategy.18 2017 PROXY STATEMENTPROPOSAL 1: Election of DirectorsGary K. AdamsAge 66Director since October 2016 
Mr. Adams was appointed to the Board in October 2016 based on a recommendation by the Company's Chief Executive Officer and the Nominating Committee. Mr. Adams is currently the chief advisor of chemicals for IHS Inc. He started his chemical industry career with Union Carbide. After 15 years serving in a number of positions at Union Carbide, Mr. Adams joined Chemical Market Associates Inc. (CMAI). He served as President, CEO and Chairman of the Board of CMAI from 1997 until its acquisition by IHS in 2011.Mr. Adams is a director of Trecora Resources and previously served on the boards of Westlake Chemical Partners LP from 2014 to 2016 and Phillips 66 Partners LP from 2013 to 2016.Skills and qualifications:Mr. Adams has a lengthy tenure and extensive experience in the energy industry, including leadership experience with operating responsibilities and in-depth knowledge of the chemicals market.John E. LoweAge 58Director since April 2012 
Mr. Lowe served as assistant to the CEO of ConocoPhillips, a position he held from 2008 until May 2012. He previously held a series of executive positions with ConocoPhillips, including Executive Vice President, Exploration and Production, from 2007 to 2008, and Executive Vice President, Commercial, from 2006 to 2007. Mr. Lowe is a Senior Executive Advisor to Tudor, Pickering, Holt & Co. He served on the board of Agrium Inc. from 2010 to 2015 and currently serves on the boards of TransCanada Corporation and Apache Corporation, where he is non-executive Chairman.Skills and qualifications:Mr. Lowe has relevant industry financial expertise in addition to his extensive experience in and knowledge of the energy industry.2017 PROXY STATEMENT 19PROPOSAL 1: Election of DirectorsDenise L. RamosAge 60Director since October 2016 
Ms. Ramos was appointed to the Board in October 2016 based on a recommendation by the Company's Chief Executive Officer and the Nominating Committee. Ms. Ramos has served as the Chief Executive Officer, President and a director of ITT Inc. (formerly ITT Corporation) since October 2011. She previously served as Senior Vice President and Chief Financial Officer of ITT. Prior to joining ITT, Ms. Ramos served as Chief Financial Officer for Furniture Brands International from 2005 to 2007. From 2000 to 2005, Ms. Ramos served as Senior Vice President and Corporate Treasurer at Yum! Brands, Inc. and Chief Financial Officer for the U.S. division of KFC Corporation. Ms. Ramos began her career in 1979 at Atlantic Richfield Company (ARCO), where she spent more than 20 years serving in a number of finance positions including Corporate General Auditor and Assistant Treasurer.Ms. Ramos served on the board of Praxair, Inc. from 2014 to 2016. She serves on the board of trustees for the Manufacturers Alliance for Productivity and Innovation, and is also a member of the Business Roundtable and the Business Council.Skills and qualifications:Ms. Ramos has more than two decades of experience in the oil and gas industry and possesses significant retail and customer-centric experience. In addition to her financial expertise, she has extensive operational and manufacturing experience with industrial companies.Majority VotingOur By-Laws require directors to be elected by the majority of the votes cast with respect to such director (i.e., the number of votes cast "for" a director must exceed the number of votes cast "against" that director). If a nominee who is serving as a Director is not elected at the Annual Meeting and no one else is elected in place of that Director, then, under Delaware law, the Director would continue to serve on the Board of Directors as a "holdover director." However, under our By-Laws, the holdover director would be required to tender his or her resignation to the Board. The Nominating Committee then would consider and recommend to the Board whether to accept or reject the tendered resignation, or whether some other action should be taken. The Board of Directors would then decide whether to accept the resignation, taking into account the recommendation of the Nominating Committee. The Director who tenders his or her resignation would not participate in the recommendation of the Nominating Committee or the decision of the Board with respect to his or her resignation. The Board is required to publicly disclose (by a press release, a filing with the SEC or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.NominationsIn selecting the 2017 nominees for Director, the Nominating Committee sought candidates who possess the highest personal and professional ethics, integrity and values and are committed to representing the long-term interests of the Company's shareholders. In addition to reviewing a candidate's background and accomplishments, the Nominating Committee reviewed candidates in the context of the current composition of the Board and the evolving needs of the Company's businesses. The Nominating Committee also considered the number of boards on which the candidate already serves. It is the Board's policy that at all times at least a substantial majority of its members meets the standards of independence promulgated by the NYSE and the SEC, and as set forth in the Company's Corporate Governance Guidelines. The Nominating Committee also seeks to ensure that the Board reflects a range of talents, ages, skills, experiences, diversity, and expertise, particularly in the areas of accounting and finance, management, domestic and international markets, leadership, and energy-related industries, sufficient to provide sound and prudent guidance with respect to the Company's strategic and operational20 2017 PROXY STATEMENTPROPOSAL 1: Election of Directorsobjectives. The Board seeks to maintain a diverse membership, but does not have a separate policy on diversity. The Board also requires that its members be able to dedicate the time and resources necessary to ensure the diligent performance of their duties on the Company's behalf, including attending Board and applicable committee meetings.The following are some of the key qualifications and skills the Nominating Committee considered in evaluating the director nominees. The individual biographies above provide additional information about each nominee's specific experiences, qualifications and skills.•CEO experience. Directors with experience as CEOs of public corporations provide the Company with valuable insights. These individuals have a demonstrated record of leadership and a practical understanding of organizations, processes, strategy, risk and risk management and the methods to drive change and growth. Through their service as top leaders at other organizations, they also bring valued perspectives on common issues affecting other companies and Phillips 66.•Financial reporting experience. An understanding of finance and financial reporting processes is important. The Company measures its operating and strategic performance by reference to financial targets. In addition, accurate financial reporting and robust auditing are critical to the Company's success. We seek to have multiple directors who qualify as audit committee financial experts, and we expect all of our directors to be financially knowledgeable.•Industry experience. Directors with experience as executives or directors or in other leadership positions in the energy industry bring pertinent background and knowledge to the Board. These directors have valuable perspective on issues specific to the Company's business.•Global experience. As a global company, directors with global business or international experience provide valuable perspectives on our operations.•Environmental experience. The perspective of directors who have experience within the environmental regulatory field is valued as we implement policies and conduct operations in order to ensure that our actions today will provide the energy needed to drive economic growth and social well-being, while also securing a stable and healthy environment for tomorrow.•Risk management experience. Directors with experience as executives managing risk provide insight and guidance that enhance the Board's capabilities in performing its risk oversight responsibilities.MR.ADAMSMR.FERGUSONMR.GARLANDMR.LOOMISMR.LOWEMR.MCGRAWMS.RAMOSMR.TILTONMS.TSCHINKELDR.WHITTINGTON CEO ExperienceüüüüüüüüFinancial Reporting ExperienceüüüüüüüüüüIndustry ExperienceüüüüüüüGlobal ExperienceüüüüüüüüüüEnvironmental ExperienceüüüüüüüüüRisk Management Experienceüüüüüüüüüü ![[MISSING IMAGE: ph_gary-adams02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_gary-adams02.jpg)
![[MISSING IMAGE: ph_john-lowe02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_john-lowe02.jpg)
Director since April 2012 ![[MISSING IMAGE: ph_denise-ramos02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_denise-ramos02.jpg)
The lack of a "ü" for a particular item does not mean that the director does not possess that qualification, characteristic, skill or experience. We look to each director to be knowledgeable in these areas; however, the "ü" indicates that the item is a specific qualification, characteristic, skill or experience that the director brings to the Board.2017 PROXY STATEMENT 21PROPOSAL 1: ElectionMs. Ramos served on the board of DirectorsPraxair, Inc. from 2014 to 2016. She serves on the board of trustees for the Manufacturers Alliance for Productivity and Innovation, and is a member of the Business Council. Committeesthe BoardCOMMITTEECURRENT MEMBERSPRINCIPAL FUNCTIONSNUMBER OFMEETINGSIN 2016 Audit and FinanceJ. Brian Ferguson*(1)![[MISSING IMAGE: ph_william-loomis02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_william-loomis02.jpg)
(1)John E. Lowe(1)Denise L. Ramos(1)Victoria J. Tschinkel
Discusses, with management,independent auditorsCEO of Lazard LLC from 2000 to 2001 and the internal auditors, the integritya Limited Managing Director of Lazard LLC from 2002 to 2004. Mr. Loomis served as a director of L Brands Inc. from 2005 to 2016. ![[MISSING IMAGE: ph_glenn-tilton02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_glenn-tilton02.jpg)
Company's accounting policies, internal controls, financial statements,Midwest of JPMorgan Chase & Co. from 2011 to 2014. From 2002 to 2010, he served as Chairman, President and financial reporting practices,CEO of UAL Corporation, a holding company, and select financial matters, covering the Company's capital structure, complex financial transactions, financial risk management, retirement plansUnited Air Lines, Inc., an air transportation company and tax planning.Reviews significant corporate risk exposureswholly-owned subsidiary of UAL Corporation. Mr. Tilton previously spent more than 30 years in increasingly senior roles with Texaco Inc., including Chairman and steps management has taken to monitor, control and report such exposures.Monitors the qualifications, independence and performance of our independent auditors and internal auditors.Monitors our compliance with legal and regulatory requirements and corporate governance guidelines, including our Code of Business Ethics and Conduct.Maintains open and direct lines of communication with the Board and our management, internal auditors and independent auditors.11ExecutiveGreg C. Garland*J. Brian FergusonWilliam R. Loomis, Jr.John E. LoweGlenn F. TiltonMarna C. WhittingtonExercises the authority of the full Board between Board meetings on all matters other than (1) those expressly delegated to another committeeCEO in 2001. He served as Non-Executive Chairman of the Board (2)of United Continental Holdings Inc. from 2010 to 2013 and currently serves on the adoption, amendment or repealboards of anyAbbott Laboratories and AbbVie Inc. (as lead director).our By-Lawsexperience in the energy industry and (3) those that cannot be delegated to a committee under statute or our Certificate of Incorporation or By-Laws.expertise in finance and capital markets matters. —Human Resources and CompensationMarna C. Whittington*Gary K. AdamsHarold W. McGraw IIIGlenn F. TiltonOversees our executive compensation policies, plans, programs and practices.Assists the Board in discharging its responsibilities relating to the fair and competitive compensation of our executives and other key employees.Reviews at least annually the performance (together with the Lead Director) and sets the compensation of the CEO.6Nominating and GovernanceWilliam R. Loomis, Jr.*J. Brian FergusonDenise L. Ramos![[MISSING IMAGE: ph_marna-whittington02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/ph_marna-whittington02.jpg)
Selects and recommends director candidates to the Board to be submitted for election at Annual Meetings and to fill any vacancies on the Board.Recommends committee assignments to the Board.Reviews and recommends to the Board compensation and benefits policies for our non-employee Directors.Reviews and recommends to the Board appropriate corporate governance policies and procedures for our Company.Conducts an annual assessment of the qualifications and performance of the Board.Reviews and reports to the Board annually on succession planning for the CEO.3Public PolicyJohn E. Lowe*Gary K. AdamsJ. Brian FergusonWilliam R. Loomis, Jr.Harold W. McGraw IIIDenise L. RamosGlenn F. TiltonVictoria J. TschinkelMarna C. WhittingtonAdvises the Board on current and emerging domestic and international public policy issues.Assists the Board with the development, review and approval of policies and budgets for charitable and political contributions and activity.Advises the Board on compliance with policies, programs and practices regarding health, safety and environmental protection.6 *Committee Chairperson(1)Audit committee financial expert22 2017ContentsCompany'sCompany’s financial statements. The Audit Committee has appointed Ernst & Young LLP to serve as the Company'sCompany’s independent registered public accounting firm for fiscal year 2017.2018. Ernst & Young has been retainedacted as the Company'sCompany’s independent registered public accounting firm continuously since 2012.Company'sCompany’s independent auditors prior to the firm'sfirm’s engagement, and periodically considers whether a regular rotation of the independent auditors is necessary to assure continuing independence. The Audit Committee and its Chairman are directly involved in the selection of Ernst & Young'sYoung’s lead engagement partner."FOR"“FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP.Company'sCompany’s independent registered public accounting firm. Even if the selection is ratified, the Audit Committee may in its discretion select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.20162017 included an audit of our consolidated financial statements, an audit of the effectiveness of the Company'sCompany’s internal control over financial reporting, and services related to periodic filings made with the SEC. Additionally, Ernst & Young provided certain other services as described below. In connection with the audit of the 20162017 consolidated financial statements, we entered into an engagement agreement with Ernst & Young that set forth the terms by which Ernst & Young performed audit services for us.Young'sYoung’s fees for professional services totaled $12.8 million for 2017 and $14.5 million for 2016, and $12.9 million for 2015, which consisted of the following: Fees (in millions) Audit Fees(1) $11.8 $13.5 Audit-Related Fees(2) 0.6 0.6 Tax Fees(3) 0.2 0.2 All Other Fees 0.2 0.2 Total $12.8 $14.5 Fees (in millions) 2016 2015 $ 13.5 $ 11.8 0.6 0.7 0.2 0.2 0.2 0.2 $ 14.5 $ 12.9 (1)$1.3 million for 2016, and 2015, respectively, which were approved by the Audit Committee of the General Partner of Phillips 66 Partners LP.(2)(3)Young'sYoung’s independence is not impaired; (b) describes the audit, audit-related, tax and other services that may be provided and the non-audit services that are prohibited; and (c) sets forth pre-approval requirements2017 PROXY STATEMENT 23PROPOSAL 2: Ratification of the Appointment of Ernst & Young LLPthe shareholders.Directors.directors. The Board has determined that each member of the Audit Committee satisfies the requirements of the NYSE as to independence, financial literacy and expertise. The Board has further determined that each of J. Brian Ferguson, William R. Loomis, Jr., John E. Lowe, and Denise L. Ramos is an audit committee financial expert as defined by the SEC. The responsibilities of the Audit Committee are set forth in the written charter adopted by the Board of Directors, which is available in the "“InvestorsInvestors"” section of the Company'sCompany’s website under the caption "“Corporate GovernanceGovernance."” One of the Audit Committee'sCommittee’s primary responsibilities is to assist the Board in its oversight of the integrity of the Company'sCompany’s financial statements. The following report summarizes certain of the Audit Committee'sCommittee’s activities in this regard for 2016.Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016,2017, and management'smanagement’s assessment of the effectiveness of the Company'sCompany’s internal control over financial reporting as of December 31, 2016,2017, included therein.No.1301No. 1301 as adopted by the Public Company Accounting Oversight Board. The Audit Committee has received the written disclosures and the letter from Ernst & Young required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant'saccountant’s communications with the Audit Committee concerning independence, and has discussed with that firm its independence from Phillips 66.Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016.2017.
William R. Loomis, Jr.
