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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
| | Preliminary Proxy Statement | | Confidential, For Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Under Rule 14a-12
CHEVRON CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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| | Fee paid previously with preliminary materials:
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|| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(4) Date Filed:
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[CHEVRON LOGO]
CHEVRON CORPORATION
Notice of the
2001 Annual Meeting
and the
2001 Proxy Statement
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TABLE OF CONTENTS
Notice of the 2001 Annual Meeting of Stockholders
2001 Proxy Statement........................................ 1
General Information......................................... 1
- - Appointment of Proxy Holders............................. 1
- - Methods of Voting........................................ 1
- - Vote Required and Method of Counting..................... 2
- - Confidential Voting...................................... 2
- - Method and Cost of Soliciting and Tabulating Votes....... 3
- - Multiple Copies of Annual Report to Stockholders......... 3
- - Electronic Access to Proxy Statement and Annual Report... 3
Election of Directors (Item 1 on the proxy form)............ 4
- - Nominees for Directors................................... 4
Board Governance and Operations............................. 8
- - Board Governance......................................... 8
- - Board Structure.......................................... 8
- - Board Meetings and Attendance............................ 8
- - Board Committee Structure................................ 8
- - Board Committee Meetings and Functions................... 9
Audit Committee Report...................................... 10
Directors' Compensation..................................... 11
- - Stock Compensation....................................... 11
- - Cash Compensation........................................ 11
- - Deferrals of Cash Compensation........................... 11
- - Expenses................................................. 11
Stock Ownership Information................................. 12
- - Directors' and Executive Officers' Stock Ownership....... 12
- - Other Security Holders................................... 12
- - Section 16(a) Beneficial Ownership Reporting
Compliance............................................... 12
Executive Compensation...................................... 13
- - Management Compensation Committee Report on Executive
Compensation............................................. 13
- - Summary Compensation Table............................... 18
- - Long-Term Incentive Plan--2000 Performance Unit Awards
Table.................................................... 18
- - Option Grants in Last Fiscal Year Table.................. 19
- - Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values Table...................... 19
- - Pension Plan Table....................................... 20
- - Termination of Employment and Change in Control
Arrangements............................................. 21
- - Performance Graph........................................ 22
Matters Relating to Texaco Inc. ............................ 23
- - The Proposed Merger...................................... 23
- - Beneficial Ownership of Chevron Stock.................... 23
- - Business Relationships Between Chevron and Texaco........ 23
Increase Shares of Chevron Stock (Item 2 on the proxy
form)..................................................... 25
Ratification of Accountants (Item 3 on the proxy form)...... 27
4
Stockholder Proposals (Items 4 through 6 on the proxy
form)..................................................... 28
- - To eliminate Bioaccumulative Halogenated Pollutants...... 28
- - To report on Potential Environmental Damage to ANWR...... 30
- - To report on Greenhouse Gas Emissions.................... 32
Submission of Future Stockholder Proposals.................. 34
Other Matters............................................... 34
Information About the Meeting............................... 35
Appendix A: Audit Committee Charter......................... A-1
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[CHEVRON LOGO]
NOTICE OF THE
2001 ANNUAL MEETING OF STOCKHOLDERS
MEETING DATE: APRIL 25, 2001
MEETING TIME: 9:30 A.M., PDT
LOCATION: LOS ANGELES MARRIOTT DOWNTOWN
333 SOUTH FIGUEROA STREET
LOS ANGELES, CA 90071
RECORD DATE: February 26, 2001
AGENDA:
- To elect nine Directors;
- To vote upon the proposal to increase the number of authorized shares of
Chevron Stock;
- To ratify the Board's appointment of independent public accountants;
- To take action on the stockholder proposals; and
- To transact any other business that may be properly brought before the
Annual Meeting.
ADMISSION
All stockholders and representatives whom stockholders have authorized in
writing are cordially invited to attend the 2001 Annual Meeting. We will hold
the Annual Meeting at the Los Angeles Marriott Downtown in Los Angeles,
California. Please refer to page 35 for information about the Annual Meeting.
VOTING
Stockholders owning Chevron Stock at the close of business on the Record Date,
or a representative whom a stockholder has authorized in writing, are entitled
to vote at the Annual Meeting. Please refer to page 2 of the proxy statement for
an explanation of Chevron's confidential voting procedures.
STOCKHOLDER LIST
Chevron will make available on the Meeting Date at the Los Angeles Marriott
Downtown in Los Angeles, a list of stockholders as of the Record Date. It will
also make the list available for ten days prior to the Annual Meeting, between
the hours of 9:00 a.m. and 4:00 p.m. at the office of Mellon Investor Services,
400 South Hope Street, Los Angeles, California 90071. A stockholder may examine
the list for any legally valid purpose related to the Annual Meeting.
We are distributing this proxy statement, proxy form and Chevron's 2000 Annual
Report to Stockholders on or about March 21, 2001.
By Order of the Board of Directors,
/s/ LYDIA I. BEEBE
Lydia I. Beebe
Corporate Secretary
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March 21, 2001 CHEVRON CORPORATION
575 Market Street
San Francisco, California
94105
2001 PROXY STATEMENT
GENERAL INFORMATION
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APPOINTMENT OF PROXY HOLDERS
Your Board of Directors asks you to appoint Samuel H. Armacost, Carla A. Hills
and David J. O'Reilly as your proxy holders to vote your shares at the 2001
Annual Meeting of Stockholders. YOU MAKE THIS APPOINTMENT BY VOTING THE ENCLOSED
PROXY FORM USING ONE OF THE METHODS OF VOTING DESCRIBED BELOW.
If appointed by you, the proxy holders will vote your shares as you direct on
the matters described in this proxy statement. In the absence of your direction,
they will vote your shares as recommended by your Board.
Unless you otherwise indicate on the proxy form or during the telephone or
Internet voting procedures, you also authorize your proxy holders to vote your
shares on any matters not known by your Board at the time this proxy statement
was printed and which, under Chevron's By-Laws, may be properly presented for
action at the Annual Meeting.
You may also vote in person at the Annual Meeting. However, your Board
recommends that you vote by appointing the proxy holders as it is not practical
for most stockholders to attend the Annual Meeting. YOUR BOARD STRONGLY
ENCOURAGES YOU TO EXERCISE YOUR RIGHT TO VOTE BY USING ONE OF THE METHODS OF
VOTING DESCRIBED BELOW. Voting early helps ensure that Chevron receives a quorum
of shares necessary to hold the Annual Meeting without a second mailing.
METHODS OF VOTING
- - VOTING BY MAIL. Stockholders may sign, date and return their proxy forms in
the pre-addressed, postage-paid envelope provided.
- - VOTING BY TELEPHONE OR THE INTERNET. If you have stock certificates issued in
your own name, you may vote by proxy by using the toll-free number or at the
Internet address listed on the proxy form. Telephone and Internet voting are
also available to those of you who own shares held in the Chevron Profit
Sharing/Savings Plan.
The telephone and Internet voting procedures are designed to verify your vote
through the use of a Control Number that is provided on each proxy form. The
procedures also allow you to vote your shares and to confirm that your
instructions have been properly recorded. Please see your proxy form for
specific instructions.
Stockholders whose shares are held through a brokerage firm, bank or other
holder of record may vote by telephone or the Internet only if the holder of
record offers those options.
REVOKING YOUR VOTING INSTRUCTIONS TO YOUR PROXY HOLDERS. If you have
certificates issued in your own name and you vote by proxy using the mail, the
Internet or a telephone, you may later revoke your proxy instructions by:
-- sending a written statement to that effect to the Corporate
Secretary;
-- submitting a proxy form with a later date signed as your name
appears on the stock account;
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GENERAL INFORMATION (Continued)
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-- voting at a later time by telephone or the Internet; or
-- voting in person at the Annual Meeting (except for shares held
through a brokerage firm, bank or other holder of record).
If you have shares held through a brokerage firm, bank or other holder of
record, and you vote by proxy, you may later revoke your proxy instructions by
informing the holder of record in accordance with that entity's procedures.
VOTE REQUIRED AND METHOD OF COUNTING
At the close of business on the Record Date, there were 641,265,353 shares of
Chevron Stock outstanding and entitled to vote at the Annual Meeting. Each
outstanding share is entitled to cast one vote.
A quorum, which is a majority of the outstanding shares as of the Record Date,
must be present to hold the Annual Meeting. A quorum is calculated based on the
number of shares represented by the stockholders attending in person and by
their proxy holders. If you indicate an abstention as your voting preference in
all matters, your shares will be counted toward a quorum but they will not be
voted on any matter.
The vote required and method of calculation is as follows for the various
business matters to be considered at the Annual Meeting:
ITEM 1--ELECTION OF DIRECTORS
Each outstanding share of Chevron Stock is entitled to cast one vote for as many
separate nominees as there are Directors to be elected. The nominees who receive
the most votes for the number of positions to be filled are elected Directors.
If you do not wish your shares to be voted for a particular nominee, you may so
indicate in the space provided on the proxy form or withhold authority as
prompted during the telephone or Internet voting instructions.
ITEM 2--INCREASE SHARES OF CHEVRON STOCK
This proposal is approved if the number of shares voted in favor is a majority
of the shares entitled to vote.
ITEM 3--RATIFICATION OF ACCOUNTANTS AND ITEMS 4 THROUGH 6--STOCKHOLDER PROPOSALS
These proposals are approved if the number of shares voted in favor of each
exceeds the number of shares voted against. Abstentions and broker non-votes
(e.g., when a broker does not have authority to vote on a specific issue) do not
affect the voting calculations.
CONFIDENTIAL VOTING
In 1979, we adopted a confidential voting policy to protect our stockholders'
voting privacy. Under this policy ballots, proxy forms and voting instructions
returned to brokerage firms, banks and other holders of record are treated as
confidential. Only the proxy solicitor, the proxy tabulator and the Inspector of
Election have access to the ballots, proxy forms and voting instructions. Anyone
who processes or inspects the ballots, proxy forms and voting instructions signs
a pledge to treat them as confidential. None of these persons is a Chevron
Director, officer or employee.
The proxy solicitor and the proxy tabulator will disclose information taken from
the ballots, proxy forms and voting instructions only in the event of a proxy
contest or as otherwise required by law.
The proxy tabulator will forward comments written on the proxy forms to
management but will not disclose your identity unless you request it in writing.
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GENERAL INFORMATION (Continued)
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METHOD AND COST OF SOLICITING AND TABULATING VOTES
Chevron has retained Georgeson Shareholder Communications Inc. to assist in
distributing these proxy materials and soliciting votes at an estimated cost of
$25,000 plus their reasonable out-of-pocket expenses. Chevron employees,
personally or by telephone, may solicit your proxy voting instructions.
Chevron will reimburse brokerage firms, banks and other holders of record for
their reasonable out-of-pocket expenses for forwarding these proxy materials to
you.
Mellon Investor Services, Chevron's transfer agent, will be the proxy tabulator
and also act as the Inspector of Election.
MULTIPLE COPIES OF ANNUAL REPORT TO STOCKHOLDERS
If you received more than one copy of the 2000 Annual Report, you may wish to
eliminate wasteful future duplication. This will also help save Chevron the cost
of producing and mailing duplicate reports.
Under current Securities and Exchange Commission (SEC) regulations, Chevron must
continue to send the annual report to at least one account at your address
unless all of the account owners elect to view future annual reports and proxy
statements over the Internet as described below.
Mailing of dividends, dividend reinvestment statements, proxy statements, proxy
forms and special notices will not be affected by your election to discontinue
duplicate mailings of annual reports. To discontinue or resume the mailing of an
annual report for an account, please call Mellon Investor Services' toll-free
number, 1-800-368-8357. If you own Chevron Stock through a brokerage firm, bank
or other holder of record and receive more than one copy of Chevron's Annual
Report, contact that holder of record to eliminate duplicate mailings.
