UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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SemGroup
2015
SemGroup2017 Proxy
Statement
Notice of Annual Meeting of Stockholders to be held on
May 14, 201517, 2017
SEMGROUP CORPORATION
Two Warren Place
6120 S. Yale Avenue, Suite 7001500
Tulsa, Oklahoma 74136-421674136-4231
April 10, 201513, 2017
LETTER FROM THE BOARDCHAIRMAN OF DIRECTORSTHE BOARD
TO OUR STOCKHOLDERS
At SemGroup, we’re focused on delivering shareholder value. Our management team andOn behalf of SemGroup’s Board of Directors, represent decadesI am pleased to invite you to our Annual Meeting of industry experience and our strategically located assets provide us with a strong platform for growth and opportunity.
With a proven track record and a clear path for success, we are optimistic about SemGroup’s future and look forward to sharingStockholders on May 17, 2017. The attached Proxy Statement contains important information with you about the companybusiness to be conducted at the annual meeting.Annual Meeting. Whether or not you plan to attend, we encourage you to vote your proxy as soon as possible so that your shares will be represented at the meeting.
This year we will vote on the election of 7seven directors and the ratification of BDO USA,Grant Thornton LLP’s selection as the company’s independent registered public accounting firm for 2015.2017. We will also conduct a non-binding advisory vote to approve the compensation of the company’s named executive officers.officers, a non-binding advisory vote regarding the frequency for which stockholders will have an advisory vote to approve the compensation paid to the company’s named executive officers, and a vote to approve an amendment to our Amended and Restated Certificate of Incorporation to authorize 4,000,000 shares of preferred stock. In addition, thereleadership will beprovide a report on the company’s business and shareholdersstockholders will have an opportunity to ask questions.
SemGroup’s Board of Directors is committed to strong corporate governance, stockholder transparency and consistent value creation for our investors. The Board and management team are comprised of individuals with decades of industry experience and diverse perspectives. As stewards of your company,investment in SemGroup, we are gratefulfocused on achieving results for you.
Thank you for your continued interest and trust in us. We look forward to exceeding your expectations.support of SemGroup.
Chairman, Board of Directors |
SEMGROUP CORPORATION
Two Warren Place
6120 S. Yale Avenue, Suite 7001500
Tulsa, Oklahoma 74136-421674136-4231
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF SEMGROUP CORPORATION
Date: | May | |
Time: | 9:00 a.m., local time | |
Place: | ||
AGENDA:
Election of seven directors named in the proxy statement;
Advisory vote to approve the compensation of our executive officers disclosed in the proxy statement;
Advisory vote regarding the frequency for which stockholders will have an advisory vote to approve the compensation paid to certain executive officers;
Ratification of appointment of BDO USA,Grant Thornton LLP as our independent registered public accounting firm for 2015;2017;
Approval of an amendment to our Amended and Restated Certificate of Incorporation to authorize 4,000,000 shares of preferred stock, as described in Proposal 5 in the proxy statement; and
Transaction of such other business as may properly come before the meeting or any adjournment thereof.
Record Date:You can vote if you were a stockholder of record on March 27, 2015.30, 2017.
Your vote is important regardless of the number of shares you own. Whether or not you expect to attend the meeting, we hope you will take the time to vote your shares. If you are a stockholder of record, you may vote over the Internet, by telephone or by completing and mailing the enclosed proxy card in the envelope provided. If your shares are held in “street name,” that is, held for your account by a broker or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted.
By Order of the Board of Directors,
William H. Gault
Candice L. Cheeseman
General Counsel and Secretary
April 10, 201513, 2017
Important Notice Regarding the Availability of Proxy Materials for the 20152017 Annual Meeting of Stockholders to be Held on May 14, 2015:17, 2017: Stockholders may view the accompanying proxy statement, our form of proxy and our 20142016 Annual Report to Stockholders over the Internet by accessing our website athttp://www.semgroupcorp.com.
SEMGROUP CORPORATION
Two Warren Place
6120 S. Yale Avenue, Suite 7001500
Tulsa, Oklahoma 74136-421674136-4231
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 14, 201517, 2017
This proxy statement is furnished in connection with the solicitation by the Board of Directors of SemGroup Corporation, a Delaware corporation (the “Company,” “SemGroup,” “we,” “our” or “us”), of proxies to be voted at the Annual Meeting of Stockholders to be held on May 14, 2015,17, 2017, or at any adjournment thereof (the “Annual Meeting”), for the purposes set forth in the accompanying Notice of Annual Meeting. This proxy statement and accompanying proxy were first sent on or about April 10, 2015,13, 2017, to stockholders of record on March 27, 2015.30, 2017.
Holders of record of our Class A Common Stock (the “Class A Common Stock”) at the close of business on the record date, March 27, 2015,30, 2017, will be entitled to notice of, and to vote at, the Annual Meeting. As of March 27, 2015,30, 2017, there were 43,899,60366,237,006 shares of our Class A Common Stock outstanding. Each share of Class A Common Stock is entitled to one vote. There are no other classes of common stock outstanding. There is no cumulative voting with respect to the election of directors.
For more information about this solicitation and voting, please see the Questions and Answers section below.
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| Proposal 1 — Election of Directors
Page 4
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4 | Nominees for Directors | |||||
Corporate Governance | ||||||
Director Compensation |
Proposal 3 — Advisory Vote on the Frequency of a Future Advisory Vote on Executive Compensation Page 14 |
Proposal 5 — Approval of an Amendment to our Amended and Restated Certificate of Incorporation to Authorize 4,000,000 Shares of Preferred Stock Page 17 |
1 | ||||
ANNEX A – Amendment to Amended and Restated Certificate of Incorporation of SemGroup Corporation | A-1 |
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Q: | Who is soliciting my proxy? | |||
A: | The Board of Directors of SemGroup (the “Board of Directors” or the “Board”). | |||
Q: | Where and when is the Annual Meeting? | |||
A: | 9:00 a.m., local time, May | |||
Q: | What am I voting on at the Annual Meeting? | |||
A: | • | The election of the seven nominees named in this proxy statement to our Board of Directors. | ||
• | An advisory vote on executive compensation. | |||
• | An advisory vote on the frequency of an advisory vote on executive compensation. | |||
• | The ratification of | |||
• | Approval of an amendment to our Amended and Restated Certificate of Incorporation to authorize 4,000,000 shares of preferred stock, as described in Proposal 5 in this proxy statement. | |||
Q: | How does the Board of Directors recommend I vote? | |||
A: | Please see the information included in this proxy statement relating to each of the matters to be voted on. Our Board of Directors recommends that you vote: | |||
• | “ | |||
• | “ | |||
• | “FOR” the option, on an advisory basis, of every one year as the preferred frequency for conducting an advisory vote on the compensation of our named executive officers; | |||
• | “ | |||
• | “FOR” the approval of an amendment to our Amended and Restated Certificate of Incorporation to authorize 4,000,000 shares of preferred stock. | |||
Q: | How do I vote? | |||
A: | Stockholders of Record. If you are a stockholder of record, you may vote by using any of the following methods: | |||
• | VOTE BY INTERNET:You may use the Internet to vote by following the simple instructions on the enclosed proxy card. When voting by Internet, you will need to have your proxy card in hand, so that you can reference the required Control Number. | |||
• | VOTE BY TELEPHONE:You may use any touch-tone telephone to vote by following the simple instructions on the enclosed proxy card. You will need to have your proxy card in hand when you call so that you can reference the required Control Number. | |||
• | VOTE BY MAIL:You may vote by marking, signing and dating your proxy card and promptly returning it in the enclosed postage-paid envelope. | |||
The persons named as your proxy holders on the proxy card will vote the shares represented by your proxy in accordance with the specifications you make. If no specification is made, such shares will be voted: | ||||
• | “ | |||
• | “ | |||
Please carefully consider the information contained in this proxy statement. Whether or not you expect to attend the Annual Meeting in person, we urge you to vote by Internet or telephone, or by signing, dating and returning the enclosed proxy card as promptly as possible in the postage-paid envelope provided, to ensure your representation and the presence of a quorum at the Annual Meeting. Stockholders of record desiring to vote in person at the Annual Meeting may vote on the ballot provided at the meeting. |
Beneficial Owners. If your shares are held in a brokerage account, by a bank, by a trustee, or by another nominee, please follow the voting instructions provided by your broker or other nominee. Most brokers or other nominees permit their customers to vote by telephone or by Internet, in addition to voting by signing, dating and returning the voting instruction form in the postage-paid envelope provided. | ||||
Beneficial owners desiring to vote at the Annual Meeting will need to contact the broker, bank, trustee, or other nominee that is the holder of record of their shares to obtain a “legal proxy” to bring to the Annual Meeting. |
Q: | Who will count the vote? | ||||
A: | Representatives of Computershare will count the votes and serve as the inspector of the election. | ||||
Q: | What constitutes a quorum? | ||||
A: | Stockholders representing at least a majority of our outstanding Class A Common Stock as of the record date must be present at the Annual Meeting, either in person or by proxy, for there to be a quorum. Abstentions and broker non-votes are counted as present for establishing a quorum. A broker non-vote occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or nominee does not have discretionary voting power and has not received instructions from the beneficial owner. | ||||
Q: | What vote is needed for these proposals to be adopted? | ||||
A: | Proposal 1—Election of Directors. The affirmative vote of a plurality of the votes cast at the Annual Meeting is required for the election of directors. This means that the nominees with the largest number of votes “for” will be elected as directors, up to the maximum number of directors to be chosen at the election. With respect to the election of directors, you may vote in favor of all nominees, withhold votes as to all nominees, or vote in favor of all nominees except any specific nominee(s) listed as to which you withhold your votes. Votes withheld are deemed present at the meeting and thus will be counted for purposes of determining whether there is a quorum. | ||||
Pursuant to our Corporate Governance Guidelines and Principles, each nominee for director is required to tender his or her irrevocable resignation as a director conditioned upon (i) the director receiving more “withhold” votes than “for” votes in an uncontested election and (ii) the Board accepting such resignation. In the event a nominee for director receives more “withhold” votes than for “for” votes in the election, the Nominating and Corporate Governance Committee of our Board of Directors shall promptly consider the tendered resignation and recommend to the Board the action to be taken with respect to such tendered resignation, and the Board will then act on such recommendation. | |||||
Proposal 2—Advisory Vote on Executive Officer Compensation. The approval, on an advisory basis, of the compensation paid to our executive officers named in this proxy statement requires the affirmative vote of a majority of shares of Class A Common Stock present or represented by proxy and entitled to vote thereon at the Annual Meeting. Abstentions, which are included in the calculation of the number of shares present or represented by proxy and entitled to vote at the Annual Meeting, will have the effect of a vote against the proposal. The results of the advisory vote on executive officer compensation will not be binding on SemGroup or the Board of Directors. | |||||
Proposal 3—Frequency of Stockholder Advisory Vote on Executive Officer Compensation. The advisory vote regarding the frequency of the stockholder advisory vote to approve the compensation paid to our named executive officers will not be binding on SemGroup or the Board of Directors. However, our Board of Directors will consider the frequency receiving the greatest number of votes (every one, two or three years) as the frequency preferred by our by stockholders. Abstentions will not be counted as a vote for any of the frequency options and, accordingly, will have no effect on the frequency preferred by our stockholders. | |||||
Proposal 4—Ratification of Independent Registered Public Accounting Firm. The appointment of | |||||
Proposal 5—Approval of Amendment to SemGroup Amended and Restated Certificate of Incorporation. The approval of the amendment to our Amended and Restated Certificate of Incorporation requires the affirmative vote of a majority of the outstanding shares of Class A Common Stock entitled to vote. Abstentions will have the effect of a vote against the proposal. | |||||
A broker non-vote will have no effect on the outcome of the election of directors or |
Q: | How will my shares be voted if they are held in a broker’s name? | |
A: | If you hold your shares through an account with a bank or broker, the bank or broker may vote your shares on some matters even if you do not provide voting instructions. Brokerage firms have the authority under the New York Stock Exchange (“NYSE”) rules to vote shares on certain matters (such as the ratification of independent registered public accounting firm) when their customers do not provide voting instructions. However, on other “non-routine” matters, when the brokerage firm has not received voting instructions from its customers, the brokerage firm cannot vote the shares on that matter and a “broker non-vote” occurs. The election of directors, | |
Q: | What should I do now? | |
A: | You should vote your shares by the Internet, by telephone or by returning your signed and dated proxy card in the enclosed postage-paid envelope as soon as possible so that your shares will be represented at the Annual Meeting. | |
Q: | Who conducts the proxy solicitation and how much will it cost? | |
A: | We are asking for your proxy for the Annual Meeting and will pay all the costs of asking for stockholder proxies. We can ask for proxies through the mail or by telephone, fax, or in person. We can use our directors, officers and employees to ask for proxies. These people do not receive additional compensation for these services. In addition, we have retained D.F. King & Co., Inc. to aid in the solicitation of proxies at a base fee of $12,500, plus reasonable out-of-pocket expenses and disbursements. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of our Class A Common Stock. |
Q: | Can I revoke my proxy? | |||
A: | Yes. You can change your vote in one of four ways at any time before your proxy is used. First, you can enter a new vote by telephone or Internet. Second, you can revoke your proxy by giving written notice to the Secretary of SemGroup at any time before it is voted. Third, you can send a later dated proxy changing your vote. Fourth, you can attend the Annual Meeting and vote in person. | |||
Q: | Who should I call with questions? | |||
A: | If you have questions about the Annual Meeting, you should call | |||
Q: | When are the stockholder proposals for the Annual Meeting held in | |||
A: | In order to be considered for inclusion in our proxy materials, you must submit proposals for next year’s annual meeting in writing to our Secretary at our executive offices at Two Warren Place, 6120 S. Yale Avenue, Suite | |||
In accordance with our Amended and Restated Bylaws, a stockholder who intends to submit a proposal for consideration, but not for inclusion in our proxy materials, or who intends to nominate a candidate for election as a director, must provide written notice of the matter to our Secretary at Two Warren Place, 6120 S. Yale Avenue, Suite |
PROPOSAL 1 ELECTION OF DIRECTORS
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Our Amended and Restated Bylaws provide that our Board of Directors shall consist of not less than three nor more than eleven directors, as determined from time to time by resolution of the Board of Directors. The number of directors is currently fixed at seven. Directors are elected by the stockholders to serve for a one-year term expiring at the next annual meeting of stockholders and until their successors are duly elected and qualified, or until their earlier death, resignation or removal. The term of the current directors will expire at the Annual Meeting.
In accordance with the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Ronald A. Ballschmiede, Sarah M. Barpoulis, John F. Chlebowski, Carlin G. Conner, Karl F. Kurz, James H. Lytal, William J. McAdam and Thomas R. McDaniel to the Board of Directors. All of the nominees are presently directors of SemGroup. At the time of Mr. McAdam’s election to the Board of Directors in March 2017, he was recommended to the Nominating and Corporate Governance Committee by a third-party search firm.
The persons named as proxies in the accompanying proxy, who have been designated by the Board of Directors, intend to vote, unless otherwise instructed in such proxy, for the election of each of the nominees for director. Should any nominee named herein become unable for any reason to stand for election as a director, it is intended that the persons named in such proxy will vote for the election of such other person or persons as the Nominating and Corporate Governance Committee may recommend and the Board of Directors may propose to replace such nominee. We know of no reason why any of the nominees will be unavailable or unable to serve.
As noted earlier in the Questions and Answers section of this proxy statement, pursuant to our Corporate Governance Guidelines and Principles of the Board of Directors, as a requirement for nomination as a director, each nominee for director must tender his or her irrevocable resignation as a director conditioned upon (i) the director receiving more “withhold” votes than “for” votes (a “Majority Withhold Vote”) in an uncontested election and (ii) the Board accepting such resignation. In the event a nominee for director receives a Majority Withhold Vote in an uncontested election, the Nominating and Corporate Governance Committee of our Board of Directors shall promptly consider the tendered resignation and recommend to the Board the action to be taken with respect to such tendered resignation. The Nominating and Corporate Governance Committee is authorized to consider all factors it deems relevant to the best interests of the Company and its stockholders in reaching its recommendation. The Board will then act on such recommendation no later than 90 days following the certification of the election results. Following the Board’s decision, the Company will publicly disclose the Board’s decision and, if applicable, the reasons for rejecting the tendered resignation. Accordingly, the seven nominees with the largest number of “for” votes will be elected as directors, and in the event any nominee receives a Majority Withhold Vote, the resignation policy as summarized here will apply. The director resignation policy is set forth in our Corporate Governance Guidelines and Principles and is available on our website athttp://www.semgroupcorp.com under the “Corporate Information—Governance Documents” caption on the “Investor Relations” page.
Our Board of Directors recommends a vote“FORFOR”” all nominees for directors.
