| 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 February 28, 2023, the Compensation and Management Development Committee (the “Committee”) of the Board of Directors (“Board”) 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:
| | • | | Environment, health and safety (5 measures): |
| | • | | Bakken routine flare rate |
| | • | | Critical inspection compliance |
| | • | | Severe + significant safety incident rate |
| | • | | Loss of primary containment rate |
| | • | | Exploration and production (“E&P”) capital and exploratory spend; |
| | • | | Controllable operated cash costs; |
| | • | | Cash return on capital employed; |
| | • | | Earnings before interest, taxes, depreciation, amortization and exploration expense (“EBITDAX”); and |
| | • | | Exploration resource additions. |
As part of its ongoing assessment of the Company’s compensation programs, the Committee determined to include an enterprise-wise performance modifier to increase or decrease payout of the Plan by up to 25% based on five evaluation principles: strategy execution; capital allocation and risk management; social responsibility and stakeholder engagement; culture, people and leadership; and environment and sustainability.
The Committee also 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 200% of target based on attainment of the pre-established enterprise metrics, the strategic performance modifier and individual performance compared with individual goals pre-established at the beginning of the fiscal year.
Long-Term Incentive Program
On February 28, 2023, the Committee approved the value of awards to the Named Executive Officers under the Company’s long-term incentive program for 2023 (the “2023 Program”), effective March 6, 2023. The long-term incentive mix for Mr. Hess for 2023 consists of performance share units (“PSUs”), which account for 60% of the target value of his award under the 2023 Program, and stock options, which account for the remaining 40% of the target value of his award under the 2023 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 2023 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.