John E. Lowe
Denise L. Ramos
Victoria J. TschinkelAUDIT AND FINANCE COMMITTEEJ. Brian Ferguson, ChairmanWilliam R. Loomis, Jr.John E. LoweDenise L. RamosVictoria J. Tschinkel24 2017Contents66's66’s Named Executive Officers (NEOs) as described in this proxy statement in the Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS section and in the Executive Compensation TablesEXECUTIVE COMPENSATION TABLES (together with the accompanying narrative disclosures)."FOR"“FOR” THE ADVISORY APPROVAL OF THE COMPENSATION OF THE COMPANY'SCOMPANY’S NAMED EXECUTIVE OFFICERS.Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),U.S. federal securities laws, Phillips 66 is providing shareholders with the opportunity to vote on an advisory resolution, commonly known as "Say-on-Pay,"“Say-on-Pay,” considering approval of the compensation of its NEOs.on page 40)in ROLE OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE), has overseen the development of compensation programs designed to attract, retain and motivate executives who enable us to achieve our strategic and financial goals. TheCOMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysisthe EXECUTIVE COMPENSATION TABLES and theExecutive Compensation Tables, together with the accompanying narrative disclosures, allow you to view the trends in compensation and application of our compensation philosophies and practices for the years presented.Company'sCompany’s ability to provide sustainable value is driven by superior individual performance. The Board believes that a company must offer competitive compensation to attract and retain experienced, talented and motivated employees. In addition, the Board believes employees in leadership roles within the organization are motivated to perform at their highest levels when performance-based pay represents a significant portion of their compensation. The Board believes that our philosophy and practices have resulted in executive compensation decisions that are aligned with Company and individual performance, are appropriate in value, and have benefited the Company and its shareholders.2017 25COMPENSATION DISCUSSION AND ANALYSIS2016, as well as2017 and provides the decisions that the Human Resources and Compensation Committee (Compensation Committee) made regarding 20162017 compensation supported by our performance.focuses on the compensationstrategic highlights are presented below. Some of our NEOsthese results are not measures of financial performance under U.S. generally accepted accounting principles (GAAP), for which more information is available in 2016. Our NEOs were: NameTitle ![[MISSING IMAGE: icon_oe02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_oe02.jpg){kind=icon}
Greg Garland0.14 Chairman Our combined TRR was the lowest in our Company history and CEORobert Hermanour Process Safety Event (PSE) rate of 0.03 was industry leading; however, our performance was diminished by a serious incident.Executive Vice President, MidstreamPaula JohnsonExecutive Vice President, Legal and Government Affairs, General Counsel and Corporate SecretaryKevin MitchellExecutive Vice President, Finance and CFOTim TaylorPresident 97.6% During the largest turnaround year in our Company’s history, our assets were available to run 3.5% more than our target goal. #1 For the second year in a row we had the lowest number of Reportable Environmental Events in our Company’s history. ![[MISSING IMAGE: icon_ind-recognized.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_ind-recognized.jpg){kind=icon}
Six refineries were recognized in 2017 as 2016 American Fuel & Petrochemical Manufacturers Safety Award winners, with one receiving the Distinguished Safety Award—our industry’s highest level of safety recognition. ![[MISSING IMAGE: icon_growth02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_growth02.jpg){kind=icon}
33% CPChem recently completed its U.S. Gulf Coast Petrochemicals project consisting of a world-scale ethane cracker and two polyethylene units. The project increases CPChem’s global ethylene and polyethylene capacity by approximately 33%.
billion We completed a $2.4 billion dropdown of Refining and Midstream assets into Phillips 66 Partners LP (PSXP). ![[MISSING IMAGE: icon_returns02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_returns02.jpg){kind=icon}
![[MISSING IMAGE: icon_arrow01.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_arrow01.jpg){kind=icon}
In Refining, we aim to be an efficient, low-cost, and reliable operator. We invest in smaller, high-return, quick payout projects to enhance margins. During 2017, we increased heavy crude processing capability at the Billings Refinery and completed a diesel recovery project at the Ponca City Refinery.
billion Our Adjusted Controllable Costs were 2% below budget, while absorbing company growth. We have successfully executed the construction of major projects and maintained our disciplined approach to capital allocation. ![[MISSING IMAGE: icon_distributions02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_distributions02.jpg){kind=icon}
11% We increased our quarterly dividend by 11%, our seventh increase in 5 years. 21% Our diversified structure allows us to invest where profitable across multiple streams of business, delivering a 2017 TSR of 21%. Our cumulative TSR since our Company inception in May 2012 through the end of 2017 was 257%—outperforming both our peer group and the broader market.
billion In 2017, we delivered $3 billion to shareholders through dividends and share repurchases. Since our inception in 2012, we have distributed $16.4 billion to shareholders, through dividends, share repurchases and share exchanges. ![[MISSING IMAGE: icon_high-performing02.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/icon_high-performing02.jpg){kind=icon}
25% Approximately 25% of our global workforce resided in locations impacted by Hurricane Harvey, yet almost all assets were operating by mid-September. We provided employees with $4.3 million in financial assistance through emergency cash and interest free loans, and donated an additional $4 million to charitable relief efforts. 73,000 Last year, our employees volunteered 73,000 hours to organizations in their local communities. Additionally, Phillips 66 provided $28 million in financial support to organizations promoting education, environmental sustainability, and community safety and preparedness. ✔ Internally we focused on achievement of our corporate priorities centered around promoting a culture of inclusion and diversity, building leadership capabilities, and maximizing the performance of our people. The 2016 energy landscape continued to highlight thenature ofindustry; however, our industry. Our diversified portfolio enables us to be resilient through industry cycles; accordingly, our overriding objectives remain the same—enable our high-performing workforce to execute our corporate strategy efficiently and effectively, while remaining vigilant and focused on safety and operating excellence, in order to:•Deliver profitable growth•Optimize returns•Reward our owners through shareholder distributionsOne way we measure progress in implementing our corporate strategy is through enterprise value growth.cycles. Through our disciplined capital allocation model, we increase our enterprise value by strategically investing capital in our higher-valued businesses while returning a significant portion of capital to shareholders through dividends and share repurchases.2016 performance results and strategic highlights are presented below. Some of these results are non-GAAP financial measures for which more information is available in Appendix A.26 2017 PROXY STATEMENTCOMPENSATION DISCUSSION AND ANALYSIS2016 PERFORMANCE HIGHLIGHTS
98.6%Our available to run metric was 98.6%, which was 3 percentage points better than target.Name Title 0.02We reduced our Process Safety Event Rate by 75%, from 0.08 in 2015 to 0.02 in 2016. Greg Garland Chairman and CEO #1Our environmental incident rate was the lowest since our Company inception. We published our Sustainability Brochure to consolidate and highlight key information. Robert Herman Executive Vice President, Refining Paula Johnson Executive Vice President, Legal and Government Affairs, General Counsel and Corporate Secretary Kevin Mitchell Executive Vice President, Finance and CFO 0.15Our Total Recordable Rate (TRR) was the best in our Company history and 50% better than the average of top quartile companies in our industries. Tim Taylor 
150,000BPDWe began operations in November 2016 at our 150,000 barrels per day (BPD) Freeport LPG Export Terminal. $4,094*MMOur capital program of $4,094 million funded the continuing expansion of our Beaumont Terminal and transportation infrastructure through acquisitions and organic growth. CPChem advanced its Gulf Coast Petrochemicals Project, with completion expected in 2017. 
$4,548MMWe delivered Adjusted EBITDA of $4,548 million in a challenging environment due to exceptional safety and operating excellence. As a result of asset rationalization, we divested the Whitegate refinery. $6,093MMOur Adjusted Controllable Costs were 4% below budget, while absorbing Company growth. 
13%We increased our quarterly dividend 13%, our sixth increase since the Company formation less than five years ago. 203%Our TSR from our Company inception in May 2012 through the end of 2016 was 203%—almost twice our peer average of 113% and more than twice the S&P 100 of 73%. $2,324MMIn 2016, $2,324 million was returned to shareholders through dividends and share repurchases. 
üWe have robust Succession Management processes to develop and deliver executive talent that will execute our strategy focused on long-term shareholder value creation. üTo ensure that we attract and retain top talent, we maintain diversity and inclusion efforts that also help ensure that our workforce represents the communities where we operate. President üIn 2016, we conducted an Employee Engagement survey and developed action plans to increase discretionary effort and elevate performance across the organization. In 2016, we retained over 98% of our top performers, a key indicator of high employee engagement. *Includes Phillips 66's portion of self-funded capital spending by DCP Midstream, LLC, CPChem,Our Compensation Philosophy remains unchanged and WRB Refining LP.Our compensation programs supportsupports our corporate missionvision of providing energy and improving lives. Our programs are aligned with key elements of our corporate strategy. Throughout the past year, we engaged with many of our largest shareholders on corporate governance topics, including executive compensation, and received positive feedback on our current compensation structure. Important tenets of our approach include:We ensure2017 PROXY STATEMENT 27
COMPENSATION DISCUSSION AND ANALYSISWe believe ourprograms play an important role in our employee value proposition. They allowallows us to attract, retain, motivate, and reward high-performing executive talent, as well as support succession planning.•pay for performance.target reasonable and competitive compensation, aligned with market median levels.•We target and award reasonable and competitive compensation, aligned with market median levels. Awards are differentiated based on performance relative to targets, peers and market conditions.•We emphasizeexecutivesexecutives.set at a multiple of their annual base salary.common in our peer group.•We•We limit executive perquisites to items that are common in our peer group and serve a reasonable business purpose.Significant Pay at RiskConsistent with our philosophy that executive compensation should be linked to Company performance and directly aligned with shareholder value creation, a significant portion of NEO compensation is at risk and based on performance metrics tied to our corporate strategy. "At risk" means there is no guarantee that the target value of the awards will be realized. The Compensation Committee has complete authority to limit and even award nothing for the performance-based payouts and individual performance adjustments under each of the Variable Cash Incentive Program (VCIP) and Performance Share Program (PSP) based on its evaluation of performance. Stock options can expire with zero value if the Company stock price does not appreciate above the grant date price over the 10-year term of the options. Restricted Stock Units (RSUs) may lose value depending on stock price performance. Therefore, for NEOs to earn and sustain competitive compensation, the Company must meet its strategic objectives, perform well relative to peers and deliver market-competitive returns to shareholders.Target MixThe target mix of the compensation program elements for the CEO and other NEOs is shown below. The charts outline the relative size, in percentage terms, of each element of targeted compensation.CEO target compensation mix is 90 percent at risk and 72 percent performance-based. The target mix for the other NEOs is 82 percent at risk and 65 percent performance-based. Further, LTI make up 73 percent of the CEO and 65 percent of other NEO target compensation mix. For both the CEO and other NEOs, target mix percentages are commensurate with their levels of responsibility. Further detail on all of these programs are provided in2016 Executive .CEO Target MixOther NEO Target Mix
28 2017 PROXY STATEMENTCOMPENSATION DISCUSSION AND ANALYSISWe utilize a performance peer group and a compensation peer group. In this section we provide the criteria used in determining each peer group, the companies included, and how we use each peer group. The Compensation Committee reviews these peer groups annually and adjusts as necessary.Performance Peer GroupCriteria for selection. Phillips 66 is uniquely positioned in the energy industry, with a large refining and marketing base, growing midstream NGL operations and significant petrochemical business. To reflect our unique portfolio of assets, we include companies operating in each of our three major businesses. We believe that our performance peer group is representative of the companies that investors use for relative performance comparisons.Companies included. The table below provides the sixteen companies in our performance peer group.Refining and MarketingMidstreamChemicals Delek US Holdings, Inc. (DK)Energy Transfer Equity, L.P. (ETE)Celanese Corporation (CE)HollyFrontier Corporation (HFC)Enterprise Products Partners L.P. (EPD)The Dow Chemical Company (DOW)Marathon Petroleum Corporation (MPC)ONEOK, Inc. (OKE)Eastman Chemical Company (EMN)PBF Energy Inc. (PBF)Targa Resources Corp. (TRGP)Huntsman Corporation (HUN)Tesoro Corporation (TSO)Westlake Chemical Corporation (WLK)Valero Energy Corporation (VLO)Western Refining, Inc. (WNR) Relative analysis. Our performance peer group is used to evaluate our business results relative to other companies with similar business operations. We used this peer group in determining the payout for both relative TSR and relative return on capital employed (ROCE) under the PSP 2014-2016. We also evaluate our TSR performance against the S&P 100 Index, which the Compensation Committee believes is an appropriate comparison for performance purposes because the index reflects the companies with which we compete for capital in the broader market.Compensation Peer GroupCriteria for selection. Our compensation peer group is primarily comprised of companies from the broader market because we draw our executive talent from a candidate pool that extends beyond the energy industry, although there is some overlap with our performance peer group. The compensation peer group primarily consists of large industrial companies with significant capital investments and complex international operations.Our compensation peer group includes companies that are comparable to Phillips 66 based on three primary criteria—assets, market capitalization, and business operations. Revenue is a secondary criteria due to the nature of our operations. The Compensation Committee believes utilizing each of these criteria is necessary in order to fully reflect the complex nature of our business and determine the optimal group of companies with which to compare Phillips 66. In 2016, the Compensation Committee used a simplified compensation peer group in making 2016 compensation decisions. These changes were implemented to align our peer group more closely with our three primary criteria—assets, market capitalization, and business operations. At the time of these changes, we were, in comparison to this group, in the 59th percentile in assets, 47th percentile in market value and 91st percentile in revenue.Companies included. The table below provides the twenty companies in our compensation peer group.2016 Compensation Decisions(1) 3M Company (MMM)E. I. du Pont de Nemours and Company (DD)Lockheed Martin Corporation (LMT)Archer-Daniels-Midland Company (ADM)Ford Motor Company (F)LyondellBasell Industries N.V. (LYB)The Boeing Company (BA)General Dynamics Corporation (GD)Marathon Petroleum Corporation (MPC)Caterpillar Inc. (CAT)General Motors Company (GM)Tesoro Corporation (TSO)Chevron Corporation (CVX)Halliburton Company (HAL)United Technologies Corporation (UTX)Deere and Company (DE)Honeywell International Inc. (HON)Valero Energy Corporation (VLO)The Dow Chemical Company (DOW)Johnson Controls, Inc. (JCI) (1)The 2015 compensation peer group was modified to include the following large industrial companies—3M Company, Halliburton Company, and LyondellBasell Industries—and remove the following service, consumer products, and non-US based companies—BP, FedEx Corporation, Johnson & Johnson, Mondelez International, The Procter & Gamble Company, Sysco Corporation, Tyson Foods, United Parcel Service, and Verizon Communications. The 2015 peer group was used to set the compensation structure for 2016 for the NEOs other than the CEO. The 2016 CEO target compensation was aligned with the 2015 and 2016 compensation peer groups.Relative analysis. We use the compensation peer group to evaluate and determine compensation levels for our NEOs, including base salary adjustments and targets for our annual bonus and LTI programs.2017 PROXY STATEMENT 29 COMPENSATION DISCUSSION AND ANALYSIS 2016 EXECUTIVE COMPENSATION PROGRAMSthe executive compensation programs and the performance drivers of each element. KEY ELEMENTS OF PAY DELIVERED VIATARGET AMOUNTPERFORMANCE DRIVERS(AND WEIGHTINGS)
(AND WEIGHTINGS) Base Salary CashCash Benchmarked to compensation peer group median; adjusted for experience, responsibility, performance and potentialpotential Annual fixed cash compensation to attract and retain NEOsNEOs Annual Incentive VCIPVariable Cash Incentive Program (VCIP) 100% of Annual Performance-Based Compensation TargetTarget Adjusted EBITDA (40%)
Operating Excellence (35%)
Adjusted Controllable Costs (15%)
High-Performing Organization (10%)
Individual Modifier (+/–- 50% of target) Long-Term Incentives (LTI) PSP(3-yearPerformance Share Program (PSP) (3-year performance period)
50% of LTI TargetTarget RelativeAbsolute ROCE (25%) AbsoluteRelative ROCE (25%)
Relative TSR (50%) OptionsOption Program(1) 25% of LTI TargetTarget Long-term stock price appreciation appreciation RSUs Restricted Stock Unit (RSU) Program 25% of LTI TargetTarget Long-term stock price appreciation appreciation (1)Thebelieves thishas authority to reduce, and even award nothing for, the performance-based payouts and individual performance adjustments under each of the VCIP and PSP. Stock options can expire with zero value if the price of our common stock does not appreciate above the grant date price over the 10-year term of the options. RSUs may lose value depending on stock price performance. Therefore, for NEOs to earn and sustain competitive compensation, the Company must meet its strategic objectives, perform well relative to peers, and deliver market-competitive returns to shareholders.aligned89 percent at risk and 71 percent performance-based. The target mix for the other NEOs is 82 percent at risk and 65 percent performance-based. Further, LTI awards make up 72 percent of the CEO and 65 percent of other NEOs target compensation mix. For both the CEO and other NEOs, target mix percentages are commensurate with their levels of responsibility. Further detail on all of these programs is provided in EXECUTIVE COMPENSATION PROGRAM DETAILS.![[MISSING IMAGE: tv487943_pie-target.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/tv487943_pie-target.jpg)
philosophy, reflects the cyclical natureprograms: WE DO... WE DO NOT... WE DO NOT... business and supports executive retention.employees'employees’ different levels of responsibility and performance. As the majority of our NEO compensation is performance-based and tied to long-term programs, base salary represents a less significant component of total compensation. In setting each NEO'sNEO’s base salary, the Compensation Committee considers factors including, but not limited to, the responsibility level for the position held, market data from the compensation peer group for comparable roles, experience and expertise, individual performance and business results.2016.2017. Because these amounts reflect each NEO'sNEO’s annualized salary as of the dates indicated, this information may vary from the information provided in theSUMMARY COMPENSATION TABLESummary Compensation Table,, which reflects actual base salary earnings in 2016,2017, including the effect of salary changes during the year. Name
($)
($)
($) Greg Garland 1,625,016 1,675,008 1,675,008 Robert Herman 670,008 693,480 693,480 Paula Johnson 704,568 749,664 749,664 Kevin Mitchell 692,136 712,920 712,920 Tim Taylor 1,080,768 1,124,016 1,124,016 Salary as of 1/1/2016
($)Salary as of 3/1/2016
($)Salary as of 12/31/2016
($) 1,575,816 1,625,016 1,625,016 627,000 655,224 670,008 (1) 671,016 704,568 704,568 670,008 692,136 692,136 1,024,416 1,080,768 1,080,768 (1)Mr. Herman received a salary increase April 1, 2016 in conjunction with responsibility changes.2016,2017, as part of the annual merit cycle for all employees. These merit increases in base salary realigned each applicable NEO'sNEO’s base salary with the respective compensation peer group levels and reflected each NEO'sNEO’s achievement of established performance requirements corresponding to his or her role. The Compensation Committee determined these adjustments were appropriate to maintain our competitiveness in the market.30 2017 PROXY STATEMENTCOMPENSATION DISCUSSION AND ANALYSISNEO'sNEO’s salary grade level to derive the NEO'sNEO’s target award. At the end of the performance period, the Compensation Committee reviews the Company'sCompany’s performance to determine the Corporate Payout Percentage. This percentage is based on a mix of operational and financial metrics, the details and weighting of which are described below. The Compensation Committee can award a Corporate Payout Percentage of zero up to the maximum of 200 percent.individual performance adjustments.Individual Performance Adjustments. Individual Performance Adjustments can range from +/–50 percent of the target award. Adjustments are based on measurable performance of the individual NEO that drives shareholder value.