ELECTRONIC ACCESS TO PROXY STATEMENT AND ANNUAL REPORT
This proxy statement and the 2000 Annual Report are available on Chevron's
Internet site at www.chevron.com.
If you are a stockholder of record, you can elect to view future proxy
statements and annual reports at this Internet site instead of receiving paper
copies in the mail. They will be available on the same day as the proxy
statement is filed with the SEC. You can make this election by marking the
appropriate box on your 2001 proxy card or by following the instructions
provided if you vote over the Internet or by telephone.
If you choose to view future proxy statements and annual reports over the
Internet, you will receive a proxy form in the mail with instructions containing
the Internet address of those materials. Your choice will remain in effect until
you call the Mellon Investor Services' toll-free number and tell them otherwise.
You do not have to elect Internet access each year.
If you hold your Chevron Stock through a brokerage firm, bank or other holder of
record, please refer to the information provided by that entity for instructions
on how to elect to view future proxy statements and annual reports over the
Internet.
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ELECTION OF DIRECTORS
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(Item 1 on the proxy form)
Your Board has nominated nine current Directors for re-election.
The persons named as proxy holders on the proxy form will vote your shares FOR
the nine nominees unless you withhold authority in the spaces provided on the
proxy form or as prompted during the telephone or Internet voting instructions.
All Directors are elected annually. They serve for a one-year term and until
their successors are elected.
If any nominee is unable to serve as a Director, which we do not anticipate, the
Board by resolution may reduce the number of Directors or elect a substitute.
Detailed information on each nominee is provided below.
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NOMINEES FOR DIRECTORS
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES.
SAMUEL H. ARMACOST
Director since 1982
Mr. Armacost, age 61, became Chairman of SRI International,
formerly Stanford Research Institute, an independent research, [ARMACOST PHOTO]
technology development and consulting organization, in 1998.
Prior Positions Held: Mr. Armacost was a Managing Director of Weiss, Peck &
Greer L.L.C. from 1990 until 1998. He was a Managing Director of Merrill Lynch
Capital Markets from 1987 until 1990. He was President, Director and Chief
Executive Officer of BankAmerica Corporation from 1981 until 1986.
Other Directorships: The James Irvine Foundation, Exponent, Inc., Scios, Inc.,
Toshiba International Advisory Group.
Other Memberships: The Business Council, the Advisory Council of the California
Academy of Sciences.
SAMUEL L. GINN
Director since 1989
Mr. Ginn, age 63, is Chairman Retired of Vodafone, a
worldwide wireless telecommunications company. [GINN PHOTO]
Prior Positions Held: Mr. Ginn was Chairman of Vodafone AirTouch, Plc., Chairman
of the Board, and Chief Executive Officer of AirTouch Communications, Inc. from
1993 until June 29, 1999. He was Chairman of the Board, President and Chief
Executive Officer of Pacific Telesis Group from 1988 until April 1, 1994.
Other Directorships: Hewlett-Packard Company.
Other Memberships: The Business Council, Council on Foreign Relations, the
Yosemite Fund.
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ELECTION OF DIRECTORS (Continued)
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AMBASSADOR CARLA
ANDERSON HILLS
Director 1977 through 1988
and since 1993
Ambassador Hills, age 67, has been Chairman and Chief
Executive Officer of Hills & Company International [HILLS PHOTO]
Consultants, a company giving advice on investment,
trade and risk issues abroad, since 1993.
Prior Positions Held: Ambassador Hills served as United States Trade
Representative from 1989 to 1993.
Other Directorships: American International Group, Inc., Lucent Technologies
Inc., Time Warner Inc., TCW Group, Inc.
Other Memberships: Director, Council on Foreign Relations; Vice-Chair, Inter-
American Dialogue; Vice-Chair, US-China Business Council; Trustee, Asia Society.
SENATOR J. BENNETT
JOHNSTON
Director since 1997
Senator Johnston, age 68, has been Chief Executive Officer
of Johnston & Associates, a governmental and business [JOHNSTON PHOTO]
consulting firm, since 1997.
Prior Positions Held: Senator Johnston served as U.S. Senator from Louisiana
from 1972 through 1996. He was a member of the Senate Committee on Energy and
Natural Resources (Chairman from 1986 until 1994 and ranking Democrat from 1994
through 1996). He was a member of the Appropriations Committee and Chairman of
the Subcommittee on Energy & Water Development from 1986 until 1994. He also
served on the Select Committee on Intelligence; the Budget Committee; and the
Special Committee on Aging. Prior to serving in the Senate he served in the
Louisiana State Legislature for eight years.
Other Directorships: Freeport-McMoRan Copper & Gold Inc., Nexant, Inc.
Other Memberships: President, U.S. Pacific Economic Cooperation Council;
Director, US-China Business Council.
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ELECTION OF DIRECTORS (Continued)
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RICHARD H. MATZKE
Director since 1997
Mr. Matzke, age 64, has been a Vice-Chairman of [MATZKE PHOTO]
the Board of Chevron since 2000.
Prior Positions Held: Mr. Matzke was Vice-President of Chevron and President of
Chevron Overseas Petroleum Inc. from 1990 until 1999. He has also served as a
Vice-President of Chevron Chemical Company, manager of Chevron's foreign
operations staff, a Director of Caltex Pacific Indonesia, and Director and
President of Chevron Canada Resources Limited. Mr. Matzke joined Chevron in
1961.
Other Directorships: Dynegy Inc., Trustee of the Africa-America Institute and
the Advisory Board of the Center for Strategic and International Studies,
Chairman of the Board of Directors of the US-Kazakhstan Business Association,
Vice-Chairman of the US-Azerbaijan Chamber of Commerce.
Other Memberships: American Institute of Professional Geologists, American
Association of Petroleum Geologists, US-Russia Business Council, Business
Council for International Understanding, Council on Foreign Relations.
DAVID J. O'REILLY
Director since 1998
Mr. O'Reilly, age 54, has been Chairman of the Board of [O'REILLY PHOTO]
Chevron since 2000.
Prior Positions Held:
Mr. O'Reilly was Vice-Chairman of the Board of Chevron from 1998 until 1999. He
was a Vice-President of Chevron from 1991 until 1998. He was President of
Chevron Products Company from 1994 until 1998. He was a Director of Caltex
Petroleum Corporation from 1992 until 1994, was a Senior Vice-President and
Chief Operating Officer of Chevron Chemical Company from 1989 until 1991. He
joined Chevron in 1968.
Other Directorships: American Petroleum Institute, San Francisco Symphony Board
of Governors, the Bay Area Council.
Other Memberships: The Business Council, The Business Roundtable, National
Petroleum Council.
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ELECTION OF DIRECTORS (Continued)
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FRANK A. SHRONTZ
Director since 1996
Mr. Shrontz, age 69, was Chairman of the Board of The
Boeing Company, manufacturer and seller of aircraft and
related products, from 1988 until February 1997. [SHRONTZ PHOTO]
Prior Positions Held: Mr. Shrontz was Chief Executive Officer of The Boeing
Company from 1986 until 1996 and was its President from 1985 until 1988. He
served as Assistant Secretary of the Air Force and as Assistant Secretary of
Defense from 1973 until 1976.
Other Directorships: Boise Cascade Corporation, Minnesota Mining and
Manufacturing Company.
Other Memberships: The Business Council, a citizen regent of The Smithsonian
Institution.
CARL WARE
Director since 2001
Mr. Ware, age 57, has been an Executive Vice-President,
Public Affairs and Administration of The Coca-Cola Company
since 2000. [WARE PHOTO]
Prior Positions Held: Mr. Ware was President of The Coca-Cola Company's Africa
Group, with operational responsibility for 50 countries in sub-Saharan Africa
from 1991 to 2000.
Other Directorships: Chairman of the Board of Trustees of Clark Atlanta
University, Georgia Power Company, PGA TOUR Golf Course Properties, Inc.,
Southern Africa Enterprise Development Fund, Medical Education for South African
Blacks, The Africa-America Institute, Coca-Cola Bottlers Consolidated.
Other Memberships: Council on Foreign Relations, Executive Committee of the
Metro Atlanta Chamber of Commerce.
JOHN A. YOUNG
Director since 1985
Mr. Young, age 68, has been Vice-Chairman of the Board of
Novell, Inc., a networking software company since 1997 and [YOUNG PHOTO]
Vice-Chairman of the Board of SmithKline Beechman PLC since 1998 until its
merger with Glaxo Wellcome in 2000.
Prior Positions Held: Mr. Young served on a variety of corporate and non-profit
boards from 1993 to 1997. He was President and Chief Executive Officer of
Hewlett-Packard Company from 1978 until 1992.
Other Directorships: Affymetrix, Inc., Lucent Technologies Inc., Chairman of the
Board of Ciphergen Biosystems, Inc.
Other Memberships: The Business Council, National Academy of Engineering.
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BOARD GOVERNANCE AND OPERATIONS
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BOARD GOVERNANCE
The business and affairs of Chevron are managed by or under the direction of
your Board. Your Board is accountable to the stockholders through the annual
election process. All Directors annually stand for election.
Your Board reviews and ratifies senior management selection, succession planning
and compensation. It monitors overall corporate performance, the integrity of
Chevron's financial controls and the effectiveness of its legal compliance
programs.
Your Board oversees Chevron's strategic and business planning process. Chevron's
strategic and business planning is a year-round process culminating in a
day-long Board review of Chevron's updated Corporate Strategic Plan, its
three-year business plan, the next year's capital expenditures budget plus other
key financial and supplemental objectives.
BOARD STRUCTURE
Your Board's composition and size are assessed at least annually by the Board
Nominating and Governance Committee. The Committee recommends prospective
directors to the Board without regard to race, religion or sex with the goal of
creating a balance of knowledge, experience, and diversity. A majority of the
Board consists of non-employee Directors.
As a stockholder you may recommend a nominee by writing to the Corporate
Secretary specifying the nominee's name and the qualifications for Board
membership. All recommendations will be brought to the attention of the Board
Nominating and Governance Committee.
Chevron has a policy of mandatory retirement at age 65 for employee Directors
and age 72 for non-employee Directors.
The Board's Nominating and Governance Committee reviews and concurs in the
election of any officer-director to outside board seats.
BOARD MEETINGS AND ATTENDANCE
Your Board held 11 Board meetings and 16 Board committee meetings in 2000. The
attendance of all Board members was on average over 92 percent of the Board and
appropriate Board committee members. Due to a serious illness, Dr. Tien was only
able to attend 65 percent of the meetings of the Board and meetings of the
Committees of the Board on which he served.
BOARD COMMITTEE STRUCTURE
The Management Compensation Committee was established in 1966, the Audit
Committee in 1975, the Nominating Committee in 1978, and the Public Policy
Committee in 1989. In 1996, the Nominating Committee's responsibilities were
expanded to add governance oversight responsibility and its name was changed to
the Board Nominating and Governance Committee.
Each Committee is chaired by a non-employee Director who determines the agenda,
the frequency and length of the meetings and who has unlimited access to
Chevron's management and information.
All Board Committees are composed entirely of non-employee Directors except for
the Public Policy Committee. Mr. O'Reilly is a member of the Public Policy
Committee.
Each non-employee Director currently serves on two committees. Committee members
serve staggered four-year terms enabling Directors in office longer than four
years to serve on various committees. Four-year terms for committee chairpersons
facilitate rotation of committee chairpersons while preserving experienced
leadership.
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BOARD GOVERNANCE AND OPERATIONS (Continued)
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BOARD COMMITTEE MEETINGS AND FUNCTIONS
The following table shows for 2000 the members of each committee, the number of
committee meetings held and the functions performed by the committees.
