FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of: February, 2019 | Commission File Number: 1-12384 |
SUNCOR ENERGY INC.
(Name of registrant)
150 6th Avenue S.W.
P.O. Box 2844
Calgary, Alberta
Canada, T2P 3E3
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F o Form 40-F ý
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SUNCOR ENERGY INC. | |||
Date: February 28, 2019 |
By: |
/s/ SHAWN POIRIER |
Exhibit
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Description of Exhibit | ||
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99.1 |
Notice of Meeting, Invitation to Shareholders and Management Proxy Circular, dated February 28, 2019 | ||
99.2 |
Form of Proxy |
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99.3 |
Notice of Annual General Meeting and Notice of Availability of Proxy Materials |
Notice of Meeting, Invitation to Shareholders and Management Proxy Circular, dated February 28, 2019
![]() MANAGEMENT PROXY CIRCULAR Notice of 2019 Annual General Meeting To be held on May 2, 2019 Suncor Energy Inc. |
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CONTENTS |
1 | Invitation to Shareholders | |
2 | About this Management Proxy Circular | |
3 | Voting and Proxies: Questions and Answers | |
6 | Business of the Meeting | |
6 | Financial Statements | |
6 | Election of Directors | |
12 | Appointment of Auditor | |
13 | Advisory Vote on Approach to Executive Compensation | |
14 | Board of Directors Compensation | |
19 | Executive Compensation | |
19 | Letter to Shareholders | |
21 | Compensation Discussion and Analysis | |
44 | Compensation Disclosure of Named Executive Officers | |
50 | Termination Agreements and Change of Control Arrangements | |
52 | Indebtedness of Directors, Executive Officers and Senior Officers | |
52 | Summary of Incentive Plans | |
56 | Claw Back Policy | |
56 | Directors' and Officers' Insurance | |
56 | Advance Notice By-Law | |
57 | Corporate Governance | |
57 | Additional Information | |
57 | Advisories | |
A-1 | Schedule A: Named Executive Officers' Outstanding Option-Based Awards and Grant Date Fair Values for Share-Based Awards | |
B-1 | Schedule B: Corporate Governance Summary | |
C-1 | Schedule C: Position Description for Independent Board Chair | |
D-1 | Schedule D: Director Independence Policy and Criteria | |
E-1 | Schedule E: Board Terms of Reference | |
F-1 | Schedule F: Change of Auditor Reporting Package | |
NOTICE OF ANNUAL GENERAL MEETING OF
SHAREHOLDERS OF SUNCOR ENERGY INC.
The annual general meeting of shareholders of Suncor Energy Inc. (the Corporation) will be held on May 2, 2019, in the Crystal Ballroom at the Fairmont Palliser Hotel, 133 Ninth Avenue S.W., Calgary, Alberta, at 10:30 a.m. Mountain Daylight Time (MDT).
The meeting will have the following purposes:
The accompanying management proxy circular provides detailed information relating to the matters to be dealt with at the meeting and forms part of this notice.
Shareholders are encouraged to express their vote in advance by completing the form of proxy or voting instruction form provided to them. Detailed instructions on how to complete and return proxies are provided on pages 3 to 5 of the accompanying management proxy circular. To be effective, the completed form of proxy must be received by our transfer agent and registrar, Computershare Trust Company of Canada, Proxy Department, 135 West Beaver Creek, P.O. Box 300, Richmond Hill, Ontario, L4B 4R5, at any time prior to 10:30 a.m. MDT on April 30, 2019 or, in the case of any adjournment or postponement of the meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the time of the adjourned or postponed meeting.
Shareholders may also vote their shares by telephone or through the internet using the procedures described in the form of proxy or voting instruction form.
Shareholders registered at the close of business on March 11, 2019 will be entitled to receive notice of and vote at the meeting.
By order of the Board of Directors of Suncor Energy Inc.
Arlene Strom
Senior Vice President, General Counsel and Corporate Secretary
February 28, 2019
Calgary, Alberta
INVITATION TO SHAREHOLDERS
Dear Shareholder:
On behalf of the board of directors (the Board), management and employees of Suncor Energy Inc. (the Corporation), we invite you to attend our annual general meeting of shareholders on May 2, 2019, to be held in the Crystal Ballroom at the Fairmont Palliser Hotel, 133 Ninth Avenue S.W., Calgary, Alberta, at 10:30 a.m. Mountain Daylight Time.
The items of business to be considered at this meeting are described in the Notice of Annual General Meeting of Shareholders of Suncor Energy Inc. and the accompanying management proxy circular. The contents of the management proxy circular have been approved by the Board.
Your participation at this meeting is very important to us. We encourage you to vote by following the instructions in the form of proxy or voting instruction form provided to you. Following the formal portion of the meeting, management will review the Corporation's operational and financial performance for 2018 and provide an outlook on priorities for 2019 and beyond. You will also have an opportunity to ask questions and to meet the directors and executives.
Many of our public documents, including our 2018 Annual Report, are available in the Investor Centre on our website located at www.suncor.com. We encourage you to visit our website during the year for information about the Corporation, including news releases and investor presentations. To ensure you receive all the latest news relating to the Corporation, including the speeches of senior executives, you can use the 'Email Alerts' subscribe feature on the Corporation's website. Additional information relating to the Corporation is available under the Corporation's profile on SEDAR at www.sedar.com.
We look forward to seeing you at the meeting.
Yours sincerely,
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Michael M. Wilson Chair of the Board |
Steven W. Williams Chief Executive Officer |
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 1
ABOUT THIS MANAGEMENT PROXY CIRCULAR
You are invited to attend the annual general meeting (the meeting) of shareholders of Suncor Energy Inc. to be held in the Crystal Ballroom at the Fairmont Palliser Hotel, 133 Ninth Avenue S.W., Calgary, Alberta, on May 2, 2019, at 10:30 a.m. Mountain Daylight Time (MDT) for the purposes indicated in the Notice of Annual General Meeting.
Suncor's management proxy circular includes important information regarding the matters to be acted upon at the meeting, and our compensation practices for and compensation of the board of directors of Suncor (the Board or Board of Directors) and Suncor's Named Executive Officers (as defined on page 21) for the year ended December 31, 2018.
This management proxy circular is dated February 28, 2019, and all information contained in this management proxy circular is given as of such date, unless stated otherwise.
In this management proxy circular, references to "Suncor", the "Corporation", the "company", "our" or "we" mean Suncor Energy Inc., its subsidiaries, partnerships and joint arrangements, unless the context otherwise requires.
Forward-Looking Information and Risks This management proxy circular contains forward-looking information based on Suncor's current expectations, estimates, projections and assumptions. This information is subject to a number of risks and uncertainties, including those discussed in Suncor's Annual Information Form for the year ended December 31, 2018 (the AIF), Suncor's Management's Discussion and Analysis for the year ended December 31, 2018 (the MD&A), and Suncor's other disclosure documents, many of which are beyond the company's control. Users of this information are cautioned that actual results may differ materially. Refer to the "Advisories" section of this management proxy circular for information on the material risk factors and assumptions underlying the forward-looking information contained in this management proxy circular. The company's business, reserves, financial condition and results of operations may be affected by a number of factors, including, but not limited to, the factors described in the "Advisories" section of this management proxy circular. Non-GAAP Financial Measures Certain financial measures in this management proxy circular namely operating earnings, funds from operations (FFO), free funds flow and return on capital employed (ROCE) are not prescribed by generally accepted accounting principles (GAAP). Refer to the "Advisories" section of this management proxy circular. These non-GAAP financial measures are used by management to analyze business performance, leverage and liquidity. These non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. Therefore, these non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. |
Measurement Conversions Suncor converts certain natural gas volumes to barrels of oil equivalent (boe) on the basis of one barrel (bbl) for every six thousand cubic feet (mcf) of natural gas. Any figure presented in boe may be misleading, particularly if used in isolation. A conversion ratio of six mcf of natural gas to one bbl of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, conversion on a 6:1 basis may be misleading as an indication of value. In this management proxy circular, references to "bbls/d" mean thousands of barrels per day and "boe/d" mean thousands of barrels of oil equivalent per day. Website References Information contained in or otherwise accessible through Suncor's website and other websites, though referenced herein, does not form part of this management proxy circular and is not incorporated by reference into this management proxy circular. |
2 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
VOTING AND PROXIES: QUESTIONS AND ANSWERS
This management proxy circular is furnished in connection with the solicitation by or on behalf of management of Suncor of proxies to be used at the annual general meeting of shareholders of Suncor. It is expected that solicitation will be primarily by mail, but proxies may also be solicited personally, by telephone or facsimile or other similar means by Suncor employees or agents. Custodians and fiduciaries will be supplied with proxy materials to forward to beneficial owners of Suncor common shares and normal handling charges will be paid for such forwarding services.
Your vote is very important to us. We encourage you to exercise your vote to ensure your shares are represented.
To be valid, proxy forms must be dated, completed, signed and deposited with our transfer agent and registrar, Computershare Trust Company of Canada (Computershare): (i) by mail using the enclosed return envelope or one addressed to Computershare Trust Company of Canada, Proxy Department, 135 West Beaver Creek, P.O. Box 300, Richmond Hill, Ontario, L4B 4R5; (ii) by hand delivery to Computershare, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1; or (iii) by facsimile to (416) 263-9524 or 1-866-249-7775. Additionally, you may vote by using the internet at www.investorvote.com or by calling 1-866-732-VOTE (8683). Your proxy instructions must be received in each case no later than 10:30 a.m. MDT on April 30, 2019 or, in the case of any adjournment or postponement of the meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the time of the adjourned or postponed meeting. The time limit for deposit of proxies may be waived or extended by the chair of the meeting at his or her discretion, without notice. Please read the following for commonly asked questions and answers regarding voting and proxies.