Set forth below is information with respect to each nominee for director, including information they have furnished as to his or her principal occupation or employment for the past five or more years and certain other directorships held. Each nominee’s information below also includes a summary of each individual’s experience, qualifications, attributes and skills that have led to the conclusion that each individual should serve as a director. In addition to the specific experiences, qualifications, attributes and/or skills set forth below, each nominee generally has demonstrated the highest professional and personal ethics, a broad range of experience in business, government and/or technology, the ability to provide insights and practical wisdom based on his or her experience and expertise, a commitment to enhancing stockholder value, compliance with legal and regulatory requirements and the ability to develop a good working relationship with other Board members and contribute to the Board’s working relationship with senior management of SemGroup. See “—Corporate Governance—Consideration of Director Nominees” below for additional information regarding director nominees and the nominating process.
Ronald A. Ballschmiede, age 59,61, has served as a director of SemGroup since November 2009. He currently serves as ChairmanChair of the Board’sNominating and Corporate Governance Committee of the Board of Directors and as a member of the Audit Committee.Committee of the Board of Directors. Since November 2015, Mr. Ballschmiede has served as Executive Vice President and Chief Financial Officer of Sterling Construction Company, Inc. (“Sterling”), a leading heavy civil construction company that specializes in the building and reconstruction of transportation and water infrastructure projects. Mr. Ballschmiede served as a director of the general
partner of Rose Rock Midstream, L.P. (“Rose Rock” or “RRMS”), a publicly traded master limited partnership and subsidiary of SemGroup which owned and operated a diversified portfolio of midstream energy assets, from April 2016 to September 2016 when SemGroup acquired all of Rose Rock. From 2006 to March 2015, Mr. Ballschmiede served as executive vice presidentExecutive Vice President and chief financial officerChief Financial Officer of Chicago Bridge & Iron Co. N.V. (“CB&I”), a leading engineering, procurement and construction company that focuses on the energy and natural resource industry. Prior to joining CB&I, he had a 29-year career in public accounting, primarily focused on serving public companies in the manufacturing and construction industry. From 2002 untilto 2006, Mr. Ballschmiede served as a partner with Deloitte & Touche LLP. From 1977 to 2002, he was employed by Arthur Andersen, LLP, becoming a partner in its audit division in 1989. Mr. Ballschmiede graduated from Northern Illinois University with a Bachelor of Science degree in accounting and is a certified public accountant.
Mr. Ballschmiede provides the Board with extensive accounting and financial expertise gained from his service as executive vice presidentExecutive Vice President and chief financial officerChief Financial Officer of Sterling and CB&I and his prior experience as a partner of Deloitte & Touche LLP and Arthur Andersen, LLP. His experience and knowledge make him a valuable contributor of financial, accounting and risk management expertise to the Board. Mr. Ballschmiede qualifies as an “audit committee financial expert” as defined by the U.S. Securities and Exchange Commission.Commission (“SEC”).
Sarah M. Barpoulis, age 50,52, has served as a director of SemGroup since November 2009. She currently serves onas Chair of the Audit Committee of the Board of Directors and as a member of the Compensation Committee of the Board of Directors. Since 2003, she has provided asset management and advisory services to the merchant energy sector through Interim Energy Solutions, LLC, a company she founded. From 1991 to February 2003, Ms. Barpoulis was employed with PG&E National Energy Group, Inc., now known as National Energy & Gas Transmission, Inc. (“National Energy”), a company that developed, built, owned and operated electric generating and natural gas pipeline facilities and provided energy trading, marketing and risk management services, last serving as senior vice president,Senior Vice President, commercial operations and trading. Ms. Barpoulis serves on the board of directors of South Jersey Industries, an energy services holding company with utility and non-utility operations. She is also a director of South Jersey Energy Company.Company and Educare, DC. She previously served as a director of Reliant Energy, Inc. from 2006 to 2008. Ms. Barpoulis has a master’s degree in business administration from the Tuck School of Business at Dartmouth College and a Bachelor of Science and engineering degree from Princeton University.
Ms. Barpoulis provides the Board with valuable executive-level leadership experience and risk management and business planning expertise obtained from her consulting services provided through Interim Energy Solutions, LLC and her varied roles of increasing responsibility with National Energy. She has received a Certificate of Director Education from the NACD and qualifies as an “audit committee financial expert” as defined by the Securities and Exchange Commission.SEC. Her risk management expertise, background and prior board and work experience allow her to be a valuable contributor to the Board.
John F. Chlebowski, age 69, has served as a director and Chairman of the Board of Directors of SemGroup since November 2009. Mr. Chlebowski served as president and chief executive officer of Lakeshore Operating Partners, LLC, a bulk liquid distribution firm, from March 2000 until his retirement in December 2004. From July 1999 until March 2000, he was a senior executive and co-founder of Lakeshore Liquids Operating Partners, LLC, a private venture firm in the bulk liquid distribution and logistics business, and from January 1998 until July 1999, he was a private investor and consultant in bulk liquid distribution. Prior to that, he was employed from 1994 until 1998 as president and chief executive officer of GATX Terminals Corporation, a subsidiary of GATX Corporation, and, prior to that, as vice president of finance and chief financial officer of GATX Corporation. He has served in the financial and energy segments of W.R. Grace & Co. Mr. Chlebowski is a director of First Midwest Bancorp, Inc., a bank holding company, and Lead Independent Director of NRG Yield, Inc., a majority-owned publicly listed (NYSE) subsidiary of NRG Energy, Inc. which is a Fortune 500 company which owns and operates one of the largest and most diverse power generation portfolios in the United States. He is a former director of Laidlaw International, Inc., Phosphate Resource Partners, SpectraSite, Incorporated and NRG Energy, Inc. Mr. Chlebowski graduated from Pennsylvania State University with a master’s degree in business administration. He also has a Bachelor of Science degree from the University of Delaware.
Mr. Chlebowski provides the Board a broad level of experience as a current and former director of a number of public companies and as a result of his executive leadership and financial management positions in diversified businesses, including, relevant to SemGroup’s business, the bulk liquid distribution business. In addition, Mr. Chlebowski has significant experience serving on the audit committee, compensation committee and nominating and governance committee of other boards, including as chairman of all three committees, and qualifies as an “audit committee financial expert” as defined by the Securities and Exchange Commission. His broad and extensive management and financial experience, leadership skills and corporate governance and related board knowledge allow him to be a valuable contributor to the Board as its Chairman.
Carlin G. Conner, age 47,49, has served as a director and as President and Chief Executive Officer of SemGroup since April 2014. Mr. Conner also servesserved as chairmanChairman of the board of directors, presidentPresident and chief executive officerChief Executive Officer of our wholly owned subsidiary Rose Rock Midstream GP, LLC, the general partner of Rose Rock, Midstream, L.P.a publicly traded master limited partnership and subsidiary of SemGroup which owned and operated a diversified portfolio of midstream energy assets, from 2014 until September 2016 when SemGroup acquired all of Rose Rock. From June 2012 until March 2014, Mr. Conner served as managing director of Oiltanking GmbH, an independent worldwide storage provider of crude oil, refined petroleum products, liquid chemicals and gases. He served as a member of the board of directors of the general partner of Oiltanking Partners, L.P., a publicly traded master limited partnership engaged in independent terminaling, storage and transportation of crude oil, refined petroleum products and liquefied petroleum gas (“Oiltanking Partners”), from March 2011 until March 2014, and was elected chairmanChairman in July 2011 in connection with the completion of Oiltanking Partners’ initial public offering. Mr. Conner also served as presidentPresident and chief executive officerChief Executive Officer of Oiltanking Partner’s general partner from March 2011 to November 2012 and as presidentPresident and chief executive officerChief Executive Officer of Oiltanking Holding Americas, Inc., a wholly owned subsidiary of Oiltanking GmbH from July 2006 to November 2012. Previously, from 2003 to 2006, he worked at Oiltanking GmbH’s corporate headquarters in Hamburg, Germany, where he was responsible for international business development and sat on the boards of several Oiltanking GmbH ventures. He joined Oiltanking Houston, L.P. in 2000. He began his career at GATX Terminals Corporation and served in various roles, including operations and commercial management. From April 2014 to October 2014, Mr. Conner served on the Board of Directors of the general partner of NGL Energy Partners LP, a publicly traded master limited partnership engaged in crude oil logistics, water solutions, liquids, retail propane, and refined products and renewables. He graduated from McNeese State University with a Bachelor of Science degree in environmental science.
Mr. Conner provides the Board more than 2324 years of experience in the midstream industry and executive level experience gained through his services with Oiltanking GmbH and its affiliates as described above. He also has substantial board experience related to management and oversight of a midstream publicly traded master limited partnership. In addition, Mr. Conner serves as our President and Chief Executive Officer and is able to provide the Board valuable insight with respect to our management and operations. His industry knowledge, board experience and positions as President and Chief Executive Officer allow him to be a valuable contributor to the Board.
Karl F. Kurz, age 53,55, has served as a director of SemGroup since November 2009. He currently serves as Chairman ofon the Compensation Committee and on the Nominating and Governance Committee of the Board of Directors. From September 2009 through September 2012, Mr. Kurz served as a
managing director of CCMP Capital Advisors, LLC, a global private equity firm. From 2000 to March 2009, he was employed with Anadarko Petroleum Corporation, one of the largest independent oil and gas exploration and production companies in the world, last serving as chief operating officerChief Operating Officer from December 2006. Prior to this position, he served Anadarko Petroleum Corporation in various capacities, including as senior vice president,Senior Vice President, North America operations, midstream and marketing, general manager,General Manager, U.S. onshore, senior vice president,Senior Vice President, marketing, and vice president,Vice President marketing. Prior to joining Anadarko Petroleum Corporation, Mr. Kurz previously served as general manager of midstream and marketing for Vastar Resources, Inc. and, prior to that, as manager of crude oil marketing for ARCO Oil & Gas Company. He currently serves on the boards of American Water Works Company, Inc. (the largest and most geographically diverse publicly traded U.S. water and wastewater utility company), WPX Energy, Inc. (an oil-focused energy company with operations in the U.S. Permian, Williston and San Juan and one of the 20 largest U.S. producers based on total assets and market capitalization), Siluria Technologies (a developer of technologies for the commercial production of fuels and chemicals made from natural gas) and RTS Services (a real estate service company) and previously served on the boards of Western Gas Partners, Chaparral Energy, Inc. and Global Geophysical Services, Inc. Mr. Kurz graduated with a Bachelor of Science degree in petroleum engineering from Texas A&M University. He is also a graduate of Harvard University Business School’s advanced management program.
Mr. Kurz provides the Board extensive knowledge of the midstream energy services industry and executive-level leadership experience gained through his services provided to Anadarko Petroleum Corporation, Vastar Resources, Inc. and Arco Oil & Gas Company as described above. In addition, he brings public company board experience to our Board. His industry knowledge, executive-level leadership experience in relatively complex organizations and public company board experience allow Mr. Kurz to be a qualified and valuable contributor to the Board.
James H. Lytal, age 57,59, has served as a director of SemGroup since November 2011. He currently serves onas Chair of the Compensation Committee and Nominating and Corporate Governanceas a member of the Audit Committee of the Board of Directors. Since April 2009, Mr. Lytal has served as a senior advisor to Global Infrastructure Partners, a New York based partnership that invests in infrastructure assets globally. From 1994 to 2004, Mr. Lytal was presidentPresident of Leviathan Gas Pipeline Partners, which later became El Paso Energy Partners, and then Gulfterra Energy Partners, where he served on the board of directors. In 2004, Gulfterra Energy Partners merged with Enterprise Products Partners, one of the largest publicly-traded energy partnerships in the United States, where Mr. Lytal served as executive vice presidentExecutive Vice President until 2009. From 1998 to 2008, he was directly involved in the development of over $3 billion in offshore platform and oil and gas pipeline projects. Having entered the energy industry in 1980, Mr. Lytal’s business experience includes midstream mergers, acquisitions and master limited partnership drop-downs, as well as onshore midstream and deepwater asset development and management. Mr. Lytal currently serves on the boardboards of MarlinAzure Midstream Partner GP, LLC.LLC, the general partner of Azure Midstream Partners LP (a fee-based, growth oriented limited partnership formed to develop, operate, and acquire midstream energy assets), Rice Midstream Management LLC, the general partner of Rice Midstream Partners LP (a fee-based, growth-oriented limited partnership formed by Rice Energy Inc. to own, operate, develop and acquire midstream assets in the Appalachian basin), and Archrock, Inc. (a U.S. natural gas contract compression services company). He graduated from the University of Texas at Austin with a Bachelor of Science degree in petroleum engineering.
Mr. Lytal has over 3435 years of experience in the midstream/MLP industry and provides the Board a broad range of knowledge and understanding in the management of midstream assets. His experience, executive leadership skills and familiarity with governance issues, particularly in the midstream sector, qualify him as a valuable and resourceful member of the Board.
Thomas R. McDanielWilliam J. McAdam, age 66,65, has served as a director of SemGroup since November 2009.March 2017. He currently serves as Chairman ofon the Nominating and Corporate Governance Committee and on the Audit Committee of the Board of Directors. Mr. McAdam was President and Chief Executive Officer of Aux Sable Liquid Products Inc., Aux Sable Canada LP, and Aux Sable Midstream LLC (North American midstream energy companies) from 2000 to 2013. Prior to joining Aux Sable, he held progressively more senior positions with Imperial Oil and Exxon Chemical from 1974 to 1994 in the engineering, refining, fertilizer, petrochemicals, planning and natural gas liquids businesses in the United States and Canada. He began working with Aux Sable in 1995 during its development phase until 1998, and was President of Mapco Canada Energy Inc. from 1998 until 1999. Mr. McAdam joined Aux Sable in 1999 to lead the start-up and development of the Aux Sable business in conjunction with the construction and commissioning of the Alliance Pipeline/Aux Sable rich gas system in 2000. He serves as a director of Seven Generations Energy Ltd., a Canadian exploration and production company, and previously served as a director of Canexus Corporation, a Canadian chemical manufacturing and handling company until it was acquired in March 2017 by ChemTrade Logistics Income Fund. Mr. McAdam earned a Bachelor of Science in Chemical Engineering from Queen’s University and a Master of Business Administration from McMaster University. He earned the ICD.D designation from the Institute of Corporate Directors in 2015.
Mr. McAdam has over 42 years of experience in the energy industry and provides the Board a robust knowledge and understanding of the Canadian and U.S. energy sector. His executive leadership gained through his service to Aux Sable combined with his industry and public company board experience qualify him to make valuable contributions to the Board.
Thomas R. McDaniel, age 68, has served as a director of SemGroup since 2009 and as Chairman of the Board of Directors since January 1, 2017. Mr. McDaniel was executive vice president, chief financial officerExecutive Vice President, Chief Financial Officer and treasurerTreasurer of Edison International, a
generator and distributor of electric power and investor in infrastructure and energy assets, before retiring in July 2008 after 37 years of service. Prior to January 2005, he was chairman, chief executive officerChairman, Chief Executive Officer and presidentPresident of Edison Mission Energy, Edison International’s power generation subsidiary specializing in the development, acquisition, construction, management and operation of power production facilities. Prior to that, Mr. McDaniel served as presidentPresident and chief executive officerChief Executive Officer of Edison Capital, a capital and financial services business subsidiary which invests worldwide in energy and infrastructure projects. Mr. McDaniel serves on the board of directors of SunPower Corporation, a manufacturer of high-performance solar electric systems worldwide for residential, commercial and utility-scale power plant customers.customers, and of Tendril, Inc., a provider of energy services management solutions. He also currently serveshas previously served on the board of directors of Aquion Engergy, Inc. and Tendril, Inc. and previously served on the board of Cypress Envirosystems, a subsidiary of Cypress Semiconductor Corp., and of Aquion Energy, Inc., a manufacturer of proprietary Aqueous Hybrid Ion (AHI™) batteries and battery systems for long-duration, stationary energy storage applications. Mr. McDaniel graduated from the University of California with a Bachelor of Science degree.
Mr. McDaniel has extensive operational and financial management experience gained from his roles of increasing responsibility with Edison International, a public company with annual revenue of $14.1 billion in fiscal 2008.International. In addition, he provides the Board with his experience as a director and audit committee member of a public company. Mr. McDaniel’s operational and financial management experience and his understanding of the role of board of directors allow him to be a valued contributor to the Board. Mr. McDaniel qualifiesBoard and as an “audit committee financial expert” as defined by the Securities and Exchange Commission.Chairman.
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Our Board of Directors is committed to sound and effective governance practices. Our Board of Directors has adopted corporate governance guidelines titled “Corporate Governance Guidelines and Principles of the Board of Directors” which provide a framework of governance principles and procedures to assist in the operation of the Board of Directors. The guidelines address, among other things, director qualifications, director independence, composition of the Board, director responsibilities, Board committees, Board self-evaluation and management review and succession. The Nominating and Corporate Governance Committee reviews the guidelines periodically, and the guidelines may be amended at any time upon recommendation by Nominating and Corporate Governance Committee and approval of the Board of Directors.