BOARD COMMITTEE MEETINGS AND FUNCTIONS
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Committees Committee Functions
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AUDIT -- Recommends to the Board the selection of independent
Meetings: 4 public accountants
-- Reviews reports of independent and internal auditors
Samuel L. Ginn* -- Reviews and approves the scope and cost of all services
J. Bennett Johnston (including nonaudit services) provided by the firm selected
Condoleezza Rice to conduct the audit
Frank A. Shrontz -- Monitors the effectiveness of the audit process and
financial reporting
-- Reviews the adequacy of financial and operating controls
-- Monitors the corporate compliance program
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MANAGEMENT COMPENSATION -- Reviews and approves salaries and other compensation
Meetings: 4 matters for executive officers
-- Administers the Excess Benefits, Management Incentive,
Samuel H. Armacost* Long-Term Incentive and Salary Deferral plans for management
Carla A. Hills employees
Charles M. Pigott
Chang-Lin Tien
John A. Young
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PUBLIC POLICY -- Identifies, monitors and evaluates international social,
Meetings: 3 political and environmental issues
-- Recommends to the Board policies and strategies
Samuel H. Armacost concerning such issues
David J. O'Reilly
Samuel L. Ginn
Condoleezza Rice*
Frank A. Shrontz
John A. Young
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BOARD NOMINATING -- Reviews Chevron's corporate governance practices and
AND GOVERNANCE recommends changes as appropriate
Meetings: 5 -- Recommends changes to improve Board, Board Committee and
individual Director effectiveness
Carla A. Hills -- Assesses the size and composition of the Board
J. Bennett Johnston -- Recommends prospective director nominees
Charles M. Pigott* -- Periodically reviews the Stockholder Rights Plan
Chang-Lin Tien
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* COMMITTEE CHAIRPERSON
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AUDIT COMMITTEE REPORT
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The Audit Committee operates under a written charter adopted by your Board. The
charter is attached as Appendix A to this proxy statement. All members of the
Audit Committee meet the independence standards established by the New York
Stock Exchange (NYSE).
The Audit Committee assists your Board in fulfilling its responsibility to
oversee management's implementation of Chevron's financial reporting process. In
discharging its oversight role, the Audit Committee reviewed and discussed the
audited financial statements contained in the 2000 Annual Report on Form 10-K
with Chevron's management and independent auditor. Management is responsible for
the financial statements and the reporting process, including the system of
internal controls. The independent auditor is responsible for expressing an
opinion on the conformity of those financial statements with accounting
principles generally accepted in the United States.
The Audit Committee met privately with the independent auditor, and discussed
issues deemed significant by the auditor, including those required by Statements
on Auditing Standards No. 61 and No. 90 (Audit Committee Communications), as
amended. In addition, the Audit Committee discussed with the independent auditor
its independence from Chevron and its management, including the matters in the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and considered whether the
provision of nonaudit services was compatible with maintaining the auditor's
independence.
In reliance on the reviews and discussions outlined above, the Audit Committee
has recommended to your Board that the audited financial statements be included
in Chevron's Annual Report on Form 10-K for the year ended December 31, 2000,
for filing with the SEC.
Respectfully submitted on February 26, 2001, by the members of the Audit
Committee of your Board:
Samuel L. Ginn, Chairperson
J. Bennett Johnston
Frank A. Shrontz
Carl Ware
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DIRECTORS' COMPENSATION
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Chevron believes that non-employee Directors' compensation should provide total
compensation that is competitive, links rewards to business results and
stockholder returns and facilitates increased ownership of Chevron Stock.
Chevron does not have a retirement plan for non-employee Directors. Chevron's
executive officers are not paid additional compensation for their services as
Directors.
In 2000, compensation for non-employee Directors included the following stock
and cash elements:
STOCK COMPENSATION
An annual grant of 400 shares of restricted Chevron Stock is made under the
Chevron Restricted Stock Plan for Non-Employee Directors. The Plan provides that
the dividends attributable to the restricted shares may be paid in cash or used
by the Director to purchase additional shares of restricted Chevron Stock.
Annual awards under the Plan are subject to forfeiture if a non-employee
Director does not serve as a Chevron Director for a minimum of five years after
the award is granted. However, such forfeiture does not apply if a Director
dies, reaches mandatory retirement age, becomes disabled, changes primary
occupation or enters government service.
CASH COMPENSATION
- - $35,000 annual retainer (effective January 1, 2001, the annual retainer was
increased to $75,000)
- - $1,500 for each Board meeting attended
- - $1,500 for each Board Committee meeting attended
- - $1,500 for each Board Committee meeting chaired.
DEFERRALS OF CASH COMPENSATION
The Deferred Compensation Plan for Directors provides an opportunity for non-
employee Directors to defer payment of their directors' fees. Under the plan, a
non-employee Director may defer receipt of all or any portion of the annual
retainer and meeting fees. Deferrals may be credited into any of the investment
fund options available to participants in the Chevron Profit Sharing/Savings
Plan, including a Chevron Stock fund. Distribution from the plan is ultimately
made in cash.
Any deferred amounts remaining unpaid at the time of a Director's death are
distributed to the Director's beneficiary.
EXPENSES
Non-employee Directors are reimbursed for out-of-pocket expenses that they incur
in connection with the business and affairs of Chevron.
11
17
STOCK OWNERSHIP INFORMATION
- --------------------------------------------------------------------------------
The following table shows the ownership interest in Chevron Stock for each
Director, nominee and executive officer as of January 31, 2001. No Director,
nominee or executive officer owns 1 percent or more of the outstanding shares of
Chevron Stock, nor do the Directors and executive officers as a group.
DIRECTORS' AND EXECUTIVE OFFICERS' STOCK OWNERSHIP
- ----------------------------------------------------------------------------------------------------------------
Name Shares Currently Exercisable Restricted Stock
("-" denotes a non-employee Director) Owned (1) Options (2) Units (3)
- ----------------------------------------------------------------------------------------------------------------
Samuel H. Armacost- 8,340 0 0
Samuel L. Ginn- 3,708 0 2,845
Carla A. Hills- 3,904 0 0
J. Bennett Johnston- 1,708 0 0
Martin R. Klitten 26,557 233,600 2,400
Richard H. Matzke 52,447 253,500 17,991
David J. O'Reilly 26,894 320,900 2,400
Charles M. Pigott- 70,559 0 3,532
Peter J. Robertson 16,941 153,400 2,400
Frank A. Shrontz- 2,958 0 0
James N. Sullivan 23,122 256,600 0
Chang-Lin Tien- 1,600 0 0
Carl Ware- 0 0 0
John A. Young- 6,240 0 0
Directors and executive officers as a group (19 persons) 298,323 1,598,900 31,568
- ----------------------------------------------------------------------------------------------------------------
(1) For non-employee Directors the amounts shown include shares of restricted
Chevron Stock awarded under the Chevron Restricted Stock Plan for
Non-Employee Directors. For executive officers the amounts shown include
shares held for them in trust under the Profit Sharing/Savings Plan.
(2) These stock options were awarded under the Long-Term Incentive Plan and are
currently exercisable. SEC rules consider a person to be the beneficial
owner of shares of Chevron Stock if (a) he or she has a right to vote or
sell them or (b) can exercise an option to acquire them now or at some time
within the next 60 days.
(3) Restricted stock units do not carry voting rights and may not be sold. But
they represent economic ownership of Chevron Stock since their value
depends on the performance of Chevron Stock and they may ultimately be paid
in shares. For non-employee Directors, these are stock units awarded under
the Chevron Restricted Stock Plan for Non-Employee Directors. For executive
officers, these are stock units deferred under the Management Incentive
Plan, the Long-Term Incentive Plan and the Salary Deferral Plan.
- --------------------------------------------------------------------------------
OTHER SECURITY HOLDERS
Chevron does not know of any person who has or shares voting and/or investment
power with respect to more than 5 percent of the shares of Chevron Stock.
However, please refer to the information regarding Texaco Inc., 2000 Westchester
Avenue, White Plains, NY 10650, beginning on page 23 which describes an
arrangement under which Texaco may be deemed to be a beneficial owner of
approximately 16.5 percent of the shares of Chevron Stock.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires your Directors and
executive officers, to file with the SEC, the NYSE and Chevron reports of
initial ownership and reports of changes in ownership of Chevron equity
securities.
Based solely on a review of the reports furnished to Chevron, we believe that
during 2000 all of your Directors and executive officers complied with the
requirements.
12
18
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
MANAGEMENT COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Management Compensation Committee of the Board of Directors (the
"Committee") makes this report to help you understand the Committee's objectives
and the procedures used to determine the compensation of Chevron's Chief
Executive Officer and other senior Chevron executives.
The Committee, consisting of five of the nine non-employee Directors, is
responsible for Chevron's executive compensation program. All members of the
Committee qualify as "outside directors" under section 162(m) of the Internal
Revenue Code. In structuring Chevron's incentive programs, the Committee is
advised on plan design by external compensation consultants. Chevron's
compensation staff provides additional counsel, data and analysis as requested
by the Committee.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee believes that compensation of Chevron's key executives should:
- - link rewards to business results and stockholder returns;
- - encourage creation of stockholder value and achievement of strategic
objectives;
- - provide a total compensation opportunity that is competitive with major oil
companies, taking into account relative company size and performance as well
as individual experience, responsibility and performance;
- - maintain an appropriate balance between base salary and short- and long-term
incentive opportunity, with more compensation at risk at the higher salary
grades; and
- - attract and retain high caliber personnel on a long-term basis.
Chevron uses eight major oil companies as its competition when determining
competitive compensation practice: BP, Exxon Mobil, US Shell, Texaco, Conoco,
Marathon, Phillips and Equiva (the downstream Joint Venture between US Shell and
Texaco). The makeup of this peer group reflects the companies Chevron competes
with for overall human resources talent.
The four largest companies (BP, Exxon Mobil, Royal Dutch Shell and Texaco) are
the primary competition in the marketplace where Chevron operates and have
comprised the Competitor Peer Group for determining relative total stockholder
return ("TSR"), which is stock price appreciation plus dividends on a reinvested
basis. Royal Dutch Shell is used in place of US Shell because US Shell is not a
publicly traded company.
The pending merger of Chevron and Texaco, if consummated, will reduce the number
of competitor companies in the peer groups. Chevron's compensation staff
continues to monitor the competitive market, and will recommend modifications to
the peer groups as appropriate.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Chevron's existing executive compensation program consists of three elements:
Base Pay, Short-Term Incentives and Long-Term Incentives. For senior executives,
the Committee believes short- and long-term incentive pay, linked to Chevron's
financial performance, should represent half or more of their total compensation
opportunity.
Base Pay
- - The executive salary structure targets the average pay levels of the major oil
competitors. When establishing the salary structure, the Committee also
reviews non-oil pay information provided by its external consultant to ensure
compensation
13
19
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
opportunity is appropriate on a broad industry basis.
- - Executive salaries and proposed changes are reviewed and approved by the
Committee. Pay increases under the executive salary program are generally
administered on a common date (April 1), which is consistent with the increase
program for the general Chevron population.
- - Actual salaries vary by individual and are based on sustained performance
toward achievement of Chevron's goals, objectives and strategic intents. The
Committee also considers experience and current salary compared to market
rates when considering salary actions.
Short-Term Incentive (Management Incentive Plan)
- - The Management Incentive Plan (MIP) is an annual cash incentive plan which
links awards to performance results of the prior year. Individual target
awards vary by salary grade and are based on the competitive annual bonus
practices of major oil competitors. Actual individual awards vary from
approximately 200 percent of target to zero.
- - Awards are based on the Committee's assessments of performance vs. objectives
for two components: corporate results and operating company or
department/staff results. For certain individuals in operating company
positions, a third component of strategic business unit (SBU) results is also
used in the award determination process. Each component is weighted about the
same (either one-half or one-third) depending on whether or not an SBU
component is included. A leadership performance factor (LPF) is used as an
overall modifier to the component ratings. The LPF is based on personal
contribution in achieving business results and leadership behaviors
demonstrated in achieving the results. Performance assessments within each of
the components are aggregate judgments; there is no specific weighting formula
for each factor within a component.