Q. Am I entitled to vote?
A. You are entitled to vote if you are a holder of Suncor common shares as of the close of business on March 11, 2019, the record date for the meeting. Subject to certain restrictions required by the Petro-Canada Public Participation Act (as described in the AIF under the heading "Description of Capital Structure Petro-Canada Public Participation Act") which section is incorporated by reference herein, each Suncor common share is entitled to one vote. A simple majority of votes (50% plus one vote) cast at the meeting in person or by proxy is required to approve all matters to be considered at the meeting. The list of registered shareholders maintained by Suncor will be available for inspection after March 11, 2019, during usual business hours at the offices of Computershare, 600, 5308th Avenue S.W., Calgary, Alberta, T2P 3S8 and will be available at the meeting.
Q. What am I voting on?
A. You will be voting on:
Q. What if amendments are made to these matters or if other matters are brought before the meeting?
A. If you attend the meeting in person and are eligible to vote, you may vote on such matters as you choose. If you have completed and returned a proxy, the common shares represented by proxy will be voted or withheld from voting in accordance with your instructions on any ballot that may be called for and, if you specify a choice with respect to any matter to be acted upon, the common shares will be voted accordingly. The persons named in the proxy form will have discretionary authority with respect to amendments or variations to matters identified in the Notice of Annual General Meeting and to other matters that may properly come before the meeting. As of the date of this management proxy circular, our management knows of no such amendment, variation or other matter expected to come before the meeting. If any other matters properly come before the meeting, the management nominees named in the proxy form will vote on them in accordance with their best judgment.
Q. Who is soliciting my proxy?
A. The management of Suncor is soliciting your proxy. Solicitation of proxies will be done primarily by mail, supplemented by telephone or other contact, by our employees or our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors who we have retained at a cost of $63,000 for their advisory services and will reimburse them for any related expenses. Any other costs related to the solicitation are paid by Suncor.
Q. How can I vote?
A. If you are eligible to vote and your shares are registered in your name, you can vote your shares in person at the meeting or by completing your proxy form through any of the methods described above.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 3
If your shares are not registered in your name but are held by a nominee, please see below.
Q. How can a non-registered shareholder vote?
A. If your shares are not registered in your name, but are held in the name of a nominee (usually a bank, trust company, securities broker or other financial institution), your nominee is required to seek your instructions as to how to vote your shares. Your nominee should have provided you with a package of information respecting the meeting, including either a proxy or a voting form. Carefully follow the instructions accompanying the proxy or voting form.
Q. How can a non-registered shareholder vote in person at the meeting?
A. Suncor does not have access to all the names of its non-registered shareholders. Therefore, if you are a non-registered shareholder and attend the meeting, we will have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as a proxyholder. If you wish to vote in person at the meeting, insert your name in the space provided on the proxy or voting form sent to you by your nominee. In doing so you are instructing your nominee to appoint you as a proxyholder. Complete the form by following the return instructions provided by your nominee. You should report to a representative of Computershare upon arrival at the meeting.
Q. Who votes my shares and how will they be voted if I return a proxy?
A. By properly completing and returning a proxy, you are authorizing the person named in the proxy to attend the meeting and vote your shares. You can use the proxy form provided to you, or any other proper form of proxy, to appoint your proxyholder.
The shares represented by your proxy must be voted or withheld from voting according to your instructions in the proxy. If you properly complete and return your proxy but do not specify how you wish the votes cast, your shares will be voted or withheld from voting as your proxyholder sees fit. Unless contrary instructions are provided, shares represented by proxies received by management will be voted:
Q. Can I appoint someone other than the individuals named in the proxy form to vote my shares?
A. Yes you have the right to appoint the person or company of your choice, who does not need to be a shareholder, to attend and act on your behalf at the meeting. If you wish to appoint a person other than the names that appear, then strike out those printed names appearing on the proxy form or voting instruction form and insert the name of your chosen proxyholder in the space provided.
NOTE: It is important to ensure that any other person you appoint is attending the meeting and is aware that his or her appointment to vote your shares has been made. Proxyholders should, upon arrival at the meeting, present themselves to a representative of Computershare.
Q. What if my shares are registered in more than one name or in the name of my corporation?
A. If the shares are registered in more than one name, all those registered must sign the form of proxy. If the shares are registered in the name of your corporation or any name other than yours, you may be required to provide documentation that proves you are authorized to sign the proxy form.
Q. Can I revoke a proxy or voting instruction?
A. If you are a registered shareholder and have returned a proxy, you may revoke it by:
If you are a non-registered shareholder, contact your nominee for information on how to revoke your proxy or voting instruction.
4 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Q. Is my vote confidential?
A. Your proxy vote is confidential. Proxies are received, counted and tabulated by our transfer agent, Computershare. Computershare does not disclose the results of individual shareholder votes unless: they contain a written comment clearly intended for management; in the event of a proxy contest or proxy validation issue; or if necessary to meet legal requirements.
Q. How many shares are outstanding?
A. As of February 22, 2019, there were 1,577,962,657 common shares outstanding. We have no other class or series of voting shares outstanding.
As of February 22, 2019, there was no person or company who, to the knowledge of our directors and executive officers, beneficially owned, or controlled or directed, directly or indirectly, common shares carrying 10% or more of the voting rights attached to all outstanding common shares.
Q. How will meeting materials be delivered?
A. We are using notice and access to deliver this management proxy circular to both our registered and non-registered shareholders. This means that Suncor will post the management proxy circular online for our shareholders to access electronically. You will receive a package in the mail with a notice (the Notice) outlining the matters to be addressed at the meeting and explaining how to access and review the management proxy circular electronically, and how to request a paper copy at no charge. You will also receive a form of proxy or a voting instruction form in the mail so you can vote your shares. All applicable meeting related materials will be indirectly forwarded to non-registered shareholders at Suncor's expense.
Notice and access is an environmentally friendly and cost effective way to distribute the management proxy circular because it reduces printing, paper and postage.
Q. How can I request a paper copy of the management proxy circular?
A. Both registered and non-registered shareholders can request a paper copy of the management proxy circular for up to one year from the date it is filed on SEDAR (www.sedar.com). The management proxy circular will be sent to you at no charge. If you would like to receive a paper copy of the management proxy circular, please follow the instructions provided in the Notice. If you request a paper copy of the management proxy circular, you will not receive a new form of proxy or voting instruction form, so you should keep the original form sent to you in order to vote.
Suncor will provide paper copies of the management proxy circular to shareholders who have standing instructions to receive, or for whom Suncor has otherwise received a request to provide, paper copies of materials.
If you have any questions about notice and access you can call our Investor Relations line at 1-800-558-9071.
Q. What is electronic delivery?
A. Electronic delivery is voluntary e-mail notification sent to shareholders when documents such as our annual report, quarterly reports and this management proxy circular are available on our website. If you wish, you may elect to be notified by e-mail when documentation is posted on our website. Electronic delivery will save paper, reduce our impact on the environment and reduce costs.
Q. How can I ask for electronic delivery?
A. If you are a registered shareholder, go to the Investor Communication website at www.InvestorDelivery.com and follow the instructions on the screen.
You will need your Control Number and your PIN number (you will find them on the proxy form provided in your package).
Non-registered shareholders can sign up for mailings (not proxy materials) through www.computershare.com/mailinglist.
Q. What if I have other questions?
A. If you have a question regarding the meeting please contact Computershare at 1-877-982-8760 or visit www.computershare.com.
Webcast of Meeting
The meeting may also be viewed via webcast on www.suncor.com starting at 10:30 a.m. MDT on May 2, 2019. Shareholders may view the meeting and ask questions online, but will not be able to vote via the webcast.
Shareholder Proposals
Eligible shareholders should direct any proposals they plan to present at the 2020 annual meeting to our Corporate Secretary. To be included in our 2020 management proxy circular, the proposal must be received at Suncor Energy Inc. at P.O. Box 2844, 1506th Avenue S.W., Calgary, Alberta, Canada T2P 3E3 by December 2, 2019.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 5
Financial Statements
The audited consolidated financial statements for the year ended December 31, 2018, together with the notes thereto and the report of the auditors thereon will be placed before the meeting. These audited consolidated financial statements form part of our 2018 Annual Report. Copies of the 2018 Annual Report may be obtained from the Corporate Secretary upon request and will be available at the meeting. The full text of the 2018 Annual Report is available on Suncor's website at www.suncor.com and has been filed with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission (SEC).
Election of Directors
Number of Directors. Suncor's articles stipulate there shall be not more than 15 nor fewer than eight directors. The Board is currently composed of nine non-employee directors, including Michael M. Wilson, our Board chair, and one member of management, Steven W. Williams, our Chief Executive Officer (CEO).
Steve Williams announced that he would be retiring as CEO at the conclusion of the meeting and would not stand for re-election as a director. During his tenure Mr. Williams demonstrated exceptionally strong leadership and has a long list of contributions. The Board deeply appreciates his commitment to Suncor and his contributions to the company and the industry. Mr. Williams' retirement will take effect at the conclusion of the meeting.
In addition, Dominic D'Alessandro will be retiring from the Board this year and will not stand for re-election. Mr. D'Alessandro was appointed to the Board in 2009. Suncor has benefitted greatly from Mr. D'Alessandro's exceptional commitment and sound business judgment as well as his focus on good governance. The Board and management would like to thank Mr. D'Alessandro for his significant contributions to the company. Mr. D'Alessandro's retirement will take effect at the conclusion of the meeting.
In accordance with our by-laws, the Board has determined that nine directors will be elected at the meeting. Following the meeting, and assuming that all proposed nominees for director are elected as contemplated in this management proxy circular, the Board will be composed of eight non-employee directors and Mark S. Little, who will be Suncor's President and CEO upon Mr. Williams' retirement. The term of office of each director is from the date of the meeting at which he or she is elected or appointed until the next annual meeting of shareholders or until a successor is elected or appointed.