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2016,2017, the Compensation Committee used the following metrics, which are aligned with our corporate strategy, to evaluate corporate performance under the VCIP. This mix of financial and operational metrics was designed to ensure a balanced view of Company performance.2016 VCIP METRICS![[MISSING IMAGE: tv487943_chrt-vcip.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/tv487943_chrt-vcip.jpg)
In 2016, we replaced Adjusted Net Income and Adjusted ROCE, each weighted at 25 percent, with Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) weighted at 40 percent. Adjusted ROCE continues to be a metric in our long-term plan because we believe it is an important measure of long-term growth. 2017 PROXY STATEMENT 31COMPENSATION DISCUSSION AND ANALYSIS5886 percent of target was appropriateearned for this metric. Overall performance was 3513 percent below target due primarily to market volatility, which was partially offset by exceptional operating excellence.
*VCIP Adjusted EBITDA, as used for VCIP, is a non-GAAP financial measure. See Appendix A for additional information.![[MISSING IMAGE: tv487943_bar1.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/tv487943_bar1.jpg)
as well as environmental stewardship and asset availability, is critical to meeting our corporate strategy of growth, returns and distributions. We measure ourselves against others in our industry for safety metrics, target sustained performance in environmental stewardship, and effectively manage unplanned downtime. In 2016, we increased the weighting of this metric from 25 percent to 35 percent, placing a greater emphasis on availability of our assets, in acknowledgment that the availability of our assets across our business segments is essential to profitability.and Lost Workday Case Rate (LWCR), and PSE Rate, we benchmarked ourselves against companies with strongthe strongest safety records in our industry. Generally, these companies fall within the top 2 quartiles of all companies reported. We then established our threshold, target, and maximum goals based on the 25th, 50th, and 75th percentiles of this group of companies.performance.performance, with a goal of continuous improvement. For asset availability, we incorporatedincorporate all of the lines of our business, and then weightedweight them by EBITDA.2016,2017, we excelledmet or exceeded our maximum stretch goal in all five areas measured for Operating Excellence—breaking many Company recordsExcellence. However, at the recommendation of the CEO, the Compensation Committee approved a 20% reduction in the metrics we usepayout for combined TRR and PSE Rate to evaluate ourselves in this area. While some financial metrics may be primarily market driven, operatingacknowledge a serious incident that resulted in a safe, environmentally conscious, and efficient way is something that we can control. fatality in February 2017.196192 percent.personal safetyLWCR was top quartile compared to our industry group. Based on this performance,group, earning 200 percent of target. While 200 percent of target was also earned for combined TRR, the Compensation Committee reduced the payout by 20 percent as noted above, resulting in a 180 percent payout.TRR recognizingPSE, the Compensation Committee reduced the payout by 20 percent as noted above, resulting in a 21180 percent improvement over 2015 and the best TRR performance in our Company history. Further, 170 percent of target was earned for LWCR recognizing that while 2016 was a good year compared to our industry group, performance in this area was slightly impaired relative to 2015.payout.•Process Safety Rate: Our Process Safety Event Rate was the best in our Company history, and a 75 percent reduction from 2015. As a result, 200 percent of target was earned for this metric.•objective by 5goal, but also were 15 percent and achievedimproved versus the lowest number of reportable environmental eventsprior year, setting record performance in our Company history. As a result, 200 percent of target was earned related to this metric.32 2017 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSISdeterminedconfirmed that our availability was 98.6of 97.6 percent across all of our lines of business with record refinery utilization, resultingresulted in achievementa payout of 200 percent of target. Payout Levels Based on Performance
Results
% Combined TRR > 0.38 0.38 0.30 0.24 0.14 180% Combined LWCR > 0.08 0.08 0.06 0.04 0.04 200% Process Safety Rate > 0.09 0.09 0.08 0.05 0.03 180% Environmental Events > 163 163 142 123 103 200% Asset Availability < 92.4% 92.4% 94.1% 95.8% 97.6% 200% ![[MISSING IMAGE: tv487943_bar2.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/tv487943_bar2.jpg)
PAYOUT LEVELS BASED ON PERFORMANCE 2016 PAYOUT 0% 50% 100% 200% RESULTS % > 0.45 0.45 0.29 0.25 0.15 200% > 0.15 0.15 0.08 0.04 0.04 170% > 0.09 0.09 0.06 0.03 0.02 200% > 175 <=175 150 <125 119 200% < 93.8% 93.8% 95.6% 97.4% 98.6% 200% 196% 
In 2016, we reduced the weighting of this metric from 25 percent to 15 percent because, as a financial measure, the effect of cost management is also recognized in Adjusted EBITDA.We established our threshold, target, and maximum goals as a percentage of budget. For threshold performance, weAdjusted Controllable Costs could not exceed budget by more than 53 percent, target performance was based on achieving budget, and maximum performance required being at least 23 percent under budget. At the end of the performance period, we then considered our costs relative to our peer group to ensure alignment with industry trends and to reflect operating decisions made in response to changing market conditions that vary from budget assumptions, to ensure earned amounts are appropriate given relative performance.2016,2017, we were 42 percent improved versus our budget, which could have resultedresulting in a payout at 200 percent; however, the Compensation Committee exercised negative discretion recognizing that we were third in a group of six refining peers on173 percent. Our lower costs per barrel. Our savingsrelative to budget were related to efficient refinery turnarounds,environmental insurance recoveries, ongoing equipment efficiencies, and lower staff costs, resulting in a payout of 180 percent of target for this metric.
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In 2016, we added the High-Performing Organization metric to measure the effectiveness of our talent management initiatives. achievement ofour success. Our employees promote our culture and are integral to achieving our strategic goals and to maximizing long-term shareholder value. We measure our performance relative to a varietythe following:including:Overall, critical skill, high-performer, diversity, and new hire retention.•Development of employees through rotational moves and transfers.•Overall, diversity, and high-performer promotion rates.•Succession planning and use of internal candidates for succession opportunities.•Qualityhires.hires;PROXY STATEMENT 33
COMPENSATION DISCUSSION AND ANALYSIStalent management,high-performing organization, as we believe it is our high-performing employees that differentiate us in the market place. Based on our performance, 110the Compensation Committee determined that 120 percent of target was earned for High-Performing Organization.
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resulted inwas a Total Corporate Payout of 130140 percent, as summarized in the following table. Metric Adjusted EBITDA 86% 40% 35% Operating Excellence 192% 35% 67% Adjusted Controllable Costs 173% 15% 26% High-Performing Organization 120% 10% 12% Total Corporate Payout PAYOUT PERCENTAGE WEIGHT CORPORATE AMOUNT 58% 40% 23% 196% 35% 69% 180% 15% 27% 110% 10% 11% 130% Applying Project-Based and Shareholder Metrics to the Annual VCIP Payoutcompensation levelsVCIP payouts for NEOs based on their responsibility for the success of projects and initiatives leadingthat lead to the successful execution of our strategy and the senior executives responsible for the success of these projects and initiatives.GROWTHRETURNSDISTRIBUTIONS GROWTH INITIATIVES FREEPORT LPGEXPORTTERMINALBEAUMONTTERMINALCRUDE TANKEXPANSIONPSXPTRANSACTIONSSUSTAINABILITYINITIATIVESWHITEGATEEXITREFINERYCRUDEUTILIZATIONCONTROLLABLECOSTSSHAREREPURCHASESDIVIDENDGROWTH IMPROVING RETURNS Greg Garland✓✓✓✓✓✓✓✓✓Robert Herman✓✓✓✓✓ Paula Johnson✓✓✓✓✓Kevin Mitchell✓✓✓✓✓✓✓✓ Tim Taylor✓✓✓✓✓✓DISTRIBUTIONS
Expansion
Investments
Capacity
Restructure
and
Expansion
Transactions
Return
Refining
Projects
Rebranding
Initiatives
Costs
Repurchases
& Dividend
Growth Greg Garland ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Robert Herman ✔ ✔ ✔ ✔ ✔ ✔ ✔ Paula Johnson ✔ ✔ ✔ ✔ ✔ ✔ ✔ Kevin Mitchell ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Tim Taylor ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ 2016 ELIGIBLE
EARNINGS
($)TARGET VCIP
PERCENTAGE
(%)CORPORATE
PAYOUT PERCENTAGE
(%)INDIVIDUAL PERFORMANCE
ADJUSTMENT
(%)TOTAL PAYOUT
($) 1,616,816 160% 130% 15% 3,751,013 661,608 85% 130% 15% 815,432 698,976 90% 130% 15% 912,164 688,448 85% 130% —% 760,735 1,071,376 110% 130% 25% 1,826,696 34 2017 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS2017 Eligible
Earnings
($)
Percentage
(%)
Payout Percentage
(%)
Adjustment
(%)
($) Greg Garland 1,666,676 160% 140% —% 3,733,354 Robert Herman 689,568 85% 140% —% 820,586 Paula Johnson 742,148 90% 140% 15% 1,035,296 Kevin Mitchell 709,456 85% 140% 15% 934,708 Tim Taylor 1,116,808 110% 140% 15% 1,904,158 2016 LTI PROGRAMS
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50%50 percent of LTI through the PSP, a significant portion of NEO compensation is tied to Company and individual performance.After the target performance share value is determined, it is tracked as shares of Company stock for the remainder of the performance period. The number of target shares is determined by usingdividing the multiple by the average of the stock'sstock’s fair market value for the 20 days prior to the start of the performance period, less anticipated dividends during the performance period.•Target sharesbe adjusted duringadjust an award by up to +/–30 percent of the performance period for significant changes in responsibility that occur during the performance period.•• in effect in 2016 are 50 percent ROCE, equally weighted between absolute and relative, and 50 percent relative TSR. maximum delivers 3.0 percent above WACC over the performance period.•The target delivers 1.5 percent above our WACC.•The threshold is a return percentage equivalent to the Adjusted EBITDA required to cover our sustaining capital and shareholder dividend commitments overduring the 3-year performance period.2017 PROXY STATEMENT 35
COMPENSATION DISCUSSION AND ANALYSISDistribution. Metric Weight Performance Share Program 2015-2017 Absolute ROCE 25%
2016 (4.4%), and 2017 (2.8%)
shareholder dividend
commitments over 3-year period
2016 (10.8%), and 2017 (9.9%)
over 3-year period
2016 (12.3%), and 2017 (11.4%)
over 3-year period Relative ROCE 25% above 10th percentile
of Performance Peers median of Performance Peers above 90th percentile
of Performance Peers Relative TSR 50% above 10th percentile
of Performance Peers median of Performance Peers above 90th percentile
of Performance Peers currently effectivecurrent PSP programs are denominated in shares, but are intended to be paid in cash at the end of their respective performance periods. Performance can range from 0-200 percent of target.20162017 were the PSP 2014-2016,2015-2017, PSP 2015-2017,2016-2018, and PSP 2016-2018.2017-2019.2014-2016,2015-2017, the Compensation Committee considered the following results when approving the payout of 170120 percent.![[MISSING IMAGE: tv487943_bar5.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/tv487943_bar5.jpg)
PSP ROCE: Our relative performance for the three-year performance period was 4th7th out of 1716 peer companies, resulting in a payout of 170117 percent of target for PSP Relative PSP ROCE, which was weighted at 25 percent.
* Relative PSP ROCE is a non-GAAP financial measure. See Appendix A for additional information.![[MISSING IMAGE: tv487943_bar6.jpg]](https://capedge.com/proxy/PRE 14A/0001144204-18-014335/tv487943_bar6.jpg)
Absolute PSP ROCE: Our Absolute PSP ROCE for the three-year performance period was 12.6 percent, or 1.8 percentage points above target, resulting in a payout of 200 percent of target for Absolute PSP ROCE, also weighted at 25 percent.
* Absolute PSP ROCE is a non-GAAP financial measure. See Appendix A for additional information.•29.555.1 percent, 6th7th out of 1817 peers (including the S&P 100 Index) on a relative basis, resulting in a payout of 150129 percent of target for Relative TSR, which was weighted at 50 percent.