SemGroup has a Code of Business Conduct and Ethics for directors, officers (including the chief executive officer, principal financial officer and principal accounting officer) and employees. SemGroup also has a separate Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which contain provisions specifically applicable to our chief executive officer and senior financial officers, including our chief financial officer and chief accounting officer.
The Corporate Governance Guidelines and Principles, the Code of Business Conduct and Ethics and the Code of Ethics for the Chief Executive Officer and Senior Financial Officers are available on our website athttp://www.semgroupcorp.com under the “Corporate Information—Governance—Governance Documents” caption on the “Investor Relations” page and copies of these documents may also be obtained in print by any stockholder who requests them from our corporate secretary. If we amend the Code of Business Conduct and Ethics or Code of Ethics for the Chief Executive Officer and Senior Financial Officers or waive the Code of Business Conduct and Ethics or Code of Ethics for the Chief Executive Officer and Senior Financial Officers with respect to the chief executive officer, principal financial officer or principal accounting officer, we will post the amendment or waiver, as the case may be, at the same location on our website.
Director Independence. Our Board of Directors has adopted a formal set of categorical independence standards with respect to the determination of director independence based on the New York Stock Exchange, or the NYSE listing standards. These standards are set forth in our Director Nomination Policy which is available on our website athttp://www.semgroupcorp.com under the “Corporate Information—Governance—Governance Documents” caption on the “Investor Relations” page. The provisions of the Director Nomination Policy regarding director independence meet and in some areas exceed the listing standards of the NYSE. In order to be considered independent a director must be determined to have no material relationship with the Company other than as a director.
Under the Director Nomination Policy, an “independent director” is one who:
has no material relationship with the Company, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company;
is not an employee of the Company and no member of his or her immediate family is an executive officer of the Company;
has not been employed by the Company and no member of his or her immediate family has been an executive officer of the Company during the past three years;
has not received, and no member of his or her immediate family has received, more than $100,000 per year in direct compensation from the Company in any capacity other than as a director or as a pension for prior service during the past three years;
(i) is not and no member of his or her immediate family is a current partner of a firm that is the Company’s internal or external auditor; (ii) is not a current employee of the Company’s internal or external auditor; (iii) does not have an immediate family member who is a current employee of the Company’s internal or external auditor and who participates in that firm’s audit, assurance or tax compliance (but not tax planning) practice; and (iv) within the last three years was not, and no member of his or her immediate family was (and no longer is), a partner or employee of the Company’s internal or external auditor and personally worked on the Company’s audit within that time;
is not and no member of his or her immediate family is currently, and for the past three years has not been, and no member of his or her immediate family has been, part of an interlocking directorate in which an executive officer of the Company serves on the compensation committee of another company that employs the director or an immediate family member of the director;
is not an executive officer or an employee, and no member of his or her immediate family is an executive officer, of another company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single year, exceeds the greater of $1 million or two percent of such other company’s consolidated revenues during any of the past three years;
is free of any relationships with the Company that may impair, or appear to impair, his or her ability to make independent judgments; and
is not and no member of his or her immediate family is employed as an executive officer of a charitable organization that receives contributions from the Company or a Company charitable trust in an amount which exceeds the greater of $1 million or two percent of such charitable organization’s total annual receipts.
For purposes of determining a “material relationship,” the following standards are utilized:
any payments by the Company to a director’s primary business affiliation or the primary business affiliation of an immediate family member of a director for goods or services, or other contractual arrangements, must be made in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated persons; and
the aggregate amount of such payments must not exceed two percent of the Company’s consolidated gross revenues; provided, however, there may be excluded from this two percent standard payments arising from (i) competitive bids which determined the rates or charges for the services and (ii) transactions involving services at rates or charges fixed by law or governmental authority.
For purposes of these independence standards, (i) immediate family members of a director include the director’s spouse, parents, stepparents, children, stepchildren, siblings, mother- and father-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone (other than domestic employees) who shares the director’s home and (ii) the term “primary business affiliation” means an entity of which the director is a principal/executive officer or in which the director holds at least a 5% equity interest.
In accordance with the Director Nomination Policy and the current director independence standards of the NYSE, the Board undertook its annual review of director and director nominee independence. During this review, the Board considered transactions and relationships between each director and director nominee or any member of his or her immediate family and the Company and its subsidiaries and affiliates. The Board also considered whether there were any transactions or relationships between directors, nominees or any member of their immediate family (or any entity of which a director, director nominee or an immediate family member is an executive officer, general partner or significant equity holder). As provided in the Director Nomination Policy and the NYSE independence standards, the purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director or nominee is independent.
The Board of Directors has affirmatively determined that each of Mr. Ballschmiede, Ms. Barpoulis, Mr. Chlebowski, Mr. Kurz, Mr. Lytal, Mr. McAdam and Mr. McDaniel, current directors of the Company, are independent under the standards set forth in the Director Nomination Policy and the current director independence standards of the NYSE. Mr. Conner is not considered to be independent because of his current employment as our President and Chief Executive Officer.
Board Meetings and Attendance. The Board held twenty-one22 meetings during the year ended December 31, 2014.2016. During that year, each of our directors attended at least 75 percent of the aggregate number of Board meetings and meetings held by all committees on which he or she then served. In addition, the Board of Directors took action four times during 20142016 by unanimous written consent.
Director Attendance at Annual Meeting of Stockholders. Each director is encouraged to participate in our annual meetings of stockholders. Each of our directors then serving attended our 20142016 annual meeting of stockholders.
Board Leadership Structure and Role in Risk Oversight. While we currently separate the offices of Chairman of the Board and Chief Executive Officer, our Corporate Governance Guidelines and Principles specify that the Board of Directors has no policy mandating the separation of the offices of Chairman of the Board and Chief Executive Officer, as our Board believes it is in our best interest to have flexibility in selecting our Chairman and board leadership structure as future circumstances may warrant. Our Board’s oversight of risk management (discussed below) has had no effect on our leadership structure.
Our Board of Directors has six independent members and only one non-independent member. A number of our independent board members are currently serving or have served as members of senior management or as directors of other public companies. Our Audit, Compensation and Nominating and Corporate Governance Committees are comprised solely of independent directors, each with a different independent director serving as chair of the committee. We believe that the number of independent, experienced directors that make up our Board of Directors, along with the independent oversight of the Board by the non-executive Chairman, benefits our Company and our stockholders.
Our Board of Directors is responsible for oversight of our enterprise-wide risk and has approved our Comprehensive Risk Management Policy that reflects an enterprise-wide approach to risk management and considers both financial and non-financial risks. Our Comprehensive Risk Management Policy and its associated framework is designed to ensure we:
identify and communicate our risk appetite and risk tolerances;
establish an organizational structure that prudently separates responsibilities for executing, valuing and reporting our business activities;
value (where appropriate), report and manage all material business risks in a timely and accurate manner;
effectively delegate authority for committing our resources;
foster the efficient use of capital and collateral; and
minimize the risk of a material adverse event.
The Audit Committee of our Board of Directors has oversight responsibilities for the implementation of, and compliance with, our Comprehensive Risk Management Policy on behalf of the Board of Directors.
While the Board of Directors oversees our risk management, our management is responsible for day-to-day risk management processes. We have established an executive management committee, comprised of corporate officers, which oversees the financial and non-financial risks associated with all activities governed by our Comprehensive Risk Management Policy and its associated framework, including: asset operations; marketing and trading;marketing; investments, divestitures, and other capital expenditures and dispositions; credit risk management; and other strategic activities. We also have a separate risk management group that is assigned responsibility for independently monitoring compliance with, reporting on, and enforcing the provisions of our Comprehensive Risk Management Policy.
Board Committees. The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each of the current members of each of the committees qualifies as an “independent” director under the current listing standards of the New York Stock Exchange.NYSE.
The table shows the current membership of the Committees and identifies our independent directors:
Name
| Ronald A. Ballschmiede | Sarah M. Barpoulis | Carlin G. Conner | Karl F. Kurz | James H. Lytal | William J. McAdam | Thomas R. McDaniel | |||||||||||||
Audit | X | X* | X | |||||||||||||||||
Compensation | X | X | X* | |||||||||||||||||
Nominating and Corporate Governance | X* | X | X | |||||||||||||||||
Independent Directors | X | X | X | X | X | X |
* Denotes Committee Chairman.
Audit Committee. The Board of Directors has determined that Ronald A. Ballschmiede and Sarah M. Barpoulis and Thomas R. McDaniel qualify as “audit committee financial experts” within the meaning of the regulations of the Securities and Exchange Commission.SEC. The Audit Committee has a written charter, which is available on our website athttp://www.semgroupcorp.com. We have in place and circulated a “whistleblower policy” entitled “Audit Committee Accounting Concern Resolution Policy.” The Audit Committee assists the Board of Directors in fulfilling its responsibilities by providing oversight relating to:
the integrity of our financial statements;
our systems of internal control over financial reporting and disclosure controls and procedures;
the engagement, compensation, independence and performance of our independent registered public accounting firm and their conduct of the annual audit of our financial statements and any other audit, review or attestation engagement;
our risk profile, including financial and non-financial risks;
compliance with our financial and risk management policies;
our legal and regulatory compliance;
the application of our related person transaction policy; and
the application of our codes of business conduct and ethics.
A more detailed description of the Audit Committee’s responsibilities can be found in its charter.
The Audit Committee held sixeight meetings during 2014.2016.
Compensation Committee. The Compensation Committee has a written charter, which is available on our website athttp://www.semgroupcorp.com. The Compensation Committee reviews and takes action for and on behalf of the Board of Directors with respect to management compensation policies and practices, including (i) determining, reviewing and recommending the
compensation for our Chief Executive Officer to the independent members of the Board of Directors for its approval, (ii) determining and approving the compensation for our other executive officers, (iii) reviewing and approving management incentive compensation policies and programs and (iv) administrating our equity incentive plan. In addition, the Compensation Committee recommends the form and amount of non-employee director compensation to the Board of Directors, and the Board of Directors makes the final determination. The Compensation Committee has authority under its charter to obtain advice and seek assistance from compensation consultants and from internal and outside legal, accounting and other advisors.
In considering and recommending the compensation of non-employee directors, the Compensation Committee may consider such factors as it deems appropriate, including historical compensation, level of compensation necessary to attract and retain non-employee directors meeting our desired qualifications and market data. In connection with the review of our non-employee director compensation by the Compensation Committee in 2014,2016, the Compensation Committee retained Mercer (US) Inc.Pearl Meyer & Partners (“Pearl Meyer”) to provide market information on non-employee director compensation, including annual board and committee retainers, board and committee meeting fees, committee chairperson fees and stock-based compensation. In October 2014, the Compensation Committee conducted a Request for Proposal process and selected Pearl Meyer and Partners to provide the Compensation Committee the market information on non-employee director compensation noted above for 2015.
The Compensation Committee has discretion under its charter to form and delegate some or all of its authority to subcommittees composed entirely of independent directors. During 2014,2016, the Compensation Committee did not form or utilize a subcommittee. More information describing the Compensation Committee’s processes and procedures for considering and determining executive compensation, including the role of our Chief Executive Officer and consultants in determining or recommending the amount or form of executive compensation, is included in the Compensation Discussion and Analysis under “Executive Compensation” below.
The Compensation Committee held seveneight meetings during 2014.2016. In addition, the Compensation Committee took action three times during 20142016 by unanimous written consent.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has a written charter, which is available on our website athttp://www.semgroupcorp.com. The Nominating and Corporate Governance Committee is responsible for identifying and recommending nominees for election or re-election as directors by stockholders at each annual meeting of stockholders, as well as candidates to fill vacancies on the Board of Directors should vacancies occur. The Nominating and Corporate Governance Committee has the authority under its charter to retain a professional search firm to identify candidates. The Nominating and Corporate Governance Committee is also responsible for developing and recommending to the Board of Directors our Corporate Governance Guidelines and Principles.
The Nominating and Corporate Governance Committee held three meetings during 2014. In addition, the Nominating and Corporate Governance Committee took action one time during 2014 by unanimous written consent.2016.
Consideration of Director Nominees. The Nominating and Corporate Governance Committee has adopted a Director Nomination Policy, which is available on our website athttp://www.semgroupcorp.com. The Committee will consider director candidates submitted to it by other directors, employees and stockholders. The Committee may engage professional search firms to assist it in identifying and evaluating potential candidates. Any stockholder recommendations of candidates proposed for consideration by the Nominating and Corporate Governance Committee should include the candidate’s name and qualifications for director and should be addressed to: Secretary, Two Warren Place, 6120 S. Yale Avenue, Suite 700,1500, Tulsa, Oklahoma 74136. In addition, as described below, our Amended and Restated Bylaws permit stockholders to nominate directors for consideration at a meeting of stockholders.
In considering prospective nominees for the Board, the Nominating and Corporate Governance Committee will endeavor to find individuals of high integrity who have a solid record of accomplishment in their chosen fields and who possess the qualifications, qualities and skills to effectively represent the best interests of all stockholders. Candidates are selected for their ability to exercise good judgment and provide practical insights and diverse perspectives. The Nominating and Corporate Governance Committee considers the following qualifications at a minimum to be required in recommending to the Board potential new Board members or the continued service of existing members:
the highest professional and personal ethics;
broad experience in business, government, education or technology;
ability to provide insights and practical wisdom based on their experience and wisdom relevant to our lines of business;
commitment to enhancing stockholder value;
sufficient time to effectively carry out their duties; their service on other boards of public companies should be limited to no more than three directorships;
compliance with legal and regulatory requirements;
ability to develop a good working relationship with other Board members and contribute to the Board’s working relationship with senior management of SemGroup; and
independence; a majority of the Board shall consist of independent directors, as defined in the Director Nomination Policy.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may also consider such other factors as it may deem are in the best interests of the Company and its
stockholders. The Nominating and Corporate Governance Committee does, however, believe it appropriate for at least one member of the Board to meet the criteria for an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission.SEC. When considering potential nominees for the Board, the Committee will consider the criteria above and each potential nominee’s individual skills and qualifications in context of the current composition of the Board and needs of the Board at such time. In connection therewith, the Committee will consider diversity in professional background, experience, expertise, perspective, age, gender and ethnicity with respect to Board composition as a whole.whole, although the Committee does not have a specific diversity policy. With respect to diversity, in accordance with our Corporate Governance Guidelines and Principles, particular emphasis is placed on identifying candidates whose experiences, qualities and skills complement and augment those of other Board members with respect to the Board of Directors as a group.
The Company’s Corporate Governance Guidelines and Principles provide that a director who changes substantially the principal occupation, position or responsibility he or she had when elected to the Board should volunteer to resign from the Board. The Nominating and Corporate Governance Committee will have the opportunity to evaluate the continued appropriateness of Board membership under the facts and circumstances and make a recommendation to the Board whether to accept the resignation or request the director to continue to serve on the Board.
Our Amended and Restated Bylaws permit stockholders to nominate directors for consideration at an annual meeting of stockholders. To nominate a director, stockholders must follow the procedures specified in our Amended and Restated Bylaws that require advance notice and certain other information. Stockholders must submit the candidate’s name and qualifications in writing to our Secretary at the following address: Secretary, SemGroup Corporation, Two Warren Place, 6120 S. Yale Avenue, Suite 700,1500, Tulsa, Oklahoma 74136. The written notice must be received by our Secretary not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. The notice must contain certain information required under our Amended and Restated Bylaws, including, among other things, (i) the nominee’s name, age, business and residential addresses, written consent to being named in the proxy statement and to serving as director if elected, and any other information relating to such person as would be required to be disclosed in solicitations of proxies for election of directors pursuant to Section 14(a) under the Securities Exchange Act of 1934 and (ii) with respect to the stockholder submitting the nomination and anyone acting in concert with that stockholder, the name and business addresses of the stockholder and the person acting in concert with the stockholder, a representation that the stockholder is a record holder of Class A Common Stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, a description of all agreements, arrangements or understandings between or among the stockholder and any other person or persons with respect to the nomination and the class and number of shares of Class A Common Stock beneficially owned by the stockholder and any person acting in concert with that stockholder. For further information, stockholders may contact our Secretary at our principal executive offices for a copy of the relevant provisions of our Amended and Restated Bylaws.