- - Corporate, operating company and SBU financial and strategic objectives are
set at the beginning of each year. Financial objectives are developed for:
earnings, return on capital employed (ROCE), cash flow and operating expense.
Non-financial measures such as organizational safety performance versus
objectives and reliable operations metrics are also included in the evaluation
process. Results are measured against objectives and against major oil
competitor results.
- - An individual's key job responsibilities and objectives are also established
at the beginning of each year. Individual objectives include achievement of
business unit financial goals as well as targets related to business
operations (e.g., refinery throughput, production volumes, product quality,
safety, environmental performance, etc.). Performance assessments are also
made on other factors including diversity, leadership, teamwork,
communication, planning and organizing, creativity and innovation, and quality
improvement.
- - The corporate performance assessment is the same for all MIP participants.
Individuals will have different operating company, SBU and leadership
performance assessments.
Long-Term Incentive (Long-Term Incentive Plan)
- - The Long-Term Incentive Plan (LTIP) is designed specifically to link a
substantial portion of executive pay to increases in stockholder value.
Individual grants vary by
14
20
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
salary grade, and are based on valuations of grants made by the major oil
competitors (these valuations are provided by the Committee's external
consultant). Grants are typically in the form of non-qualified stock options
and performance units.
- - Non-Qualified Stock Options (NQSOs) are awarded at market price on the day of
grant, vest after one year, and have a ten-year term. Their ultimate value
depends entirely on appreciation of Chevron Stock. The Committee does not
grant discounted options.
- - Performance Units--The ultimate value of performance units (denominated in
shares of Chevron Stock) is tied to TSR as compared to TSRs for the peer group
competitors. Performance units have a three-year vesting period, with a
performance modifier based on relative TSR ranking that can vary from 0
percent to 150 percent, as determined by the Committee. If Chevron's TSR is
the lowest of the peer group competitors, the modifier is 0 percent; if
highest, the modifier is 150 percent. Moreover, if the difference between one
or more competitor's TSR and Chevron's TSR is less than one percent, the TSR
ranking modifiers are averaged. Payout is in cash and is equal to the number
of performance units, multiplied by the performance modifier, multiplied by
the 20-day trailing average price of Chevron Stock at the end of the
performance period.
EXECUTIVE STOCK OWNERSHIP
Chevron does not have formal stock ownership guidelines. Executives participate
in Chevron's Profit Sharing/Savings Plan (a broad-based employee stock ownership
and savings plan) which has a Chevron Stock fund account. They also have the
option to defer MIP awards and LTIP performance unit payouts into Chevron Stock
units. As a result of these opportunities, the average value of Chevron Stock
holdings of executives as a group is more than four times their annual salaries.
2000 CEO COMPENSATION
Base Pay
Mr. O'Reilly served as Vice Chairman of Upstream operations during 1999. Chevron
had a strong year in 1999, meeting or exceeding most of its operational targets,
especially in the upstream area. Worldwide liquids production and international
liquids production all established new records in 1999. Mr. O'Reilly assumed the
role of CEO on January 1, 2000. The Committee granted Mr. O'Reilly a salary
increase to $900,000 commensurate with his new role.
Short-Term Incentives (MIP)
In October, Chevron and Texaco announced a merger that will create a company,
ChevronTexaco Corporation, which would rank among the world's largest and most
competitive international energy companies. The combined company expects to
achieve annual savings of approximately $1.2 billion within six to nine months
of the merger completion.
Chevron reported record profits in 2000 as operational earnings climbed to $5.4
billion, over twice the yearly objective of $2.6 billion, and the 1999 results
of $2.3 billion. Higher crude and natural gas prices as well as improved U.S.
refining operations were the primary drivers for the increase. West Texas
Intermediate spot market oil prices averaged $30.34/bbl. in 2000, up 57 percent
from 1999. Henry Hub spot market natural gas prices averaged $4.23/MCF, 86
percent above last year's average. Operational ROCE was 21.7 percent. Through
nine months (for which competitor data is available), operational ROCE was 20.9
percent, which
15
21
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
placed Chevron first among the LTIP competitors.
Operating expense increased in 2000 to $6.06/bbl., up from $5.16/bbl. in 1999.
Absolute operating expense totaled $7.27 billion, up $1.18 billion from 1999 due
to rising fuel and transportation costs. Also contributing to the increase was
Chevron's strategy to increase well workovers in order to boost production to
capture higher prices and improve earnings. Since 1991, the year this metric was
established, annual operating expense has decreased 2 percent from $7.4 billion.
Upstream operations continue to grow and net worldwide oil and equivalent gas
production, worldwide liquids production and international liquids production
all established new records in 2000. Worldwide liquids production averaged
1,159,000 barrels a day in 2000, rising 2.8 percent over 1999. International
liquids production rose 4.4 percent above 1999 levels, aided by Chevron's
strategic acquisition of operations in Argentina and Thailand in 1999. The
worldwide net proved oil and equivalent-gas (OEG) reserves replacement ratio was
152 percent. This marks Chevron's eighth consecutive year of reserves
replacement in excess of 100 percent. Excluding sales and acquisitions, the
reserves replacement ratio is 132 percent. More than 175 million barrels added
to reserves were the result of successful discoveries in areas that included
Thailand, Argentina, Nigeria, Angola, the United Kingdom and the U.S. Gulf of
Mexico Shelf. In the North America Upstream business, the Gulf of Mexico Shelf
business unit drilled approximately 150 wells or about 50 percent more than
targeted for 2000. These efforts helped the business unit to offset the
historical well declines of 40 - 50 percent, and maintained a less than 2
percent decline in production. Chevron reached agreement with the Republic of
Kazakhstan to purchase an additional 5 percent stake in the Tengizchevroil joint
venture, increasing Chevron's share to 50 percent. The purchase was completed in
January 2001. Production from the Tengiz field during the 4th quarter averaged
approximately 280,000 barrels per day and is expected to average 260,000 barrels
per day during 2001.
U.S. Downstream operational earnings doubled in 2000. Although motor gasoline
sales volumes were about flat versus 1999 as consumers reacted to higher prices,
volumes remained more than 3 percent above 1998 levels. Marketing sales volumes
of jet and diesel increased 7 percent compared to 1999. Strong improvement was
achieved in non-fuel earnings, including convenience store and credit card
operations.
Caltex, the major component of Chevron's international downstream segment,
continued to streamline its organization in 2000, reducing manpower by over 4
percent during the year. Caltex's expansion into the fast-growing gas and power
market continued with the acquisition of two power plants and city gas companies
in Korea. Additionally, a major liquified petroleum gas terminal in China was
completed and became operational in early 2000.
In July, Chevron combined most of its chemicals operations with those of
Phillips Petroleum Company to form a 50/50 joint venture named Chevron Phillips
Chemical Company. The new company, with more than $6 billion in assets, is a
world-class competitor in the petrochemical industry. Synergies from the
combined operations are expected to reduce annual costs by $150 million, and
improve capital spending.
The merger of Chevron's equity affiliate, Dynegy Inc., with Illinova Corporation
was completed in February 2000. Chevron owns
16
22
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
26.5 percent of the combined company, and Chevron's share of Dynegy earnings in
2000 totaled $119 million, a 170 percent increase over 1999. In addition,
Chevron recorded an after-tax gain of $104 million in 2000 due to the increase
in book equity that resulted from public and employee stock offerings.
Chevron became the first petroleum company to enter the fast growing energy
services market with the formation of Chevron Energy Solutions. This new unit
will deliver customized, cost-reducing solutions to commercial and industrial
institutions worldwide. Chevron also entered into a number of Internet ventures
in 2000 to exploit the business-to-business e-commerce area in the petroleum and
related industries.
Based on Chevron's 2000 performance, the Committee granted Mr. O'Reilly a MIP
award of $2,000,000. The MIP awards granted to Mr. O'Reilly and to the other
four highest-paid officers for the past three performance years are presented in
the summary compensation table which follows this report.
Long-Term Incentives (LTIP)
Chevron's LTIP grants are made under the same determination rules for all LTIP
participants. Mr. O'Reilly received a stock option grant of 150,000, and 32,000
performance units from the Committee in 2000. Based on data provided by its
outside consultant, the Committee believes this grant is reasonable and well
within competitive practice for his level of responsibilities.
Mr. O'Reilly was granted 8,000 performance units in 1997 for the performance
period January 1, 1998 through December 31, 2000. Chevron's TSR of 5.0 percent
for this three-year period resulted in a performance unit payout of $195,376 to
Mr. O'Reilly.
Other
The Committee also notes that Mr. O'Reilly was allocated $18,317 from his
participation in Chevron's Profit Sharing/Savings Plan. The allocation to this
Plan was based on Chevron's 2000 income.
January 31, 2001
MANAGEMENT COMPENSATION COMMITTEE
S. H. Armacost, Chairperson
C. A. Hills C. M. Pigott
C. Tien J. A. Young
17
23
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------
Securities Vested Non-
Bonus($) Underlying Performance Stock All Other
Name and Salary (Year Options Units Award (1) Compensation (2)
Principal Position Year ($) Earned) (#) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------------
D. J. O'Reilly 2000 $862,500 $2,000,000 150,000 $195,375 $195,375 $ 86,047
Chairman 1999 $575,000 $ 720,000 150,000 $422,355 -- $ 32,132
1998 $469,167 $ 420,000 58,600 $399,920 -- $ 41,544
R. H. Matzke 2000 $670,833 $1,300,000 60,000 $195,375 $195,375 $ 66,924
Vice-Chairman 1999 $568,525 $ 750,000 60,000 $422,655 -- $ 31,875
1998 $527,500 $ 395,000 45,500 $399,920 -- $ 46,243
M. R. Klitten 2000 $502,892 $ 700,000 45,500 $195,375 $195,375 $ 49,594
Vice-President 1999 $485,000 $ 375,000 33,000 $422,655 -- $ 27,105
1998 $473,750 $ 315,000 33,000 $558,378 -- $ 41,462
P. J. Robertson 2000 $479,167 $ 700,000 33,000 $195,375 $195,375 $ 47,803
Vice-President 1999 $444,167 $ 470,000 33,000 $105,589 -- $ 24,933
1998 $415,000 $ 259,000 33,000 $141,481 -- $ 36,227
J. N. Sullivan 2000 $519,333 $ 750,000 -- $282,208 $282,208 $ 69,620
Retired Vice-Chairman 1999 $764,750 $ 685,000 60,000 $686,327 -- $ 42,877
1998 $735,000 $ 545,000 58,600 $958,298 -- $ 64,293
- ------------------------------------------------------------------------------------------------------------------
(1) Special award made by the Committee in January 2001 under the Long-Term
Incentive Plan for performance during 1998, 1999 and 2000.
(2) Includes Chevron's contributions to the Profit Sharing/Savings Plan and
allocations under the Excess Benefit Plan for the Profit Sharing/Savings
Plan. For 2000, contributions under the Profit Sharing/Savings Plan for the
five named individuals were as follows: D. J. O'Reilly, $18,317, R. H.
Matzke, $18,284, M. R. Klitten, $19,503, P. J. Robertson, $19,484, and J.
N. Sullivan, $18,284; and contributions under the Excess Benefit Plan for
the five named individuals were as follows: D. J. O'Reilly, $67,730, R. H.
Matzke, $48,640, M. R. Klitten, $30,091, P. J. Robertson, $28,319, and J.