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2014-2016.2015-2017. The payment was made in February 20172018 and is described further in the footnotes of theSUMMARY COMPENSATION TABLESummary Compensation Table.2016,2017, 25 percent of the LTI target value was delivered to executives in the form of stock options. These awards are inherently performance-based, as the stock price must increase before the executive can realize any gain. We believe stock options drive behaviors and actions that enhance long-term shareholder value.20162017 vest ratably over a three-year period and have a ten-year term. These stockStock options neitherdo not have voting rights nor entitle the holderand are not entitled to receive dividends. Based on its assessment of the individual performance of each NEO, the Compensation Committee may adjust an award by up to +/–30 percent of the target amount at grant. The CEO provides input on the grant amounts and individual performance adjustments for all NEOs36 2017 PROXY STATEMENTCOMPENSATION DISCUSSION AND ANALYSIS(other than himself). The Compensation Committee evaluates the individual performance of the CEO. The Compensation Committee did not make any individual performance adjustments to NEO stock option awards in 2016.2016,2017, 25 percent of the LTI target value was delivered to executives in the form of RSUs. The Compensation Committee believes maintaining RSUs in our LTI program complements the overall compensation mix for our executives by:Driving•Providing•Resulting•SupportingCompanythe Company’s stock on the date of grant. RSUs awarded to our NEOs in February 20162017 cliff vest at the end of the three-year holding period and will be delivered to the NEOs in the form of unrestricted Company stock. These RSUs do not carry voting rights but do generateearn dividend equivalents during the vesting period. The Compensation Committee assesses the individual performance of each NEO, and based on that assessment may adjust an award by up to +/–30 percent of the target amount at grant. The CEO provides input regarding awards made to all NEOs (other than himself). The Compensation Committee evaluates the individual performance of the CEO.20162016.2017. The Compensation Committee considered the individual performance of each NEO as outlined above when determining the target values. These values do not reflect prospective promotional adjustments to PSP targets and may not match the accounting values presented in theGRANTS OF PLAN-BASED AWARDSGrants of Plan-Based Awards table. NAME
($)
($)
($)
($) Greg Garland 5,898,808 2,949,404 2,949,404 11,797,616 Robert Herman 1,142,364 519,256 571,182 2,232,802 Paula Johnson 1,278,791 581,269 639,395 2,499,455 Kevin Mitchell 1,072,811 536,405 536,405 2,145,621 Tim Taylor 2,593,843 1,080,768 1,296,922 4,971,533 PSP 2016-2018(1)
($) STOCK OPTIONS(2)
($) RSUs(3)
($) TOTAL TARGET
($) 5,720,212 2,860,106 2,860,106 11,440,424 1,069,035 485,925 534,518 2,089,478 1,217,894 553,588 608,947 2,380,429 1,142,364 519,256 571,182 2,232,802 2,458,598 1,024,416 1,229,299 4,712,313 (1)2016-20182017-2019 targets include individual adjustments for Mr. Herman (+10 percent), Ms. Johnson (10(+10 percent), and Mr. Taylor (20(+20 percent), Mr. Mitchell (10 percent) and Mr. Herman (10 percent).(2)(3)(10(+10 percent), and Mr. Taylor (20(+20 percent). 2017 Compensation Peer Group 3M Company (MMM) E. I. du Pont de Nemours and Company (DD) Lockheed Martin Corporation (LMT) Archer-Daniels-Midland Company (ADM) Ford Motor Company (F) LyondellBasell Industries N.V. (LYB) The Boeing Company (BA) General Dynamics Corporation (GD) Marathon Petroleum Corporation (MPC) Caterpillar Inc. (CAT) General Motors Company (GM) Tesoro Corporation (TSO) Chevron Corporation (CVX) Halliburton Company (HAL) United Technologies Corporation (UTX) Deere and Company (DE) Honeywell International Inc. (HON) Valero Energy Corporation (VLO) The Dow Chemical Company (DOW) Johnson Controls, Inc. (JCI) Mr. Mitchell (10 percent)the successor to the combination of Tesoro Corporation and Mr. Herman (10 percent).Western Refining Inc., and DowDuPont Inc. (DWDP), reflecting the merger of The Dow Chemical Company and E. I. du Pont de Nemours and Company; 2018 Compensation Peer Group Anadarko Petroleum Corporation (APC) Enterprise Products Partners L.P. (EPD) Honeywell International Inc. (HON) Andeavor (ANDV) Exxon Mobil Corporation (XOM) LyondellBasell Industries N.V. (LYB) Archer-Daniels-Midland Company (ADM) Ford Motor Company (F) Marathon Petroleum Corporation (MPC) Chevron Corporation (CVX) General Motors Company (GM) Schlumberger Limited (SLB) ConocoPhillips (COP) Halliburton Company (HAL) Valero Energy Corporation (VLO) DowDuPont Inc. (DWDP) Refining and Marketing Midstream Chemicals Delek US Holdings, Inc. (DK) Energy Transfer Equity, L.P. (ETE) Celanese Corporation (CE) HollyFrontier Corporation (HFC) Enterprise Products Partners L.P. (EPD) The Dow Chemical Company (DOW) Marathon Petroleum Corporation (MPC) ONEOK, Inc. (OKE) Eastman Chemical Company (EMN) PBF Energy Inc. (PBF) Targa Resources Corp. (TRGP) Huntsman Corporation (HUN) Tesoro Corporation (TSO) Westlake Chemical Corporation (WLK) Valero Energy Corporation (VLO) Western Refining Inc. (WNR) above:Summary Compensation Table. We did not provide a gross-up for these benefits.2017 PROXY STATEMENT 37COMPENSATION DISCUSSION AND ANALYSIS20162017 designated by the Board as requiring increased security under this program. Mr. Garland was covered for the entire year. Mr. Taylor was covered beginning March 1, 2016, following a security review. The program allows for certain additional security measures in specific situations when the senior executive is travelingairplane on Company business.airplane. An additional security review of the NEO'sNEOs’ personal residenceresidences is also included. Any additional costs to the Company for these activities are reported as All Other Compensation and included in theSUMMARY COMPENSATION TABLESummary Compensation Table.Nonqualified Deferred Compensation table.•Nonqualified Deferred Compensation table.•Pension Benefits as of DecemberPENSION BENEFITS AS OF DECEMBER 31, 20162017 table.U.S. basedU.S.-based employees with a face value approximately equal to their annual base salary. For our NEOs, the face value of this coverage is approximately two times their annual base salary.Change in Control Severance Plan (CICSP)CICSP to accomplish several specific objectives, including:Ensuringstability.stability;•Providingexecutive'sexecutive’s job loss.loss; and•Competingexecutive'sexecutive’s base salary, depending on salary grade level, and the executive’s current target annual bonus if he or she is involuntarily terminated without cause. The CICSP provides a payment equal to two or three times the sum of the executive'sexecutive’s base salary and the greater of his or her target bonus or average of the last two bonus payments, depending on salary grade level. The executive must be involuntarily terminated without cause in connection with a change in control or terminate employment for good reason within two years after the change in control to be eligible for CICSP payment. This "double trigger"We believe this “double trigger” requirement is in the best interest of shareholders and is considered a best practice.Potential Payments upon Termination or Change in Control section. These plans do not provide any excise tax gross-up protections.38 2017 PROXY STATEMENTCOMPENSATION DISCUSSION AND ANALYSISownership guidelineshelps align executive performance with shareholder value creation and mitigatemitigates compensation risk. Each executive mustOur stock ownership guidelines require executives to own at least the following amounts of Phillips 66 common stock, valued as a multiple of the executive’s base salary, within five years from the date of program eligibility: SALARY MULTIPLE Chairman and CEO 66 PresidentPresident 55 Executive Vice President 3-53-5 RSUs, but notoptions or PSP targets,owned and RSUs are included when determining whether an executive has met the amount of stock owned by an executive.required ownership levels. Compliance with the stock ownership guidelines is reviewed annually. All NEOs currently comply with these stock ownership guidelines or are on track to comply within the applicable five-year period. Compensation Committee considers the deductibility of compensation under IRC Section 162(m) is one of the factors the Compensation Committee considers when making decisions andexecutive compensation decisions. Although the Compensation Committee generally attemptshas attempted to structure elements of executive compensation to meet the requirements for deductibility. However, the Compensation Committeedeductibility, it has retained the flexibility to designaward compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by the Company for tax purposes.maintain the programs in the most beneficial manner to shareholders, including payments that may be subjectuncertainties as to the deductibility limits under IRCapplication and interpretation of Section 162(m).For 2016 after the Compensation Committee believes it has taken the necessary stepslegislative change, no assurance can be given that any compensation originally intended to qualify payments made undersatisfy the VCIP and awards made under the LTI programs (PSP and RSUs) as performance-based under IRCrequirements for exemption from Section 162(m).Ourstandardsstandards;•Thepeerspeers; and,•Theexecutives2017 PROXY STATEMENT 39
COMPENSATION DISCUSSION AND ANALYSISThe Compensation Committee retained Meridian Compensation Partners, LLC as its independent executive compensation consultant through May 2016. The Compensation Committee evaluated whether Meridian's work raised any conflict of interest and determined that no such conflict existed.October 2016,2017, the Compensation Committee retained Mercer as its independent executive compensation consultant. The Compensation Committee evaluated whether Mercer’s work that Mercer had done for the Company prior to being retained by the committeeraised any conflict of interest and determined that it did not present ano such conflict of interest.existed. During 2016,2017, fees paid to Mercer in its role as the independent compensation consultant for the Compensation Committee totaled $23,964.$172,955. In addition, the Company paid fees to Mercer totaling $5,965,345$1,034,452 during 20162017 for all other services performed for the Company. These services can be broken down as 9013 percent related to administration of international broad-based benefit planspension liabilities in international locations that wehave been sold, in 2016, 729 percent related to administration of ongoing international broad-based benefit plans, and 314 percent related to Human Resources consulting engagements.management'smanagement’s risk assessment of all elements of our compensation programs, policies and practices for all employees. Management has concluded that our compensation programs, policies and practices are not reasonably likely to have a material adverse effect on the Company. Relevant provisions of our programs include, but are not limited to:•••poorly.poorly or when warranted by company performance.•••Company'sCompany’s risk management program. At least annually, the Compensation Committee reviews with the CEO succession planning for senior leadership positions (other than the CEO position itself, for which succession planning is reviewed by the NominationNominating Committee), and the timing and development required to ensure continuity of leadership over the short- and long-terms, to manage risk in this area.2016,2017, we had 11 Senior Officers. The compensation tables that follow provide information about our CEO and certain of our Senior Officers. In addition, the Compensation Committee acts as plan administrator of the compensation programs and benefit plans for our CEO and Senior Officers and as an avenue of appeal for current and former Senior Officers regarding disputes over compensation and benefits.40 2017COMPENSATION DISCUSSION AND ANALYSISCompany'sCompany’s executive compensation philosophy, policies, plans and programs for our CEO and Senior Officers to ensure:Alignmentshareholders,shareholders;•Competitivenesstalent,talent;•Retentiontalent,talent; and,•DevelopmentCommittee'sCommittee’s responsibilities is to assist the Board in its oversight of the integrity of the Company'sCompany’s COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis. TheHUMAN RESOURCES AND COMPENSATION COMMITTEE REPORTHuman Resources and Compensation Committee Report summarizes certain Compensation Committee activities concerning compensation earned during 20162017 by our NEOs."“InvestorsInvestors"” section of our website under the caption "“Corporate GovernanceGovernance.""non-employee," "independent"“non-employee,” “independent” and "outside"“outside” director status under the Exchange Act, NYSE listing standards, and the IRC, respectively. The members of the Compensation Committee and the member to be designated as Chair, like the members and Chairs of all the Board committees, are reviewed annually by the Nominating Committee, which recommends committee appointments to the full Board. The Board of Directors has final approval of the committee structure of the Board.2016,2017, the Compensation Committee had five regularly scheduled meetings and one additional telephonic meeting. More information regarding the Compensation Committee'sCommittee’s activities at such meetings can be found in theCOMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis.Receivescompensation.compensation;•Regularlygovernance. This review is aided by the Company's management, the Compensation Committee's independent compensation consultant, and, when deemed appropriate, independent legal counsel.governance;•AnnuallyDirectors.Directors;•AnnuallyCommittee'sCommittee’s actions and seeks ideas to improve its processes and oversight.oversight;•RegularlyCompany'sCompany’s executive compensation programs are having the desired effects without encouraging an inappropriate level of risk.risk; and•Regularly20174143Compensation Discussion and Analysis presented in this proxy statement.2016.2017. Mercer was retained directly by the Compensation Committee, independent of the management of the Company. The Compensation Committee has received written disclosure from Mercer confirming the consultant'sconsultant’s independence, has discussed with Mercer its independence from Phillips 66, and believes Mercer to be independent of management.Compensation Discussion and Analysis be included in the Phillips 66 proxy statement on Schedule 14A and the Phillips 66 Annual Report on Form 10-K for the year ended December 31, 2016.