Unless authority to do so is withheld, the persons named in the form of proxy intend to vote FOR the election of the nominees whose names appear on pages 7 to 11. Management does not expect that any of the nominees will be unable to serve as a director but, if that should occur for any reason prior to the meeting, the persons named in the form of proxy reserve the right to vote for another nominee at their discretion unless the proxy specifies the common shares are to be withheld from voting in the election of directors.
Majority Voting for Directors. The Board has adopted a policy (the Majority Voting Policy) that requires that any nominee for director who receives a greater number of votes "withheld" than votes "for" his or her election as a director shall submit his or her resignation to the Governance Committee of the Board for consideration promptly following the meeting. The Majority Voting Policy applies only to uncontested elections, meaning elections where the number of nominees for directors is equal to the number of directors to be elected. The Governance Committee shall consider the resignation and shall provide a recommendation to the Board. The Board will consider the recommendation of the Governance Committee and determine whether to accept it within 90 days of the applicable meeting. Absent exceptional circumstances, the Board shall accept the resignation which will be effective upon such acceptance. A news release will be issued promptly by Suncor announcing the Board's determination, including, if applicable, the reasons for rejecting the resignation. A director who tenders his or her resignation will not participate in any meetings to consider whether the resignation shall be accepted.
Shareholders should note that, as a result of the Majority Voting Policy, a "withhold" vote is effectively the same as a vote against a director nominee in an uncontested election. A copy of the Majority Voting Policy is available on Suncor's website at www.suncor.com.
6 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
The Persons Nominated for Election as Directors Are:
Patricia M. Bedient | |
65 |
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Sammamish, Washington, USA | |
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Director from February 24, 2016 to present | |
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Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors | 6 of 6 | 100% | |||
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Audit (Chair) | 6 of 6 | 100% | |||
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Environment, Health, Safety and Sustainable Development | 4 of 4 | 100% | |||
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
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Finance, Technology / IT, Strategy | Year | Votes in Favour | Alaska Air Group, Inc. | ||||||||
and Economics, Human Resources | 2018 | 99.58% | Park Hotels & Resorts Inc. | ||||||||
and Compensation, EHS and | 2017 | 99.62% | |||||||||
Social Responsibility, Governance | |||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
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Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
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2018 | Nil | 29 924 | 29 924 | 1 141 002 | Yes | 1.4x | |||||||
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2017 | Nil | 21 793 | 21 793 | 1 005 747 | |||||||||
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2016 | Nil | 13 607 | 13 607 | 597 347 | |||||||||
Patricia Bedient retired as executive vice president of Weyerhaeuser Company (Weyerhaeuser), one of the world's largest integrated forest products companies, effective July 1, 2016. From 2007 until February 2016, she also served as chief financial officer of Weyerhaeuser. Prior thereto, she held a variety of leadership roles in finance and strategic planning at Weyerhaeuser after joining the company in 2003. Before joining Weyerhaeuser, she spent 27 years with Arthur Andersen LLP and ultimately served as the managing partner for its Seattle office and partner in charge of the firm's forest products practice. Ms. Bedient serves on the board of directors of Alaska Air Group, Inc. and Park Hotels & Resorts Inc. and also serves on the Overlake Hospital Medical Center board of trustees, the Oregon State University board of trustees, and the University of Washington Foster School of Business advisory board. She achieved national recognition in 2012 when the Wall Street Journal named her one of the Top 25 CFOs in the United States. She is a member of the American Institute of CPAs and the Washington Society of CPAs. Ms. Bedient received her bachelor's degree in business administration, with concentrations in finance and accounting, from Oregon State University in 1975.
Mel E. Benson | |
70 |
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Calgary, Alberta, Canada | |
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Director from April 19, 2000 to present | |
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Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors | 6 of 6 | 100% | |||
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Environment, Health, Safety and Sustainable Development | 4 of 4 | 100% | |||
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Human Resources and Compensation | 5 of 5 | 100% | |||
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
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Operations, Project Management, | Year | Votes in Favour | None | ||||||||
Public Policy / Government Relations, | 2018 | 97.89% | |||||||||
Strategy and Economics, Human | 2017 | 98.69% | |||||||||
Resources and Compensation, EHS and Social Responsibility, Governance | |||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
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Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
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2018 | 17 548 | 105 192 | 122 740 | 4 680 076 | Yes | 5.9x | |||||||
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2017 | 17 548 | 97 067 | 114 615 | 5 289 482 | |||||||||
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2016 | 17 548 | 89 034 | 106 582 | 4 678 950 | |||||||||
Mel Benson is president of Mel E. Benson Management Services Inc., an international consulting firm working in various countries with a focus on First Nations/corporate negotiations. Mr. Benson retired from Exxon International and Imperial Oil Canada in 2000 after a long career as an operations manager and senior member of project management. While based in Houston, Texas, Mr. Benson worked on international projects based in Africa and the former Soviet Union. Mr. Benson is a member of Beaver Lake Cree Nation, located in northeast Alberta. In 2015, Mr. Benson was inducted into the Aboriginal Business Hall of Fame and received the lifetime achievement award and he has previously received the Indspire Award for Business.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 7
John D. Gass | |
66 |
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Palm Coast, Florida, USA | |
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Director from February 3, 2014 to present | |
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Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors | 6 of 6 | 100% | |||
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Governance | 5 of 5 | 100% | |||
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Human Resources and Compensation (Chair) | 5 of 5 | 100% | |||
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
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Operations, | Year | Votes in Favour | Southwestern Energy Company | ||||||||
Project Management, | 2018 | 99.41% | Weatherford International plc | ||||||||
Marketing / Sales, | 2017 | 99.17% | |||||||||
Strategy and Economics, Human Resources and Compensation, EHS and Social Responsibility |
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Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
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Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
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2018 | 6 698 | 43 054 | 49 752 | 1 897 044 | Yes | 2.4x | |||||||
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2017 | 6 698 | 35 809 | 42 507 | 1 961 698 | |||||||||
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2016 | 6 698 | 28 483 | 35 181 | 1 544 446 | |||||||||
John Gass is former vice president, Chevron Corporation, a major integrated oil and gas company, and former president, Chevron Gas and Midstream, positions he held from 2003 until his retirement in 2012. He has extensive international experience, having served in a diverse series of operational positions in the oil and gas industry with increasing responsibility throughout his career. Mr. Gass serves as a director of Southwestern Energy Company and Weatherford International plc. He is also a member of the advisory board for the Vanderbilt Eye Institute. Mr. Gass graduated from Vanderbilt University in Nashville, Tennessee, with a bachelor's degree in civil engineering. He also holds a master's degree in civil engineering from Tulane University in New Orleans, Louisiana. A resident of Florida, he is a member of the American Society of Civil Engineers and the Society of Petroleum Engineers.
Dennis M. Houston | |
67 |
![]() |
Spring, Texas, USA | |
|
|
Director from January 1, 2018 to present(6) | |
|
|
Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors | 5 of 6 | 83% | |||
|
|||||
Environment, Health, Safety and Sustainable Development | 2 of 2 | 100% | |||
|
|||||
Human Resources and Compensation | 2 of 2 | 100% | |||
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
|||||||||
Operations, Project Management, | Year | Votes in Favour | GasLog Ltd. | ||||||||
Marketing / Sales, Strategy and | 2018 | 99.93% | |||||||||
Economics, EHS and Social | 2017 | N/A | |||||||||
Responsibility, Governance | |||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
|||||||||||
Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
|||||||
2018 | 18 600 | 11 060 | 29 660 | 1 130 936 | Yes | 1.4x | |||||||
|
|||||||||||||
2017 | 5 600 | N/A | 5 600 | 258 440 | |||||||||
Dennis Houston served as executive vice president of ExxonMobil Refining and Supply Company, chairman and president of ExxonMobil Sales & Supply LLC and chairman of Standard Tankers Bahamas Limited until his retirement in 2010. Prior to that, Mr. Houston held a variety of leadership and engineering roles in the midstream and downstream businesses in the ExxonMobil organization. Mr. Houston has approximately 40 years' experience in the oil and gas industry, including over 35 years with ExxonMobil and its related companies. Mr. Houston serves on the board of directors of Argus Media Limited and GasLog Ltd. Mr. Houston holds a bachelor's degree in chemical engineering from the University of Illinois and an honorary doctorate of public administration degree from Massachusetts Maritime Academy. Mr. Houston has served on a variety of advisory councils, including an appointment by President George H.W. Bush to the National Infrastructure Advisory Council, the Chemical Sciences Leadership Council at the University of Illinois and the Advisory Council Center for Energy, Marine Transportation & Public Policy at Columbia University. Mr. Houston also serves on the Alexander S. Onassis Public Benefit Foundation board, is honorary consul to the Texas Region for the Principality of Liechtenstein and a board member for the American Bureau of Shipping Group of Companies.