N. Sullivan, $51,336.
- --------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLAN--2000 PERFORMANCE UNIT AWARDS TABLE
- --------------------------------------------------------------------------------
Number of Performance Estimated Future Payout (1)
Performance Period Until ------------------------------
Name Units Granted Payout Threshold Target Maximum
- ----------------------------------------------------------------------------------------------------------------------
D. J. O'Reilly......................................... 32,000 3 Years 12,000 32,000 48,000
R. H. Matzke........................................... 12,500 3 Years 4,688 12,500 18,750
M. R. Klitten.......................................... 9,700 3 Years 3,638 9,700 14,550
P. J. Robertson........................................ 7,000 3 Years 2,625 7,000 10,500
J. N. Sullivan......................................... -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
(1) The payout can vary depending on Chevron's TSR vs. its peer group
competitors. A performance modifier provides the incentive to maximize TSR
relative to the peer group competitors by modifying the payout value
(e.g., the modifier is 150 percent for the highest relative TSR and 0
percent for the lowest relative TSR). Payout (in dollars) is equal to the
number of performance units times a performance modifier based on relative
TSR times the 20-day trailing average price of Chevron Stock at the end of
the performance period.
- --------------------------------------------------------------------------------
18
24
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR TABLE
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Individual
Grants
Number of Percentage of
Securities Total NQSOs/SARs Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (1) 2000 (per Share) Date
- ---------------------------------------------------------------------------------
D. J. O'Reilly 150,000 8.6 $81.5000 10/25/10
R. H. Matzke 60,000 3.4 $81.5000 10/25/10
M. R. Klitten 45,500 2.6 $81.5000 10/25/10
P. J. Robertson 33,000 1.9 $81.5000 10/25/10
J. N. Sullivan -- -- -- --
Executive Plan
NQSO Stock Price/
Share $81.5000
All Optionees for
NQSOs 1,751,500
All Stockholders 641,042,642
Optionee Gain as %
of All
Stockholders'
Gain(2)
- ---------------------------------------------------------------------------------
- --------------------- --------------------------------------------------------
Potential Realizable Value After 10 Years
based on Assumed Compounded Annual
Rates of Stock Price Appreciation
Name 0% per Year 5% per Year 10% per Year
- --------------------- --------------------------------------------------------
D. J. O'Reilly $ -- $ 7,688,237 $ 19,483,502
R. H. Matzke $ -- $ 3,075,295 $ 7,793,401
M. R. Klitten $ -- $ 2,332,099 $ 5,909,995
P. J. Robertson $ -- $ 1,691,412 $ 4,286,370
J. N. Sullivan $ -- $ -- $ --
Executive Plan
NQSO Stock Price/
Share $81.5000 $ 132.7549 $ 211.3990
All Optionees for
NQSOs $ 89,772.979 $ 227,502,353
All Stockholders $32,856,584,257 $83,265,035,499
Optionee Gain as %
of All
Stockholders'
Gain(2) 0.3% 0.3%
- ---------------------------------------------------------------------------------
(1) NQSOs have a 10-year term and are 100 percent vested one year after the
date of grant. The exercise price is the fair market value on the date of
grant.
(2) Represents the potential aggregate increase in market capitalization of
Chevron based upon the 641,042,642 outstanding shares of Chevron Stock as
of December 31, 2000.
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Shares Unexercised Shares In-the-Money Shares
Acquired on Value ----------------------------- -----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------------
D. J. O'Reilly -- -- 320,900 150,000 $3,101,646 $441,000
R. H. Matzke 16,000 $ 902,848 253,500 60,000 $4,695,365 $176,400
M. R. Klitten -- -- 233,600 45,500 $5,300,064 $133,770
P. J. Robertson -- -- 153,400 33,000 $2,169,701 $ 97,020
J. N. Sullivan 172,200 $8,874,861 256,600 -- $3,162,654 $ --
- ---------------------------------------------------------------------------------------------------------------------------------
19
25
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
Years of Credited Service
-------------------------------------------------------------------------------------------------
Remuneration 25 30 35 40
- ---------------------------------------------------------------------------------------------------------------------------------
$1,000,000 $390,500 $ 458,000 $ 525,500 $ 681,700
$1,250,000 $488,100 $ 572,500 $ 656,900 $ 852,100
$1,500,000 $585,800 $ 687,000 $ 788,300 $1,022,600
$1,750,000 $683,400 $ 801,500 $ 919,600 $1,193,000
$2,000,000 $781,000 $ 916,000 $1,051,000 $1,363,500
$2,250,000 $878,700 $1,030,500 $1,182,400 $1,533,900
$2,500,000 $976,300 $1,145,000 $1,313,800 $1,704,400
- ---------------------------------------------------------------------------------------------------------------------------------
The table above illustrates the approximate annual pension that the named
executive officers in the Summary Compensation Table would receive under the
Chevron Retirement Plan and the Retirement Plan portion of the Excess Benefit
Plan if the plans remained in effect and the named executive officers retired at
age 65 and elected an individual life pension. However, because of changes in
the tax laws or future adjustments to benefit plan provisions, actual pension
benefits could differ significantly from the amounts set forth in the table.
Mr. Sullivan retired in September with 40 years of credited service. If the
other named executive officers remain employees until they reach age 65, the
years of credited service will be as follows: D. J. O'Reilly, 40 years; R. H.
Matzke, 40 years; M. R. Klitten, 39 years; and P. J. Robertson, 39 years. The
amounts set forth in the table above do not include modest reductions to reflect
the offset for federal social security benefits required by the Retirement Plan.
The Retirement Plan is a defined benefit pension plan. Eligible employees of
Chevron and consolidated subsidiaries automatically participate in the Plan and
start accruing benefits from their first day of employment. Eligible employees
become fully vested in their pension benefits after completing five years of
service.
Pension benefits are calculated on a "final average pay formula" based on the
length of credited service and the annual average of the highest 36 consecutive
months of earnings. For executive officers, earnings include MIP awards and
generally correspond with the combined amounts set forth in the "Salary" and
"Bonus" columns in the Summary Compensation table on page 18. The same 36
consecutive month period is used to determine the highest average earnings for
both salary and MIP awards.
The total pension benefit is equal to the sum of 1.4 percent of average earnings
(less $600) multiplied by years of credited service prior to July 1, 1971; plus
1.35 percent of average earnings multiplied by years of credited service after
June 30, 1971 and prior to July 1, 1986; plus 1.6 percent of average earnings
multiplied by years of credited service after June 30, 1986. The basic pension
is reduced by a portion of the federal social security benefit. Employees of
acquired companies might receive benefits calculated under different formulas
for their service under plans merged into the Retirement Plan. Benefits under
the Retirement Plan are payable monthly in the form of an individual life
pension upon retirement at age 65, although reduced benefits are available to
eligible employees who terminate employment before attaining age 65. Instead of
an individual life pension, eligible employees may elect to receive a 50 percent
20
26
EXECUTIVE COMPENSATION (Continued)
- --------------------------------------------------------------------------------
or 100 percent joint-and-survivor pension, or a lump sum payment. Other forms of
distribution are available under the Excess Benefit Plan.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
In the event of a change in control, executive officers of Chevron are generally
entitled to the following enhanced benefits:
- - unvested benefits under retirement plans become fully vested
- - outstanding stock options are converted into options of the surviving company
- - payouts on outstanding performance units must be at least equal to target
amounts
- - MIP bonuses for the year in which the change in control occurs must be at
least equal to target amounts.
If executive officers are terminated other than for cause (or resigns as a
result of a demotion), they will receive:
- - severance benefits up to a maximum of three years salary and MIP bonus
- - immediate vesting of any unvested stock options
- - immediate vesting on a pro rated basis for other incentive awards such as
performance units and MIP bonuses
- - gross up payments for excise tax liability, if any
- - insurance coverage protected for two years
- - a trust fund established to secure payment of any vested, but unpaid benefits.
As defined by the By-Law amendment, a "change in control" would occur if:
- - anyone acquired 20 percent or more of Chevron Stock (other than from Chevron
itself); or
- - the current Directors and those elected in normal circumstances cease to be a
majority; or
- - a merger or other business combination occurs and Chevron's stockholders
receive less than 55 percent of the resulting equity.
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EXECUTIVE COMPENSATION (Continued)
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PERFORMANCE GRAPH
The stock performance graph below was prepared from data provided by Standard &
Poor's Compustat group. It shows how an initial investment of $100 in Chevron
Stock would have compared to an equal investment in the S&P 500 Index or the
Competitor Peer Group indexes. The Competitor Peer Group companies are those
with which Chevron competes directly and against which for a number of years it
has measured its performance for purposes of calculating grants under its MIP
and its LTIP. The comparison covers a five-year period beginning December 31,
1995 and ending December 31, 2000 and is weighted by market capitalization as of
the beginning of each year. It includes the reinvestment of all dividends that
an investor would be entitled to receive, with the reinvestment made on the
ex-dividend trading date. The interim measurement points show the value of $100
invested on December 31, 1995 as of the end of each year between 1995 and 2000.
[PERFORMANCE GRAPH]
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1995 1996 1997 1998 1999 2000
- --------------------------------------------------------------------------------
Chevron Corp 100 128.45 157.00 174.36 187.35 188.42
S&P 500 Index 100 122.96 163.98 210.85 255.21 231.98
Peer Group #1 100 122.36 149.89 180.75 220.21 220.76
Peer Group #2 100 123.20 153.52 172.59 213.28 214.69
- --------------------------------------------------------------------------------
(*) Competitor Peer Group 1 is comprised of Amoco Corp. (96 - 98), Atlantic
Richfield Co., BP Amoco PLC-ADS (99 only), Exxon Mobil Corp., Mobil Corp.
(96 - 98) and Texaco Inc.
(**) To better reflect the primary competition in the marketplace where Chevron
operates, the Management Compensation Committee changed the Peer Group to
be Amoco Corp. (95 - 98), Atlantic Richfield Co., BP Amoco PLC-ADS (99
only), Exxon Mobil Corp., Mobil Corp. (95 - 98), Royal Dutch Petroleum--NY
Reg and Texaco Inc. The SEC's rules require Chevron to show the performance
of both of these Competitor Peer Groups for the five-year period from 1995
to 2000.
22
28
MATTERS RELATING TO TEXACO INC.
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THE PROPOSED MERGER
On October 15, 2000, Chevron entered into a merger agreement with Texaco.
Pursuant to the terms of this agreement, a subsidiary of Chevron will merge with
Texaco so that Texaco becomes a wholly owned subsidiary of Chevron, and Chevron
will change its name to ChevronTexaco. The merger is conditioned, among other
things, on stockholders' approval for both companies, pooling accounting
treatment for the merger and regulatory approvals of government agencies such as
the U.S. Federal Trade Commission.
Chevron and Texaco have filed a preliminary proxy statement/prospectus
concerning the proposed merger with the SEC. A definitive proxy statement will
be mailed to you when it becomes available seeking your approval of the proposed
merger. In addition, you will be able to obtain the document free of charge at
the website maintained by the SEC at www.sec.gov. Also, you may obtain documents
filed with the SEC by Chevron free of charge by requesting them in writing from
the Corporate Secretary, Chevron Corporation, 575 Market Street, San Francisco,
CA 94105, or by telephone at (415) 894-2965. We urge you to read the definitive
proxy statement/prospectus when it becomes available and any other relevant
documents filed with the SEC, because they will contain important information.
BENEFICIAL OWNERSHIP OF CHEVRON STOCK
In connection with the merger agreement, on October 15, 2000, Chevron and Texaco
entered into a Stock Option Agreement pursuant to which Chevron granted Texaco
an option to purchase up to 127,000,000 shares of Chevron Stock at $85.96. This
option becomes exercisable in the event that the merger agreement is terminated
under specific circumstances. Texaco has granted Chevron a substantially similar
stock option with respect to Texaco common stock. As a result of this option,
Texaco may be deemed to be the beneficial owner of 127,000,000 shares of Chevron
Stock which represents approximately 19.8 percent of Chevron's currently
outstanding common stock. If the option becomes exercisable and is exercised,
Texaco would own approximately 16.5 percent of the then outstanding shares of
Chevron Stock.