Gary K. Adams
Harold W. McGraw III
Glenn F. Tilton42 201720162017 for services to Phillips 66 or any of our subsidiaries during 2017, 2016 2015 and 2014.2015 and 2014.2015. NAME AND POSITION
($)
($)
AWARDS(3)
($)
AWARDS(4)
($)
INCENTIVE
PLAN
COMPENSATION(5)
($)
PENSION
VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS(6)
($)
COMPENSATION(7)
($)
($) Greg Garland
Chairman and CEO 2017 1,666,676 — 8,785,668 2,951,040 3,733,354 6,270,030 244,128 23,650,896 2016 1,616,816 — 8,677,840 2,861,166 3,751,013 7,897,187 251,272 25,055,294 2015 1,549,164 — 8,290,120 2,763,828 4,585,525 5,531,249 211,253 22,931,139 Robert Herman
Executive Vice President, Refining 2017 689,568 — 1,701,495 520,672 820,586 208,340 1,572,730 5,513,391 2016 661,608 — 1,621,773 486,432 815,432 223,973 646,450 4,455,668 2015 — — — — — — — — Paula Johnson
Executive Vice President, Legal
and Government Affairs,
General Counsel and Corporate
Secretary 2017 742,148 — 1,904,666 581,728 1,035,296 1,125,884 82,714 5,472,436 2016 698,976 — 1,847,570 553,992 912,164 939,432 90,168 5,042,302 2015 640,512 — 1,802,647 472,884 1,019,055 592,646 71,233 4,598,977 Kevin Mitchell
Executive Vice President, Finance and CFO 2017 709,456 — 1,597,830 537,632 934,708 124,156 93,540 3,997,322 2016 688,448 — 1,732,942 520,212 760,735 100,918 67,857 3,871,112 2015 — — — — — — — — Tim Taylor
President 2017 1,116,808 — 3,863,324 1,082,048 1,904,158 298,946 197,064 8,462,348 2016 1,071,376 — 3,729,811 1,025,223 1,826,696 325,493 169,570 8,148,169 2015 1,004,712 — 3,447,557 985,332 2,210,366 183,866 133,338 7,965,171 NAME AND
POSITION YEAR SALARY
($)(1) BONUS
($)(2) STOCK
AWARDS
($)(3) OPTION
AWARDS
($)(4) NON-EQUITY
INCENTIVE
PLAN
COMPENSATION
($)(5) CHANGE IN
PENSION
VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS
($)(6) ALL OTHER
COMPENSATION
($)(7) TOTAL
($) Greg Garland 2016 1,616,816 — 8,677,840 2,861,166 3,751,013 7,897,187 251,272 25,055,294 Chairman and CEO 2015 1,549,164 — 8,290,120 2,763,828 4,585,525 5,531,249 211,253 22,931,139 2014 1,510,427 — 8,732,652 2,393,385 2,658,351 8,984,486 229,132 24,508,433 Robert Herman 2016 661,608 — 1,621,773 486,432 815,432 223,973 646,450 4,455,668 Executive Vice President, 2015 — — — — — — — — Midstream 2014 — — — — — — — — Paula Johnson 2016 698,976 — 1,847,570 553,992 912,164 939,432 90,168 5,042,302 Executive Vice President, Legal 2015 640,512 — 1,802,647 472,884 1,019,055 592,646 71,233 4,598,977 and Government Affairs, General 2014 596,676 — 1,634,565 371,420 590,709 879,304 76,683 4,149,357 Counsel and Corporate Secretary Kevin Mitchell 2016 688,448 — 1,732,942 520,212 760,735 100,918 67,857 3,871,112 Executive Vice President, 2015 — — — — — — — — Finance and CFO 2014 — — — — — — — — Tim Taylor 2016 1,071,376 — 3,729,811 1,025,223 1,826,696 325,493 169,570 8,148,169 President 2015 1,004,712 — 3,447,557 985,332 2,210,366 183,866 133,338 7,965,171 2014 888,188 — 3,451,492 570,395 1,052,503 199,465 107,152 6,269,195 (1)(2) mandatory performance measures that must be achieved before any payout can be made to our NEOs, VCIP payments are shown in the Non-Equity Incentive Plan Compensation column of the table rather than the Bonus column.(3)generally accepted accounting principles (GAAP).GAAP. Assumptions used in calculating these amounts are included in Note 20—Employee Benefit Plans in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2017 (our “2017 Form 10-K”).(our "2016 Form 10-K").These include awardshas a performance period that are expected to be finalized as late asends in 2018. The amounts shown for awards from the PSP relate totarget award included in 2017 has a performance periodsperiod that beganends in 2014, 2015 and 2016 and that end in 2016, 2017 and 2018, respectively.20162017 were approved by the Compensation Committee at its February 20172018 meeting. Those payouts were as follows (with values shown at fair market value on the date of payout): Mr. Garland, $12,839,189;$9,970,589; Mr. Herman, $1,850,105;$1,753,361; Ms. Johnson, $2,324,881;$2,119,314; Mr. Mitchell, $1,055,106;$1,472,189; and Mr. Taylor, $4,415,719.2014-20162015-2017 have been, and under the PSP 2015-20172016-2018 and PSP 2016-20182017-2019 are expected to be, made in cash at the end of the applicable performance period and will be forfeited if the NEO is terminated prior to the end of the performance period (other than for death or following disability or after a change in control). If the NEO retires after age 55 and with five years of service, the NEO is entitled to a prorated award for any ongoing program in which he or she participated for at least 12 months.20162017 Form 10-K.(5)(6)20174345NAME COMPANY
CONTRIBUTIONS TO
NONQUALIFIED
DEFINED
CONTRIBUTION
PLANS
($)(a) EXECUTIVE
GROUP LIFE
INSURANCE
PREMIUMS
($)(b) EXECUTIVE
HEALTH
SERVICES
($)(c) FINANCIAL
COUNSELING
($)(d) MATCHING
CONTRIBUTIONS
UNDER THE
TAX-QUALIFIED
SAVINGS
PLAN
($)(e) MATCHING
GIFT
PROGRAM
($)(f) MISCELLANEOUS
PERQUISITES
AND TAX
PROTECTION
($)(g) PERSONAL
USE OF
COMPANY
AIRCRAFT
($)(h) 94,627 8,343 1,247 16,513 18,550 30,000 18,951 63,041 27,763 3,414 — 16,560 18,550 15,200 564,963 — 30,378 1,929 — 15,149 18,550 19,417 4,745 — 29,641 1,900 937 14,165 7,950 12,000 1,264 — 56,446 8,486 1,292 16,510 18,550 15,000 12,682 40,604 NAME
CONTRIBUTIONS TO
NONQUALIFIED
DEFINED
CONTRIBUTION
PLANS(a)
($)
GROUP LIFE
INSURANCE
PREMIUMS(b)
($)
HEALTH
SERVICES(c)
($)
COUNSELING(d)
($)
CONTRIBUTIONS
UNDER THE
TAX-QUALIFIED
SAVINGS PLAN(e)
($)
GIFT
PROGRAM(f)
($)
PERQUISITES
AND TAX
PROTECTION(g)
($)
OF COMPANY
AIRCRAFT(h)
($) Greg Garland 97,767 13,200 962 16,810 18,900 15,000 22,333 59,156 Robert Herman 29,370 3,558 747 16,796 18,900 1,000 1,502,359 — Paula Johnson 33,050 2,048 — — 18,900 20,000 8,716 — Kevin Mitchell 30,762 1,958 847 16,687 18,900 12,000 12,386 — Tim Taylor 59,277 8,845 1,008 16,614 18,900 — 35,762 56,658 Nonqualified Deferred Compensation table and accompanying narrative and notes for more information.(b)employee'semployee’s annual salary. We maintain group life insurance policies on each of our NEOs equal to approximately two times his or her annual salary. The amounts shown are for premiums paid by us to provide the additional group life insurance above what is provided to the broad-based employees.(c)(d)(e)(f)2016,2017, which due to processing delays can include contributions in 20152016 that were matched by the Company in 20162017 and are therefore reported in this proxy statement.(g) In 2016, we made these tax payments for three different reasons. First, Mr. Herman received tax assistance after he exercised stock options that he had been granted while an expatriate employee prior to becoming an NEO ($563,107)1,493,411). All expatriate employees receive this tax assistance. Second, weWe also provide tax assistance when we request family members or other guests to accompany an NEO to a Company function and, as a result, the NEO is deemed to make personal use of Company assets such as Company aircraft and thereby incurs imputed income. We believe this type of expense is appropriately characterized as a business expense and, if the NEO incurs imputed income in accordance with applicable tax laws, we will generally reimburse the NEO for any increased tax costs (Mr. Garland $12,454;$20,714; Mr. Herman $1,499;$8,491; Ms. Johnson $4,497;$8,274; Mr. Mitchell $905;$11,914; and Mr. Taylor $10,259)$9,075). Finally, weWe also provide tax assistance on miscellaneous gifts such(such as duffel bags, jackets, and ornaments received as a member of the Board or the Executive Leadership Team.Team), occasional car and driver for personal use, and companion travel expenses. The total cost of these giftsbenefits and thetheir tax assistance are as follows: Mr. Garland $407,$1,188; Mr. Herman $357,$457; Ms. Johnson $248,$442; Mr. Mitchell $359,$472; and Mr. Taylor $407. $546. such as those required for employees covered under our Comprehensive Security Program, which includes Mr. Garland and effective March 1, 2016, Mr. Taylor. These benefits include the use of a car and driver when security deems it required (Mr Garland $5,505; Mr. Taylor $2,016) and home security fees that are in excess of the cost of a "standard" system typical for homes in their neighborhood (Mr. Garland $585)$431; Mr. Taylor $26,141).(h) effective March 1, 2016, Mr. Taylor fly on Company aircraft. The amount presented above represents the approximate incremental cost to Phillips 66 for personal use of the aircraft. Approximate incremental cost has been determined by calculating the variable costs for each aircraft during the year, dividing that amount by the total number of miles flown by that aircraft, and multiplying the result by the miles flown for personal use during the year. Incremental costs for flights to the hangar or other locations without passengers, commonly referred to as "deadhead"“deadhead” flights, are included in the calculation.44 2017Summary Compensation Table. This table includes both equity and non-equity awards.
NON-EQUITY INCENTIVE PLAN AWARDS(2)
EQUITY INCENTIVE PLAN AWARDS(3)
STOCK
AWARDS:
NUMBER OF
SHARES OF
STOCK OR
UNITS(4)
(#)
OPTION
AWARDS:
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS
(#)
OR BASE
PRICE OF
OPTION
AWARDS
($/SH)
FAIR VALUE
OF STOCK
AND
OPTION
AWARDS(5)
($) NAME
DATE(1)
($)
($)
($)
(#)
(#)
(#) Greg Garland — 2,666,682 6,666,705 — — — — — — — 2/7/2017 — — — — — — 37,584 — — 2,949,404 2/7/2017 — — — — 74,371 148,742 — — — 5,836,264 2/7/2017 — — — — — — — 174,000 78.475 2,951,040 Robert Herman — 586,133 1,465,333 — — — — — — — 2/7/2017 — — — — — — 7,279 — — 571,220 2/7/2017 — — — — 14,403 28,806 — — — 1,130,275 2/7/2017 — — — — — — — 30,700 78.475 520,672 Paula Johnson — 667,933 1,669,833 — — — — — — — 2/7/2017 — — — — — — 8,148 — — 639,414 2/7/2017 — — — — 16,123 32,246 — — — 1,265,252 2/7/2017 — — — — — — — 34,300 78.475 581,728 Kevin Mitchell — 603,038 1,507,595 — — — — — — — 2/7/2017 — — — — — — 6,835 — — 536,377 2/7/2017 — — — — 13,526 27,052 — — — 1,061,453 2/7/2017 — — — — — — — 31,700 78.475 537,632 Tim Taylor — 1,228,489 3,071,223 — — — — — — — 2/7/2017 — — — — — — 16,527 — — 1,296,956 2/7/2017 — — — — 32,703 65,406 — — — 2,566,368 2/7/2017 — — — — — — — 63,800 78.475 1,082,048 ALL OTHER
STOCK
AWARDS:
NUMBER OF
SHARES OF
STOCK OR
UNITS
(#)(4) ALL OTHER
OPTION
AWARDS:
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS
(#) GRANT DATE
FAIR VALUE
OF STOCK
AND
OPTION
AWARDS
($)(5) ESTIMATED FUTURE PAYOUTS
UNDER NON-EQUITY INCENTIVE
PLAN AWARDS(2) ESTIMATED FUTURE PAYOUTS
UNDER EQUITY INCENTIVE
PLAN AWARDS(3) EXERCISE
OR BASE
PRICE OF
OPTION
AWARDS
($/SH) NAME GRANT
DATE(1) THRESHOLD
($) TARGET
($) MAXIMUM
($) THRESHOLD
(#) TARGET
(#) MAXIMUM
(#) — 2,586,906 6,467,265 — — — — — — — 2/2/2016 — — — — — — 36,379 — — 2,860,117 2/2/2016 — — — — 73,998 147,996 — — — 5,817,723 2/2/2016 — — — — — — — 169,400 78.620 2,861,166 — 562,367 1,405,918 — — — — — — — 2/2/2016 — — — — — — 6,799 — — 534,537 2/2/2016 — — — — 13,829 27,658 — — — 1,087,236 2/2/2016 — — — — — — — 28,800 78.620 486,432 — 629,078 1,572,695 — — — — — — — 2/2/2016 — — — — — — 7,745 — — 608,912 2/2/2016 — — — — 15,755 31,510 — — — 1,238,658 2/2/2016 — — — — — — — 32,800 78.620 553,992 — 585,181 1,462,953 — — — — — — — 2/2/2016 — — — — — — 7,265 — — 571,174 2/2/2016 — — — — 14,777 29,554 — — — 1,161,768 2/2/2016 — — — — — — — 30,800 78.620 520,212 — 1,178,514 2,946,285 — — — — — — — 2/2/2016 — — — — — — 15,636 — — 1,229,302 2/2/2016 — — — — 31,805 63,610 — — — 2,500,509 2/2/2016 — — — — — — — 60,700 78.620 1,025,223 (1)(2)20162017 are calculated using base salary earned in 20162017 and reflected in the "Non-Equity“Non-Equity Incentive Plan Compensation"Compensation” column of theSUMMARY COMPENSATION TABLESummary Compensation Table.(3)2016,2017, targets for each NEO were set with respect to an award for the three-year performance period beginning in 20162017 and ending in 2018.2019. The Compensation Committee retains the authority to make awards under the PSP using its judgment, including making awards greater than the maximum payout shown in the table above, provided the award does not exceed amounts permitted under the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66.(4)2016,2017, but still have vesting restrictions.(5)20162017 Form 10-K, for a discussion of the relevant assumptions used in this determination.201745472016.••• STOCK AWARDS NAME
DATE(2)
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
EXERCISABLE(3)
(#)
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
UNEXERCISABLE
(#)
EXERCISE
PRICE
($)
EXPIRATION
DATE
SHARES OR
UNITS OF
STOCK THAT
HAVE NOT
VESTED(4)
(#)
VALUE OF
SHARES OR
UNITS OF
STOCK THAT
HAVE NOT
VESTED
($)
INCENTIVE
PLAN AWARDS:
NUMBER OF
UNEARNED
SHARES,
UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED(5)
(#)
INCENTIVE
PLAN AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES,
UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED
($) Greg Garland 2/9/2012 42,728 — 32.030 2/9/2022 — — — — 2/7/2013 158,500 — 62.170 2/7/2023 — — — — 2/6/2014 126,300 — 72.255 2/6/2024 — — — — 2/3/2015 97,800 48,900 74.135 2/3/2025 — — — — 2/2/2016 56,466 112,934 78.620 2/2/2026 — — — — 2/7/2017 — 174,000 78.475 2/7/2027 — — — — — — — — 589,087 59,586,150 148,369 15,007,524 Robert Herman 2/9/2012 47,433 — 32.030 2/9/2022 — — — — 2/7/2013 12,300 — 62.170 2/7/2023 — — — — 2/6/2014 11,400 — 72.255 2/6/2024 — — — — 2/3/2015 15,666 7,834 74.135 2/3/2025 — — — — 2/2/2016 9,600 19,200 78.620 2/2/2026 — — — — 2/7/2017 — 30,700 78.475 2/7/2027 — — — — — — — — 74,420 7,527,583 28,232 2,855,667 Paula Johnson 2/7/2013 12,000 — 62.170 2/7/2023 — — — — 2/6/2014 19,600 — 72.255 2/6/2024 — — — — 2/3/2015 16,733 8,367 74.135 2/3/2025 — — — — 2/2/2016 10,933 21,867 78.620 2/2/2026 — — — — 2/7/2017 — 34,300 78.475 2/7/2027 — — — — — — — — 77,663 7,855,612 31,878 3,224,460 Kevin Mitchell 2/3/2015 6,600 3,300 74.135 2/3/2025 — — — — 2/2/2016 10,266 20,534 78.620 2/2/2026 — — — — 2/7/2017 — 31,700 78.475 2/7/2027 — — — — — — — — 16,604 1,679,495 28,303 2,862,848 Tim Taylor 2/7/2013 32,100 — 62.170 2/7/2023 — — — — 2/6/2014 30,100 — 72.255 2/6/2024 — — — — 2/3/2015 34,866 17,434 74.135 2/3/2025 — — — — 2/2/2016 20,233 40,467 78.620 2/2/2026 — — — — 2/7/2017 — 63,800 78.475 2/7/2027 — — — — — — — — 164,115 16,600,232 64,508 6,524,984 OPTION AWARDS(1) STOCK AWARDS NAME GRANT
DATE(2) NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
EXERCISABLE(3)