8 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Mark S. Little | |
56 |
![]() |
Calgary, Alberta, Canada | |
|
|
Director Nominee(7) | |
|
|
Non-Independent, Management | |
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
|||||||||
Operations, Project Management, | Year | Votes in Favour | None | ||||||||
Technology / IT, Public Policy / | 2018 | N/A | |||||||||
Government Relations, Strategy and Economics, EHS and Social Responsibility |
|||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
|||||||||||
Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4)(8) |
Meets Target |
Current Status |
|||||||
2018 | 55 744 | 56 285 | 112 029 | 4 271 649 | Yes | 1.0x | |||||||
Mark Little is president and chief operating officer of Suncor with accountabilities for all of the company's operations and many of its corporate services. His immediate past role was as president of Suncor's upstream organization with responsibility for all of Suncor's operated and non-operated oil sands, in situ, conventional exploration and production assets worldwide. Mr. Little has previously served as executive vice president, Upstream; executive vice president, Oil Sands; senior vice president, International and Offshore; senior vice president, Integration, following Suncor's merger with Petro-Canada; and senior vice president, Strategic Growth and Energy Trading. In these roles, Mr. Little's accountabilities have spanned from operations in the Wood Buffalo region to operations in offshore East Coast Canada, the North Sea, and international onshore operations in Latin America, North Africa and the Near East, where he oversaw significant improvements in efficiency and performance, as well as portfolio growth. Before joining Suncor, Mr. Little led the development of oil sands projects for a major international energy company. His past experience also includes leadership roles in oil sands production and refining operations, strategic planning, environment, health and safety, and energy trading. Mr. Little has been active in industry and the community, serving as chair of the board of directors of Syncrude Canada and as a member of Energy Safety Canada until 2018. Mr. Little also served as chair of the Oil Sands Safety Association prior to its merger into Energy Safety Canada. Having played an integral role in the signing of agreements with the Fort McKay and Mikisew Cree First Nations relating to Suncor's East Tank Farm, he has actively promoted the partnership as a model for future energy development with Indigenous communities. He has co-chaired the Canadian Council of Aboriginal Business' procurement initiative and is a current board member of Accenture Global Energy and the Canadian Association of Petroleum Producers, where he also serves as a member of the Executive Committee. Mr. Little holds degrees in both computer science and applied petroleum engineering technology and is a graduate of the advanced management program at Harvard Business School. Mr. Little will assume the role of chief executive officer in May 2019 following the meeting.
Brian P. MacDonald | |
53 |
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Naples, Florida, USA | |
|
|
Director from July 23, 2018 to present(6) | |
|
|
Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors | 2 of 2 | 100% | |||
|
|||||
Audit | 3 of 3 | 100% | |||
|
|||||
Governance | 2 of 2 | 100% | |||
Experience and Skills(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
|||||||||
CEO Experience, Finance, Operations, | Year | Votes in Favour | None | ||||||||
Project Management, Marketing / | 2018 | N/A | |||||||||
Sales, Technology / IT, Strategy and Economics, Human Resources and Compensation, EHS and Social Responsibility, Governance | |||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
|||||||||||
Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
|||||||
2018 | 5 000 | 8 546 | 13 546 | 516 509 | No | 0.6x | |||||||
Brian MacDonald served as the president and chief executive officer of CDK Global, Inc., a leading global provider of integrated information technology and digital marketing solutions to the automotive retail and adjacent industries from 2016 to November 2018. Prior to joining CDK Global, Inc., Mr. MacDonald served as chief executive officer and president of Hertz Equipment Rental Corporation, and served as interim chief executive officer of Hertz Corporation. Mr. MacDonald previously served as president and chief executive officer of ETP Holdco Corporation, an entity formed following Energy Transfer Partners' $5.3 billion acquisition of Sunoco, Inc. where Mr. MacDonald had served as chairman, president and chief executive officer. He was the chief financial officer at Sunoco, Inc. and held senior financial roles at Dell Inc. Prior to Dell Inc., Mr. MacDonald spent more than 13 years in several financial management roles at General Motors Corporation in North America, Asia and Europe. He previously served on the board of directors for Computer Sciences Corporation (now DXC Technology Company), Ally Financial Inc., Sunoco Inc., Sunoco Logistics L.P. and CDK Global, Inc. Mr. MacDonald earned a MBA from McGill University and a bachelor's degree in chemistry from Mount Allison University.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 9
Maureen McCaw | |
64 |
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Edmonton, Alberta, Canada | |
|
|
Director from April 27, 2004 to present(9) | |
|
|
Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors | 6 of 6 | 100% | |||
|
|||||
Audit | 6 of 6 | 100% | |||
|
|||||
Governance | 5 of 5 | 100% | |||
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
|||||||||
Marketing / Sales, Public Policy / | Year | Votes in Favour | None | ||||||||
Government Relations, Strategy and | 2018 | 97.76% | |||||||||
Economics, Human Resources and | 2017 | 98.27% | |||||||||
Compensation, EHS and Social Responsibility, Governance | |||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
|||||||||||
Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
|||||||
2018 | 6 108 | 91 601 | 97 709 | 3 725 644 | Yes | 4.7x | |||||||
|
|||||||||||||
2017 | 5 936 | 82 916 | 88 852 | 4 100 520 | |||||||||
|
|||||||||||||
2016 | 5 774 | 74 245 | 80 019 | 3 512 834 | |||||||||
Maureen McCaw was most recently executive vice-president of Leger Marketing, Canada's largest privately held market research firm and formerly president of Criterion Research, a company she founded. Ms. McCaw currently serves as a director of the Francis Winspear Music Center / Edmonton Symphony and the Nature Conservancy of Canada. Ms. McCaw has previously served on a number of boards, including as chair of the CBC Pension Fund Plan board of trustees and the Edmonton International Airport and has also served on the board of directors of the Canadian Broadcasting Corporation. Ms. McCaw is also past chair of the Edmonton Chamber of Commerce. Ms. McCaw completed Columbia Business School's executive program in financial accounting and has an ICD.D.
Eira M. Thomas | |
50 |
![]() |
West Vancouver, British Columbia, Canada | |
|
|
Director from April 27, 2006 to present | |
|
|
Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors | 6 of 6 | 100% | |||
|
|||||
Environment, Health, Safety and Sustainable Development (Chair) | 4 of 4 | 100% | |||
|
|||||
Human Resources and Compensation | 5 of 5 | 100% | |||
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
|||||||||
CEO Experience, Finance, Operations, | Year | Votes in Favour | Lucara Diamond Corp. | ||||||||
Project Management, Public Policy / | 2018 | 98.45% | |||||||||
Government Relations, Strategy and | 2017 | 98.81% | |||||||||
Economics, Human Resources and Compensation, EHS and Social Responsibility, Governance | |||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
|||||||||||
Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
|||||||
2018 | 4 000 | 93 705 | 97 705 | 3 725 492 | Yes | 4.7x | |||||||
|
|||||||||||||
2017 | 4 000 | 85 936 | 89 936 | 4 150 546 | |||||||||
|
|||||||||||||
2016 | 4 000 | 77 144 | 81 144 | 3 562 222 | |||||||||
Eira Thomas is a Canadian geologist with over 20 years of experience in the Canadian diamond business. She is currently the chief executive officer and a director of Lucara Diamond Corp., a publicly traded diamond producing company. Previous roles include serving as chief executive officer and director of Kaminak Gold Corporation, vice president of Aber Resources, now Dominion Diamond Corp., and as founder and CEO of Stornoway Diamond Corp.
10 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Michael M. Wilson | |
67 |
![]() |
Bragg Creek, Alberta, Canada | |
|
|
Director from February 3, 2014 to present | |
|
|
Independent | |
Suncor Board and Board Committees | Meeting Attendance | ||||
Board of Directors (Chair) | 6 of 6 | 100% | |||
Skills and Experience(1) | Annual General Meeting Voting Results |
Other Public Company Boards |
|||||||||
CEO Experience, Finance, Operations, | Year | Votes in Favour | Air Canada | ||||||||
Project Management, Marketing / | 2018 | 99.71% | Celestica Inc. | ||||||||
Sales, Strategy and Economics, | 2017 | 97.94% | |||||||||
Human Resources and Compensation, Governance | |||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
Total Common |
Total Value of Common |
Share Ownership Target(5) |
|||||||||||
Fiscal Year |
Common Shares(2) |
DSUs(3) |
Shares and DSUs |
Shares and DSUs ($)(4) |
Meets Target |
Current Status |
|||||||
2018 | 10 000 | 57 163 | 67 163 | 2 560 925 | Yes | 1.8x | |||||||
|
|||||||||||||
2017 | 10 000 | 43 698 | 53 698 | 2 478 163 | |||||||||
|
|||||||||||||
2016 | 10 000 | 31 717 | 41 717 | 1 831 376 | |||||||||
Michael Wilson is former president and chief executive officer of Agrium Inc., a retail supplier of agricultural products and services and a wholesale producer and marketer of agricultural nutrients, a position he held from 2003 until his retirement in 2013. Prior thereto, he served as executive vice president and chief operating officer. Mr. Wilson has significant experience in the petrochemical industry, serving as president of Methanex Corporation, and holding various positions with increasing responsibility in North America and Asia with Dow Chemical Company. Mr. Wilson has a bachelor's degree in chemical engineering from the University of Waterloo and currently serves on the boards of Air Canada and Celestica Inc.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 11
Cease Trade Orders, Bankruptcies, Penalties or Sanctions. No proposed director is, as at the date hereof, or has been in the last ten years, a director, chief executive officer or chief financial officer of any company (including Suncor) that (a) was the subject of a cease trade order or similar order or an order that denied the company access to any exemption under securities legislation, for a period of more than 30 consecutive days, that was issued while the proposed director was acting in that capacity, or (b) was subject to a cease trade order or similar order or an order that denied the company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in that capacity.
No proposed director is, as at the date hereof, or has been in the last ten years, a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, other than Mr. Benson, a current and proposed director of Suncor, who was a director of Winalta Inc. (Winalta) when it obtained an order on April 26, 2010 from the Alberta Court of Queen's Bench providing for creditor protection under the Companies' Creditors Arrangement Act (Canada). A plan of arrangement for Winalta received court confirmation later that year, and Mr. Benson ceased to be a director of Winalta in May of 2013.
No proposed director has, within the last ten years, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his or her assets.
No proposed director has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.