BUSINESS RELATIONSHIPS BETWEEN CHEVRON AND TEXACO
Chevron and its subsidiaries operate in many of the same or similar lines of
business as Texaco and its subsidiaries. As is typical in the oil and gas
industry, in 2000 numerous transactions occurred in the ordinary course of
business between Chevron and its subsidiaries and Texaco and its subsidiaries.
Similar transactions are expected to occur in 2001. The following is a summary
of the business relationships and transactions between Chevron and Texaco.
THE CALTEX GROUP OF COMPANIES
Chevron and Texaco each hold a 50 percent interest in the Caltex group of
companies, which consists of:
- - Caltex Corporation, which, through its subsidiaries and affiliates, conducts
refining, trading and marketing activities principally in Asia, Africa, the
Middle East, Australia and New Zealand;
- - P.T. Caltex Pacific Indonesia, an exploration and production company operating
in Indonesia; and
- - American Overseas Petroleum Limited, which, through its subsidiary, manages
operations in Indonesia.
Chevron and Texaco created the Caltex group of companies in 1936. For more
information
23
29
MATTERS RELATING TO TEXACO INC. (Continued)
- --------------------------------------------------------------------------------
about the Caltex group of companies, please see the financial statements and
related notes contained in the 2000 Annual Report.
FUEL AND MARINE MARKETING LLC (FAMM)
Chevron and Texaco formed FAMM in 1998. FAMM is a joint venture which purchases
residual fuel oil from Chevron and Texaco, including the residual fuel output of
Chevron's and Texaco's refineries worldwide, and other suppliers and markets
that fuel to marine vessel operators, power plants and other industrial users.
FAMM also conducts research, development and marketing of marine lubricants,
coolants and other maritime products. Texaco holds 69 percent of FAMM and
Chevron owns 31 percent. For more information about FAMM, please see the
financial statements and related notes contained in the 2000 Annual Report.
P.T. MANDAU CIPTA TENAGA NUSANTARA (MCTN)
Chevron and Texaco formed MCTN in 1998. MCTN is an Indonesian company which
provides steam and electricity supply for operations in Indonesia. Chevron and
Texaco each hold 47.5 percent of MCTN.
OTHER TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS
In addition to the foregoing business ventures, in 2000 Chevron and its
subsidiaries engaged in transactions with Texaco and its subsidiaries which
included crude oil purchases, sales of chemicals, sales of lube oils, sales of
mineral oils, sales and purchases of natural gas, services and various other
product purchases that amounted in aggregate to approximately $156 million.
24
30
INCREASE SHARES OF CHEVRON STOCK
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(Item 2 on the proxy form)
Your Board unanimously recommends amending Chevron's Restated Certificate of
Incorporation to increase the number of authorized shares of seventy-five cents
($0.75) par value common stock from two billion (2,000,000,000) to four billion
(4,000,000,000), subject to stockholder approval and consummation of the merger
between Chevron and Texaco. The resolution in its entirety states:
"RESOLVED: That subject to stockholder approval and consummation of the merger
between Chevron and Texaco, the Restated Certificate of Incorporation is hereby
amended by deleting in its entirety the first paragraph of the existing Article
IV of the Restated Certificate and substituting the following:
The total of shares of all classes of stock which the Corporation shall have
authority to issue is four billion one hundred million (4,100,000,000) of which
one hundred million (100,000,000) shares shall be Preferred Stock of the par
value of one dollar ($1.00) per share, and four billion (4,000,000,000) shares
shall be Common Stock of the par value of seventy-five cents ($0.75) per share."
As of the February 26, 2001 641,265,353 shares of Chevron Stock were outstanding
and 71,221,715 were held in treasury. The proposed amendment would not increase
the authorized number of shares of Preferred Stock. There are no shares of
Preferred Stock outstanding.
If you approve the increase in authorized shares, there will be approximately
3,288,000,000 authorized but unissued shares available for future utilization.
Approximately 712,000,000 shares will be issued. Although Chevron has no present
plan to issue any of the unissued shares except in connection with the proposed
merger between Chevron and Texaco, the additional shares would be available for
the declaration of stock splits, stock dividends, acquisitions and any other
proper corporate purpose. Chevron stockholders have no preemptive rights with
respect to the issuance of additional shares of Chevron Stock. Once authorized
in the Restated Certificate of Incorporation, your Board may issue shares of
Chevron Stock without further authorization by the stockholders unless Chevron
is required to obtain stockholder approval by applicable law or stock exchange
regulations.
The primary reason Chevron is seeking your approval to increase the number of
authorized shares is to facilitate a stock dividend or stock split at a later
date, without specific stockholder approval.
At the present time, Chevron has a sufficient number of authorized shares to
effectuate a stock split. However, if and when the merger with Texaco is
completed, the number of authorized but unissued shares of Chevron Stock will be
reduced. In addition, the number of shares needed to effectuate a stock split
will be increased. These effects will result from the issuance of Chevron Stock
to the Texaco stockholders in the merger. This proposed amendment will ensure
that Chevron has the authorized shares necessary to facilitate a stock split at
a later date following completion of the merger. This amendment will not become
effective until the merger with Texaco is completed. Furthermore, if the merger
with Texaco is not completed for any reason, the proposed amendment will be
abandoned and will not become effective notwithstanding your approval of the
amendment.
Chevron last split its stock in 1994. While Chevron has no present intent to
effect a stock split, if the proposal is adopted, it may do so at any time your
Board believes it to be
25
31
INCREASE SHARES OF CHEVRON STOCK (Continued)
- --------------------------------------------------------------------------------
in the best interests of Chevron and its stockholders.
Chevron could also use the additional shares for acquisitions when its shares
constitute an attractive "currency" for payment, such as with the pending merger
with Texaco, which contemplates the exchange 0.77 shares of Chevron Stock for
each outstanding share of Texaco common stock.
Chevron could use the additional shares in part to fund its broad-based profit
sharing plan or its incentive compensation plans for senior management. In
addition, the shares could be used to raise additional equity capital. However,
Chevron does not foresee the need to use the shares for these purposes.
The NYSE, on which Chevron Stock is listed, places some limitations on the use
of authorized stock, which Chevron plans to follow. These include the
requirement of stockholder approval for the issuance of shares to officers or
directors and in situations in which the number of new shares to be issued in an
acquisition or capital raising transaction would equal or exceed twenty percent
of the outstanding common stock. The purpose of these NYSE requirements is to
give stockholders control over events that could significantly dilute the value
of their equity interests or result in excessive compensation to corporation
insiders. Chevron plans to maintain the listing of its shares on the NYSE; and,
therefore, these NYSE protections will remain intact.
YOUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION.
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32
RATIFICATION OF ACCOUNTANTS
- --------------------------------------------------------------------------------
(Item 3 on the proxy form)
The Board's Audit Committee, which is composed entirely of non-employee
Directors, has selected PricewaterhouseCoopers LLP as independent public
accountants to audit the books, records and accounts of Chevron and its
subsidiaries for the year 2001. Your Board has endorsed this appointment.
PricewaterhouseCoopers LLP has audited the consolidated financial statements of
Chevron for many years and during the year ended December 31, 2000 provided both
audit and nonaudit services.
AUDIT FEES
Fees for the calendar year 2000 audit of Chevron's consolidated financial
statements and the reviews of quarterly reports on Form 10-Q were $5.0 million,
of which an aggregate amount of $3.5 million had been billed through December
31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Aggregate fees for financial information systems design and implementation were
$2.7 million during the year ended December 31, 2000.
ALL OTHER FEES
Aggregate fees billed for all other services rendered by PricewaterhouseCoopers
LLP during the year ended December 31, 2000 were $26.2 million. These services
included:
- - audits and reviews of certain financial and statistical information in
connection with contracts and other agreements;
- - assistance with 1933 Securities Act filings and accounting technical advice;
- - income tax consulting;
- - employee benefit advisory and administration services; and
- - other management consulting services.
All audit and nonaudit services provided by PricewaterhouseCoopers LLP are
approved by the Audit Committee, which considers whether the provision of
nonaudit services is compatible with maintaining the auditor's independence.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting, will have an opportunity to make statements if they desire, and will be
available to respond to appropriate questions.
If the stockholders do not approve the appointment of PricewaterhouseCoopers
LLP, the Audit Committee will select another firm of auditors for the ensuing
year.
YOUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
27
33
STOCKHOLDER PROPOSALS
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STOCKHOLDER PROPOSAL TO ELIMINATE BIOACCUMULATIVE HALOGENATED POLLUTANTS
(Item 4 on the proxy form)
WHEREAS:
PCBs, PBBs, dioxins, polybrominated diphenyl ethers (PBDEs) and many similar
chemicals containing chlorine or bromine are extremely toxic and bioaccumulate
in food and mother's milk to levels that cause effects in children and
disproportionately affect health in many communities of color;
The Environmental Protection Agency has found that any emission of these
extremely toxic pollutants is of concern, and many governments are working
toward their virtual elimination, however, companies are not required to develop
and report options for eliminating these pollutants under existing federal laws;
Exposure to these pollutants is associated with many health effects, which in
the case of dioxins may include cancer, diabetes, endometriosis, a range of
childhood learning problems, and other effects;
These pollutants are often created inadvertently, by reactions involving
chlorine or bromine, in many industrial processes;
Generating these pollutants is now known to be unnecessary and costly to
companies and economies, because their generation can be eliminated cost
effectively with sound planning based on sound information;
Processes used by Chevron refineries generate these pollutants, including PCBs
and dioxins, among the most toxic synthetic chemicals known, and Chevron's
mission to create superior value, and the company's goal to be an industry
leader in health performance, indicate that we should lead in sharing
information about the virtual elimination of these pollutants.
Therefore, be it resolved that the shareholders request that Chevron:
1. Adopt a plan for virtual elimination of bioaccumulative halogenated
pollutants at its major facilities which identifies, for each facility, all
inputs and uses of chlorine and bromine, any sources of dioxin and other
bioaccumulative pollutants containing these halogens in the facility, and
any options that may eliminate the generation of these pollutants and
2. Provide a summary report to shareholders on these virtual elimination
options annually.
SUPPORTING STATEMENT
This policy makes business sense because preventing pollution is cost effective
in the short term and avoids costly long-term liabilities related to toxic
chemical exposures.
Ethically this is the right thing for our company to do because children and
other family members are sick in disproportionately exposed communities near its
facilities, and our actions can prevent some exposures.
It will improve our company's image if Chevron goes beyond its existing policy
to minimize pollution and joins the new efforts for virtual elimination of toxic
and bioaccumulative pollutants.
28
34
STOCKHOLDER PROPOSALS (Continued)
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YOUR BOARD'S RECOMMENDATION AGAINST THE PROPOSAL TO ELIMINATE BIOACCUMULATIVE
HALOGENATED POLLUTANTS
Our existing Policy 530 and Protecting People and the Environment program
established in 1992, together with associated operating, communication and
management practices, address the concerns raised in the proposal. We have
continually anticipated and responded to heightened stakeholder expectations in
the areas of health, safety and the environment. We are proud of our efforts and
continue to work hard to ensure our policies, practices and plans in this area
remain unsurpassed.
Chevron does not directly manufacture products such as polychlorinated biphenyls
(PCB), polybrominated biphenyls (PBB), polybrominated diphenyl ethers (PBDE),
dioxin or other so-called bioaccumulative halogenated compounds. They are
present in the environment from a multitude of different sources. Because some
chlorine and bromine, which are precursors of these compounds, are present as
naturally occurring contaminants or in raw materials we use, it is possible that
extremely small quantities of these compounds might be formed and be emitted
from our industrial processes. However, we believe that these trace emissions do
not pose a real health risk to our employees or the communities around our
facilities.
Oil refineries are not a significant source of exposure to dioxin. A recent EPA
study tentatively concludes that dioxin exposure is remarkably uniform in the
U.S. population and depends primarily on dietary habits.