(#) NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
UNEXERCISABLE
(#) OPTION
EXERCISE
PRICE ($) OPTION
EXPIRATION
DATE NUMBER OF
SHARES OR
UNITS OF
STOCK THAT
HAVE NOT
VESTED(4) (#) MARKET
VALUE OF
SHARES OR
UNITS OF
STOCK THAT
HAVE NOT
VESTED ($) EQUITY
INCENTIVE
PLAN AWARDS:
NUMBER OF
UNEARNED
SHARES,
UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED(5)
(#) EQUITY
INCENTIVE
PLAN AWARDS:
MARKET OR
PAYOUT VALUE
OF UNEARNED
SHARES,
UNITS OR
OTHER RIGHTS
THAT HAVE
NOT VESTED
($) 2/9/2012 42,728 — 32.030 2/9/2022 — — — — 2/7/2013 158,500 — 62.170 2/7/2023 — — — — 2/6/2014 84,200 42,100 72.255 2/6/2024 — — — — 2/3/2015 48,900 97,800 74.135 2/3/2025 — — — — 2/2/2016 — 169,400 78.620 2/2/2026 — — — — — — — — 620,151 53,587,248 314,602 27,184,759 2/9/2012 47,433 — 32.030 2/9/2022 — — — — 2/7/2013 12,300 — 62.170 2/7/2023 — — — — 2/6/2014 7,600 3,800 72.255 2/6/2024 — — — — 2/3/2015 7,833 15,667 74.135 2/3/2025 — — — — 2/2/2016 — 28,800 78.620 2/2/2026 — — — — — — — — 82,591 7,136,688 56,956 4,921,568 2/7/2013 12,000 — 62.170 2/7/2023 — — — — 2/6/2014 13,066 6,534 72.255 2/6/2024 — — — — 2/3/2015 8,366 16,734 74.135 2/3/2025 — — — — 2/2/2016 — 32,800 78.620 2/2/2026 — — — — — — — — 79,512 6,870,632 66,924 5,782,903 2/3/2015 3,300 6,600 74.135 2/3/2025 — — — — 2/2/2016 — 30,800 78.620 2/2/2026 — — — — — — — — 55,853 4,826,258 54,154 4,679,447 2/7/2013 32,100 — 62.170 2/7/2023 — — — — 2/6/2014 20,066 10,034 �� 72.255 2/6/2024 — — — — 2/3/2015 17,433 34,867 74.135 2/3/2025 — — — — 2/2/2016 — 60,700 78.620 2/2/2026 — — — — — — — — 159,909 13,817,737 131,906 11,397,997 46 2017 PROXY STATEMENT
EXECUTIVE COMPENSATION TABLES(3)20162017 or prior years (although under certain termination circumstances, the options may still be forfeited). Options become exercisable in one-third increments on the first, second and third anniversaries of the grant date.(4)endingthat ended on or before December 31, 2014 continue to have restrictions upon transferability. Restrictions on PSP awards for performance periods endingthat ended on or before December 31, 2010 lapse upon separation from service. Restrictions on PSP awards for later performance periods lapse five years from the grant date unless the NEO elected prior to the beginning of the performance period to defer lapsing of the restrictions until separation from service. Awards are subject to forfeiture if, prior to lapsing, the NEO separates from service for a reason other than death, disability, layoff, retirement after reaching age 55 with five years of service, or after a change of control, although the Compensation Committee has the authority to waive forfeiture. The awards have no voting rights, but do entitle the holder to receive dividend equivalents in cash. The value of the awards reflects the closing price of our common stock, as reported on the NYSE, on December 30, 201629, 2017 ($86.410)101.15).(5)20172018 and December 31, 2018.2019. These awards are shown at maximum levels;target; however, there is no assurance that awards will be granted at, below or above target after the end of the relevant performance periods, as the determination to make a grant and the amount of any grant is within the judgment of the Compensation Committee. Until an actual grant is made, these unearned awards pay no dividend equivalents. The value of these unearned awards reflects the closing price of our common stock, as reported on the NYSE, on December 30, 201629, 2017 ($86.410)101.15).20162016:2017: OPTION AWARDS NAME
ACQUIRED ON EXERCISE
(#)
UPON EXERCISE
($)
ACQUIRED ON VESTING
(#)
UPON VESTING
($) Greg Garland — — 168,612 15,397,642 Robert Herman — — 33,029 2,973,062 Paula Johnson — — 31,245 2,910,325 Kevin Mitchell — — 60,844 5,338,637 Tim Taylor — — 53,299 5,064,448 OPTION AWARDS STOCK AWARDS(1) NAME NUMBER OF
SHARES
ACQUIRED ON
EXERCISE
(#) VALUE REALIZED
UPON EXERCISE
($) NUMBER OF
SHARES
ACQUIRED ON
VESTING
(#) VALUE REALIZED
UPON VESTING
($) 138,665 6,922,898 191,969 16,337,483 82,699 4,632,707 24,870 2,133,017 40,141 1,921,155 30,952 2,656,808 — — 12,145 1,055,106 77,260 3,685,473 61,234 5,239,514
$4,087,219.(1)restricted stock unitsRSUs that vested during the year, as well as the PSP 2014-20162015-2017 award that vested on December 31, 2016,2017, and was paid out in cash in early 2017.2018. The PSP awards were as follows: Mr. Garland 147,78899,964 units valued at $12,839,189;$9,970,589; Mr. Herman 21,29617,579 units valued at $1,850,105;$1,753,361; Ms. Johnson 26,76121,248 units valued at $2,324,881;$2,119,314; Mr. Mitchell 12,14514,760 units valued at $1,055,106;$1,472,189; and Mr. Taylor 50,82840,978 units valued at $4,415,719.201747492016TITLE ITITLE II(1)TITLE IV TITLE I TITLE IV Current Eligibility Mr. Garland Mr. Taylor, Mr. Mitchell, Mr. Herman(4) Ms. Johnson Normal Retirement Age 65 Age 65 Age 65 Early Retirement(2) Age 55 with five years of service or if laid off during or after the year in which the participant reaches age 50 Executives may receive their vested benefit upon termination of employment at any age Age 50 with ten years of service Benefit Calculation(2) Calculated as the product of 1.6 percent times years of credited service multiplied by the final average eligible earnings Based on monthly pay and interest credits to a nominal cash balance account created on the first day of the month after an executive'sexecutive’s hire date. Pay credits are equal to a percentage of total salary and annual bonus. Calculated as the product of 1.6 percent times years of credited service multiplied by the final average eligible earnings Final Average Earnings Calculation Calculated using the three highest consecutive compensation years in the last ten calendar years before retirement plus the year of retirement N/A Calculated using the higher of the highest three years of compensation or the highest consecutive 36 months of compensation Eligible Pension Compensation(3) Includes salary and annual bonus Includes salary and annual bonus Includes salary and annual bonus Benefit Vesting All participants are vested in this title Employees vest after three years of service All participants are vested in this title Payment Types Allows payments in the form of several annuity types or a single lump sum IRS limitations Benefits under all Titles are limited by the IRC. In 2016,2017, that limit was $265,000.$270,000. The IRC also limits the annual benefit available under these Titles expressed as an annuity. In 2016,2017, that limit was $210,000$215,000 (reduced actuarially for ages below 62). (1)(2)(3)(4)48 2017 PROXY STATEMENT
EXECUTIVE COMPENSATION TABLESNEO'sNEO’s defined benefit pension as of December 31, 2016.2017. NAME PLAN NAME
CREDITED SERVICE(1)
(#)
ACCUMULATED BENEFIT
($)
LAST FISCAL YEAR
($) Greg Garland Phillips 66 Retirement Plan—Title I 28 1,710,860 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 37,557,618 — Robert Herman Phillips 66 Retirement Plan—Title II 12 320,876 — Phillips 66 Retirement Plan—Title III 22 567,052 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 720,030 — Paula Johnson Phillips 66 Retirement Plan—Title IV 15 707,557 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 3,788,264 — Kevin Mitchell Phillips 66 Retirement Plan—Title II 4 80,325 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 201,482 — Tim Taylor Phillips 66 Retirement Plan—Title II 6 149,424 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 1,081,405 — NAME PLAN NAME NUMBER OF
YEARS CREDITED
SERVICE (#)(1) PRESENT VALUE
OF ACCUMULATED
BENEFIT ($) PAYMENTS DURING
LAST FISCAL YEAR ($) Greg Garland Phillips 66 Retirement Plan—Title I 27 1,519,964 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 31,478,484 — Robert Herman Phillips 66 Retirement Plan—Title II 11 292,695 — Phillips 66 Retirement Plan—Title III 22 504,246 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 602,677 — Paula Johnson Phillips 66 Retirement Plan—Title IV 14 579,488 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 2,790,449 — Kevin Mitchell Phillips 66 Retirement Plan—Title II 3 57,497 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 100,154 — Tim Taylor Phillips 66 Retirement Plan—Title II 5 120,733 — Phillips 66 Key Employee Supplemental Retirement Plan(2) — 811,150 — (1)(2)NEO'sNEO’s salary deferral under the KEDCP or due to the IRC annual limit on compensation that may be taken into account under a qualified plan. Distributions are made as a lump sum six months after separation from service, unless the NEO elects to receive one to fifteen annual payments beginning at least one year after separation from service.Nonqualified Deferred Compensation table below.2017 PROXY STATEMENT 49EXECUTIVE COMPENSATION TABLES2016: NAME
BALANCE
($)
CONTRIBUTIONS
IN LAST FISCAL
YEAR
($)
CONTRIBUTIONS
IN THE LAST
FISCAL YEAR(2)
($)
EARNINGS
IN LAST
FISCAL YEAR(3)
($)
WITHDRAWALS/
DISTRIBUTIONS
($)
BALANCE
AT LAST
FISCAL
YEAR END(4)
($) Greg Garland Phillips 66 Defined Contribution Make-Up Plan 993,005 — 97,767 170,517 — 1,261,289 Phillips 66 Key Employee Deferred Compensation Plan 1,102,782 — — 132,417 — 1,235,199 Robert Herman Phillips 66 Defined Contribution Make-Up Plan 310,148 — 29,370 55,330 — 394,848 Phillips 66 Key Employee Deferred Compensation Plan 1,789,519 — — 330,195 — 2,119,714 Paula Johnson Phillips 66 Defined Contribution Make-Up Plan 193,359 — 33,050 36,523 — 262,932 Phillips 66 Key Employee Deferred Compensation Plan — — — — — — Kevin Mitchell Phillips 66 Defined Contribution Make-Up Plan 50,139 — 30,762 9,428 — 90,329 Phillips 66 Key Employee Deferred Compensation Plan — — — — — — Tim Taylor Phillips 66 Defined Contribution Make-Up Plan 475,232 — 59,277 66,467 — 600,976 Phillips 66 Key Employee Deferred Compensation Plan 1,845,271 — — 226,966 — 2,072,237 NAME APPLICABLE PLAN(1) BEGINNING
BALANCE
($) EXECUTIVE
CONTRIBUTIONS
IN LAST FISCAL
YEAR
($) COMPANY
CONTRIBUTIONS
IN THE LAST
FISCAL YEAR
($)(2) AGGREGATE
EARNINGS
IN LAST
FISCAL YEAR
($)(3) AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
($) AGGREGATE
BALANCE
AT LAST
FISCAL
YEAR END
($)(4) Greg Garland Phillips 66 Defined Contribution Make-Up Plan 828,332 — 94,627 70,046 — 993,005 Phillips 66 Key Employee Deferred
Compensation Plan
1,033,274 — — 69,508 — 1,102,782 Robert Herman Phillips 66 Defined Contribution Make-Up Plan 258,736 — 27,763 23,649 — 310,148 Phillips 66 Key Employee Deferred
Compensation Plan 1,601,531 — — 187,988 — 1,789,519 Paula Johnson Phillips 66 Defined Contribution Make-Up Plan 149,008 — 30,378 13,973 — 193,359 Phillips 66 Key Employee Deferred
Compensation Plan
— — — — — — Kevin Mitchell Phillips 66 Defined Contribution Make-Up Plan 19,100 — 29,641 1,398 — 50,139 Phillips 66 Key Employee Deferred
Compensation Plan — — — — — — Tim Taylor Phillips 66 Defined Contribution Make-Up Plan 392,188 — 56,446 26,598 — 475,232 Phillips 66 Key Employee Deferred
Compensation Plan
1,706,469 — — 138,802 — 1,845,271 (1)2016,2017, participants in these plans had 92 investment options—27 of the options were the same as those available in our 401(k) plan and the remaining options were other mutual funds approved by the plan administrator.(2)"All“All Other Compensation"Compensation” column of theSUMMARY COMPENSATION TABLESummary Compensation Table.(3)2016.2017. These amounts are not included in theSUMMARY COMPENSATION TABLESummary Compensation Table.(4)2016;2017; plus contributions by our NEOs, and earnings from January 1, 20162017 through December 31, 20162017 (shown in the appropriate columns of this table, with amounts that are included in theSUMMARY COMPENSATION TABLESummary Compensation Table). The total includes all contributions by our NEOs and by us reported in this proxy statement and our proxy statements from prior years as follows: $620,525$718,292 for Mr. Garland; $27,763$57,133 for Mr. Herman; $150,028$183,078 for Ms. Johnson; $29,641$60,403 for Mr. Mitchell; and $305,444$364,721 for Mr. Taylor.2016,2017, Mr. Garland, Mr. Herman, and Mr. Taylor were retirement-eligible under both our benefit plans and our compensation programs. Therefore, as of December 31, 2016,2017, a voluntary resignation of Mr. Garland, Mr. Herman, or Mr. Taylor, would have been treated as a retirement, and each would have retained all awards earned under the current and earlier programs. As such, awards under these programs are not included in the amounts reflected in the table below. Please see theOUTSTANDING EQUITY AWARDS AT FISCAL YEAR ENDOutstanding Equity Awards at Fiscal Year End table for more information. Our compensation programs provide for the following upon retirement:PaymentsPayments.••Amounts amounts contributed and vested under our defined contribution plans,•Amounts and amounts accrued and vested under our pension plans50 2017 PROXY STATEMENTEXECUTIVE COMPENSATION TABLESEquity.•Grants considerations include grants under the PSP for ongoing performance periods in which the executive participated for at least one year,•Previously previously granted restricted stock and RSUs,•Previously and previously granted stock option awards exercisable through the original term2016,2017, through the Phillips 66 ESP due to an involuntary termination without cause or through the Phillips 66 CICSP due to a change in control event. Benefits that would be available generally to all or substantially all salaried employees on the U.S. payroll are not included in the amounts shown. Executives are not entitled to receive benefits under both the ESP and the CICSP as a result of the same event. These two plans have the following in common:Amountsplans.plans;•BenefitsCompany.Company; and,•Bothlevel:PaymentsPayments. ESP cash severance payments include:Aexecutive'sexecutive’s base salary and current target annual bonus.bonus;•Aplan.plan; and•AEquityEquity.•executive'sexecutive’s employment is terminated by the employer other than for cause, or by the executive for good reason, the executive will receive the following benefits, which may vary depending on salary grade level:PaymentsPayments. CICSP cash severance payments include:Aexecutive'sexecutive’s base salary and the higher of the current target annual bonus or the average of the annual bonuses paid for the previous two years.years;•Aplan.plan; and,•A2017 PROXY STATEMENT 51
EXECUTIVE COMPENSATION TABLESEquity•VestingEquity. CICSP benefits include the vesting of all equity awards and lapsing of any restrictions.NEO'sNEO’s estate as a result of death are likewise provided.