Any single stockholder, or group of stockholders, that has beneficially owned more than 5% of our outstanding common stock for at least one year as of the date of recommendation may recommend nominees for director to the Nominating and Governance Committee by delivering a written notice to our Secretary that satisfies the notice, information, and consent requirements of the Director Nomination Policy. The Committee will evaluate such recommended nominees against the same criteria that it uses to evaluate other nominees. The notice must be received by the Nominating and Governance Committee no later than the date that is 120 calendar days prior to the anniversary of the date that our proxy statement was released to stockholders in connection with the previous year’s annual meeting. The notice must include, among other things, proof of the required stock ownership, proof of identification of the stockholder(s) submitting the proposal, information regarding the proposed candidate to the Board of Directors and a signed statement by the candidate with respect to certain matters. The notice should be addressed to: Secretary, Two Warren Place, 6120 S. Yale Avenue, Suite 700,1500, Tulsa, Oklahoma 74136.
Executive Sessions. Each regularly scheduled meeting of the Board of Directors includes an executive session of the non-management directors. These sessions are chaired by the independent, non-executive Chairman of the Board. If our non-
managementnon-management directors include any directors who have been determined not to be independent by the Board, the Board will schedule an executive session of just the independent directors at least once each year.
Communications with the Board of Directors. Stockholders who wish to communicate with our Board of Directors or any of its committees may send written communications to: Board of Directors, SemGroup Corporation, Two Warren Place, 6120 S. Yale Avenue, Suite 700,1500, Tulsa, Oklahoma 74136. In addition, stockholders and other interested parties may communicate with the Chairman of the Board or with the non-management directors as a group by writing to: Chairman of the Board, Two Warren Place, 6120 S. Yale Avenue, Suite 700,1500, Tulsa, Oklahoma 74136.
PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
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In accordance with Section 14A of the Securities Exchange Act of 1934, we are providing our stockholders the opportunity to approve, on an advisory and non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement.
This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and our compensation objectives, philosophy and practices described in this proxy statement. As discussed in greater detail in the “Compensation Discussion and Analysis” in this proxy statement, our compensation program is designed to, among other things:
attract, motivate and retain highly-talented executives;
link executive compensation to the achievement of our business objectives as well as reinforce appropriate leadership behaviors; and
encourage executives to consider the impact of decisions to drive our short-term and long-term success.
We believe that our compensation program, with its balance of base salary, short-term and long-term incentives and benefits, fairly accomplishes our objectives. We believe our executive compensation program has allowed us to attract and build a leadership team which is focused on our business objectives and helped us achieve many of our 20142016 objectives as noted in “2014“2016 Business Highlights” under “Executive Compensation—Compensation Discussion and Analysis—Executive Summary” in this proxy statement.
Accordingly, our Board of Directors recommends our stockholders vote in favor of the say-on-pay proposal as set forth in the following resolution:
“RESOLVED, that the compensation of the Company’s named executive officers as disclosed in its Proxy Statement for the 20152017 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the executive compensation tables and the corresponding narrative discussion, is approved.”
This vote is advisory, and therefore nonbinding. Stockholders are strongly encouraged to read the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure. The Board of Directors and the Compensation Committee expect to take into account the outcome of the vote in connection with their evaluation of our compensation program to the extent they can determine the stockholders’ concerns associated with any significant negative voting results. At our 20142016 annual meeting, the compensation of our named executive officers as disclosed in last year’s proxy statement was approved by over 98.7%98.58% (more than 98.9%98.59% if abstentions are excluded from the calculation) of the votes cast on the proposal, which demonstrated strong stockholder support for our executive compensation approach.
As determined by the Board of Directors, we will providehave provided our stockholders with the opportunity to vote on the compensation to our named executive officers at every annual meeting of stockholders until the next requiredsince 2011. An advisory vote at the 2017 annual meeting of stockholders on the frequency of stockholder advisory votes on the compensation of our named executive officers.officers is being conducted again in connection with the Annual Meeting as set forth in Proposal 3.
Our Board of Directors recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers.
PROPOSAL 3 ADVISORY VOTE ON THE FREQUENCY OF A FUTURE ADVISORY VOTE ON EXECUTIVE COMPENSATION |
In accordance with Section 14A of the Securities Exchange Act of 1934, we are also including in this proxy statement a separate resolution to enable our stockholders to vote, on an advisory and non-binding basis, for their preference as to how frequently we should seek future say-on-pay advisory votes on the compensation of our named executive officers. Stockholders may indicate whether future advisory votes on executive compensation should occur every one, two or three years. Stockholders also may, if they wish, abstain from casting a vote on this proposal.
This advisory vote on the frequency of future say-on-pay votes must be provided to stockholders at least once every six years. At the May 2011 annual meeting of our stockholders, our Board of Directors recommended, and the stockholders voted on an advisory basis in favor of, holding the say-on-pay vote every year. The Board accepted our stockholders’ recommendation, and stockholders have been provided with the opportunity to vote to approve, on an advisory and non-binding basis, the compensation of our named executive officers every year.
Our Board of Directors continues to believe that a frequency of “every year” for the advisory vote on executive compensation is the most optimal interval for conducting and responding to a say-on-pay vote. The Board believes that an annual advisory vote on executive compensation will allow our stockholders to provide direct input on the philosophy, policies and practices of our executive compensation program as disclosed in the proxy statement every year. An annual advisory vote on our executive compensation will provide a better opportunity for stockholders to constructively communicate with us regarding their views on our executive compensation program on a timely basis.
The proxy card and the Internet and the telephone proxy submission procedures each will provide stockholders with the opportunity to choose among four options: holding the vote every one, two or three years, or abstaining. Stockholders will not be voting to approve or disapprove our Board of Directors’ recommendation.
Although this advisory vote on the frequency of the say-on-pay vote is nonbinding, our Board of Directors will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation. The Board may decide that it is in the best interests of our stockholders and us to hold an advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by our stockholders.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years or three years or abstain from voting when you vote in response to the resolution set forth below.
“RESOLVED, that the option of every one year, two years or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which the Company is to hold a stockholder vote to approve, on an advisory basis, the compensation of the named executive officers.”
Our Board of Directors recommends that you vote “FOR” the option of every one year as the preferred frequency for the holding of future advisory votes on compensation of our named executive officers.
PROPOSAL 4 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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TheOn February 26, 2017, the Audit Committee has appointed BDO USA,Grant Thornton LLP as our independent registered public accounting firm (“independent auditor”) for the fiscal year ending December 31, 2015. BDO USA, LLP has been our independent auditor since December 2008.2017. A proposal will be presented at the Annual Meeting asking the stockholders to ratify the appointment of BDO USA,Grant Thornton LLP as our independent auditor for 2015.2017. If the stockholders do not ratify the appointment of BDO USA,Grant Thornton LLP, the Audit Committee will reconsider the appointment. Even if the appointment is ratified, the Audit Committee, in its sole discretion, may change the appointment at any time during the year if the Audit Committee determines that a change is in the best interests of SemGroup.
A representative of BDO USA,Grant Thornton LLP will be present at the Annual Meeting and will have the opportunity to make a statement, if he or she desires to do so, and respond to appropriate questions.
Our Board of Directors recommends a vote “FOR” the ratification of BDO USA,Grant Thornton LLP as our independent auditor for 2015.the fiscal year ending December 31, 2017.
Change in Independent Registered Public Accounting Firm
SemGroup recently solicited bids for audit services for 2017 from several independent auditors, including BDO USA, LLP (“BDO USA”), which had been our independent auditor since 2008. As a result of this process and following careful consideration and deliberation, on February 26, 2017, the Audit Committee approved the engagement of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017 and to perform interim review procedures related to the financial statements included in our quarterly reports on Form 10-Q, beginning with the quarter ending March 31, 2017. Also on February 26, 2017, the Audit Committee dismissed BDO USA as the Company’s independent registered public accounting firm. BDO USA was notified of the Committee’s decision on February 27, 2017.
BDO USA’s audit reports on the Company’s consolidated financial statements for the two most recent fiscal years ended December 31, 2016 and 2015, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles generally accepted in the United States (“US GAAP”).
During the Company’s two most recent fiscal years and through the subsequent interim period through February 26, 2017, (i) there were no disagreements between the Company and BDO USA on any matters of US GAAP or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of BDO USA, would have caused BDO USA to make reference to the subject matter of the disagreement in its reports on the Company’s consolidated financial statements for such years, and (ii) there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.
During the Company’s two most recent fiscal years ended December 31, 2016 and 2015, and during the subsequent interim period through February 26, 2017, we did not consult with Grant Thornton LLP with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report was provided to the Company nor oral advice was provided to the Company that Grant Thornton LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions or a “reportable event” as described in Item 304(a)(1)(v) of Regulation S-K.
Fees of Independent Registered Public Accounting Firm
The following table sets forth the fees for professional services provided to us by BDO USA, LLP for fiscal 20142016 and 2013:2015:
Service | 2014 | 2013 | 2016 | 2015 | ||||||||||||
Audit fees | $ | 1,785,600 | $ | 1,974,082 | $ | 2,248,077 | $ | 2,255,925 | ||||||||
Audit-related fees | 38,728 | 35,750 | 40,000 | 36,154 | ||||||||||||
Tax fees | 53,389 | 4,769 | 24,129 | 22,064 | ||||||||||||
All other fees | — | — | — | — | ||||||||||||
Total | $ | 1,877,717 | $ | 2,014,601 | $ | 2,312,206 | $ | 2,314,143 |
Audit fees include those related to the audit of our consolidated financial statements, reviews of our quarterly financial statements, audits of the financial statements of our subsidiaries (as required by statute, by our credit agreements, by partnership agreements and by regulations of the Securities and Exchange Commission)SEC), and the audit of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. Audit fees also include consultations on accounting and reporting matters directly related to such audits.services performed in connection with other filings with the SEC. Audit-related fees are related to the audits of benefit plans. Tax fees are related to certain international tax consultation services.
The Audit Committee pre-approves all audit and permissible non-audit services by its independent registered public accountant prior to the receipt of such services. All services for the fiscal years ended December 31, 20142016 and 20132015 set forth in the table above were pre-approved by the Audit Committee.
PROPOSAL 5 APPROVAL OF AN AMENDMENT TO OUR AMENDED |
Introduction
Our Board of Directors has approved an amendment to our Amended and Restated Certificate of Incorporation, which we refer to as the “Preferred Stock Amendment,” to provide authority to issue up to 4,000,000 shares of preferred stock, par value $0.01 per share, and has directed that the Preferred Stock Amendment be submitted to our stockholders for approval at the Annual Meeting. The proposed Preferred Stock Amendment is set forth in Annex A attached to this proxy statement, which amendment has been marked to indicate additions to our Amended and Restated Certificate of Incorporation as underlined text and deletions to our Amended and Restated Certificate of Incorporation as strike-outs.
Authorization of Preferred Stock
We are not currently authorized under our Amended and Restated Certificate of Incorporation to issue any shares of preferred stock. The Preferred Stock Amendment authorizes our Board of Directors to issue, from time to time, up to 4,000,000 shares of preferred stock in one or more series with such designations, powers, preferences and rights as may be determined by our Board of Directors. The specific terms of a particular series of preferred stock would be described in a certificate of designation relating to that series. Our Amended and Restated Certificate of Incorporation currently authorizes (i) 90,000,000 shares of Class A Common Stock, par value $0.01 per share, and (ii) 10,000,000 shares of Class B Common Stock, par value $0.01 per share. As of the record date, March 30, 2017, there were 66,237,006 shares of Class A Common Stock outstanding and no shares of Class B Common Stock outstanding.
If the Preferred Stock Amendment is approved, no further stockholder approval would be required prior to the issuance of the authorized shares of preferred stock, except as may be required by applicable law or NYSE rules. The authorization of the preferred stock will not have any immediate effect on the rights of our existing stockholders. However, in connection with the issuance of preferred stock, our Board of Directors would have the authority to designate and issue series of our preferred stock with dividend, liquidation, conversion, voting or other rights that may be superior to those of our common stock. The effects of the issuance of preferred stock upon holders of our common stock may include, among other things: (i) a preference in the payment of dividends to holders of preferred stock, which may restrict our ability to declare dividends on our common stock; (ii) dilution of voting power if holders of preferred stock are given voting rights; (iii) dilution of equity interests and voting power if the preferred stock is convertible, and converted into, common stock; or (iv) a preference in payments upon liquidation to holders of preferred stock, which may limit liquidation payments on our common stock.
Reasons for the Preferred Stock Amendment
Our Board of Directors has determined that the authorization of preferred stock is advisable and in the best interests of SemGroup and its stockholders because it will provide SemGroup with the flexibility to consider and respond to future business needs and opportunities as they arise from time to time, including in connection with capital raising, financing and acquisition needs or opportunities. The availability of shares of preferred stock would provide us flexibility in responding to future capital raising, financing and acquisition needs and opportunities without the delay and expense associated with holding a special meeting of stockholders to obtain further stockholder approval. As part of our business and growth strategy, we monitor and screen for potential strategic acquisitions and investments, and shares of preferred stock could be issued on a timely basis as consideration for an acquisition or in connection with the financing of an acquisition or investment. If determined to be in the best interest of SemGroup and its stockholders, the Board of Directors will be able to authorize the issuance of shares of preferred stock without the delay and expense associated with obtaining further stockholder approvals and to customize the terms of the preferred stock to meet the particular needs of any transaction or market conditions.
The Preferred Stock Amendment has been prompted by business and financial considerations. Future purposes for utilizing shares of preferred stock could include, but would not be limited to, issuances in public or private offerings of shares for cash, effecting acquisitions or other strategic transactions, and pursuing additional financing opportunities. We have no current plan, commitment, arrangement, understanding or agreement regarding the issuance of shares of preferred stock resulting from the approval of the Preferred Stock Amendment.
Potential Anti-Takeover Effect of the Proposed Preferred Stock Amendment
The Preferred Stock Amendment is not intended to have any anti-takeover effect and is not part of any series of anti-takeover measures contained in our Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws in effect on the date of this proxy statement. Our Board of Directors represents that, if the Preferred Stock Amendment is approved, it will not, without prior stockholder approval, approve the issuance or use of any of the preferred stock for any defensive or anti-takeover purpose or for the purpose of implementing any stockholder rights plan. Within these limits, as well as others imposed by
applicable law and NYSE rules, our Board of Directors may approve the issuance or use of preferred stock for capital raising, financing and acquisition needs or opportunities that has the effect of making an acquisition of SemGroup more difficult or costly, as could also be the case if our Board of Directors were to issue additional shares of common stock for such purposes.
Effectiveness of the Preferred Stock Amendment
The Preferred Stock Amendment will become effective once it is approved at the Annual Meeting and filed with the Secretary of State of the State of Delaware.
Appraisal Rights
Under Delaware General Corporation Law, stockholders are not entitled to appraisal rights with respect to the proposed Preferred Stock Amendment.
Our Board of Directors recommends a vote “FOR” the approval of the amendment to our Amended and Restated Certificate of Incorporation to authorize 4,000,000 shares of preferred stock.
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF
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Except as otherwise indicated, we believe that the beneficial owners of our Class A Common Stock and the common units of Rose Rock Midstream, L.P. listed in the tables below, based on information furnished by such owners, have sole investment and voting power with respect to such shares, and units, as the case may be, subject to community property laws where applicable.
Principal Stockholders
The following table contains information regarding the only persons we know of that beneficially own more than 5% of our outstanding shares of Class A Common Stock as of March 23, 201510, 2017 (except as noted below). The percentages of the Class A Common Stock amounts are based on 43,899,42166,237,006 shares of our Class A Common Stock outstanding as of March 23, 2015.10, 2017.
Name and Address | Number of Stock | Percentage of Stock | ||||||
Iridian Asset Management LLC 276 Post Road West Westport, Connecticut 06880 | 3,580,403(1) | 8.16% | ||||||
Prudential Financial, Inc. 751 Broad Street Newark, NJ 07102 | 2,908,971(2) | 6.63% | ||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 2,711,613(3) | 6.18% | ||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10022 | 2,498,715(4) | 5.69% | ||||||
Goldman Sachs Asset Management 280 West Street New York, NY 10282 | 2,485,629(5) | 5.66% |
Name and Address | Number of Class A Stock | Percentage of Stock | ||||||
Iridian Asset Management LLC 276 Post Road West Westport, CT 06880 | 6,368,602(1) | 9.61 | % | |||||
Chickasaw Capital Management, LLC 6075 Poplar Ave. Suite 720 Memphis, TN 38119 | 5,969,323(2) | 9.01 | % | |||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 5,226,574(3) | 7.89 | % | |||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 4,076,161(4) | 6.15 | % | |||||
Goldman Sachs Asset Management 200 West Street New York, NY 10282 | 3,749,005(5) | 5.66 | % | |||||
Harvest Fund Advisors LLC 100 W. Lancaster Ave., Suite 200 Wayne, PA 19087 | 3,501,460(6) | 5.29 | % | |||||
Prudential Financial, Inc. 751 Broad St. Newark, New Jersey 07102 | 3,313,395(7) | 5.00 | % |
(1) | Information is as of December 31, |
(2) | Information is as of December 31, |
(3) | Information is as of December 31, 2016 and is based on Amendment No. 4 to Schedule 13G dated February 9, |
(4) | Information is as of December 31, |
(5) | Information is as of December 31, |
(6) | Information is based on Amendmet No. 1 to Schedule 13G dated February 10, 2017 which was filed by Harvest Fund Advisors LLC. |
(7) | Information is as of December 31, 2016 and is based on Amendment No. 2 to Schedule 13G dated January 30, 2017, which was filed by Prudential Financial, Inc. Prudential Financial, Inc. reported (i) sole voting power over 16,415 of such shares; (ii) shared voting power over 3,296,980 of such shares; (iii) sole dispositive power over 16,415 of such shares; and (iv) shared dispositive power over 3,296,980 of such shares. Prudential Financial, Inc. is a parent holding company and the indirect parent of the following subsidiaries: (a) The Prudential Insurance Company of America, which is the beneficial owner of 9,700 of such shares; (b) Jennison Associates LLC, which is the beneficial owner of 3,297,512 of such shares; and (c) Quantitative Management Associates LLC, which is the beneficial owner of 6,183 of such shares. |
Stock Ownership of Directors and Executive Officers
The following table sets forth, as of March 23, 2015,10, 2017, the beneficial ownership of our Class A Common Stock by:
each of our directors and nominees for director;
each of our executive officers named in the Summary Compensation Table under “Executive Compensation” below; and
all of our directors and executive officers as a group.