Appointment of Auditor
Management and the Board propose that KPMG LLP be appointed as Suncor's auditor until the close of the next annual meeting. In keeping with our commitment to best practices in corporate governance, Suncor completed a comprehensive tender process in 2018 for the selection of our auditor. Following the completion of this tender process, the Board (on the recommendation of the Audit Committee), approved the appointment of KPMG LLP as auditor effective March 1, 2019. PricewaterhouseCoopers LLP (PwC), the predecessor auditor, has notified Suncor that, at the request of Suncor, it would resign as auditor effective March 1, 2019. Additional documents related to the change in auditor, being the Change of Auditor Notice and the acknowledgments of that notice by PwC and KPMG LLP, are set out in Schedule F to this management proxy circular. There were no "reportable events" within the meaning of National Instrument 51-102 Continuous Disclosure Obligations. Unless authority to do so is withheld, the persons named in the form of proxy intend to vote FOR the appointment of KPMG LLP.
PwC was our auditor for the years ended December 31, 2017 and 2018 and the fees paid and payable to PwC are detailed below.
($ thousands) | 2018 | 2017 | |||
Audit Fees | 5 016 | 5 254 | |||
|
|||||
Tax Fees | | | |||
|
|||||
Audit-Related Fees | 449 | 415 | |||
|
|||||
All Other Fees | 15 | 15 | |||
Total | 5 480 | 5 684 | |||
12 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
The nature of each category of fees is as follows:
Audit Fees. Audit Fees were paid, or are payable, for professional services rendered by the auditor for the audit of Suncor's annual financial statements, or services provided in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Audit-Related Fees were paid for professional services rendered by the auditor for the review of quarterly financial statements and for the preparation of reports on specified procedures as they relate to audits of joint arrangements and attest services not required by statute or regulation.
All Other Fees. All Other Fees were subscriptions to auditor-provided and supported tools.
All services described beside the captions "Audit Fees", "Audit-Related Fees" and "All Other Fees" were approved by the Audit Committee in compliance with paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X under the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act). None of the fees described above were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Regulation S-X under the Exchange Act. Further details respecting our auditor is provided in our AIF under the heading "Audit Committee Information".
Advisory Vote on Approach to Executive Compensation
The Board believes that shareholders should have the opportunity to fully understand the objectives, philosophy and principles that the Board has used to make executive compensation decisions.
We hope you will carefully review the "Letter to Shareholders" beginning on page 19 and our "Compensation Discussion and Analysis" beginning on page 21 before voting on this matter. We encourage any shareholder who has comments on our approach to executive compensation to forward these comments to the chair of the Human Resources and Compensation Committee (HR&CC) c/o the Corporate Secretary, Suncor Energy Inc., P.O. Box 2844, 150 6th Avenue S.W., Calgary, Alberta, T2P 3E3. The "Compensation Discussion and Analysis" section discusses our compensation philosophy and approach to executive compensation, what our Named Executive Officers are paid and how their level of compensation is determined. This disclosure has been approved by the Board on the recommendation of the HR&CC.
At the meeting, shareholders will have an opportunity to vote on our approach to executive compensation through consideration of the following advisory resolution:
"RESOLVED, on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the management proxy circular of Suncor Energy Inc. delivered in advance of its 2019 annual meeting of shareholders."
As this is an advisory vote, the results will not be binding upon the Board. However, in considering its approach to compensation in the future, the Board will take into account the results of the vote, together with feedback received from shareholders in the course of our engagement activities. Since instituting a vote on an advisory resolution on our approach to executive compensation in 2011, Suncor has received strong support from shareholders with an average of 93.48% of votes "for", including 94.26% of the votes cast in favour in 2018.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 13
BOARD OF DIRECTORS COMPENSATION
Philosophy and Approach
Philosophy. Compensation of non-employee directors is intended to:
Approach. The Governance Committee reviews Board compensation levels periodically to ensure Suncor's approach to Board compensation is competitive at the median of the Suncor Compensation Peers (as defined below) and takes into account governance and best practice trends.
As part of this review, the Governance Committee engages Willis Towers Watson to validate benchmark compensation for non-employee directors and the Board chair and provide information on Board compensation governance and best practice trends. This information is used by the Governance Committee in determining the compensation components, mix and pay level for non-employee directors, including the Board chair, that is then recommended to the full Board for approval.
The total compensation structure for non-employee directors for 2018 consisted of annual retainers and an annual equity award provided in the form of DSUs. DSUs are notional units that have the same value as our common shares, and therefore have the same upside potential and downside risk. Non-employee directors are required to meet robust share ownership guidelines. DSUs, along with Suncor common shares, count towards meeting these guidelines.
Structure
Suncor's North American energy peers, identified on page 29 (the Suncor Compensation Peers), used for benchmarking Suncor's non-employee director and Board chair compensation structure are the same companies used for benchmarking senior executive compensation. Suncor's rank, as compared to the Suncor Compensation Peers, in relation to revenue, assets and market capitalization, is also provided on page 29. The following tables display the compensation structure for 2018 for all non-employee directors.
Compensation Structure Components for Non-Employee Directors (excluding Board chair) | ($) | |||
Retainer |
||||
|
||||
Annual Retainer(1) | 72 500 | |||
|
||||
Annual Committee Chair Retainer: | ||||
|
||||
Audit Committee | 25 000 | |||
|
||||
HR&CC | 15 000 | |||
|
||||
EHS&SD Committee and Governance Committee | 10 000 | |||
|
||||
Annual Committee Member Retainer: | ||||
|
||||
Audit Committee | 7 500 | |||
|
||||
EHS&SD Committee, Governance Committee and HR&CC | 5 000 | |||
|
||||
Travel within continental North America (Per Round Trip)(2) | 1 500 | |||
|
||||
Travel originating from outside continental North America (Per Round Trip)(3) | 3 000 | |||
|
||||
Annual Equity |
||||
|
||||
Annual DSU target value(4) | 217 500 | |||
14 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Compensation Structure for Board chair(5) | ($) | ||
Retainer |
|||
|
|||
Annual Retainer(1) | 250 000 | ||
|
|||
Travel within continental North America (Per Round Trip)(2) | 1 500 | ||
|
|||
Travel originating from outside continental North America (Per Round Trip)(3) | 3 000 | ||
|
|||
Annual Equity |
|||
|
|||
Annual DSU target value(4) | 280 000 | ||
Looking Ahead to 2019:
At its meeting in November 2018, the Governance Committee recommended that the Board maintain the 2018 target total compensation for non-employee directors and the Board chair for 2019. The Board approved the recommendation.
Committee Membership. The following table sets forth the current committee members, all of whom are non-employee and independent directors.
Committee Members |
Audit Committee |
EHS&SD Committee |
Governance Committee |
HR&CC |
|
||||
---|---|---|---|---|---|---|---|---|---|
Patricia M. Bedient | Chair | ü | |||||||
|
|||||||||
Mel E. Benson | ü | ü | |||||||
|
|||||||||
Dominic D'Alessandro | ü | Chair | |||||||
|
|||||||||
John D. Gass | ü | Chair | |||||||
|
|||||||||
Dennis M. Houston | ü | ü | |||||||
|
|||||||||
Brian MacDonald | ü | ü | |||||||
|
|||||||||
Maureen McCaw | ü | ü | |||||||
|
|||||||||
Eira M. Thomas | Chair | ü | |||||||
Building Equity Ownership. Share ownership guidelines are one way non-employee directors demonstrate their commitment to Suncor's long-term success and alignment with shareholders. For 2018, share ownership guidelines were $1,400,000 for the Board chair and $800,000 for all other non-employee directors. The level of ownership must be attained by each director within five years of when he or she is first elected or appointed or from the date an increase in the share ownership guidelines is approved. Suncor common shares and DSUs count toward the share ownership guideline.
As at December 31, 2018, all non-employee directors, including the Board chair, have met or are on track to meet the share ownership guidelines.
Suncor periodically benchmarks its share ownership guideline levels to ensure they are in line with its peers.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 15
Total Compensation
Total Compensation Summary. The following table provides information on the total compensation paid to the non-employee directors for the year ended December 31, 2018.
($) | |||||||
Name(1) |
Total Fees Paid |
Share-Based Awards(2) |
Total Compensation(3) |
||||
Patricia M. Bedient | 108 500 | 228 836 | 337 336 | ||||
|
|||||||
Mel E. Benson | 82 500 | 228 836 | 311 336 | ||||
|
|||||||
Jacynthe Côté(4) | 82 417 | 182 894 | 265 311 | ||||
|
|||||||
Dominic D'Alessandro | 94 500 | 228 836 | 323 336 | ||||
|
|||||||
John D. Gass | 97 000 | 228 836 | 325 836 | ||||
|
|||||||
Dennis M. Houston | 84 500 | 443 815 | 528 315 | ||||
|
|||||||
John R. Huff(4) | 35 875 | 54 317 | 90 192 | ||||
|
|||||||
Brian MacDonald | 45 500 | 361 108 | 406 608 | ||||
|
|||||||
Maureen McCaw | 91 000 | 228 836 | 319 836 | ||||
|
|||||||
Michael W. O'Brien(4) | 38 417 | 54 317 | 92 733 | ||||
|
|||||||
Eira M. Thomas | 93 500 | 228 836 | 322 336 | ||||
|
|||||||
Michael M. Wilson | 251 500 | 294 483 | 545 983 | ||||
Total | 1 105 209 | 2 763 950 | 3 869 158 | ||||
Fees Paid. The following table provides a detailed breakdown of the fees paid to our non-employee directors for the year ended December 31, 2018. Fees are paid quarterly.