(1)
NOT-FOR-CAUSE
TERMINATION
(NOT CIC)
($)
GOOD REASON
TERMINATION
(CIC)
($)
($)
($) Greg Garland Severance Payment 11,693,852 21,993,568 — — Accelerated Equity(1) — — — — Life Insurance — — 3,350,016 — TOTAL 11,693,852 21,993,568 3,350,016 — Robert Herman Severance Payment 2,824,345 5,107,043 — — Accelerated Equity(1) — — — — Life Insurance — — 1,386,960 — TOTAL 2,824,345 5,107,043 1,386,960 — Paula Johnson Severance Payment 4,035,516 7,007,389 — — Accelerated Equity(1) 13,224,509 13,224,509 13,224,509 13,224,509 Life Insurance — — 1,499,328 — TOTAL 17,260,025 20,231,898 14,723,837 13,224,509 Kevin Mitchell Severance Payment 2,933,182 4,399,774 — — Accelerated Equity(1) 5,920,091 5,920,091 5,920,091 5,920,091 Life Insurance — — 1,425,840 — TOTAL 8,853,273 10,319,865 7,345,931 5,920,091 Tim Taylor Severance Payment 5,173,256 10,106,224 — — Accelerated Equity(1) — — — — Life Insurance — — 2,248,032 — TOTAL 5,173,256 10,106,224 2,248,032 — EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION INVOLUNTARY
NOT-FOR-CAUSE
TERMINATION
(NOT CIC)
($) INVOLUNTARY OR
GOOD REASON
TERMINATION
(CIC)
($) DEATH
($) DISABILITY
($) 12,893,437 21,603,684 — — — — — — — — 3,250,032 — 12,893,437 21,603,684 3,250,032 — 2,728,237 4,567,647 — — — — — — — — 1,340,016 — 2,728,237 4,567,647 1,340,016 — 3,425,403 5,799,676 — — 11,334,547 11,334,547 11,334,547 11,334,547 — — 1,409,136 — 14,759,950 17,134,223 12,743,683 11,334,547 2,825,209 4,237,814 — — 7,317,346 7,317,346 7,317,346 7,317,346 — — 1,384,272 — 10,142,555 11,555,160 8,701,618 7,317,346 4,977,446 8,793,938 — — — — — — — — 2,161,536 — 4,977,446 8,793,938 2,161,536 — (1)For the PSP, amountsAmounts for PSP 2014-20162015-2017 are shown based on the cash amount received in February 2017,2018, while amounts for other PSP periods are prorated to reflect the portion of the performance period completed by the end of 20162017 and shown at target payout levels. These amounts reflect the closing price of our common stock, as reported on the NYSE, on December 30, 201629, 2017 ($86.41)101.15).30, 201629, 2017 ($86.41)101.15).stock'scommon stock’s closing price on December 31, 2016,2017, amounts reflect the intrinsic value as if the options had been exercised on December 31, 2016,2017, but only for options the NEO would have retained for the specific termination event.52PROXY STATEMENTTablethe annual total compensation of Contents
This ratio is based on an October 1, 2017 employee population of 14,316, which excluded 412 non-U.S. employees in Germany (270), Singapore (71), Austria (39), Canada (30), and the United Arab Emirates (2). The median employee was identified using annual base pay, overtime pay, annual bonus, and target LTI compensation using data as of September 30, 2017. The annual total compensation for our CEO includes both the amount reported in the “Total” column of our 2017 SUMMARY COMPENSATION TABLE of $23,650,896 and the estimated value of our CEO’s health and welfare benefits of $26,313. NON-EMPLOYEE DIRECTOR COMPENSATIONDirectordirector compensation program are equity compensation and cash compensation, the current levels of which have been in place since January 1, 2016.Directorsdirectors is reviewed annually by the Nominating Committee, with the assistance of such third-party consultants as the Nominating Committee deems advisable, and set by action of the Board of Directors. The Board'sBoard’s goal in designing such compensation is to provide a competitive package that will enable it to attract and retain highly skilled individuals with relevant experience and reflects the time and talent required to serve on the board of a complex, multinational corporation. The Board seeks to provide sufficient flexibility in the form of payment to meet individual needs while ensuring that a substantial portion of director compensation is linked to the long-term success of the Company. In furtherance of our commitment to be a socially responsible member of the communities in which we participate, the Board believes that it is appropriate to extend the Phillips 66 matching gift program to charitable contributions made by individual Directors.2016,2017, each non-employee Directordirector received a grant of RSUs with an aggregate value of $200,000 on the date of grant. Restrictions on the units issued to a non-employee Directordirector will lapse in the event of retirement, disability, death, or a change of control, unless the Directordirector has elected to receive the underlying shares after a stated period of time. Directors forfeit the units if, prior to the lapse of restrictions, the Board finds sufficient cause for forfeiture (although no such finding can be made after a change in control). Before the restrictions lapse, Directorsdirectors cannot sell or otherwise transfer the units, but the units are credited with dividend equivalents in the form of additional RSUs. When restrictions lapse, Directorsdirectors will receive unrestricted shares of CompanyPhillips 66 common stock as settlement of the RSUs.2016,2017, each non-employee Directordirector received $125,000 in cash compensation for service as a Director.director. Non-employee Directorsdirectors serving in specified committee or leadership positions also received the following additional cash compensation: Lead Director $50,000 N/A Audit and Finance Committee $25,000 $10,000 Human Resources and Compensation Committee $25,000 $10,000 All Other Committees $10,000 N/A LEAD / CHAIR MEMBER $ 50,000 N/A $ 25,000 $ 10,000 $ 25,000 $ 10,000 $ 10,000 N/A Director'sdirector’s deferred compensation account as described below. The RSUs issued in lieu of cash compensation are subject to the same restrictions as the annual RSUs described above underEquity Compensation.Directorsdirectors can elect to defer their cash compensation under the Phillips 66 Deferred Compensation Program for non-Employee Directors (the "Director“Director Deferral Plan"Plan”). Deferred amounts are deemed to be invested in various mutual funds and similar investment choices (including Phillips 66 common stock) selected by the Directordirector from a list of investment choices available under the Director Deferral Plan.Directorsdirectors of Phillips 66 may be funded in a grantor trust designed for this purpose.Directors'Directorsdirectors are eligible to participate in the Directors'Directors’ Annual Matching Gift Program. This provides a dollar-for-dollar match of gifts of cash or securities, up to a maximum during any one calendar year of $15,000 per donor for active Directorsdirectors and $7,500 per donor for retired Directors,directors, to charities and educational institutions (excluding certain religious, political, fraternal, or collegiate athletic organizations) that are tax-exempt under Section 501(c)(3) of the IRC or meet similar requirements under the applicable law of other countries. Amounts representing these matching contributions are contained in the "All“All Other Compensation"Compensation” column of theNON-EMPLOYEE DIRECTOR COMPENSATION TABLENon-employee Director Compensation Table.2017 PROXY STATEMENT 53NON-EMPLOYEE DIRECTOR COMPENSATIONDirectorsdirectors and executives to attend certain meetings to enhance the collegiality of the Board. The cost of such attendance is treated by the Internal Revenue Service as income and is taxable to the recipient. The Company reimburses Directorsdirectors for the cost of resulting income taxes. Amounts representing this reimbursement are contained in the "All“All Other Compensation"Compensation” column of theNON-EMPLOYEE DIRECTOR COMPENSATION TABLENon-employee Director Compensation Table.Directordirector is expected to own an amount of CompanyPhillips 66 common stock equal to at least the aggregate amount of the annual equity grants during their first five years on the Board. Directors are expected to reach this level of target ownership within five years of joining the Board. Actual shares of stock, Restricted Stock, or RSUs, including deferred stock units, may be counted in satisfying the stock ownership guidelines. All current directors are in compliance, or on pace to comply, with the guidelines.Directordirector compensation design and pay levels against a group of peer companies. The Company targets the median of this peer group for all elements of non-employee Directordirector compensation.Directorsdirectors for 20162017 (for compensation paid to our sole employee Director,director, Mr. Garland, please seeEXECUTIVE COMPENSATION TABLESExecutive Compensation Tables):. NAME
PAID IN CASH(1)
($)
AWARDS(2)
($)
AWARDS
($)
INCENTIVE PLAN
COMPENSATION
($)
AND NONQUALIFIED
DEFERRED COMPENSATION
EARNINGS
($)
COMPENSATION(3)
($)
($) Gary K. Adams 135,000 200,001 — — — 1,146 336,147 J. Brian Ferguson 150,000 200,001 — — — 343 350,344 William R. Loomis, Jr. 145,000 200,001 — — — 20,412 365,413 John E. Lowe 145,000 200,001 — — — 15,095 360,096 Harold W. McGraw III 135,000 200,001 — — — 353 335,354 Denise L. Ramos 135,000 200,001 — — — 8,039 343,040 Glenn F. Tilton 185,000 200,001 — — — 22,940 407,941 Victoria J. Tschinkel 135,000 200,001 — — — 22,702 357,703 Marna C. Whittington 150,000 200,001 — — — 22,372 372,373 NAME FEES
EARNED
OR PAID
IN CASH
($)(1) STOCK
AWARDS
($)(2) OPTION
AWARDS
($) NON-EQUITY
INCENTIVE PLAN
COMPENSATION
($) CHANGE IN PENSION
VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS
($) ALL OTHER
COMPENSATION
($)(3) TOTAL
($) 31,935 47,331 — — — 2,715 81,981 150,000 200,066 — — — 2,790 352,856 148,750 200,066 — — — 23,748 372,564 137,500 200,066 — — — 9,136 346,702 146,667 200,066 — — — 523 347,256 31,935 47,331 — — — 362 79,628 180,833 200,066 — — — 17,632 398,531 142,500 200,066 — — — 17,857 360,423 138,750 200,066 — — — 21,826 360,642 (1)20162017 base cash compensation of $125,000 payable to each non-employee Director.director. In 2016,2017, non-employee Directorsdirectors serving in specified committee positions also received the additional cash compensation described previously. Compensation amounts reflect adjustments related to various changes in committee assignments by Board members throughout the year, if any. Amounts shown include any amounts that were voluntarily deferred to the Director Deferral Plan, received in Phillips 66 common stock, or received in RSUs.(2)Directordirector compensation program, non-employee Directorsdirectors received a 20162017 grant of RSUs with an aggregate value of $200,000 on the date of grant, based on the average of the high and low prices for Phillips 66 common stock, as reported on the NYSE, on such date. These grants are made in whole shares with fractional share amounts rounded up, resulting in shares with a value of $200,066$200,001 being granted on January 15, 2016. The grants to Mr. Adams and Ms. Ramos are pro rated amounts reflecting that they joined the Board in October 2016.17, 2017.(3)Directorsdirectors to charities and educational institutions (excluding certain religious, political, fraternal, or athletic organizations) that are tax-exempt under Section 501(c)(3) of the IRC or meet similar requirements under the applicable law of other countries that we match under our Matching Gifts Program (Mr. Loomis $15,000; Mr. Lowe $6,000;$10,500; Mr. Tilton $15,000; Ms. Tschinkel $15,000, and Ms.Dr. Whittington $15,000). For active Directors,directors, the program matches up to $15,000 with regard to each program year. The amounts shown reflect the actual payments made by us in 2016.2017. All Other Compensation also includes any personal flights, automobile transportation expenses, smaller gifts (such as books, ornaments, and jackets) as well as associated tax protection, and tax assistance when we request family members or other guests to accompany a Directordirector to a Company function and, as a result, the Directordirector is deemed to make personal use of Company assets such as Company aircraft and thereby incurs imputed income.54 2017 572016:2017: PLAN CATEGORY
BE ISSUED UPON EXERCISE
OF OUTSTANDING OPTIONS,
WARRANTS AND
RIGHTS(1,2)
(a)
EXERCISE PRICE OF
OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS(3)
(b)
FOR FUTURE ISSUANCE UNDER EQUITY
COMPENSATION PLANS (EXCLUDING
SECURITIES REFLECTED IN COLUMN (a))(4)
(c) Equity compensation plans approved by security holders 10,521,382 58.34 35,673,784 Equity compensation plans not approved by security holders 0 0 0 Total 10,521,382 58.34 35,673,784 PLAN CATEGORY NUMBER OF SECURITIES
TO BE ISSUED UPON
EXERCISE OF
OUTSTANDING
OPTIONS, WARRANTS
AND RIGHTS(1,2)
(a) WEIGHTED-AVERAGE
EXERCISE PRICE OF
OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS(3)
(b) NUMBER OF SECURITIES REMAINING
AVAILABLE FOR FUTURE ISSUANCE UNDER
EQUITY COMPENSATION PLANS (EXCLUDING
SECURITIES REFLECTED IN COLUMN (a))(4)
(c) 11,619,005 49.48 38,196,937 0 0 — 11,619,005 49.48 38,196,937 (1)(2)5,103,1304,838,855 Incentive Stock Options and Nonqualified Stock Options issued to employees, 20,64010,539 Restricted Stock Awards granted under historical LTI plans, and 3,239,4972,558,278 PSUs. The number of securities to be issued includes 3,255,7383,113,710 RSUs, of which 226,995226,874 were issued to non-employee Directors.directors. Some awards held by ConocoPhillips employees at our spin-off were adjusted or substituted with a combination of ConocoPhillips and Phillips 66 equity. Awards representing a total of 13,071,435 shares were issued to ConocoPhillips employees, of which 3,429,0612,567,745 remain outstanding as of December 31, 2016.2017. The awards issued to ConocoPhillips employees are included in the outstanding awards listed above.(3)(4)shareholder'sshareholder’s most recent ownership filing with the SEC): COMMON STOCK NAME AND ADDRESS
SHARES
CLASS Berkshire Hathaway Inc.(1)
3555 Farnam Street
Omaha, Nebraska 68131 45,689,892 9.8% The Vanguard Group(2)
100 Vanguard Blvd.
Malvern, PA 19335 31,919,497 6.8% BlackRock, Inc.(3)
55 East 52nd Street
New York, NY 10055 27,591,749 5.9% COMMON STOCK NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS Berkshire Hathaway Inc.(1)
3555 Farnam Street
Omaha, Nebraska 68131
80,689,892 15.55% The Vanguard Group(2)