Name | Shares of Class A Common Stock Beneficially Owned(1) | Percentage of Class | ||||||
Ronald A. | * | |||||||
Sarah M. | ||||||||
* | ||||||||
Carlin G. Conner | * | |||||||
Karl F. Kurz | * | |||||||
James H. Lytal | * | |||||||
* | ||||||||
Robert N. Fitzgerald(5) | * | |||||||
Candice L. Cheeseman(6) | * | |||||||
Timothy R. O’Sullivan | * | |||||||
Peter L. | * | |||||||
All executive officers and directors as a group (11 people) | * |
* | Less than one percent. |
(1) | Shares beneficially owned include shares of restricted Class A Common Stock held by our directors and executive officers over which they have voting power but not investment power as follows: Mr. Ballschmiede – |
(2) | Includes |
(3) | Includes 12,903 shares of Class A Common Stock held of record by the Sarah M. Barpoulis Living Trust dated September 17, 2003, of which Ms. Barpoulis and her husband are co-trustees. Each trustee has independent voting power and dispositive power over the shares held in the trust. |
Includes |
(5) | Includes 10 shares of Class A Common Stock held by son. |
(6) | Includes |
The following table sets forth, as of March 23, 2015, the beneficial ownership of common units of Rose Rock Midstream, L.P. by:
each of our directors and nominees for director;
each of our executive officers named in the Summary Compensation Table under “Executive Compensation” below; and
all of our directors and executive officers as a group.
Name | Common Units Beneficially Owned(1) | Percentage of Class | ||||||
Ronald A. Ballschmiede | – | – | ||||||
Sarah M. Barpoulis | 5,000 | * | ||||||
John F. Chlebowski | 10,000 | * | ||||||
Carlin G. Conner | 22,168 | * | ||||||
Karl F. Kurz | 5,000 | * | ||||||
James H. Lytal | – | – | ||||||
Thomas R. McDaniel(2) | 7,184 | * | ||||||
Norman J. Szydlowski(3) | 15,000 | * | ||||||
Robert N. Fitzgerald | 12,671 | * | ||||||
Candice L. Cheeseman(4) | 11,063 | * | ||||||
Timothy R. O’Sullivan | 7,578 | * | ||||||
Peter L. Schwiering | 17,233 | * | ||||||
All executive officers and directors as a group (11 people) | 97,897 | * |
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Compensation Discussion and Analysis
Executive Summary. SemGroup is focused on delivering stockholder value through growth and financial discipline. We strive to generate consistent earnings and cash flows and capitalize on organic growth opportunities around our assets, and grow our business through strategic and accretive asset acquisitions.assets. We are committed to managing risk and promoting a company culture centered on safety and integrity.
This Compensation Discussion and Analysis (“CD&A”) describes SemGroup’s executive compensation program for 2014.2016. Our program is designed to protect our assets in the near-term and position the Company for future growth by attracting, motivating and retaining a senior management team capable of delivering stockholder value by ensuring each of our businesses meet or exceed financial and operational targets. In particular, this CD&A explains how the Compensation Committee of the Board (the “Committee”) made 20142016 compensation decisions for the following named executive officers (“NEOs”):
NEO | Title | |
Carlin G. Conner | President and Chief Executive Officer | |
Robert N. Fitzgerald | Senior Vice President and Chief Financial Officer | |
Candice L. Cheeseman | Vice President and General Counsel | |
Timothy R. O’Sullivan | Vice President, Corporate Planning and Strategic Initiatives | |
Peter L. Schwiering | Former Vice President of the Company and Chief Operating Officer of |
Mr. Szydlowski’s planned retirement was announced in August 2013, contingent upon the appointment of a successor. Mr. Szydlowski retired as CEO of the Company on April 1, 2014, when Mr. Conner was appointed as our CEO. In order to help ensure a smooth leadership transition, Mr. Szydlowski remained with the Company in an advisory capacity through the end of May 2014.
We believe ourOur executive compensation program promotes good governance and operates in the best interests of our stockholders. A summary of our compensation governance practices are listed below:
We Do: | We Do Not | |
× Offer tax-related gross ups outside of relocation benefits | ||
× Have any significant perquisites | ||
× Allow pledging or hedging of SemGroup securities | ||
× Have single trigger change-in-control severance agreements | ||
× Guarantee short-term incentive payouts |
20142016 Business Highlights. During 2014,2016, we successfully implemented several initiatives supporting our strategic plan to grow our presence in the midstream energy sector. We focused on our business objectives, positioned our Company for growth and achieved the following:
Successfully delivered strongDelivered stable financial results:
Achieved an adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA targetEBITDA”) of $287 million up approximately 50% from $189 million for the year ended December 31, 2013
Increased dividends declared by 40% over 2013
Increased RRMS unit holder distributions declared by 25% over 2013
Successfully executed our growth strategy:
Invested approximately $386$307 million in capital projects
Completed installation of the Rose Valley I gas processing plant in March 2014
Completed final drop down of White Cliffs Pipeline to RRMS in June 2014
Completed Chesapeake transportation assets acquisition in June 2014
Completed SemCAMS gathering pipeline providing a 10 mile, 10-inch pipeline terminating at SemCAMS’ KA plant backed by long-term agreement with Shell completed in June 2014
Completed Tampa Pipeline lateral in July 2014
Completed 80,000 bpd White CliffsWapati Pipeline expansion in August 2014
Successfully implemented
DRIVE Values: Who We Are and What We Believe | SUCCESS Purpose: Our Goals and Corresponding Actions | |
Dedicated to Excellence | Safety | |
Respect Everyone | Unmatched Excellence | |
Integrity In All We Do | Committed to Growth | |
Value Teamwork | Community Involvement | |
Entrepreneurial Spirit | Employee Well-Being | |
Social Responsibility | ||
Shareholder Value |
20142016 Compensation Decisions & Actions.
NEO base salaries:NEO salaries withremained flat as the exception ofCommittee believed the CEO, increasedrecent downturn in the oil and gas market would continue to provide a challenging year in 2016 and an average of 3.8% during 2014 to maintain alignment with the competitive market.
Short-term incentive awards:In February 2016, the Committee adjusted the weighting of the performance metrics to include both Consolidated EBITDA and Crude Adjusted EBITDA. Annual bonuses for 20142016 performance paid out on average at 186% ofslightly above target reflecting our actual performance in relation to targeted performance, as well as key strategic accomplishments completed during the year.
• |
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CEO new-hire compensation and awards:In March 2014, the Board of Directors approved the CEO’s employment agreement which included a sign-on bonus of $600,000 and a one-time equity grant of $5 million.
20142016 CEO Pay At-A-Glance
The majority of our CEO’s pay is variable and linked to drivers of financial performance or growth in stockholder value. The chart below shows the elements of our CEO’s total direct compensation (base salary, annual bonus, and grant date or target value of annual equity grants) for the past three years, as well as target CEO total compensation for 2015.years. In 2014, Mr. Conner received a one-time equity award of $5 million in shares of restricted stock and RRMS restricted common units intended in part to make Mr. Conner whole for equity value that he forfeited at his previous employer when he agreed to join SemGroup. This one-time award was also intended to provide immediate and significant direct alignment between Mr. Conner’s compensation and stockholder interests.
Effect of Stockholder Say-on-Pay Vote on Executive Compensation Decisions. The Committee has reviewed the voting results from the annual advisory vote on executive compensation (commonly known as a say-on-pay proposal) conducted at our 20142016 annual meeting of stockholders. At this meeting, approximately 99%98.6% of the votes cast on the say-on-pay proposal were in favor of our NEOs’ compensation as disclosed in the proxy statement for that meeting and, as a result, our NEOs’ compensation was approved.
In addition, over the past year we have engaged in a dialogue with many of our stockholders to solicit their input on a range of topics, including executive compensation and governance matters. The Committee determined that, based on such discussions and given the very high level of support, no substantive changes to our executive compensation policies and decisions were necessary. We intend to continue such dialogue with our stockholders, and the Committee intends to continue to make its executive compensation decisions as it has in the past year by focusing on performance-based compensation, gauging competitive practices and authorizing compensation that is within the range of what is deemed to be competitive and appropriate in our industry.
The Committee continues to value the opinions of our stockholders. In the event there is any significant vote against the compensation of our NEOs as disclosed in the proxy statement, the Committee will consider the concerns of the stockholders and evaluate any actions necessary to address such concerns.
The Committee continues to believe that a substantial majority of NEO compensation should be variable, at risk and subject to performance conditions. Given that 80% of CEO compensation and over 65% of compensation for our other NEOs is variable/at risk, we believe our compensation program is designed to drive and reward outstanding performance in the face of these challenging market conditions.
Compensation Philosophy. Our Committee oversees an executive compensation program designed to motivate high performance, ethics and alignment with the interests of our stockholders. Our compensation program rewards our executive officers for achieving performance objectives and fostering a culture of collaboration and teamwork. This forms the basis of our pay-for-performance philosophy.
To support our compensation philosophy, we established the following objectives:
attract, motivate and retain exceptional talent with market competitive compensation;
link pay to performance;
drive achievement of both long-term and annual business objectives;
reinforce corporate values and commitments; and
align executive compensation with stockholder interests.interests; and
We design, implement and administer our compensation program to support our philosophy and collectively achieve these objectivesphilosophy.
Compensation Overview. Consistent with our philosophy, our compensation program consists of a market-competitive pay mix designed to motivate and reward our NEOs and employees for successfully implementing our strategy to grow our business and create long-term stockholder value. We believe dividing the total compensation awarded to executive officers among the following four direct components helps us achieve a balanced set of incentives to accomplish our goals:
base salary;
short-term incentive program;
long-term incentive program; and
benefits.
Elements of Compensation. Our mix of compensation includes: base pay, short-term cash incentives, long-term equity incentives and benefits. The chart below illustratessummarizes how our compensation design supports our compensation objectives:
Compensation Element | Compensation Objective | Key Features | ||
Base Salary | • Attract and retain executives by providing a stable income at a level that appropriately compensates NEOs for the day to day execution of their primary duties and is consistent with the market.
• Link pay to performance and reinforce corporate values by basing annual merit increases on an executive’s direct contributions. | • Annual review to ensure our compensation is in line with the market.
• Annual adjustments based on performance rating and the market.
• During the first quarter of each year, the Board of Directors approves base pay of CEO and the Committee approves other NEOs. | ||
Short-term incentives |
• Link pay to performance by directly tying goals to the Company’s business
•
• Reinforce corporate values through shared performance objectives with an emphasis on our defined employee and leadership competencies.
| • Discretionary program.
• Target performance measure levels set to achieve annual objectives.
• Reviewed annually in relation to current market data and approved by the Committee.
• Funding approved by the Committee. • CEO award approved by the Board of Directors and other NEO awards approved by the Committee. | ||
Long-term incentives | •
• Link pay to performance by
• Align with best interests of stockholders by reinforcing the critical objective of building stockholder value over the long-term. | •
•
• Individual targets set in relation to current market data and executive’s role at the Company.
• CEO award approved by the Board of Directors and other | ||
Benefits | • Attract and retain individuals by offering market competitive benefits. | • Reviewed annually to ensure competitive with the market. |
The Committee believes that the majority of an executive’s compensation should be based on his or her contribution to the success of the Company and the creation of value for our stockholders. Our executive compensation is heavily weighted toward variable, “atat risk,” pay elements based on performance. To further strengthen our alignment with stockholders, the majority of our executives’ “at risk”variable, at risk compensation is based on our long-term success.
Compensation Methodology. Setting executive pay is an annual process that involves our management, the Committee, our Audit Committee, our Board of Directors and an independent compensation consultant. We review our pay programs to ensure consistency with our compensation philosophy and business objectives. The Committee strives to target total direct compensation levels to be competitive with the market in which we compete for executive talent.
We review each NEO’s total compensation in light of our Company’s strategic objectives, market conditions and individual responsibilities and accomplishments. Part of this review includes considering the appropriate compensation level and mix. Although we focus on total direct compensation, each individual element of compensation is reviewed against the market, which includes the 25th, 50th25th, 50th and 75th75th percentile of compensation paid to similarly situated executives represented in the market data, to ensure our compensation is in line with the market. Variations from the median may occur due to experience, skills, criticality of function to the Company and the sustained performance of the executive.
Role of the Board of Directors. The Board of Directors acts on any recommendations regarding executive compensation matters made by the Committee and approvesits independent directors approve CEO compensation.
Role of the Compensation Committee. The Committee operates pursuant toUnder its formal charter. Under the charter, the Committee is charged with establishing our compensation program and compensation policies, approving and recommending compensation program designs to the full Board for approval. Also, the Committee has the responsibility for recommending the compensation of our CEO to the Board of Directors for approval. For all other NEOs, the Committee reviews the CEO’s recommendations, supporting market data and individual performance assessments in establishing targets under the compensation program, and administering and approving payouts pursuant to such program. The charter authorizes the Committee to engage consultants and other professionals without management approval to the extent necessary. Details of the Committee’s authority and responsibilities are specified in the Committee’s charter, which is available on our website at http://www.semgroupcorp.com.
Role of Management. Our CEO and other executive officers develop recommendations regarding the appropriate level and mix of compensation for their direct reports. Recommendations are based on our compensation philosophy, the range of compensation programs authorized by the Committee, market data from nationally recognized executive and industry related salary surveys, and the individual responsibilities and performance of each direct report.
Our CEO and Senior DirectorVice President of Human Resources provide support to the Committee and attend all Committee meetings, but are not present for discussion of their individual compensation.
Role of Audit Committee. With respect to our CFO,Chief Financial Officer (“CFO”), the Audit Committee of the Board of Directors consults with management and the Committee about his performance evaluation and compensation.
Additionally, the Audit Committee validates the calculation of our achievement percentage for each performance measure prior to the determination of our incentive pool. Our Internal Auditinternal audit function confirms the short-term incentive pool before payments are processed. Also, the Internal Auditinternal audit function validates the calculation of our achievement percentage for our performance metrics related to our performance-based equity awards. Internal AuditOur internal audit function confirms the calculation prior to the Committee certifying the achievement of our performance-based equity awards and distribution of equity awards.
Role of the Independent Compensation Consultant. The Committee retained Mercer (US) Inc. until October 2014engaged Pearl Meyer & Partners (“Pearl Meyer”) to serve as the Committee’sits independent compensation consultant on matters related to executive compensation during 2016, including the review of executive compensation recommendations provided by management. MercerPearl Meyer also provided guidance on director compensation. MercerPearl Meyer reported directly to the Committee and performed no other services for the Company. The Committee has assessed the independence of MercerPearl Meyer pursuant to Securities and Exchange CommissionSEC rules and concluded that Mercer’sPearl Meyer’s work for the Committee did not raise any conflict of interest. In October 2014, the Committee conducted a Request for Proposal process and selected Pearl Meyer and Partners (“PM&P”) to serve as its independent compensation consultant for the matters noted above. The Committee has also assessed the independence of PM&P pursuant to Securities and Exchange Commission rules and concluded that PM&P’s work for the Committee did not raise any conflict of interest.