($) | |||||||||||||||
Name |
Retainer Fee |
Committee Retainer Fee |
Committee Chair Retainer Fee |
Travel Fees |
Total Fees Paid(1) |
Fees Taken in DSUs |
Fees Taken in Cash |
||||||||
Patricia M. Bedient | 72 500 | 5 000 | 25 000 | 6 000 | 108 500 | 108 500 | | ||||||||
|
|||||||||||||||
Mel E. Benson | 72 500 | 10 000 | | | 82 500 | | 82 500 | ||||||||
|
|||||||||||||||
Jacynthe Côté(2) | 66 458 | 11 458 | | 4 500 | 82 417 | 82 417 | | ||||||||
|
|||||||||||||||
Dominic D'Alessandro | 72 500 | 7 500 | 10 000 | 4 500 | 94 500 | 94 500 | | ||||||||
|
|||||||||||||||
John D. Gass | 72 500 | 5 000 | 15 000 | 4 500 | 97 000 | 48 500 | 48 500 | ||||||||
|
|||||||||||||||
Dennis M. Houston | 72 500 | 7 500 | | 4 500 | 84 500 | 42 250 | 42 250 | ||||||||
|
|||||||||||||||
John R. Huff(2) | 30 208 | 4 167 | | 1 500 | 35 875 | 35 875 | | ||||||||
|
|||||||||||||||
Brian MacDonald | 36 250 | 6 250 | | 3 000 | 45 500 | 45 500 | | ||||||||
|
|||||||||||||||
Maureen McCaw | 72 500 | 12 500 | | 6 000 | 91 000 | 45 500 | 45 500 | ||||||||
|
|||||||||||||||
Michael W. O'Brien(2) | 30 208 | 5 208 | | 3 000 | 38 417 | | 38 417 | ||||||||
|
|||||||||||||||
Eira M. Thomas | 72 500 | 5 000 | 10 000 | 6 000 | 93 500 | | 93 500 | ||||||||
|
|||||||||||||||
Michael M. Wilson | 250 000 | | | 1 500 | 251 500 | 251 500 | | ||||||||
Total | 920 624 | 79 583 | 60 000 | 45 000 | 1 105 209 | 754 542 | 350 667 | ||||||||
16 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Equity Based Compensation
Annual DSU Grant. Non-employee directors participate in Suncor's DSU Plan. When redeemed after leaving the Board, each DSU pays the holder the then current cash equivalent of the market price per share, as calculated in accordance with the DSU Plan.
DSUs are an important component of non-employee director compensation. They provide a stake in Suncor, promote greater alignment between directors and shareholders and are considered to be a preferred form of non-employee director equity compensation under governance best practices.
Under the DSU Plan, each non-employee director receives an annual DSU grant as part of his or her total compensation. The annual grant of DSUs is generally awarded in equal quarterly installments.
For each new non-employee director, the DSU Plan provides for a joining grant of DSUs equal to the annual grant for the year in which he or she is appointed to the Board. New non-employee directors who join the Board and any director who becomes Board chair during the year will receive a pro-rated annual DSU grant based on the date they join the Board or became Board chair, as applicable.
Each non-employee director, other than Messrs. Huff and O'Brien, who retired from the Board on May 2, 2018, Ms. Côté, who resigned from the Board on November 7, 2018 and Messrs. Houston and MacDonald, who were each appointed to the Board in 2018, received 4,950 DSUs in 2018. Messrs. Huff and O'Brien received 1,237 DSUs and Ms. Côté received 3,712 DSUs. Mr. Houston received 9,900 DSUs, comprised of a pro-rated annual grant and a joining grant, both of 4,950 DSUs. Mr. MacDonald received 7,425 DSUs, comprised of a pro-rated annual grant of 2,475 DSUs and a joining grant of 4,950 DSUs. In 2018, non-employee directors, including the Board chair, received an aggregate of 59,581 DSUs.
Fees Paid in DSUs. Until share ownership guidelines for non-employee directors are met (see page 15 for details), non-employee directors receive one-half or, if they choose, all of their fees (excluding expense reimbursements) in the form of DSUs. The number of DSUs to be credited to the non-employee director's account on each payment date is equal to the number of Suncor common shares that could have been purchased based on the market value on the quarterly payment date based on the fees allocated to the director. On each dividend payment date for Suncor common shares, an additional number of DSUs, equivalent to the number of Suncor common shares that could have been acquired on that date by notional dividend reinvestment based on the market value, are credited to the non-employee directors' DSU accounts.
Redemption of DSUs. DSUs may be redeemed when a non-employee director ceases to hold office, on a date elected by that director prior to November 30 of the calendar year following such cessation. For directors subject to payment of U.S. federal tax, the redemption period to elect payout of the DSUs they hold commences on the first day of the calendar year following the year in which the non-employee director ceases to be a member of the Board, and ends on November 30 of that same year. However, no redemption will be permitted within the first six months following separation from service by a U.S. taxpayer who is considered a "specified employee". The cash payment at redemption is calculated by multiplying the number of DSUs by the then-current market value of a Suncor common share, as per the terms of the DSU Plan.
Stock Options. In line with governance best practices, stock option grants to non-employee directors were discontinued effective January 1, 2009. There are no remaining stock options awarded prior to 2009.
Director Equity Compensation Hedging. Pursuant to Suncor's policies, directors are not permitted to engage in short selling in Suncor common shares or purchase financial instruments (including, for greater certainty, puts, options, calls, prepaid variable forward contracts, equity swaps, collars or units of exchange funds) that are designed to hedge or offset a change in the market value of Suncor common shares or other securities of Suncor held by the director.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 17
Share-Based Awards. The following table provides information about share-based awards outstanding for our non-employee directors as at December 31, 2018 and provides the value vested in relation to share-based awards held by our non-employee directors during the year ended December 31, 2018.
Name |
Value vested during the year(1) ($) |
Aggregate market or payout value of vested share-based awards not paid out or distributed(2) ($) |
|||
Patricia M. Bedient | 228 836 | 1 141 002 | |||
|
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Mel E. Benson | 228 836 | 4 010 971 | |||
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Jacynthe Côté(3) | 182 894 | 1 447 148 | |||
|
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Dominic D'Alessandro | 228 836 | 3 486 493 | |||
|
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John D. Gass | 228 836 | 1 641 649 | |||
|
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Dennis M. Houston | 443 815 | 421 718 | |||
|
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John R. Huff(3) | 54 317 | 5 886 319 | |||
|
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Brian MacDonald | 361 108 | 325 859 | |||
|
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Maureen McCaw | 228 836 | 3 492 746 | |||
|
|||||
Michael W. O'Brien(3) | 54 317 | 3 480 735 | |||
|
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Eira M. Thomas | 228 836 | 3 572 972 | |||
|
|||||
Michael M. Wilson | 294 483 | 2 179 625 | |||
Total | 2 763 950 | 31 087 237 | |||
Director Value at Risk. The following table provides the aggregate equity holdings of current non-employee directors for the years ended December 31, 2017 and 2018 as well as the net change during 2018 and the total value at risk as at December 31, 2018.
December 31, 2017 |
December 31, 2018 |
Net Change During 2018 |
|||||||||||||||||||
Name | Shares |
Share- based awards(1) |
Options(2) | Shares |
Share- based awards(1) |
Options | Shares |
Share- based awards(3) |
Options |
Total value at risk(4) ($) |
|||||||||||
Patricia M. Bedient | | 21 793 | | | 29 924 | | | 8 131 | | 1 141 002 | |||||||||||
|
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Mel E. Benson | 17 548 | 97 067 | 4 000 | 17 548 | 105 192 | | | 8 125 | (4 000 | ) | 4 680 076 | ||||||||||
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Dominic D'Alessandro | 40 000 | 81 692 | | 70 000 | 91 437 | | 30 000 | 9 745 | | 6 155 593 | |||||||||||
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John D. Gass | 6 698 | 35 809 | | 6 698 | 43 054 | | | 7 245 | | 1 897 044 | |||||||||||
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Dennis M. Houston | 5 600 | | | 18 600 | 11 060 | | 13 000 | 11 060 | | 1 130 936 | |||||||||||
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Brian P. MacDonald | | | | 5 000 | 8 546 | | 5 000 | 8 546 | | 516 509 | |||||||||||
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Maureen McCaw | 5 936 | 82 916 | | 6 108 | 91 601 | | 172 | 8 685 | | 3 725 644 | |||||||||||
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Eira M. Thomas | 4 000 | 85 936 | 4 000 | 4 000 | 93 705 | | | 7 769 | (4 000 | ) | 3 725 492 | ||||||||||
|
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Michael M. Wilson | 10 000 | 43 698 | | 10 000 | 57 163 | | | 13 465 | | 2 560 925 | |||||||||||
18 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Letter to Shareholders
To Our Fellow Shareholders:
On behalf of the Human Resources and Compensation Committee (HR&CC) and the Board of Directors (Board) of Suncor Energy Inc. (Suncor), we are pleased to share the company's approach to senior executive compensation and how it aligns with company performance.
In the Compensation Discussion and Analysis section that follows, we share detailed information on our pay-for-performance philosophy, compensation programs, governance practices and compensation for our Named Executive Officers (NEOs).
Business Environment. While a decrease in global inventory levels contributed to the improvement in commodity prices in the first half of 2018, the global market continued to demonstrate signs of volatility. This was particularly the case in Western Canada and specifically Alberta, where there was insufficient market access to move production, causing a significant widening in crude price differentials. In response, the Government of Alberta introduced a compulsory production curtailment program, which commenced in early 2019. Market access continues to be a significant factor for many companies which, unlike Suncor, have not been able to secure sufficient takeaway capacity.
Company Performance. 2018 was a busy year for Suncor as we worked diligently to execute on our strategic plan. We achieved the safe and successful ramp up of two major developments Fort Hills and Hebron and completed the purchase of additional interests in Syncrude, Fort Hills, the Rosebank project and the Fenja field. We also began implementing Autonomous Haul Systems at our operated mine sites and applied our operational excellence focus to support further integration with Syncrude to improve operational flexibility.
