| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Annual Cash Incentive Plan
On March 2, 2021, the Compensation and Management Development Committee (the “Committee”) of the Board of Directors of Hess Corporation (the “Company”) approved annual incentive targets under the Company’s Annual Incentive Plan (the “Plan”) for all of the Company’s full-time employees worldwide, including the Company’s chief executive officer, chief financial officer and three other most highly compensated executive officers (the “Named Executive Officers”). The Plan is intended to promote alignment of pay and performance and an enhanced focus on creating long-term stockholder value.
Payout on awards is determined based on attainment of pre-established enterprise level metrics and individual performance objectives. The following are the enterprise metrics, each with pre-established threshold, target and maximum performance goals. For 2021, the Committee approved changes to the environment, health and safety performance metrics under the Plan to include a Bakken flaring reduction target, further emphasizing the importance of greenhouse gas emissions reduction and its integration into the Company’s strategy and operations:
| | • | | Environment, health and safety (4 measures): |
| | • | | Performance standard test compliance |
| | • | | Severe + significant safety incident rate |
| | • | | Loss of primary containment rate |
| | • | | E&P capital and exploratory spend; |
| | • | | Controllable operated cash costs; |
| | • | | Cash return on capital employed; |
| | • | | Exploration resource additions |
The Committee establishes annual incentive targets for each Named Executive Officer based upon position, responsibilities and competitive practice.
Payouts for the Named Executive Officers range from 0% to 175% of target based on attainment of the pre-established enterprise metrics. A multiplier may be applied to adjust the bonus down to 0% or up by an additional 25% (capped at 200%) of target based on individual performance compared with individual goals pre-established at the beginning of the fiscal year.
Long-Term Incentive Program
On March 2, 2021, the Committee approved the value of awards to the Named Executive Officers under the Company’s long-term incentive program for 2021 (the “2021 Program”), effective March 6, 2021. The long-term incentive mix for Mr. Hess for 2021 consists of performance share units (“PSUs”), which account for 60% of the target value of his award under the 2021 Program, and stock options, which account for the remaining 40% of the target value of his award under the 2021 Program. As a result, 100% of the target value of Mr. Hess’ awards under the program will be performance-contingent. For the Company’s other Named Executive Officers, 80% of the target value of awards under the 2021 Program will be performance-contingent, with 60% in the form of PSUs, 20% in the form of stock options and the remaining 20% in the form of restricted stock. The Committee believes this mix of awards encourages sustained long-term performance and further supports alignment of the interests of senior management and stockholders.
Restricted stock and stock option awards vest in equal installments over a three-year period beginning on the first anniversary of the grant date. Payouts on the PSUs awarded in 2021 will be determined based on the Company’s total shareholder return (“TSR”) for the three-year performance period ending December 31, 2023 compared to the