The Committee regularly reviews consultant independence and the services provided by its outside consultant. In making its determination regarding the independence of outside advisors during 2014,for 2016, the Committee noted that:
Neither Mercer nor PM&P providedPearl Meyer did not provide any services to the Company or our management other than services requested by or with the approval of the Committee, which were limited to executive and director compensation consulting;
Fees we paid to Mercer and PM&PPearl Meyer in 20142016 were less than 1% of each organization’s total revenues;
None of the Mercer or PM&PPearl Meyer consultants working on our matters had any business or personal relationship with any of the Committee members;
None of the Mercer or PM&PPearl Meyer consultants working on our matters had any business or personal relationship with any of our executive officers;
None of the Mercer or PM&PPearl Meyer consultants working on our matters owns our stock; and
PM&PPearl Meyer maintains a conflicts policy, which was provided to the Committee, with specific policies and procedures designed to ensure independence.
The Committee will monitormonitors the independence of its compensation consultant on an annual basis.
Role of the Peer Group. The Committee compares our executive compensation program to a group of companies that are comparable in terms of size and industry (“the peer group”). The peer group serves two purposes.purposes:
First, it provides
• | Market Reference:Provides a market frame of reference for evaluating our compensation arrangements (current or proposed), understanding compensation trends among comparable companies and reviewing other compensation and governance-related topics that may arise during the course of the year. To this end, we regularly evaluate industry-specific and general market compensation practices and trends to ensure that our program features and NEO pay opportunities remain appropriately competitive. When determining salaries, target bonus opportunities and annual long-term incentive grants for NEOs, the Committee considers the performance of the Company and the individual, the nature of an individual’s role within the Company, experience in the officer’s current role, as well as input from its independent compensation consultant, among other variables. |
Second, we use the peer group to measure our relative TSR performance for purposes of determining a portion of the value of the performance-based awards under our long-term incentive plan. We must achieve an attractive TSR relative to our peer group to deliver a target-level award. Please see “Long-Term Incentives” for more information about performance-based awards.
• | TSR Performance: Measures our relative TSR performance for purposes of determining a portion of the value of the performance- based awards under our long-term incentive plan. We must achieve an attractive TSR relative to our peer group to deliver a target-level award. Please see “Long-Term Incentives” for more information about performance-based awards. |
MercerPearl Meyer provided the market data used when designing our NEOs’ compensation program for 2014. Mercer’s2016. Pearl Meyer’s market compensation analysis used compensation information from SemGroup’s current peer group as the primary data source. Where there was insufficient data from the peers (e.g., small sample sizes, etc.), the market data was supplemented with data from other similarly-sizedsimilarly- sized companies that operate in the Oil and Gas Storage & Transportation industry and/or Energy sector.
For 2014,2016, the peer group includes the following 1519 companies, which comprise a mix of both direct competitors and companies whose primary business matched at least one of our business groups:
Access Midstream Partners LP
Atlas Pipeline Partners LP
Boardwalk Pipeline Partners, LP
Buckeye Partners, LP
Eagle Rock Energy Partners LP
Enbridge Energy Partners, LP
Genesis EnergyEnLink Midstream Partners, LP
MarkWest Energy Partners, LP
NuStar Energy LP
ONEOK, Inc.
Plains All American Pipeline, LP
Targa ResourcesSpectra Energy Corp
While some of the companies in our peer group have revenues, assets and market capitalization larger than SemGroup, we believe the peer group continues to be aligned with our current organization as well as the strategic vision of our company. The Committee reviews our peer group annually and makes adjustments as necessary. TheIn its review for 2016, the Committee revised ourapproved several changes to the peer group to account for 2014 from our 2013 peer group.acquisitions, changes in size, and the availability of public compensation data.
20142016 Total Direct Compensation.
The chart below illustrates the pay-mix and actual total target direct compensation for our NEOs for 2014.2016. Each individual component is discussed below.
Base Salary. During the first quarter of athe year, recommendations for NEOs, excluding the CEO, are made by the CEO to the Committee on base pay for that year. Merit increases for base salary take into account the individual executive’s performance and achievement of goals, as well as the executive’s current salary level relative to the market. The Committee considers the recommendations and approves the base pay of our NEOs, excluding the CEO. The Committee recommends base pay for the CEO and other NEOs.to the independent directors serving on the Board of Directors for approval. Base pay affects other elements of our total compensation, including our short-term and long-term incentives. In reviewing and approving base salaries for the NEOs, the Committee considers the impact on the NEOs’ total compensation. Base salaries become effective as of the first payroll in March of each year.
NEO | 2013 Salary | 2014 Salary | 2014 Percent Change | Comments | 2015 Salary | 2016 Salary | 2016 Percent Change | |||||||||||||||||||||
Carlin G. Conner | — | $ | 550,000 | — | 2014 salary annualized | $ | 575,000 | $ | 575,000 | 0 | % | |||||||||||||||||
Norman J. Szydlowski | $ | 790,000 | $ | 790,000 | 0 | % | 2014 salary annualized | |||||||||||||||||||||
Robert N. Fitzgerald | $ | 372,466 | $ | 383,640 | 3 | % | $ | 402,100 | $ | 402,100 | 0 | % | ||||||||||||||||
Candice L. Cheeseman | $ | 318,470 | $ | 328,024 | 3 | % | $ | 342,000 | $ | 342,000 | 0 | % | ||||||||||||||||
Timothy R. O’Sullivan | $ | 299,317 | $ | 308,297 | 3 | % | $ | 320,000 | $ | 320,000 | 0 | % | ||||||||||||||||
Peter L. Schwiering | $ | 295,058 | $ | 324,564 | 10 | % | $ | 340,000 | $ | 340,000 | 0 | % |
After considering the experience and skills of the NEOs and their total compensation levels and mix relative to market,NEO salaries remained flat as the Committee believesbelieved the percent increases given are appropriate.recent downturn in the oil and gas market would continue to provide a challenging year in 2016 and an environment where cash management, capital efficiency, and cost control remain important.
Short-Term Incentives. Our NEOs participate in our short-term incentive program, which rewards employees for making decisions that improve our performance in accordance with our annual objectives. Similar to base pay, competitive market information is used to determine short-term incentive targets (expressed as a percentage of base pay) for each executive officer.NEO. Our short-term incentives are based on achievement of certain performance measures established prior to the beginning of the performance period. Attainment of these performance measures can result in payments of short-term incentives along a continuum between threshold and maximum levels, which correspondaward payouts ranging from 0% to 0% through 200% of the NEO’s short-term incentive target.
The annual short-term incentive targets as a percentage of eligible earnings (base salary for a performance year) for our NEOs in 20142015 and 20132016 were as follows:
NEO | 2013 Target | 2014 Target | 2015 Target | 2016 Target | ||||||||||||
Carlin G. Conner | N/A | 100 | % | 100 | % | 100 | % | |||||||||
Robert N. Fitzgerald | 60 | % | 70 | % | 70 | % | 70 | % | ||||||||
Candice L. Cheeseman | 60 | % | 70 | % | 70 | % | 70 | % | ||||||||
Timothy R. O’Sullivan | 50 | % | 50 | % | 60 | % | 60 | % | ||||||||
Peter L. Schwiering | 50 | % | 60 | % | 60 | % | 60 | % |
During 2014,
For 2016, we completed an analysis of the design and compensation levels utilized in our short-term incentive program. The review consisted of:
a market update on annual incentive plans;
an overview of performance metrics commonly used in annual incentive plans;
a review of proxy data for peer companies; and
the Committee’s and CEO’s assessment of the annual incentive plan’s alignment with the Company’s strategic objectives.
As a result of this review, we concluded that our overall short-term incentive program design was consistent with our objectives and that we would maintain current short-term target bonus opportunities foraligned with market practice. Consistent with previous years, the NEOs.program’s metrics are designed to promote consolidated, business unit and individual performance. The 2016 program included additional emphasis on financial metrics and corporate strategic initiatives to drive both behavior and results necessary to achieve our 2016 operating budget and long-term strategic plan.
Financial Performance. We continued to use consolidated Adjusted EBITDA for 2014 to provide alignment with financial metrics reported externally by the Companyconsolidated and to create transparency with our executives. We believebusiness unit performance. Adjusted EBITDA is a good measure of our financial performance and provides information regarding our ability to meet future debt service, capital expenditures and working capital requirements. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, adjusted for select items that we believe impact the comparability of financial results between reporting periods.
In 2014, our short-term incentive plan for all of the NEOs contained performance measures tied to consolidated Adjusted EBITDA and individual performance.Individual Performance. Our NEOs’ individual performance measure is evaluated by the CEO and his assessment of their contributions and achievement of individual performance goals. In addition to thesegoals, as well as our corporate strategic objectives, which are customized and defined in each NEO’s 2016 performance measures,goals and are aligned with “DRIVE SUCCESS” initiatives as follows:
Individual Performance Measures | ||
Values | Definition | |
Dedicated to Excellence | Trust, accountability, and empowerment frees us to execute our business. We strive to do our work right the first time with the right people in the right role. We act with a sense of urgency and we expect every employee to continuously improve their processes and work environment. | |
Respect Everyone | We have a humility that serves all of our stakeholders. We earn trust, communicate and behave in a truthful, respectful, consistent manner with each other, customers, vendors, and communities. We commit to the protection of the environment and the safety of all. | |
Integrity in All We Do | Deep integrity permeates all we do. We act ethically, we are intellectually honest and absolutely compliant with all legal and regulatory requirements. We take responsibility for what we do and we deliver on our promises and commitments. | |
Value Teamwork | We foster an environment of open communication and approachability to identify opportunities and solve problems. We seek differing perspectives in our decision making process. We value diverse opinions, experiences, and cultures of our team members in support of our business goals. We recognize and celebrate success. | |
Entrepreneurial Spirit | Entrepreneurship energizes us and we encourage innovation and adaptability. Sustainability is a core mission and requires thoughtful, long-term decisions. We foster an environment that embraces change, an appetite for calculated risk and a reasonable acceptance of failure. |
Corporate Strategic Initiatives. Our corporate strategic initiatives are customized and were defined in each NEO’s 2016 performance measure for the creationgoals and are aligned with SemGroup’s “DRIVE SUCCESS” initiatives, which include:
Commitments | Definition | |
Safety | Overall improvement of safety performance including process and communication. | |
Unmatched Excellence | Focus on opportunities to create efficiencies in current processes and procedures. | |
Committed to Growth | Continue to review and evaluate all growth opportunities, utilize our commercial resources to leverage commercial opportunities and execute on all sensible opportunities. | |
Community Involvement | Continue to support host communities, through sponsorship and employee participation of various charities. | |
Employee Well Being | Build and enhance employee programs for the betterment of the organization. | |
Social Responsibility | Continue to evaluate industry regulations, current and potential, that affect SemGroup’s compliance both internal and external. | |
Shareholder Value | Deliver on Adjusted EBITDA, SemGroup dividends, and debt/EBITDA ratio set forth in 2016 operating budget. |
2016 Weighting of additional Adjusted EBITDA through acquisitions and other business opportunities (“Incremental Adjusted EBITDA”) is included for Mr. O’Sullivan. Consistent with the prior year, Mr. Schwiering has an additional performance measure directly tied to the Adjusted EBITDA of the business unit for which he was responsible (i.e., Crude’s Adjusted EBITDA). These performance measures directly reflect our efforts to support our growth strategy and enhance the Company’s value for our stockholders. Performance Measures.The weighting of these metricsmeasures for the NEOs are as follows:
Weighting of Performance Metrics for NEO’s other than Messrs. O’Sullivan and Schwiering | ||||
Consolidated Adjusted EBITDA | Individual Performance | Total | ||
70% | 30% | 100% |
Financial Performance Measures | Strategic and Individual Performance Measures | |||||||||||||||||||||||
NEO | Group | Consolidated Adjusted EBITDA | Crude Adjusted EBITDA | Corporate Strategic Initiatives | Individual Performance | Total | ||||||||||||||||||
Carlin G. Conner | Corporate | 30% | 30% | 25% | 15% | 100 | % | |||||||||||||||||
Robert N. Fitzgerald | Corporate | 30% | 30% | 25% | 15% | 100 | % | |||||||||||||||||
Candice L. Cheeseman | Corporate | 30% | 30% | 25% | 15% | 100 | % | |||||||||||||||||
Timothy R. O’Sullivan | Corporate | 30% | 30% | 25% | 15% | 100 | % | |||||||||||||||||
Peter L. Schwiering(1) | Crude | 30% | 30% | 25% | 15% | 100 | % |
Weighting of Performance Metrics for Mr. O’Sullivan | ||||||
Consolidated Adjusted EBITDA | Incremental Adjusted EBITDA | Individual Performance | Total | |||
35% | 35% | 30% | 100% |
Weighting of Performance Metrics for Mr. Schwiering | ||||||
Consolidated Adjusted EBITDA | Crude Adjusted EBITDA | Individual Performance | Total | |||
25% | 45% | 30% | 100% |
(1) | Mr. Schwiering retired August 5, 2016 and a pro-rata short-term incentive award was paid. See “Compensation of Former Named Executive” for further discussion regarding Mr. Schwiering’s retirement. |
Actual payouts for the short-term incentive program are discretionary and are disbursed from a company-wideCompany-wide pool approved by the Committee. In approving the incentive pool, the Committee considers our actual performance in relation to the targeted performance for each performance measure, as well as key strategic accomplishments completed during the year. Recommendations for each NEO were based on the NEO’s short-term incentive target adjusted for the achievement of the pre-established performance measures and for personal contributions. We used the following as a guide in calculating each NEO’s recommended short-term incentive payout prior to discretionary adjustments:
Eligible Earnings for 20142016 × Short-term Incentive Target % × (sum of the (Weighting of Performance Measure × Achievement Factor for the Performance Measure) for each Performance Measure)
Our incentive program allows the Committee to make adjustments in the calculation of our performance relative to the performance measures to reflect certain business events. The use of Adjusted EBITDA for our performance metric aligns with our non-GAAP financial measures reported publicly and helps ensure that incentive programs do not result in unearned windfalls or
impose undue penalties. We believe the use of Adjusted EBITDA improves the alignment of incentives with stockholder value creation and effectively encourages our NEOs to take actions to create value for stockholders.
The Audit Committee validates our calculation of the achievement of each performance measure to support the determination of the company-wide pool, as adjusted for these items, and ensure consistency with our financial statements.
The chart below shows the achievement of our 2014 short-term incentive2016 performance measures and the resulting recommended funding level.
Performance Metric (millions) | Threshold | Target | Maximum | Actual Performance | Achievement Factor (% of Target to be Paid) | |||||||||||||||||||||||||||||||||||
Financial Performance Metrics (millions) | Threshold | Target | Maximum | Actual Performance | Achievement Factor (% of Target to be Paid)(1) | |||||||||||||||||||||||||||||||||||
Consolidated Adjusted EBITDA | $ | 198.8 | $ | 248.5 | $ | 285.8 | $ | 287.5 | 200.0% | $ | 278.8 | $ | 309.8 | $ | 372.8 | $ | 282.8 | 88.0% | ||||||||||||||||||||||
Crude Adjusted EBITDA | $ | 106.7 | $ | 133.4 | $ | 153.4 | $ | 156.8 | 200.0% | $ | 149.7 | $ | 166.3 | $ | 199.6 | $ | 172.3 | 117.5% | ||||||||||||||||||||||
Incremental Adjusted EBITDA (1) | $ | 80.0 | $ | 100.0 | $ | 115.0 | $ | 0.0 | 0.0% |
(1) |
Individual Performance Values | ||
D | Dedicated to Excellence | |
R | Respect Everyone | |
I | Integrity In All We Do | |
V | Value Teamwork | |
E | Entrepreneurial Spirit | |
NEO individual performance was slightly above target: 110% |
Corporate Strategic Initiatives Commitments | Achievement | |||
S | Safety | Above Target | ||
U | Unmatched Excellence | Above Target | ||
C | Committed to Growth | Below Target | ||
C | Community Involvement | Target | ||
E | Employee Well-Being | Target | ||
S | Social Responsibility | Target | ||
S | Shareholder Value | Target | ||
Overall: | Exceeds Expectations: 120% | Above Target |
The Committee reviewed and confirmed these results and approved the short-term incentive pool. The Committee exercised its discretion to reduce payouts to reflectevaluated Adjusted EBITDA performance, as well as multiple operational, safety, strategic, and individual performance during 2014 and early 2015. Safety and integrity are pillars of our company culture, and safety performance will remain a key consideration in determining payments under our short-term incentive program.factors before approving the final payout factor. Our NEOs received, excluding Mr. Schwiering’s pro rata award, on average 186%113% of their short-term incentive target payout based on consolidated resultsactual performance in relation to targeted performance for each performance measure, key strategic accomplishments and individual performance.
Long-Term Incentives. We provide long-term incentives in the form of equity awards under our Equity Incentive Plan and historically under the RRMS Equity Incentive Plan. The Committee oversees the administration of the equity awards granted under both of these plans. Awards issued under the RRMS Equity Incentive Plan arewere also approved by the Board of Directors of the general partner of RRMS. To determine the value of equity awards to be granted to NEOs, we consider the following factors:
the proportion of long-term incentives relative to base pay;
our long-term business objectives;
awards made to executives in similar positions with other comparably sized energy companies;
the NEO’s impact on our performance and ability to create value; and
the NEO’s performance.