Our strong overall operational performance, optimized through our integrated model, allows Suncor to mitigate the impact of wider crude price differentials on our financial performance. Through integration, we have proven our ability to link our upstream oil sands operations with closely-tied refining and marketing assets. At the same time, our offshore business provides geographically diversified cash flow by selling into global markets. This distinct advantage has positioned Suncor to continue to build on our financial strength and deliver long-term shareholder value, as demonstrated in our fourth quarter results, which included the achievement of record Oil Sands production and Refining and Marketing crude throughput.
While it was a challenging year for the industry, as illustrated in the one year total shareholder return (TSR) performance charts to the right, Suncor continued to
TSR performance (%)
outperform the majority of the Suncor Compensation Peers (as defined on page 14) and the S&P/TSX Capped Energy Index in 2018. Suncor's three and five year TSR also significantly outperformed the majority of the Suncor Compensation Peers and the S&P/TSX Capped Energy Index. From 2014 to 2018, Suncor's positive TSR of 19%, is significantly above the negative 44.3% median of the Suncor Compensation Peers and the negative 41.8% of the S&P/TSX Capped Energy Index over the same time period.
Suncor's performance is a result of the effective execution of our business strategy and the capable stewardship of our experienced leadership team. More information on the performance of our NEOs can be found beginning on page 36.
Compensation Governance. As a leading integrated energy company, it's critical that we attract and retain top executive talent. To ensure our programs are both attractive and competitive, we benchmark senior executive pay levels against a North American peer group of energy companies. Compensation programs and practices for our senior executives are reviewed regularly with the assistance of external consultants. The review process considers alignment with best practice, company and shareholder interests and competitive benchmarks.
For a fourth consecutive year, a decision was made to not increase the current total direct compensation structure for our executives. A review in 2018 found the structure continues to reinforce Suncor's business strategy, is market competitive, and is aligned with current best practices.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 19
Chief Executive Officer (CEO) pay. Mr. Williams' total direct compensation was $14.5 million in 2018. His pay is consistent with Suncor's pay for performance philosophy and is an outcome of solid financial and operating performance under his leadership.
In 2018, 90% of the CEO's total direct compensation varied with performance and approximately 69% was provided in the form of mid- to long-term incentives, which continues to reinforce the linkage to relative and absolute share price performance.
As announced on November 14, 2018, Mr. Williams will retire from Suncor following the annual general meeting on May 2, 2019. During his time at Suncor he has demonstrated exceptional leadership as President and CEO. On behalf of the Board, it has been a privilege to work with Mr. Williams. He has not only been an exceptional leader for Suncor but for the industry, delivering significant value to shareholders over his time as President and CEO and positioning Suncor for long-term success.
Compensation Approach for the New President and CEO. Through our succession planning process, the Board has stewarded the CEO transition and the current President and Chief Operating Officer Mark Little will become President and CEO on May 2, 2019. The HR&CC, working with the Board, has determined compensation for Mr. Little in 2019 taking into account his transition to CEO. Mr. Little will receive increases in his base salary, annual incentive target and mid- to long-term incentives during 2019 and in line with his appointment. These compensation changes will position him at an appropriate level as the new President and CEO based on the median level of total direct compensation for Suncor's North American energy peers.
Aligning with Shareholder Interests. Our equity-based and performance-contingent incentive programs form the largest components of total direct compensation for our NEOs, which ensures that the value they receive is aligned with the interests of our shareholders. The assessment of realizable CEO pay relative to Suncor's peers can be found on page 23 and confirms that, over the past three years, Suncor's strong TSR performance is aligned to realizable pay. Our absolute analysis indicates that CEO realizable pay since 2014 is 8.4% above pay opportunity as a result of superior financial and share price performance as detailed on page 42.
The Board seeks to be transparent and responsive to shareholders and views engagement as an important part of our success. As a result of our engagement, decisions were made to add Return on Capital Employed (ROCE) as a second measure to the performance share unit plan and to further sharpen the focus of our annual incentive plan to reinforce safety, sustainability, base business and growth.
Looking Ahead. The collective strength of our effective senior leadership team and our dedicated employees gives us reason to be optimistic. Together, they're focused on producing strong results and the execution of our strategy to consistently deliver shareholder value.
Your Board, with the support of the HR&CC, is committed to ensuring that Suncor's senior executive compensation continues to align with our shareholders' interests and supports the company's competitiveness and future success.
We welcome shareholder feedback on our business operations, policies and practices, including executive compensation.
Sincerely,
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|
John D. Gass Chair of the Human Resources and Compensation Committee |
Michael M. Wilson Chair of the Board |
20 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
COMPENSATION DISCUSSION AND ANALYSIS
Page | |||
2018 Named Executive Officers | 21 | ||
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Pay and Performance Overview | 21 | ||
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Compensation Governance | 25 | ||
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Our Approach to Executive Compensation | 28 | ||
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Compensation of the Named Executive Officers | 33 | ||
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2018 Performance | 36 | ||
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Executive Compensation Alignment with Shareholder Value | 41 | ||
2018 Named Executive Officers
The persons (the Named Executive Officers or NEOs) who are the focus of the Compensation Discussion and Analysis and who appear in the compensation tables are:
STEVEN W. WILLIAMS | S.W. WILLIAMS | CHIEF EXECUTIVE OFFICER(1) | ||
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ALISTER COWAN | A. COWAN | EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER | ||
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MARK S. LITTLE | M.S. LITTLE | PRESIDENT AND CHIEF OPERATING OFFICER(1) | ||
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MICHAEL R. MACSWEEN | M.R. MACSWEEN | EXECUTIVE VICE PRESIDENT, UPSTREAM | ||
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STEPHEN D.L. REYNISH | S.D.L. REYNISH | EXECUTIVE VICE PRESIDENT, STRATEGY & OPERATIONS SERVICES | ||
Pay and Performance Overview
Suncor's executive compensation programs are designed to align the interests of our executives with shareholders, rewarding executives for delivering annual and longer term results and building sustainable shareholder value.
Our business is linked to the commodity cycle with significant long-term capital investments. It requires focus on profitable growth, achieved through capital discipline and reliable operations that are conducted in a safe and environmentally and socially responsible way.
The following information provides an overview of some key points regarding pay and performance at Suncor.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 21
Focusing on Performance. We look at performance from a number of important perspectives with the intention of aligning short-term financial and operational metrics with long-term shareholder value creation:
Financial Results | Value Drivers | Leadership | Shareholder Value | ||||
FFO(1) ROCE(1) |
Safety Sustainability Base Business Growth |
Personal performance, which includes the successful execution of operational and capital plans. |
Relative total shareholder return (TSR) through our performance share unit (PSU) plan (PSU Plan). Absolute share price appreciation through stock options. |
||||
How Total Direct Compensation (TDC) is Delivered.
Component | Performance Orientation | Time Frame | |||
Salary | Reflects the market competitive value of the role versus peers. Salary increases reflect performance demonstrated on the job. |
Annual review with adjustments as appropriate | |||
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Annual Incentive | Aligns with financial and operational performance objectives. Reflects a combination of corporate, business unit and personal performance. |
Short-term Annual performance |
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PSUs | Rewards relative share price performance. Fully at-risk with a 0% to 200% of target payout |
Mid-term Three-year rolling performance cycles |
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Stock Options | Rewards absolute share price performance. Only delivers value if share price appreciates over the grant price. |
Long-term Seven-year term Vest over three years |
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22 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Pay Alignment to Total Shareholder Return. Suncor has a long-standing pay-for-performance philosophy that is reflected in the design of our programs. A significant portion of the NEOs' total direct compensation is contingent upon Suncor's financial results, operating results and share price performance. The alignment of our pay programs with performance over short- and mid- to long-term periods is regularly reviewed, with the aim of ensuring that our short-term actions lead to long-term increases in shareholder value.
In reviewing alignment of our pay programs with performance we look at two different perspectives: pay opportunity and realizable pay.
Pay Opportunity | Realizable Pay | ||
Static numbers reported in the Summary Compensation Table for total direct compensation in 2016 and 2017 and estimated pay for 2018. It does not reflect the impact of share price on the ultimate value received through equity awards. |
Dynamic numbers that capture total direct compensation reflecting the value of outstanding equity awards as at December 31, 2018. The values ultimately received could be lower or higher than those in the Summary Compensation Table depending on future performance. |
||
The following charts demonstrate the alignment between Suncor's CEO's pay and TSR over the past three years for his pay opportunity and realizable pay relative to the chief executive officers of the Suncor Compensation Peers.
Suncor's CEO's pay opportunity and realizable pay is positioned in the upper right of the charts below, within the zone of reasonable alignment, indicating the company had strong relative TSR performance that is aligned to its relative pay. Suncor's TSR performance was in the third quartile of the peer group over the three year period, while three peers had a higher pay opportunity and four peers had a higher realizable pay.
Pay Opportunity(1) | Realizable Pay(2) | |
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CEO Pay Multiple of Median Peer Group Pay. We also look at the pay opportunity for the CEO as a multiple of the median pay opportunity of the Suncor Compensation Peers. The 2018 pay for the CEO compared to the pay opportunity for the Suncor Compensation Peers based on current data is at a multiple of 1.2 times the median with the majority of the difference in mid- to long-term performance contingent pay. The HR&CC believes there is no excessive pay disparity between Suncor's CEO and market pay, given Suncor's relative size and performance versus peers. The pay multiple is well within the acceptable range based on best practices recommended by institutional investors and governance organizations.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 23
CEO Pay at a Glance. As displayed in the corresponding chart, Mr. Williams' actual 2018 total direct compensation, as indicated in the summary compensation table, is approximately 44% higher than Suncor's total direct compensation structure for the CEO role which is targeted at the median of the Suncor Compensation Peers. The 2018 actual compensation level reflects Mr. Williams' ongoing leadership and personal performance for the past year as assessed by the Board and the corporate and business unit results for 2018. For more information on Mr. Williams' performance and compensation in 2018, see page 36.