Our Policy 530 and Protecting People and the Environment program provide a
systematic approach for managing health, safety and environmental affairs.
Implementation of the pollution prevention element of the program commits our
facilities to have operational practices in place to identify, minimize and
prevent pollution. Practices include identification of potential sources of
emissions, assessment of exposures and health risks, and implementation of plans
to minimize or eliminate the emissions.
We are also complying with new U.S. Toxic Release Inventory requirements, which
for the year 2000 include the annual reporting of facility release data of
certain persistent toxic materials including bioaccumulative halogenated
pollutants. This information will be publicly available in 2001 from the EPA's
web site.
Policy 530 also commits us to work with public representatives and to encourage
the development of regulations that are based on sound science and consider
cost-benefit principles. We are supporting the development of EPA strategies for
bioaccumulative halogenated compounds. These strategies will help to quantify
possible sources of emissions, assess potential impacts and provide action plans
for priority sources.
We believe that our Policy 530 and Protecting People and the Environment program
address the concerns raised in this proposal.
YOUR BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
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35
STOCKHOLDER PROPOSALS (Continued)
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STOCKHOLDER PROPOSAL TO REPORT ON POTENTIAL ENVIRONMENTAL DAMAGE TO ANWR
(Item 5 on the proxy form)
WHEREAS: the Arctic National Wildlife Refuge (the "Refuge") is the only
conservation area in the nation that provides a complete range of Arctic and
sub-Arctic ecosystems balanced with a wide variety of wildlife, including large
populations of caribou, muskoxen, polar bears, snow geese and 180 species of
other migratory birds;
Interior Secretary Bruce Babbitt has likened drilling in the Refuge to damming
up the Grand Canyon;
The coastal plain of the Arctic Refuge is the only section of Alaska's entire
North Slope not open for oil and gas exploration and production;
RESOLVED, the Shareholders request that Board of Directors prepare a report, at
reasonable cost and omitting proprietary information, on the potential
environmental damage that would result from the company proceeding with plans to
drill for oil and gas in the coastal plain of the Arctic National Wildlife
Refuge. The report should also cover the financial costs of the plan and the
expected return.
SUPPORTING STATEMENT
"Ninety-five percent of Alaska's most promising oil-bearing lands are already
open for development, but it is imperative that we continue to protect the
wildlife, fish and wilderness that make up the rest of this invaluable part of
our American heritage." --President Jimmy Carter (1995)
Once part of the largest intact wilderness area in the United States, America's
Arctic now hosts one of the world's largest industrial complexes. Oil companies
already have access to 95 percent of the North Slope. More than 1500 miles of
roads and pipelines and thousands of acres of industrial facilities sprawl over
some 400 square miles of once pristine arctic tundra. Oil operations on the
North Slope annually emit roughly 43,000 tons of oxides of nitrogen, which
contribute to smog and acid rain.
The coastal plain is the biological heart of the Refuge, to which the vast
Porcupine River caribou herd migrate each spring to give birth. The Department
of Interior has concluded that development in the coastal plain would result in
major adverse impacts on the caribou population. According to the Alaska
Department of Fish and Game caribou inhabiting the oil fields do not thrive as
well as members of the same herd that seldom encounter oil-related facilities.
The coastal plain is the most important onshore denning area for the entire
South Beaufort Sea polar bear population and serves as crucial habitat for
muskoxen and for at least 134 bird species that gather there for breeding,
nesting and migratory activities.
Balanced against these priceless resources is the small potential for
economically recoverable oil in the coastal plain. In fact the most recent
federal estimate predicted that only 2.4 billion barrels would be economically
recoverable in the coastal plain--less than 6 months worth of oil for the United
States.
Vote YES for this proposal which will improve our Company's reputation as a
leader in environmentally responsible energy recovery.
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36
STOCKHOLDER PROPOSALS (Continued)
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YOUR BOARD'S RECOMMENDATION AGAINST THE PROPOSAL TO REPORT ON POTENTIAL
ENVIRONMENTAL DAMAGE TO ANWR
We believe that opening the ANWR Coastal Plain to oil and gas operations would
be a responsible step in implementing a comprehensive national energy policy,
more fully described on our web site at www.chevron.com. It would help assure
secure U.S. energy supplies, which are necessary to support economic growth and
an improved quality of life. Allowing access to ANWR's resources would
acknowledge that recent advancements in technology permit discovery and
development of energy resources with minimal environmental impact, and it would
represent a new national commitment to reasonable and balanced use of the
country's resources.
The ANWR Coastal Plain could hold more oil than Prudhoe Bay, the largest U.S.
field. The U.S. Geological Survey's 1998 estimate of in-place reserves in the
ANWR Coastal Plain area ranges from 11.6 to 31.5 billion barrels of oil, and as
much as 14.5 trillion cubic feet of gas. At its peak Prudhoe Bay area production
represented 30 percent of present day U.S. oil production. We believe that ANWR
Coastal Plain production could be equally significant as a secure energy source.
Producing these reserves would offer major economic benefits for the U.S., which
currently imports more than 50 percent of its oil and is increasingly dependent
on natural gas imports. ANWR Coastal Plain production would help reduce this
dependency and the related trade deficit. It would also earn the U.S. Treasury
billions of dollars a year from lease sales and production royalties. Opening
the ANWR Coastal Plain would mean jobs. A large oil discovery could create
several hundred thousand jobs across the country to support development efforts.
Should oil and gas operations in the ANWR Coastal Plain be allowed, they would
be carried out in a manner compatible with the environment and wildlife. Many
decades of exploration and production operations in arctic Alaska--much of it
next door at the Prudhoe Bay field--confirm this. These operations have not
harmed the area's caribou population--in fact they have thrived. The central
Arctic caribou herd that grazes in the Prudhoe Bay field is several times larger
than when oil development began in the early 1970s. State biologists estimate
the herd has swelled to 27,000, up 35 percent from 1997.
We have already explored in the area on lands leased from the native-owned
Arctic Slope Regional Corporation, under plans reviewed by the U.S. Fish and
Wildlife Service as well as other state and federal agencies. These plans
ensured that our work would not have a significant adverse effect on the
wildlife, its habitat or the environment. We would conduct any future operations
on the ANWR Coastal Plain in a similarly responsible manner. Exploration in the
Arctic is conducted during the winter months using ice roads and ice pads, which
melt and are virtually undetectable by summer. Well pad designs and new
directional and extended reach drilling technology allow numerous production
wells to be drilled at an angle from a single small gravel pad.
We are confident both economic and environmental stewardship can be achieved in
ANWR. We are expressly committed to conducting our business in a socially
responsible and ethical manner that protects safety, health and the environment.
This commitment is spelled out in our Policy 530 and Protecting People and the
Environment program. Our operations in some of the most sensitive environments
in the world evidence this commitment.
We believe that oil and gas development in the ANWR Coastal Plain can take place
in a responsible manner, without degradation to the environment, and will help
to fulfill the nation's need for additional dependable energy supplies.
YOUR BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
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STOCKHOLDER PROPOSALS (Continued)
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STOCKHOLDER PROPOSAL TO REPORT ON GREENHOUSE GAS EMISSIONS
(Item 6 on the proxy form)
WHEREAS:
The overwhelming majority of independent, peer-reviewed atmospheric scientists
agree that global warming is a real, existing problem, posing serious challenges
to our country;
The Intergovernmental Panel on Climate Change, composed of more than 2000
government selected scientists, warns that global warming caused by burning
fossil fuels and emitting greenhouse gases is already under way;
More frequent and deadly heat waves have claimed the lives of increasing numbers
of poor, asthmatic and elderly people nationwide;
Spring comes a week earlier across the Northern Hemisphere than it did 30 years
ago;
Severe rainstorms have grown by almost 20%;
The Arctic ice sheet is in many places 40 inches thinner than its normal 10 ft;
Warmer waters have bleached coral reefs around the globe;
Glaciers are melting;
Sea levels are rising.
WE BELIEVE:
In order to leave the children of the world a safe and healthy environment, and
protect threatened plants and animals, it is time for Chevron to live up to its
responsibility as a producer of the pollution which causes global warming. A
variety of companies including Enron, BP Amoco, 3M, Toyota and others have
stated that they "accept the views of most scientists that enough is known about
the science and environmental impacts of climate change for us to take actions
to address its consequences." These companies are preparing for the future now
by taking the concrete steps necessary to assess their opportunities for
reducing the amount of carbon pollution they produce. Failing to rise to the
challenge set by these industry leaders will hurt our company's competitiveness
and cost our shareholders increasing amounts of money.
RESOLVED: that the shareholders of Chevron request that the Board of Directors
report (at reasonable costs and omitting proprietary information), to
shareholders by August 2001, on the greenhouse gas emissions from our company's
own operations and products, including (with dollar amounts where relevant) (i)
what our company is doing in research and/or action to reduce those emissions
and ameliorate the problem, and (ii) the financial exposure of our company and
its shareholders due to the likely costs of reducing those emissions for damages
associated with climate change.
SUPPORTING STATEMENT
We believe that Chevron is exposing its shareholders to financial risk by
continuing to produce unnecessary amounts of the pollution which causes global
warming, even as the problem of climate change becomes more severe, more widely
understood, and more likely to lead to legislation that will penalize excessive
carbon polluters. Furthermore, we believe that our company is using shareholder
money for advertising and lobbying to suggest that the problem of global warming
is exaggerated, not real, or too costly to deal with; and thus using our
prestige and influence to obstruct efforts to address climate change.
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38
STOCKHOLDER PROPOSALS (Continued)
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YOUR BOARD'S RECOMMENDATION AGAINST THE PROPOSAL TO REPORT ON GREENHOUSE GAS
EMISSIONS
We are concerned about the possible effects of climate change on future
generations. That's why our Policy 530 and Protecting People and the Environment
program obligate us to reduce our energy use and greenhouse gas emissions, as
described in our statement, "Position On Global Climate Change," on our web
site, www.chevron.com.
We understand the concerns about the greenhouse gases emitted during combustion
of fossil fuels, but we also must provide energy products vital to the growth of
the world's economies. We believe we are doing our part to slow the worldwide
increase in greenhouse gas emissions through efforts such as these:
- - In 2001, we are improving our tracking of greenhouse gas emissions to produce
more accurate baselines against which we can benchmark future efforts to
reduce emissions.
- - Our emissions per unit of production have declined over the past five years.
- - Our total greenhouse gas emissions in the developed countries are declining
and are currently more than 10 percent below 1990 levels.
- - Since 1991, Chevron has improved overall energy efficiency by about 17
percent.
- - We are leading billion-dollar-plus efforts to reduce gas flaring from our
operations in Africa. Our Escravos Natural Gas Project in Nigeria has the
capacity to process about 300 million cubic feet per day of gas that otherwise
would be flared. Also we are designing the West Africa Gas Pipeline that will
reduce emissions by an additional 100 million metric tons over its 20-year
project life.
- - We are co-sponsoring a project to develop new carbon dioxide separation and
geologic sequestration technology, and we are developing hydrocarbon fuels and
reformer technology for fuel cells.
- - We are working with U.S. governmental officials to establish incentives for
companies to develop and receive credit for projects that reduce greenhouse
gas emissions. We do not directly support organizations that claim global
warming is unimportant.
We believe that our Policy 530 and Protecting People and the Environment program
and our current operational, reporting and management practices address the
issues raised in this proposal.
YOUR BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
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39
SUBMISSION OF FUTURE STOCKHOLDER
PROPOSALS
- --------------------------------------------------------------------------------
Chevron's Restated Certificate of Incorporation precludes taking action on any
proposal that is not included in the proxy statement unless the Board decides to
waive the restriction.
If a stockholder wishes to present a proposal for action at the Annual Meeting
of Stockholders in 2002, the proponent and the proposal must comply with the
proxy proposal submission rules of the SEC. One of the requirements is that the
proposal be received by the Corporate Secretary no later than November 21, 2001.