OurThe Committee has allocated long-term incentive plan includes time-basedequity awards as follows:
(weighted 50%):Time-vested awards include awards under both our Equity Incentive Plan and historically under the RRMS Equity Incentive Plan and are allocated based on time dedicated by the NEOs to each of the Company and RRMS.
The performance-based Time-based awards are measured based on two metrics: one internal performance metric designed to drive achievement of long-term business objectives and an external performance metric designed to reinforcevest three-years after the critical objective of building stockholder value over the long-term. For the external performance metric we used relative TSR as it mirrors the market return of our stockholders and compares our performance to that of our peer group. For our internal performance metric we used ROCE for the three-year performance-based RSUs for 2011 and 2012. In an effort to provide transparency and align with the market, we changed our internal metric beginning in 2013 to Adjusted EBITDA Growth for the three-year performance-based RSUs. NEOs will earn their targeted performance-based RSUs if we deliver a target level performance. For those awards based on relative TSR we must achieve an attractive TSR relative to our peer group to deliver a target level award. A partial award can be earned on achievement of either metric. See “The Role of the Peer Group” under “Compensation Overview” above for more information concerning our peer group.
The Committee supports this design as it is equity-based and delivers a significant portion of the equity in performance-based awards to our participants including our NEOs, and further strengthensstrengthening alignment with stockholders.
In general, we plan to make our annual equity grants around the same time each year. It is possible that newly hired or promoted executives may receive equity grants on the date on which they are hired or promoted or on the date of a Committee meeting on or around the hire or promotion date. The Committee approves all equity grants to the NEOs and the grant date for such awards is on or after the date of such approval.
The Committee does not intend to make equity grants in anticipation of the release of material non-public information and does not intend to time the release of such information based on equity award grant dates.
20142016 Long-Term Incentive Awards. We made modest increases in certain of our long-term incentive target awards to better align with market data and support our objectives to keep compensation opportunities tied to stockholder interests. Additionally, we awarded incremental shares to certain of our NEOs to recognize individual and professional achievements and further strengthen alignment with stockholders. The long-term incentive targets as a percentage of eligible earnings (base salary for a performance year) for our NEOs in 2014 and 2013 were as follows:2016 are listed in the table below. In 2016, the Committee awarded NEOs, with the exception of the CEO, long-term incentive grants 10% below target in recognition of the increased pressure on available share balances in our equity incentive plans. The CEO was awarded a long-term incentive grant of 115% of target.
NEO | 2013 Target Annual (% of salary) | 2014 Target Annual (% of salary) | ||||||
Robert N. Fitzgerald | 130% | 185% | ||||||
Candice L. Cheeseman | 115% | 130% | ||||||
Timothy R. O’Sullivan | 100% | 100% | ||||||
Peter L. Schwiering | 120% | 130% |
NEO | 2016 Target Annual (% of salary) | |||
Carlin G. Conner | 260% | |||
Robert N. Fitzgerald | 200% | |||
Candice L. Cheeseman | 130% | |||
Timothy R. O’Sullivan | 130% | |||
Peter L. Schwiering | (1) |
Our
(1) | Mr. Schwiering announced his retirement in February 2016 and no long-term incentive award was issued for 2016. See “Compensation of Former Named Executive” for further discussion regarding Mr. Schwiering’s retirement. |
2014 long-term incentive awards were split between 50 percent restricted stock/RRMS common units time-vested awards with a three-year cliff vesting period and 50 percent performance-based restricted stock unit awards with a three-year performance period.
Consistent with 2013, our performance metrics were Adjusted EBITDA Growth and relative TSR. We believe both measures are appropriate and link our NEOs’ potential increase in equity compensation to that realized by our stockholders.
2012 Performance-Based RSUs Vesting.Performance Share Unit Awards Vesting. Consistent with our design, the 20122014 performance-based awards were weighted 50% tied to the ROCEAdjusted EBITDA Growth performance metric and 50% tied to relative TSR and had a three-year performance period ended December 31, 2014.2016. The following ROCEAdjusted EBITDA Growth and relative TSR performance calculations were verified by our internal audit department. The achievement of these metrics was reviewed and certified by the Committee on February 25, 2015.22, 2017.
Metric | Threshold | Target | Stretch | Actual Performance | Calculated Percentage (% of | |||||||||||||||
ROCE | 6% | 11% | 17% | 8% | 73% | |||||||||||||||
Relative TSR | 25th%ile | 50th%ile | 75th%ile | 92%ile | 150% |
Metric | Threshold | Target | Stretch | Actual Performance | Calculated Percentage (% of | |||||||||||||||
Adjusted EBITDA Growth | 60% growth | 100% growth | 120% growth | 60% growth | 50% | |||||||||||||||
Relative TSR | 25th%ile | 50th%ile | 75th%ile | 0 percentile | 0% |
Benefits. Our NEOs currently receive the same level of health and welfare benefits provided to all employees. In addition, our NEOs participateemployees including participating in our 401(k) Plan which provides for a matching contribution of a portion of an employee’s annual tax-deferred contribution. Our NEOs currently receive no perquisites (perks) or supplemental benefits, except for the following:
• | Tax and Financial Planning Allowance: We provide up to $15,000 annually to our CEO for annual income tax return preparation and financial planning to provide expertise on current tax laws, to assist with personal financial planning and to prepare for contingencies such as death and disability. We provide this benefit in order to help our CEO keep his focus on his responsibilities at SemGroup. |
OtherCompensation of Former Named Executive Compensation Matters.
Executive Severance AgreementsPeter L. Schwiering. We entered into severance agreementsPeter L. Schwiering, age 72, retired from the Company effective August 5, 2016. In connection with each of our NEOs, other than our CEO, to encouragehis retirement, the Company and motivate such executive officers to devote their full attention to their duties without the distraction of concerns regarding their involuntary or constructive termination of employment under certain circumstances and for reasons described below. Each severance agreement expires on May 31, 2016 unless extended.
Employment Agreements.Carlin G. Conner. We entered into an employment agreement with our current President and CEO, Carlin G. Conner, on March 6, 2014. Mr. Conner’s employment agreement provides for certain basic compensation provisions, including a starting salary, signing bonus and one-time equity award, and eligibility to participate in incentive compensation programs and benefit programs available to our other executives. Mr. Conner’s one-time equity award consisted of time-based equity awards allocated 85% in restricted stock and 15% in RRMS restricted common units and vest in five annual installments. Mr. Conner will have a target annual grant value beginning in 2015. Mr. Conner’s agreement also includes certain termination-related benefits which are described in greater detail under “Potential Payments Upon Termination or Change in Control” below.
Norman J. Szydlowski. We entered into an employment agreement with our former President and CEO, Norman J. Szydlowski, on November 30, 2009, which employment agreement was terminated effective April 1, 2014 upon Mr. Conner’s appointment as CEO. The Company thenSchwiering entered into a Terminationconsulting agreement (the “Consulting Agreement”). Pursuant to the Consulting Agreement, with Mr. Szydlowski, under which Mr. Szydlowski continued inSchwiering will provide consulting services to the Company through July 31, 2017 to ensure an advisory role on an at-will basis through the end of May 2014 in order to help smooth theorderly transition of the CEO role.his responsibilities and be paid $22,000 per month. Pursuant to
the Terminationterms of the Consulting Agreement, following Mr. Szydlowski’s resignationSchwiering participated on a pro-rata basis in the Company’s short-term incentive plan with respect to the year ended December 31, 2016. Upon his retirement, Mr. Schwiering’s (i) 3,375 shares of Company restricted stock, together with associated unvested dividends, fully vested and (ii) 5,718 RRMS unit awards, together with associated distribution rights, fully vested. Mr. Schwiering’s 6,749 outstanding performance-based equity awards granted by the Company will vest on a pro rata basis if performance criteria associated with such awards are achieved at the end of May certain termination provisions and restrictive covenants of his original employment agreement survived, including payment of any accrued but unpaid salary and vacation through the date of termination.applicable performance periods.
Other Executive Compensation Matters
Stock Ownership Policy. We have a Stock Ownership Policy for our executive officers, including NEOs, which we believe further strengthens our NEOs’ alignment with stockholders. All NEOs must maintain an equity interest in the Company and its affiliates equal to a specified multiple of their base pay. Executives are required to retain 100% of annual equity awards, including RRMS common units, net of taxes, until ownership requirements are met. Fifty percent of the unvested time-based equity awards will count towards the ownership requirements. Unvested performance-based awards do not count toward the ownership requirements. We intend to periodically review the policy and adjust it as internal objectives or market conditions warrant. The chart below shows the NEO stock ownership guidelines currently in effect.
Position | Holding Requirement as a Percent of Base Pay | |||
CEO | 3x | |||
NEO | 2x | |||
Other Executive Officers | 1x |
Clawback Policy. We have a Clawback Policy that if an accounting restatement occurs due to material noncompliance with the financial reporting requirements under U.S. federal securities laws, the Committee has the right to use reasonable efforts to recover from any of our current or former executive officers who received incentive-based compensation during the three-year period preceding the date on which the Company is required to prepare an accounting restatement any excess incentive-based compensation awarded as a result of the misstatement. This policy is intended to be interpreted in a manner consistent with any rules or regulations adopted by the Securities and Exchange CommissionSEC or listing guidelines adopted by the New York Stock ExchangeNYSE as contemplated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Our short-term incentive program and form of award agreements for long-term incentives require participants and grantees to return any incentive-based compensation which we determine we are required to recover from the participants and grantees under this policy. Our executive severance agreements discussed abovebelow also contain certain forfeiture and clawback provisions in the event that the executive breaches any non-competition, non-solicitation, non-disparagement, confidential information or intellectual property covenants in the agreements.
2015 Compensation Program Changes. The Committee regularly reviews our existing pay programs to ensure we are able to attract and retain the talent needed to deliver the financial and operating performance necessary to create stockholder value. In 2015, we intend to further refine our annual short-term incentive performance measures to more closely align with our corporate strategic initiatives
Policy on Hedging and Pledging Our Securities. Our Insider Trading Policy specifically prohibits our directors, named executive officers and other employees from (a) engaging in any hedging activities with respect to our securities or (b) holding our securities in a margin account or otherwise pledging our securities.
Compensation Program as it Relates to Risk. We have reviewed our compensation policies and practices for both executives and non-executives as they relate to risk and have determined that at this time they are not reasonably likely to have a material adverse effect on the Company.
In reaching this conclusion, we considered the various elements of our compensation program that are designed to help mitigate excessive risk taking, including:
Components of Compensation: We use a mix of compensation elements including base salary, short-term incentives and long-term incentives to avoid placing too much emphasis on any one component of compensation.
• | Components of Compensation: We use a mix of compensation elements including base salary, short-term incentives and long-term incentives to avoid placing too much emphasis on any one component of compensation. |
Level of Compensation: Our total direct compensation is designed to be competitive with the marketplace and aligned with the interest of our stockholders.
• | Level of Compensation: Our total direct compensation is designed to be competitive with the marketplace and aligned with the interest of our stockholders. |
Short-term Incentive: Our short-term incentive plan does not allow for unlimited payouts. Short-term incentive payments cannot exceed 200% of target levels. Our short-term incentive plan is discretionary and is subject to the Committee’s approval.
• | Short-term Incentive:Our short-term incentive plan does not allow for unlimited payouts. Short-term incentive payments cannot exceed 200% of target levels. Our short-term incentive plan is discretionary and is subject to the Committee’s approval. |
Equity Awards: Our restricted stock and RRMS common unit awards drive a long-term perspective and have a three-year cliff vesting period.
• | Equity Awards:Our restricted stock and RRMS common unit awards drive a long-term perspective and have a three-year cliff vesting period. |
Board/Committee Oversight: The Board of Directors and the Committee maintain full discretion of reviewing and administering all awards under short- and long-term incentive plans.
• | Board/Committee Oversight: The Board of Directors and the Committee maintain full discretion of reviewing and administering all awards under short- and long-term incentive plans. |
Performance Measures: Our performance goal setting process is aligned with our business strategy and our key foundational tenets.
Comprehensive Risk Management Policy: Our policy provides that employees will not be compensated for exposing us to undue risk as determined by our senior management and/or Board of Directors.
• | Performance Measures: Our performance goal setting process is aligned with our business strategy and our values and commitments. |
• | Comprehensive Risk Management Policy: Our policy provides that employees will not be compensated for exposing us to undue risk as determined by our senior management and/or Board of Directors. |
Clawback Policy: We have the ability to recover any excess incentive-based compensation awarded to any of our executive officers as a result of any accounting restatement due to material non-compliance with the reporting requirements under U.S. federal securities laws.
• | Clawback Policy: We have the ability to recover any excess incentive-based compensation awarded to any of our executive officers as a result of any accounting restatement due to material non-compliance with the reporting requirements under U.S. federal securities laws. |
Our compensation program is intended to motivate NEOs and employees to achieve business objectives that generate stockholder returns while demonstrating behaviors that are consistent with our values.
Executive Severance Agreements. We entered into severance agreements with each of our NEOs, other than our CEO, to encourage and motivate such executive officers to devote their full attention to their duties without the distraction of concerns regarding their involuntary or constructive termination of employment under certain circumstances. Each severance agreement expires on June 1, 2018 unless extended. Termination-related benefits are described in greater detail under “Potential Payments Upon Termination or Change in Control” below.
Employment Agreement. We entered into an employment agreement with Carlin G. Conner on March 6, 2014, in conjunction with the commencement of his service as our President and Chief Executive Officer on April 1, 2014. Mr. Conner’s employment agreement provides for certain basic compensation provisions, including a base salary and eligibility to participate in incentive compensation programs and benefit programs available to our other executives, and provided for a sign-on bonus payment and one-time equity award. Mr. Conner’s agreement also includes certain termination-related benefits in the event of his involuntary or constructive termination of employment, including following a change of control, which are described under “Potential Payments Upon Termination or Change in Control” below. The benefits offered by the employment agreement were the result of negotiations between us and Mr. Carlin in connection with our hiring him away from his previous employer. We believe the termination-related benefits are appropriate and competitive and that they should allow Mr. Carlin to devote his full attention to his various duties without the distraction of concerns regarding his involuntary or constructive termination of employment under the circumstances set forth in the agreement.
Accounting and Tax Treatment. We consider the impact of accounting and tax treatment when designing all aspects of compensation, but the primary driver of program design is the support of business objectives. In that regard, we review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which limits the tax deductibility by a corporation of compensation in excess of $1 million paid to its CEO and any of its three other most highly compensated executive officers, other than the CFO. Compensation which qualifies as “performance-based” is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals under a plan approved by the corporation’s stockholders. We intend to designThe Committee, however, has not adopted a large share of our incentivepolicy
that all compensation for our NEOs to qualify for the exemption of “performance-based” compensation from the deductibility limit. However, ifmust be deductible. If future compliance with Section 162(m) is inconsistent with our compensation philosophy or what is believed to be in the best interests of our stockholders, then future compensation arrangements may not be fully deductible under Section 162(m). For example, our time-vested awards of restricted stock do not qualify as performance-based and may not be fully deductible.
The Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management of SemGroup and, based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE |
James H. Lytal (Chair) |
Karl F. Kurz |
Sarah M. Barpoulis |
|
The following table summarizes the total compensation earned by or paid or awarded to each of the named executive officers with respect to each of the fiscal years ended December 31, 2014, 20132016, 2015 and 2012.2014. The persons named below, except for Mr. Schwiering, constitute all of the executive officers of SemGroup as of December 31, 2016. Mr. Schwiering retired as Vice President of SemGroup on August 5, 2016.
For each of the fiscal years presented, we have compensated Mr. Conner, our President and Chief Executive OfficerCEO, pursuant to an employment agreement. For additional information regarding this employment agreement, see “Potential Payments Upon Termination or Change in Control – Conner Employment Agreement” below. We have not entered into an employment agreement with any of the other named executive officers.