100 Vanguard Blvd.
Malvern, PA 19335 30,915,033 5.96% BlackRock, Inc.(3)
55 East 52nd Street
New York, NY 10055
27,862,379 5.36% (1)14, 2017,21, 2018, by Warren E. Buffett on behalf of himself and Berkshire Hathaway Inc., National Indemnity Company, National Liability & Fire Insurance Co., Berkshire Hathaway Assurance Corp., Columbia Insurance Company, Flightsafety International Inc. Retirement IncomeBerkshire Hathaway Consolidated Pension Plan Fruit of the Loom PensionMaster Trust, GEICO Corporation Pension Plan Trust, Johns Manville Corporation Master Pension Trust, and General Re Corp. Employee Retirement Trust.Berkshire Hathaway Homestate Insurance Company.(2)13, 2017,9, 2018, by The Vanguard Group on behalf of itself, Vanguard Fiduciary Trust Company, and Vanguard Investments Australia, Ltd.(3)25, 2017,23, 2018, by BlackRock, Inc. on behalf of itself, BlackRock Advisors, LLC, BlackRock Financial Management, Inc., BlackRock Investment Management, LLC, BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock Fund Managers Ltd, BlackRock Life Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock (Singapore) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock International Limited, BlackRock Institutional Trust Company, N.A., BlackRock Japan Co. Ltd., BlackRock Capital Management, Inc., FutureAdvisor, Inc., and BlackRock Asset Management North Asia Limited, and FutureAdvisor, Inc.Limited.2016,2017, all Section 16(a) reports applicable to those officers and directors were filed on a timely basis, except for the following: (1) a Form 4 that was filed on March 7, 2016, on behalf of Chukwuemka Oyolu, Vice President and Controller, related to a sale by his spouse on February 29, which was delayed while awaiting information from the executing broker; (2) a Form 4 that was filed on September 22, 2016, on behalf of Robert Herman, Executive Vice President, Midstream, related to a sale on September 15, which was delayed while awaiting information from the executing broker; and (3) a Form 4 that was filed on January 12, 2017, on behalf of Greg Garland, Chairman and CEO, related to Phillips 66 stock held by his late father's estate; Mr. Garland became the executor of the estate on September 26, 2016, and discovered that his father owned the stock subsequent to the filing of a Form 4 on behalf of Mr. Garland in November 2016.10, 2017,12, 2018, by each Phillips 66 Director,director, by each NEO and by all of our directors and executive officers as a group. Together these individuals beneficially own less than one percent of our common stock. The table also includes information about stock options, restricted stock, RSUs and Deferred Stock Units credited to the accounts of our directors and executive officers under various compensation and benefit plans. For purposes of this table, shares are considered to be "beneficially"“beneficially” owned if the person, directly or indirectly, has sole or shared voting or investment power with respect to such shares. In addition, a person is deemed to beneficially own shares if that person has the right to acquire such shares within 60 days of March 10, 2017.12, 2018. NUMBER OF SHARES OR UNITS NAME OF BENEFICIAL OWNER
BENEFICIALLY OWNED
STOCK UNITS(1)
WITHIN 60 DAYS(2) Mr. Garland 225,995 483,918 645,161 Ms. Johnson 37,213 71,324 89,999 Mr. Mitchell 34,220 24,538 40,999 Mr. Taylor 73,761 128,003 176,232 Mr. Herman 26,942 67,081 124,066 Mr. Adams 4,901 — — Mr. Ferguson 234 20,657 — Mr. Loomis(3) 72,582 22,623 — Mr. Lowe 30,000 20,657 — 873 39,942 — Ms. Ramos — 5,004 — Mr. Tilton 5,900 20,657 — 42,830 10,258 — Dr. Whittington 2,500 20,657 — Directors and Executive Officers as a Group (15 Persons) 560,879 958,669 1,094,056 NUMBER OF SHARES OR UNITS NAME OF BENEFICIAL OWNER TOTAL COMMON STOCK
BENEFICIALLY OWNED RESTRICTED/DEFERRED
STOCK UNITS(1) OPTIONS EXERCISABLE
WITHIN 60 DAYS(2) 126,963 610,837 481,794 26,789 80,541 59,266 5,972 62,688 16,866 48,709 166,028 117,299 16,219 79,794 96,399 2,978 — — 234 18,134 — 72,582 20,038 — 30,000 18,134 — 873 36,802 — — 2,982 — 5,900 18,134 — 40,253 10,505 — 2,500 18,134 — 408,683 1,326,485 862,356 (1)(2)10, 2017,12, 2018, through stock options awarded under compensation plans.(3)(4)5620172018 Annual Meeting of Shareholders of Phillips 66.10, 2017,12, 2018, the record date established by the Board of Directors. Each share of common stock is entitled to one vote. As of March 10, 2017,12, 2018, we had 516,970,525466,325,141 shares of common stock outstanding and entitled to vote. There is no cumulative voting.10, 2017,12, 2018, must be present in person or by proxy at the meeting. This is referred to as a quorum. Your shares are counted as present at the Annual Meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. Abstentions and broker non-votes will also be counted for purposes of establishing a quorum at the meeting.Applicable rules permit brokerson routine matters wheneven though the brokers have not received voting instructions from the beneficial owner on how to vote those shares.the shares only on routine matters. The ratification of an independent auditor is an example of a routine matter on which brokers may vote in this manner. Brokerssuch asinclude the election of directors, proposals relating to executive compensation and proposals to amend certificates of incorporation and certain other corporate governance changes, unless they have received voting instructions from the beneficial owner on how to vote those shares.changes. Shares that are not voted by brokers on non-routine matters are called broker non-votes."“FOR"” vote of the majority of the votes cast in person or by proxy atcast.meeting. proposal to declassify the Board, requires the affirmative “FOR” vote of 80 percent of outstanding shares as of the record date. As a result, a broker non-vote on Proposal 4 has the same effect as a vote against the proposal."“FOR"” vote of a majority of those shares present in person or represented by proxy at the meeting and entitled to vote.Company's 2016Company’s 2017 Annual Report to Shareholders are being made available to the Company'sCompany’s shareholders on the Internet atwww.proxyvote.comwww.proxyvote.com through the notice and access process. The Company's 2016Company’s 2017 Annual Report to Shareholders contains consolidated financial statements and reports of the independent registered public accounting firm, management'smanagement’s discussion and analysis of financial condition and results of operations, information concerning the quarterly financial data for the past two fiscal years, and other information.••envelope"street name"“street name”), your ability to vote by telephone or over the Internet depends on your broker'sbroker’s voting process. Please follow the directions on your proxy card or voter instruction form carefully.2017 PROXY STATEMENT 57ABOUT THE ANNUAL MEETING••envelope2, 2017.Voting2, 20178, 2018;•Signingmeetingmeeting; or•Votingmeetingdon'tdon’t provide my proxy and don'tdon’t attend the Annual Meeting?be able to vote those shares for certain "routine"routine matters even if you do not provide the broker with voting instructions. Only the ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 20172018 is considered to be a routine matter.not considered "routine."that are non-routine. This is a broker non-vote. Without instructions from you, the broker may not vote on any proposals other than the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2017."“FOR," "” “AGAINST,"” or "“ABSTAIN."” If you vote to "“ABSTAIN"” on the election of directors, it is not considered as a vote cast and, therefore, your vote will reduce the number, but not the percentage, of affirmative votes needed to elect the nominees. If"“ABSTAIN," on the other proposals,” your shares are still considered as present and entitled to vote and, therefore, your abstention has the same effect as a vote "“AGAINST."58 2017 PROXY STATEMENTABOUT THE ANNUAL MEETINGdon'tdon’t vote for some of the matters listed on my proxy card?"“FOR"” the director nominees listed on the card, "“FOR"” the ratification of Ernst & Young LLP as the independent registered public accounting firm for Phillips 66 for fiscal year 2017, and "2018, “FOR"” the approval of the compensation of our Named Executive Officers.Officers, and “FORMEETINGMEETING..Company's 2016Company’s 2017 Annual Report are being made available to the Company'sCompany’s shareholders on the Internet atwww.proxyvote.comwww.proxyvote.com through the notice and access process. Most shareholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.sendmaterial@proxyvote.com, through the Internet atwww.proxyvote.comwww.proxyvote.com or by writing to Phillips 66, c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, NY 11717. You will need your 12-digit16-digit control number located on your Notice of Internet Availability to request a package. You will also be provided with the opportunity to receive a copy of the proxy statement and annual report in future mailings.2017 PROXY STATEMENT 59ABOUT THE ANNUAL MEETING (SEC) rules permit us to deliver a single copy of an annual report and proxy statement to any household not participating in electronic proxy material delivery at which two or more shareholders reside, if we believe the shareholders are members of the same family. This benefits both you and the Company, as it eliminates duplicate mailings that shareholders living at the same address receive and conserves resources and reduces printing and mailing costs. This rule applies to any annual reports, proxy statements, proxy statements combined with a prospectus or information statements. Each shareholder will continue to receive a separate proxy card or voting instruction card.www.proxyvote.com, by email atsendmaterial@proxyvote.comsendmaterial@proxyvote.com, or by writing to Phillips 66, c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, NY 11717. Shareholders sharing the same address can request delivery of a single copy of these materials using the same methods described in the preceding sentence. If a broker or other nominee holds your shares, you may continue to receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings by allowing shareholders to consent to such elimination, or through implied consent if a shareholder does not request continuation of duplicate mailings. Because not all brokers and nominees may offer shareholders the opportunity to request eliminating duplicate mailings, you may need to contact your broker or nominee directly to discontinue duplicate mailings to your household.60 201720182019 Annual Meeting of Shareholders, our Corporate Secretary must receive the proposal at our principal executive offices by November 22, 2017.28, 2018. Any such proposal must comply with the requirements of Rule 14a-8 promulgated under the Exchange Act.shareholder'sshareholder’s intention to introduce a nomination or proposed item of business for an annual meeting not less than 90 days nor more than 120 days before the first anniversary of the prior year'syear’s meeting. Assuming that our 20172018 Annual Meeting is held on schedule, we must receive notice pertaining to the 2018 Annual Meeting no earlier than January 3, 2018,9, 2019, and no later than February 2, 2018.8, 2019.••shareholder'sshareholder’s notice of intention to introduce a nomination no later than 10 days after the earlier of the date we first provide notice of the meeting to shareholders or announce it publicly."“Corporate GovernanceGovernance"” caption.2016,2017, including the financial statements and the financial statement schedules, are available without charge to shareholders upon written request to Phillips 66, Investor Relations Department, P.O. Box 4428, Houston, Texas 77210411 S. Keeler, Bartlesville, Oklahoma, 74003 or via the Internet atwww.Phillips66.comwww.Phillips66.com. We will furnish the exhibits to our Annual Report on Form 10-K upon payment of our copying and mailing expenses.20176165"adjusted“Adjusted EBITDA," "PSP” “PSP ROCE,"” and "adjusted controllable costs" amounts.“Adjusted Controllable Costs” amounts, as used for purposes of our compensation programs. These measures are not measures of financial performance under U.S. generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies using the same or similar terminology.We useManagement uses this measure as a factor in assessingits assessment of performance for the purposes of compensation decisions. A reconciliation of adjustedVCIP Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, is set forth below. YEAR ENDED DECEMBER 31, 2017 Net Income $ 5,248 Plus: Income tax expense (benefit) (1,693) Net interest expense 407 Depreciation and amortization (D&A) 1,318 EBITDA 5,280 Adjustments: Impairments by equity affiliates 64 Pending claims and settlements (57) Gain on consolidation of business (423) Equity affiliate ownership restructuring — Recognition of deferred logistics commitments — Railcar lease residual value deficiencies and related costs — Pension settlement expense 83 Hurricane-related costs 210 Proportional share of selected equity affiliates income taxes 69 Proportional share of selected equity affiliates net interest 66 Proportional share of selected equity affiliates D&A 682 EBITDA attributable to Phillips 66 noncontrolling interests (211) Certain tax impacts (23) VCIP Adjusted EBITDA $ 5,740 YEAR ENDED DECEMBER 31 MILLIONS OF DOLLARS
2016 $ 1,644 547 321 1,168 3,680 (124 ) 79 137 725 95 (115 ) 33 30 40 (32 ) $ 4,548 We useManagement uses this measure as a factor in assessingits assessment of performance for the purposes of compensation decisions. PSP ROCE is a ratio, the numerator of which is adjusted earnings plus after-tax interest expense, and the denominator of which is average adjusted total equity plus total debt.2017 PROXY STATEMENT A-1 MILLIONS OF DOLLARS (except as indicated)
2015-2017 PSP ROCE Numerator Net income $ 5,248 1,644 4,280 After-tax interest expense 285 220 201 GAAP ROCE earnings 5,533 1,864 4,481 (2,837) (57) (34) PSP ROCE Earnings 2,696 1,807 4,447 Denominator 35,700 33,344 31,749 In-process capital (2,233) (3,097) (3,016) Cash adjustment (60) (37) (1,141) PSP Average Capital Employed $ 33,407 30,210 27,592 PSP ROCE (percent) 10.1% 8.1% 6.0% 16.1% GAAP ROCE (percent) 11.7% 15.5% 5.6% 14.1% MILLIONS OF DOLLARS EXCEPT AS INDICATED YEARS ENDED DECEMBER 31 PSP AVERAGE
2014–2016 2016 2015 2014 $ 1,644 4,280 4,797 220 201 173 1,864 4,481 4,970 (57 ) (34 ) (980 ) 1,807 4,447 3,990 33,344 31,749 29,595 (3,097 ) (3,016 ) (1,675 ) (37 ) (1,141 ) (2,303 ) $ 30,210 27,592 25,617 12.6% 6.0% 16.1% 15.6% 12.2% 5.6% 14.1% 16.8% ***controllable costsControllable Costs is a measure of how effectively we manage costs versus internal targets. We useManagement uses this measure as a factor in assessingits assessment of performance for the purposes of compensation decisions. Adjusted controllable costsControllable Costs is a non-GAAP financial measure because it excludes certain costs that we believemanagement believes are not directly relevant to compensation decisions. A reconciliation of adjusted controllable costsAdjusted Controllable Costs to the sum of operating expenses and selling, general and administrative expenses, the most directly comparable GAAP measures, is set forth below. YEAR ENDED DECEMBER 31, 2017 Operating Expenses $ 4,699 Selling, General and Administrative Expenses 1,695 Adjustments: Certain employee benefits (161) Consolidation of business impacts 53 Turnaround timing impacts 59 Foreign currency and weather impacts (49) Adjusted Controllable Costs $ 6,296 YEAR ENDED DECEMBER 31 MILLIONS OF DOLLARS
2016 $ 4,275 1,638 (82 ) 50 212 $ 6,093 A-2 2017
VOTE BY INTERNET - www.proxyvote.com Use Internet to transmit your voting instructions
Amended and for electronic deliveryRestated Certificate of information up until 11:59 p.m. Eastern Time on May 2, 2017. Have your Voting Direction card in hand when you access the web site and follow the instructions to obtain your records and to complete an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Incorporation
of
Phillips 66mailing proxy materials, you can consentits entirety as follows:receiving all future proxy statements, Voting Direction cards and annual reports electronically via e-mail ortime by resolution adopted by affirmative vote of a majority of the Internet. To sign upentire Board of Directors. The directors, other than those who may be elected by the holders of any series of Preferred Stock under specified circumstances, shall be divided, with respect to the time for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronicallywhich they severally hold office, into three classes, as nearly equal in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 2, 2017. Have your Voting Direction card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your Voting Direction card and return it in the postage-paid envelope we have provided or return it to Phillips 66, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. 2331 CITYWEST BLVD. HOUSTON, TX 77042 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E18900-P88285 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS VOTING DIRECTION CARD IS VALID ONLY WHEN SIGNED AND DATED. PHILLIPS 66 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 - 3. 1. ELECTION OF DIRECTORS Nominees: For Against Abstain ! ! ! ! ! ! ! ! ! 1a. William R. Loomis, Jr. 1b. Glenn F. Tilton 1c. Marna C. Whittington For Against Abstain ! ! ! ! ! ! 2. To ratify the appointment of Ernst & Young LLPnumber as the Company's independent registered public accounting firm for fiscal year 2017. 3. To consider and vote on a proposal to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers. In their discretion, the named proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date V.1.1
If you plan to attend the Annual Meeting of Shareholders, you will be asked to verify that you are a shareholder by presenting this admission ticket togetheris reasonably possible, each with a proper formterm of identification. Important Notice Regardingoffice to expire at the Availabilitythird succeeding annual meeting of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. E18901-P88285 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF SHAREHOLDERS MAY 3, 2017 The shareholder(s) hereby appoint(s) Greg C. Garland and Paula A. Johnson, or either of them, as proxies,stockholders after their election, with each with the powerdirector to appointhold office until his or her substitute,successor shall have been duly elected and hereby authorize(s) them to represent and to vote, as designatedqualified. Unless otherwise required by law, any vacancy on the reverse sideBoard of Directors or newly created directorship may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been appointed expires and until their successors are duly elected and qualified, or until their earlier death, resignation, removal or departure from the Board of Directors for other cause.ballot, allArticle FIFTH, and the election, term of office, removal and filling of vacancies in respect of such director or directors shall be governed by the resolution of the Board of Directors so providing for the establishment of such series and by applicable law.Commonthe votes entitled to be cast by the Voting Stock.of Phillips 66 that the shareholder(s) is/are entitled to vote atelect directors of the Annual MeetingCorporation pursuant to the provisions applicable in the case of Shareholdersarrearages in the payment of dividends or other defaults contained in the resolution or resolutions of the Board of Directors providing for the establishment of any such series, any such director of the Corporation so elected may be removed in accordance with the provisions of such resolution or resolutions.helda director or on the ability of any director to vote on any matter brought before the Board or any Board committee, except (i) as required by applicable law, (ii) as set forth in this Certificate of Incorporation or (iii) any By-Law adopted by the Board of Directors with respect to the eligibility for election as a director or the qualification for continuing service as a director upon reaching a specified age or, in the case of employee directors, with respect to the qualification for continuing service of directors upon ceasing employment from the Corporation.9:00 a.m.all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors.Central Time, on May 3, 2017,or the alteration, amendment or the repeal of, or the adoption of any provision inconsistent with, this sentence, by the stockholders shall require the affirmative vote of shares representing not less than 80% of the votes entitled to be cast by the Voting Stock; and PROVIDED, FURTHER, HOWEVER, that in the case of any such stockholder action at a special meeting of stockholders, notice of the Houston Marriott Westchase, 2900 Briarpark Drive, Houston, Texas,proposed alteration, amendment, repeal or adoption of the new By-Law or By-Laws must be contained in the notice of such special meeting, or (ii) by action of the Board of Directors of the Corporation; provided, however, that in the case of any such action at a meeting of the Board of Directors, notice of the proposed alteration, amendment, repeal or adoption of the new By-Law or By-Laws must be given not less than two days prior to the meeting. The Provisions of this paragraph (ED)(1) of this Article FIFTH are subject to Section 12 of Article IIIV of the By-Laws.adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE THREE DIRECTOR NOMINEES NAMED ON THE REVERSE SIDE; "FOR" RATIFYING THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2017; AND "FOR" THE ADVISORY (NON-BINDING) APPROVAL OF THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE. ContinuedBy-Laws adopted by the stockholders; PROVIDED, HOWEVER, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.signed on reverse side V.1.1 ADMISSION TICKET
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