Proposals we receive after that date will not be included in the proxy statement
or acted upon at the 2002 Annual Meeting. We urge stockholders to submit
proposals by Certified Mail--Return Receipt Requested.
You may obtain a copy of the current rules for submitting stockholder proposals
from the SEC at:
U.S. Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, DC 20549
or through the Commission's internet site: www.sec.gov. Request SEC Release No.
34-40018, May 21, 1998.
Chevron prints qualifying proposals in the proxy statement in the form that we
receive them. We do not print the name, address and share ownership of the
stockholder submitting a qualifying proposal but will promptly send the
information upon oral or written request.
OTHER MATTERS
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Your Board does not know of any other matter that will be presented for
consideration at the 2001 Annual Meeting. Unless your Board otherwise permits,
only the matters described in this Notice of the 2001 Annual Meeting and the
2001 Proxy Statement will be voted upon at the Annual Meeting. If any other
matter does properly come before the 2001 Annual Meeting, the proxy holders will
vote on it as they think best unless you direct otherwise in your proxy
instruction.
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INFORMATION ABOUT THE MEETING
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We will hold the Annual Meeting at the Los Angeles Marriott Downtown in Los
Angeles, California.
Stockholders must present a ticket to be admitted to the Annual Meeting. For
stockholders of record, your admission ticket is the detachable portion of your
proxy form.
For stockholders who hold shares through a brokerage firm, bank or other holder
of record, your ticket is the copy of your latest account statement showing your
Chevron Stock balance. Please present your account statement to the registration
area at the Annual Meeting.
Parking validation will be provided in the registration area.
We will have headsets available at the Annual Meeting for stockholders with
impaired hearing. If you require other special accommodations at the Annual
Meeting due to a disability, please identify your specific need in writing to
the Corporate Secretary, Chevron Corporation, 575 Market Street, San Francisco,
CA 94105 by April 13, 2001.
Directions to the Los Angeles Marriott Downtown
FROM THE WEST
Take Santa Monica Freeway (10) East to Harbor Freeway (110) North; Exit 9th
Street (one way into downtown); Turn left onto Figueroa
FROM THE VALLEY
Take Hollywood Freeway (101) or Golden State Freeway (5) South to Harbor Freeway
(110) South; Exit Wilshire Boulevard; Turn left onto Wilshire; Turn left onto
Figueroa
FROM THE EAST
Take the San Bernardino Freeway (10) or Pomona (60) West to Santa Monica Freeway
(10) to; Harbor Freeway (110) North; Exit 9th Street (one way into downtown);
Turn left onto Figueroa
FROM ORANGE COUNTY
Take the Santa Ana (5) Freeway, North to the Santa Monica Freeway (10) West;
Harbor Freeway (110) North; Exit 9th Street (one way into downtown); Turn Left
onto Figueroa
[CHEVRON LOGO]
YOUR VOTE IS IMPORTANT
PLEASE VOTE AS SOON AS POSSIBLE
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APPENDIX A: AUDIT COMMITTEE CHARTER
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Committee Charter
AUDIT COMMITTEE
(Committee of the Board of Directors)
Membership:
S. Ginn, Chairman
J. Bennett Johnston
C. Rice
F. A. Shrontz
Secretary, J. A. Aleveras
PURPOSE
The Audit Committee's purpose is to assist the Board of Directors in fulfilling
its responsibility to oversee management's implementation of Chevron
Corporation's financial reporting process.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Corporation and the power to retain outside
counsel, auditors, or other experts for this purpose.
The Committee's function is one of oversight recognizing that the Corporation's
management is responsible for preparing the Corporation's financial statements,
and the independent auditor is responsible for auditing those statements. In
carrying out its oversight responsibilities, the Committee is not providing any
expert or special assurance as to the Corporation's financial statements or any
professional certification as to the independent auditor's work.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the Board,
and its membership shall meet the qualification requirements of the New York
Stock Exchange Listed Company Manual.
Accordingly,
1. Members shall have no relationship to the Corporation that may interfere with
the exercise of their independence from management and the Corporation; and
2. Members shall be financially literate or become financially literate within a
reasonable period of time after appointment to the Committee; and
3. At least one member of the Committee shall have accounting or related
financial management expertise.
RESPONSIBILITIES
The following shall be the common recurring responsibilities of the Committee in
carrying out its oversight function. These responsibilities are set forth below
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
1. Subject to ratification by the Board and the shareholders of the Corporation,
the Committee shall select and employ a firm of certified public accountants
to serve as the independent auditor. The independent auditor is ultimately
responsible to the Board and the Committee. The independent auditor shall
audit the books and accounts of the Corporation and its
A-1
42
APPENDIX A: AUDIT COMMITTEE CHARTER
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subsidiaries for the fiscal year for which it is appointed.
2. The Committee shall review and discuss with management and the independent
auditor the audited financial statements to be included in the Corporation's
Annual Report on Form 10-K (or the Annual Report to Shareholders if
distributed prior to the filing of the Form 10-K).
3. The Committee shall review and discuss with the independent auditor the
matters required to be discussed by Statements on Auditing Standards No. 61
and No. 90 (Audit Committee Communications).
4. As a whole, or through the Committee chair, the Committee shall review and
discuss with management and the independent auditor the Corporation's interim
financial results to be included in the Corporation's quarterly reports filed
with the Securities and Exchange Commission, and the matters required to be
discussed by Statements on Auditing Standards No. 61 and No. 90. This review
shall occur prior to the Corporation's filing of the Form 10-Q.
5. Regarding auditor independence, the Committee shall:
-- request annually from the independent auditor a formal written
statement delineating all relationships between the auditor and the
Corporation consistent with Independence Standards Board Standard
Number 1;
-- discuss with the independent auditor any such disclosed relationships
and their impact on the auditor's independence; and
-- recommend that the Board take appropriate action in response to the
independent auditor's report to satisfy itself of the auditor's
independence.
6. The Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Corporation's annual
stockholders' meeting proxy statement.
7. The Committee shall review the annual findings of the Corporate Compliance
Committee regarding adherence to corporate policies and review processes in
place relating to training, monitoring, and reporting of policy compliance.
The Committee shall communicate the findings and status of the Corporate
Compliance Committee to the Board.
PROCEDURES
The Chairman of the Committee shall establish such rules as may from time to
time be necessary and proper for the conduct and business of the Committee.
APPROVED: Board of Directors
DATE: May 31, 2000
A-2
43
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CHEVRON CORPORATION
The undersigned stockholder of Chevron Corporation hereby appoints Samuel H.
Armacost, Carla A. Hills and David J. O'Reilly, and each of them, proxy holders
of the undersigned each with the power of substitution to represent and to vote
all the shares of Common Stock of Chevron Corporation held of record by the
undersigned on February 26, 2001, at Chevron's Annual Meeting of Stockholders to
be held on April 25, 2001, and any adjournment thereof. The proxy holders will
vote as directed by the undersigned. If the undersigned gives no directions, the
proxy holders will vote in accordance with the Board's recommendations. The
proxy holders will vote on such other matters as may properly come before the
meeting unless the undersigned strikes out this sentence.
(Continued, and to be marked, dated and signed, on the other side)
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44
[CHEVRON LOGO]
Dear Stockholder:
The top portion of this card is your 2001 Chevron Corporation proxy. It is
important that you vote your shares. You may vote by telephone, by the Internet
or by mail. If you wish to vote by telephone or by the Internet, instructions
are printed on the reverse side of this card. If you wish to vote by mail,
mark, sign, date and return the proxy (the top portion of this card) using the
enclosed envelope.
The lower portion of this card is your 2001 Annual Meeting Ticket. I invite you
to attend Chevron's 2001 Stockholders' Meeting at the Los Angeles Marriott
Downtown, 333 South Figueroa Street, Los Angeles, California. Please bring this
ticket with you to the Stockholders' Meeting. It is your admission ticket.
Sincerely,
Lydia I. Beebe
Corporate Secretary
2001 ANNUAL STOCKHOLDERS' MEETING TICKET CHEVRON
- Meeting Date: April 25, 2001
- Meeting Time: 9:30 a.m. (doors open at 8:30 a.m.)
- Meeting Location: Los Angeles Marriott Downtown
333 South Figueroa Street
Los Angeles, California
This is your admission ticket.
Please have it out and available when you enter the meeting.
Note: Cameras, tape recorders, cell phones, etc. will not be allowed in the
meeting, other than for Company purposes. A checkroom will be provided. For
your protection, all briefcases, purses, packages, etc. will be subject to an
inspection as you enter the meeting. We regret any inconvenience this may cause
you.
(See reverse side for additional information.)
45
YOUR BOARD RECOMMENDS FOR AND YOUR PROXY HOLDERS WILL VOTE FOR THE ELECTION OF
THE FOLLOWING DIRECTORS UNLESS YOU DIRECT OTHERWISE:
1.Election of Directors 1)S. H. Armacost 6)D. J. O'Reilly
2)S. L. Ginn 7)F. A. Shrontz
3)C. A. Hills 8)C. Ware
4)J. B. Johnston 9)J. A. Young
5)R. H. Matzke
To vote for all nominees, To withhold authority to vote for
check this box. [ ] all nominees, check this box [ ]
To withhold authority to vote for any individual nominee while voting for the
remainder, write that nominee's name in the following space: __________________
YOUR BOARD RECOMMENDS FOR AND YOUR PROXY HOLDERS WILL VOTE FOR THE FOLLOWING
UNLESS YOU DIRECT OTHERWISE:
2. Increase Shares of Chevron Stock For [ ] Against [ ] Abstain [ ]
3. Ratification of Accountants For [ ] Against [ ] Abstain [ ]
YOUR BOARD RECOMMENDS AGAINST AND YOUR PROXY HOLDERS WILL VOTE AGAINST THE
FOLLOWING STOCKHOLDER PROPOSALS UNLESS YOU DIRECT OTHERWISE:
4. Eliminate Bioaccumulative Halogenated Pollutants For [ ] Against [ ] Abstain [ ]
5. Report on Potential Environmental Damage to ANWR For [ ] Against [ ] Abstain [ ]
6. Report on Greenhouse Gas Emissions For [ ] Against [ ] Abstain [ ]
By checking the box to the right, I consent to future access of
the Annual Reports, Proxy Statements, Prospectuses and other
communications electronically via the Internet. I understand that
Chevron may no longer distribute printed materials to me for any
future stockholders' meeting until such consent is revoked. I [ ]
understand that I may revoke my consent at any time by contacting
the Chevron's transfer agent, Mellon Investor Services LLC,
Ridgefield, NJ. I also understand that costs normally associated
with electronically access, such as usage and telephone charges,
will be my responsibility.
Signature(s)
______________________________________________________Date____________
Please sign your name exactly as it appears hereon. When signing for shares that
are owned jointly, each stockholder please sign. When signing as an executor,
administrator, trustee, custodian or guardian, please give your full title. When
signing on behalf of a corporation, please sign in the full corporate name by an
authorized officer.
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- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXY HOLDERS TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
- ---------------------------------- ------------------------------------ --------------------------
INTERNET TELEPHONE MAIL
HTTP://WWW.PROXYVOTING.COM/CHV/ 1-800-840-1208
Use the Internet to vote your Use any touch-tone telephone to Mark, sign and date
proxy. Have your proxy card in vote your proxy. Have your proxy your proxy card
hand when you access the web OR card in hand when you call. You will OR and
site. You will be prompted to enter be prompted to enter your control return it in the
your control number, located in number, located in the box below. enclosed postage-paid
the box below, to create and sub- and then follow the directions given. envelope.
mit an electronic ballot.
- ---------------------------------- ------------------------------------ --------------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT: WWW.CHEVRON.COM
(HTTP://WWW.CHEVRON.COM)