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option ($) | Non-Equity Incentive Plan Compensation ($)(3) | Change in ($) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||||||||
Carlin G. Conner(5) President and Chief Executive Officer | 2014 | 416,731 | 600,000 | 5,000,000 | (6) | – | 1,000,000 | – | 185,086 | 7,201,817 | ||||||||||||||||||||||||||
Norman J. Szydlowski(5) Former President and Chief Executive Officer | 2014 | 328,154 | – | 1,386,334 | – | – | – | 68,512 | 1,783,000 | |||||||||||||||||||||||||||
2013 | 790,000 | – | 1,509,494 | – | 887,565 | – | 27,750 | 3,214,809 | ||||||||||||||||||||||||||||
2012 | 790,000 | – | 1,185,031 | – | 789,200 | – | 27,500 | 2,791,731 | ||||||||||||||||||||||||||||
Robert N. Fitzgerald Senior Vice President and Chief Financial Officer | 2014 | 383,267 | – | 761,869 | – | 510,000 | – | 13,000 | 1,668,136 | |||||||||||||||||||||||||||
2013 | 371,767 | – | 880,451 | – | 424,000 | – | 12,750 | 1,688,968 | ||||||||||||||||||||||||||||
2012 | 358,659 | – | 389,885 | – | 335,250 | – | 1,990 | 1,085,784 | ||||||||||||||||||||||||||||
Candice L. Cheeseman General Counsel | 2014 | 327,705 | – | 427,599 | – | 436,300 | – | 13,000 | 1,204,604 | |||||||||||||||||||||||||||
2013 | 317,872 | – | 602,038 | – | 373,000 | – | 12,750 | 1,305,660 | ||||||||||||||||||||||||||||
2012 | 307,326 | – | 298,922 | – | 293,890 | – | 12,500 | 912,638 | ||||||||||||||||||||||||||||
Timothy R. O’Sullivan Vice President Corporate Planning and Strategic Initiatives | 2014 | 307,983 | – | 349,282 | – | 292,800 | – | 13,000 | 963,065 | |||||||||||||||||||||||||||
2013 | 298,755 | – | 457,978 | – | 269,000 | – | 12,750 | 1,038,483 | ||||||||||||||||||||||||||||
2012 | 283,384 | – | 251,827 | – | 250,400 | – | 10,696 | 796,307 | ||||||||||||||||||||||||||||
Peter L. Schwiering Vice President / Chief Operating Officer of Rose Rock Midstream GP, LLC | 2014 | 320,932 | – | 489,424 | – | 354,000 | – | 12,750 | 1,177,106 | |||||||||||||||||||||||||||
2013 | 294,500 | – | 623,468 | – | 295,058 | – | 12,750 | 1,225,776 | ||||||||||||||||||||||||||||
2012 | 284,770 | – | 280,503 | – | 285,100 | – | 12,500 | 862,873 | ||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option ($) | Non-Equity Incentive Plan Compensation ($)(3) | Change in ($) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||||||||
Carlin G. Conner(5) President and CEO | 2016 | 577,211 | – | 1,735,041 | – | 575,000 | – | 15,900 | 2,903,152 | |||||||||||||||||||||||||||
2015 | 573,173 | – | 1,699,922 | – | 393,300 | – | 20,365 | 2,686,760 | ||||||||||||||||||||||||||||
2014 | 416,731 | 600,000 | 5,000,000 | (6) | – | 1,000,000 | – | 185,086 | 7,201,817 | |||||||||||||||||||||||||||
Robert N. Fitzgerald Senior Vice President and Chief Financial Officer | 2016 | 403,646 | – | 740,441 | – | 337,764 | – | 15,900 | 1,497,751 | |||||||||||||||||||||||||||
2015 | 400,665 | – | 891,939 | – | 200,970 | – | 13,250 | 1,506,824 | ||||||||||||||||||||||||||||
2014 | 383,267 | – | 759,750 | – | 510,000 | – | 13,000 | 1,666,017 | ||||||||||||||||||||||||||||
Candice L. Cheeseman Vice President and General Counsel | 2016 | 343,315 | – | 409,341 | – | 275,310 | – | 15,900 | 1,043,866 | |||||||||||||||||||||||||||
2015 | 341,058 | – | 444,537 | – | 166,630 | – | 13,250 | 965,475 | ||||||||||||||||||||||||||||
2014 | 327,705 | – | 426,408 | – | 436,300 | – | 13,000 | 1,203,413 | ||||||||||||||||||||||||||||
Timothy R. O’Sullivan Vice President Corporate Planning and Strategic Initiatives | 2016 | 321,231 | – | 383,022 | – | 211,200 | – | 14,664 | 930,117 | |||||||||||||||||||||||||||
2015 | 319,354 | – | 459,993 | – | 133,635 | – | 13,250 | 926,232 | ||||||||||||||||||||||||||||
2014 | 307,983 | – | 348,309 | – | 292,800 | – | 13,000 | 962,092 | ||||||||||||||||||||||||||||
Peter L. Schwiering Former Vice President / Former Chief Operating Officer of Rose Rock Midstream GP, LLC | 2016 | 204,000 | – | – | – | 128,690 | – | 152,528 | 485,218 | |||||||||||||||||||||||||||
2015 | 338,814 | – | 492,935 | – | 143,005 | – | 13,250 | 988,004 | ||||||||||||||||||||||||||||
2014 | 320,932 | – | 481,937 | – | 354,000 | – | 12,750 | 1,169,619 | ||||||||||||||||||||||||||||
(1) | The amount represents a sign-on bonus paid to Mr. Conner under the terms of his employment agreement as an inducement to accept our employment offer. |
(2) | Represents the grant date fair value computed in accordance with ASC Topic 718, “Compensation –Stock Compensation,” which excludes the effect of estimated forfeitures, of the shares of restricted stock and performance share units granted under our Equity Incentive Plan and the restricted RRMS common units granted under the RRMS Equity Incentive Plan. Awards with performance conditions are valued on the grant date closing price on the NYSE based on the number of awards expected to vest. Awards with market conditions are valued using Monte Carlo simulations. The assumptions used to value the SemGroup stock awards are included in Note |
The value included for the performance share units is based on 100 percent of the performance share units vesting at the end of the three-year performance period. Using the maximum number of shares of stock issuable upon vesting of the performance share units (200 percent of the units granted in |
Name | 2014 | 2013 | 2012 | 2016 | 2015 | 2014 | ||||||||||||||||||
Carlin G. Conner | — | — | — | $ | 1,745,030 | $ | 1,699,926 | — | ||||||||||||||||
Norman J. Szydlowski | $ | 1,368,724 | $ | 1,509,457 | $ | 888,769 | ||||||||||||||||||
Robert N. Fitzgerald | $ | 752,212 | $ | 880,477 | $ | 292,409 | $ | 740,442 | $ | 891,948 | $ | 759,774 | ||||||||||||
Candice L. Cheeseman | $ | 422,160 | $ | 602,010 | $ | 224,197 | $ | 409,342 | $ | 444,575 | $ | 426,405 | ||||||||||||
Timothy R. O’Sullivan | $ | 344,846 | $ | 458,012 | $ | 188,871 | $ | 383,014 | $ | 459,969 | $ | 348,314 | ||||||||||||
Peter L. Schwiering | $ | 477,080 | $ | 558,458 | $ | 210,381 | — | $ | 492,935 | $ | 481,877 |
(3) | For |
(4) | All Other Compensation for |
Name | 401(k) Matching Contribution ($) | Tax and Financial Planning ($)(a) | Relocation ($)(b) | Tax Gross-Up ($)(c) | Legal ($)(d) | Accrued ($)(e) | Total Other Compensation ($) | 401(k) Matching Contribution ($) | Consulting Fee($) (a) | Accrued Vacation ($)(b) | Total Other Compensation ($) | |||||||||||||||||||||||||||||||||
Carlin G. Conner | 13,000 | — | 128,706 | 22,102 | 21,278 | — | 185,086 | 15,900 | — | — | 15,900 | |||||||||||||||||||||||||||||||||
Norman J. Szydlowski | 13,000 | 15,000 | — | — | — | 40,512 | 68,512 | |||||||||||||||||||||||||||||||||||||
Robert N. Fitzgerald | 13,000 | — | — | — | — | — | 13,000 | 15,900 | — | — | 15,900 | |||||||||||||||||||||||||||||||||
Candice L. Cheeseman | 13,000 | — | — | — | — | — | 13,000 | 15,900 | — | — | 15,900 | |||||||||||||||||||||||||||||||||
Timothy R. O’Sullivan | 13,000 | — | — | — | — | — | 13,000 | 14,664 | — | — | 14,664 | |||||||||||||||||||||||||||||||||
Peter L. Schwiering | 12,750 | — | — | — | — | — | 12,750 | 14,618 | 105,218 | 32,692 | 152,528 |
(a) | Represents |
(b) | Represents |
(5) | Mr. Conner commenced his service as our President and Chief Executive Officer as of April 1, |
(6) | Represents a one-time, new-hire award to Mr. Conner under the terms of his employment agreement intended in part to make Mr. Conner whole for equity value forfeited at his previous employer and to also provide alignment between Mr. Conner’s compensation and stockholder interests. |
Grants of Plan-Based Awards During 20142016
The following table provides information about stock, option and RRMS common unit awards and non-equityandnon-equity and equity incentive plan awards granted to our named executive officers during the year ended December 31, 2014.2016. No stock options were granted to our named executive officers in 2014.2016. There can be no assurance that the Grant Date Fair Value of Stock and Option Awards will ever be realized.
Name | Grant Date | Approval Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Stock Awards: Number of of or (#)(3) | All Option Awards: Number Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($ / Sh) | Grant Date Fair Value of Stock Option Awards ($)(4) | Grant Date | Approval Date |
Estimated Possible Payouts Under |
Estimated Future Payouts Under | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($ / Sh) | Grant Date Value of Stock Option Awards ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carlin G. Conner | — | — | — | 550,000 | 1,100,000 | — | — | — | — | — | — | — | — | — | — | 575,000 | 1,150,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/1/2014 | 3/6/2014 | — | — | — | — | — | — | — | — | — | — | 3/1/2016 | 2/23/2016 | — | — | — | 23,430 | 46,859 | 93,718 | — | — | — | 872,515 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/1/2014 | 3/6/2014 | — | — | — | — | — | — | 63,766 | — | — | 4,250,004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/1/2014 | 3/6/2014 | — | — | — | — | — | — | 17,647 | — | — | 749,996 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norman J. Szydlowski | — | — | — | 592,500 | 1,185,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | 5,134 | 10,268 | 20,536 | — | — | — | 684,362 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 7,701 | — | — | 513,272 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 35,144 | (3) | — | — | 654,381 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 4,440 | — | — | 188,700 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 17,826 | (4) | — | — | 208,145 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert N. Fitzgerald | — | — | — | 268,548 | 537,096 | — | — | — | — | — | — | — | — | — | — | 281,470 | 562,940 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | 2,822 | 5,643 | 11,286 | — | — | — | 376,106 | 3/1/2016 | 2/23/2016 | — | — | — | 9,942 | 19,883 | 39,766 | — | — | — | 370,221 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 4,232 | — | — | 282,063 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 14,912 | (3) | — | — | 277,661 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 2,440 | — | — | 103,700 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 7,927 | (4) | — | — | 92,559 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Candice L. Cheeseman | — | — | — | 229,617 | 459,233 | — | — | — | — | — | — | — | — | — | — | 239,400 | 478,800 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | 1,584 | 3,167 | 6,334 | — | — | — | 211,080 | 3/1/2016 | 2/23/2016 | — | — | — | 5,496 | 10,992 | 21,984 | — | — | — | 204,671 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 2,375 | — | — | 158,294 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 8,244 | (3) | — | — | 153,503 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 1,370 | — | — | 58,225 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 4,383 | (4) | — | — | 51,167 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Timothy R. O’Sullivan | — | — | — | 154,148 | 308,296 | — | — | — | — | — | — | — | — | — | — | 192,000 | 384,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | 1,294 | 2,587 | 5,174 | — | — | — | 172,423 | 3/1/2016 | 2/23/2016 | — | — | — | 5,143 | 10,285 | 20,570 | — | — | — | 191,507 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 1,940 | — | — | 129,301 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 7,714 | (3) | — | — | 143,635 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 1,119 | — | — | 47,558 | 3/1/2016 | 2/23/2016 | — | — | — | — | — | — | 4,100 | (4) | — | — | 47,880 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter L. Schwiering | — | — | — | 194,738 | 389,477 | — | — | — | — | — | — | — | — | — | — | 204,000 | 408,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | 1,790 | 3,579 | 7,158 | — | — | — | 238,540 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 1,790 | — | — | 119,304 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2014 | 2/25/2014 | — | — | — | — | — | — | 3,096 | — | — | 131,580 |
(1) | Represents estimated possible payouts under our short-term incentive plan. The estimated possible payout amounts are based on the applicable bonus target percentage and base salary for each named executive officer in effect for |
(2) | Represents the range of payouts in shares of stock for the performance period beginning January 1, |
shares are forfeited if employment is terminated for any other reason. If a participant continuously serves not less than 12 months during the performance period and a change of control occurs during the performance period, such participant will be entitled to the number of shares at the target level. |
(3) | Represents restricted shares of Class A Common Stock underlying restricted stock awards granted under our Equity Incentive |
involuntarily terminated by the Company, as the direct result of a divestiture or otherwise, without cause. If an execute officer’s employment is terminated for any reason other than those in (i), (ii) and (iii) above, all unvested restricted shares, and any dividends distributed thereon, will be forfeited. |
(4) | Represents restricted shares of Class A Common Stock, after adjusting for the merger exchange ratio, underlying restricted RRMS common unit awards granted under the RRMS Equity Incentive Plan. |
Represents the grant date fair value computed in accordance with ASC Topic 718, “Compensation—Stock Compensation,” which excludes the effect of estimated forfeitures, of the shares of restricted stock and performance share units granted under our Equity Incentive Plan and the restricted RRMS common units granted under the RRMS Equity Incentive Plan. Awards with performance conditions are valued on the grant date closing price on the NYSE based on the number of awards expected to vest. Awards with market conditions are valued using Monte Carlo simulations. The assumptions used to value the SemGroup stock awards are included in Note |
Outstanding Equity Awards at Fiscal Year-End 20142016
The following table shows the outstanding equity awards held by our named executive officers as of December 31, 2014.2016.
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A | Proposals — | The Board of Directors recommends a voteFOR all the nominees listed,FOR Proposal 2, the frequency of “1 YEAR” on Proposal 3 andFOR Proposals | ||
1. | Election of Directors: | 01 - Ronald A. Ballschmiede | 02 - Sarah M. Barpoulis | 03 - Carlin G. Conner | + | |||||
04 - Karl F. Kurz | 05 - James H. Lytal | 06 - William J. McAdam | ||||||||
07 - Thomas R. McDaniel |
☐ | Mark here to voteFOR all nominees | ☐ | Mark here toWITHHOLD vote from all nominees | ☐ | For AllEXCEPT- To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) below. | |||||||||||||||||
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For | Against | Abstain | 1 Year | 2 Years | 3 Years | Abstain | ||||||||||||||||||||||||||||||||||
2. | To approve, on a non-binding advisory basis, the compensation of the company’s named executive officers. | ¨ | ¨ | ¨ | 3. | Ratification of BDO USA, LLP as independent registered public accounting firm for 2015. | ¨ | ¨ | ¨ |
To approve, on anon-binding advisory basis, the compensation of the company’s named executive officers. |
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To select, on anon-binding advisory basis, the frequency of future stockholder advisory votes on the compensation of the company’s named executive officers. |
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To approve, on anon-binding advisory basis, the compensation of the company’s named executive officers. |
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To approve an amendment to the company’s Amended and Restated Certificate of Incorporation to authorize 4,000,000 shares of preferred stock. |
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In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting and at any and all adjournments thereof. | In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting and at any and all adjournments thereof. |
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting and at any and all adjournments thereof. |
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021VAB
Important Notice Regarding the Availability of Proxy Materials for the 20152017 Annual Meeting of Stockholders to be Held on May 14, 201517, 2017: Stockholders may view the proxy statement, this form of proxy and our 20142016 Annual Report to Stockholders over the Internet by accessing our website at:http://www.semgroupcorp.com.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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Proxy — SemGroup Corporation
Annual Meeting – May 14, 201517, 2017
Doubletree by Hilton Hotel Tulsa atTwo Warren Place
61106120 South Yale Ave., Tulsa, Oklahoma, 5th Floor
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John F. Chlebowski and Thomas R. McDaniel, Carlin G. Conner and James H. Lytal, and each of them, with full power of substitution, as proxies to represent and vote all of the shares of Class A Common Stock the undersigned is entitled to vote at the Annual Meeting of Stockholders of SemGroup Corporation to be held on the 14th17th day of May, 2015,2017, at 9:00 a.m., local time, at the Doubletree by Hilton Hotel Tulsa atTwo Warren Place, 61106120 South Yale Avenue, 5th Floor, Tulsa, Oklahoma, and at any and all adjournments thereof, on all matters coming before said meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL NOMINEES ON PROPOSAL 1, “FOR” PROPOSAL 2, THE FREQUENCY OF “1 YEAR” ON PROPOSAL 3 AND “FOR” PROPOSALS 24 AND 3.5.
PLEASE MARK, SIGN AND DATE THE PROXY ON THE REVERSE SIDE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
C | Non-Voting Items |
Change of Address — Please print new address below. | Comments — Please print your comments below. | |||
IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. | + |