Pay Programs Are Supported By Key Governance Practices. Suncor has implemented and maintains a number of key executive compensation governance practices which we believe are consistent with best practices, support our business objectives and align with shareholder interests.
Key Practices
ü | Our HR&CC is comprised entirely of independent directors | |
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ü | The HR&CC engages an independent executive compensation advisor that does not provide other services to Suncor | |
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ü | Maintain minimum share ownership guidelines including 6 times salary for the CEO, 4 times salary for the President and Chief Operating Officer and 3 times salary for Executive Vice Presidents | |
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ü | Have a claw back policy | |
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ü | Conduct a compensation program risk assessment annually | |
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ü | Benchmark senior executive target pay against a relevant North American industry peer group | |
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ü | Have a post-retirement share ownership hold period for the CEO | |
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ü | Provide at least 50% of mid- to long-term incentive compensation through PSUs | |
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ü | Have no termination payments in excess of 2 times cash pay | |
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ü | Have double trigger change of control provisions for equity awards | |
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ü | Have vesting requirements and service and earnings caps on the Suncor Energy Supplemental Executive Retirement Plan (SERP) | |
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ü | Have significant performance contingent pay for the CEO with over 85% of pay at risk | |
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ü | Have a robust target setting process | |
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ü | Annual incentive plan (AIP) and PSU Plan include threshold performance levels and payout caps | |
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ü | Have an AIP deferral program that allows executives to take a portion or all of their annual incentive payment in DSUs | |
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ü | No option re-pricing | |
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ü | No loans are provided to executives | |
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ü | Have a no hedging policy for common shares and other Suncor securities held by an executive | |
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ü | No excessive perquisites are provided | |
24 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Compensation Governance
Board of Directors. The Board oversees development of the overall strategic direction and policy framework for Suncor. This responsibility, in part, is discharged with the assistance of Board committees, including the HR&CC. Further details relating to Board committees can be found in Schedule B.
Human Resources & Compensation Committee. Central to the role of the HR&CC is aligning executive compensation with the delivery of shareholder value. The role and operation of the HR&CC under its mandate include assisting the Board annually in the areas of executive compensation, succession planning, incentive compensation plans and compensation governance. Key objectives in these areas include:
The HR&CC fulfilled its mandate, as summarized in this section, in 2018.
All HR&CC members are independent directors. The HR&CC is currently comprised of the following members: John D. Gass (chair), Mel E. Benson, Dennis M. Houston and Eira M. Thomas.
The HR&CC members have experience in leadership roles involving EHS and social responsibility, strong knowledge of the energy industry (three of four with an energy industry background), a mix of functional experience and competency, and tenure as directors of various public companies. This background provides the HR&CC with the collective experience, skills and qualities to effectively support the Board in carrying out its mandate. Further information on the HR&CC committee member experience and skills is provided in the inventory of Board member capabilities and competencies on page B-3 of Schedule B.
Executive Compensation Consultants. Willis Towers Watson provides advice to the HR&CC, supports management in the area of executive compensation and provides services in other human resources areas, including pensions. Willis Towers Watson has protocols in place to ensure that they are in a position to provide independent advice. Willis Towers Watson was originally retained in February 2006.
Meridian Compensation Partners (Meridian) is directly retained by the HR&CC as its independent advisor. Meridian was originally retained by the HR&CC in February 2010.
Willis Towers Watson provides the HR&CC consulting support and information in the following areas:
Meridian's role is to review and provide advice to the HR&CC on analysis and recommendations put forward by management and Willis Towers Watson. As the HR&CC's independent advisor, Meridian:
The decisions made by the HR&CC may reflect factors and considerations other than as provided or recommended by our executive compensation consultants. During 2018, Willis Towers Watson and Meridian met with the HR&CC chair and attended relevant sections of HR&CC meetings, as necessary.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 25
Executive Compensation-Related Fees
Executive compensation-related fees paid by Suncor in 2018 and 2017 to Willis Towers Watson and Meridian are displayed in the table below.
Executive Compensation Consultant |
Fees Paid related to 2018 ($) |
Fees Paid related to 2017 ($) |
|||
Willis Towers Watson | 234 080 | 273 040 | |||
|
|||||
Meridian | 53 268 | 19 136 | |||
All Other Fees
Willis Towers Watson's Human Capital and Benefits practice also assisted in certain matters related to pension and benefits, including, but not limited to, actuarial and accounting services. Total fees payable to Willis Towers Watson for the foregoing services were $1,540,478 in 2018 and $1,952,477 in 2017. In addition, Willis Towers Watson provides broking and corporate risk services, as well as other general management consulting services, which are separate and distinct from the Willis Towers Watson Human Capital and Benefits consulting. Total fees payable to Willis Towers Watson for these services were $825,000 in 2018 and $1,091,054 in 2017. Other than the fees disclosed above, no other fees were paid by Suncor to Meridian in 2018 and 2017.
The HR&CC pre-approves all material executive compensation-related fees paid to Willis Towers Watson and Meridian. The HR&CC does not pre-approve services provided by Willis Towers Watson that do not relate to executive compensation-related services.
Managing Compensation Risk. Suncor's executive compensation policies and programs are designed to create appropriate incentives to increase long-term shareholder value. While the energy business by its nature requires some level of risk taking to achieve returns in line with shareholder expectations, Suncor structures compensation plans and programs and maintains guidelines and policies which it believes limit excessive risk. Key oversight procedures and risk mitigating features to support managing compensation risk are outlined below.
26 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Oversight Procedures
Suncor's strategic plan, as reviewed by the Board, balances investment risk and reward, and assesses company and industry risks in advance to support planning, risk
management and decision making. Suncor uses tools including an Enterprise Risk Management System, Operational Excellence Management System and Trading Risk Management Policy to identify and manage risk. In the normal course of business, Suncor has financial controls that provide limits and authorities in areas such as capital and operating expenditures, divestiture decisions and marketing and trading transactions. These financial controls mitigate inappropriate risk taking. |
The HR&CC uses a compensation program risk assessment framework in assessing Suncor's compensation policies and programs to determine whether any components could
encourage unacceptable or excessive risk taking. The elements of the compensation risk assessment framework are categorized in four areas: pay philosophy and compensation structure, plan designs, performance metrics and governance. The HR&CC reviews the results of the compensation program risk assessment annually to take into account and consider any significant shifts in Suncor's business strategies or compensation policies and programs. From its review in 2018 the HR&CC concluded that Suncor's compensation policies and programs do not encourage excessive risk that could have a material adverse effect on Suncor. |
||
Key Risk Mitigating Features
Plan and Program Design | |||
Total direct compensation for executives provides a balance between base salary and variable performance contingent compensation. For our NEOs, emphasis is not focused
on one compensation component, but is spread across annual, mid- and long-term programs to support and balance sustained short-term performance and long-term profitability. For our NEOs, typically 80% or more of their target total direct compensation is variable based on company, business unit and personal performance and the remaining 20% or less is base salary. Of the 80% or more of variable compensation, approximately 80% or more is mid- and long-term focused and approximately 20% or less is short-term focused. The strong weighting towards mid- to long-term compensation mitigates the risk of undue emphasis on short-term goals at the expense of long-term sustainable performance. Annual grants of stock options vest over three years and have a seven-year term, reinforcing the goal of building and sustaining long-term value in line with shareholder interests. Our mid-term PSU Plan rewards relative TSR performance over three years versus our PSU peer group of companies, as described on page 53. Annual awards and overlapping three year performance periods deter short-term focused decision making and require sustained performance to achieve a payout. For PSU grants, there is no payout if relative TSR performance is in the bottom grouping of companies, a payout cap of 200% of target when relative TSR performance is in the top company grouping of the peer group and a sliding scale of payout levels based on each company grouping in between. |
The AIP for all salaried employees is inherently designed to limit risk. Short-term incentive pay is earned based on achievement against a balanced and diversified mix
of performance measures. The measures include both financial and operating performance targets. This balanced approach discourages focus on a single measure at the expense of other key factors (e.g., profitable growth at the expense of safety).
This design diversifies the risk under any one performance area. AIP targets, results and payouts are stress tested and reviewed by the HR&CC. The funds to provide for annual cash payouts under the AIP are determined based on key corporate measures and a scorecard for each business unit with consistent measurement across areas critical to Suncor's success. A performance threshold for payouts under the AIP is established each year. For 2018, the threshold was based on achievement of a minimum FFO level requirement. Under the DSU Plan, executives may elect annually to allocate 25% to 100% of their AIP payment to DSUs. This feature in the DSU Plan is used by executives to assist in meeting share ownership requirements and defers annual incentive compensation, further encouraging a focus on long-term performance. For the 2018 performance period, three of the NEOs elected to take a portion of their AIP payment in DSUs. |
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Policies and Guidelines |
|||
Suncor's total compensation for executives is regularly benchmarked against a peer group of companies of similar size and business scope approved by the HR&CC. This
ensures that compensation is competitive with peers and aligned with Suncor's philosophy. Suncor executives must achieve and maintain specific share ownership levels based on a multiple of their annual salary. A substantial share ownership level assists in aligning executive interests with those of shareholders. The share ownership guidelines for NEOs are found on page 30. The CEO must maintain his share ownership requirement level through the first year following retirement. |
The HR&CC and the Board provide strong oversight of the management of Suncor's compensation programs. The HR&CC has discretion in assessing performance under
executive compensation programs to adjust metrics or the payouts based on results and events and has used this discretion to reduce or increase payouts under certain programs in the past. Claw back policy allows the Board to seek reimbursement of incentive compensation under certain situations involving a material restatement of all or a portion of the company's financial statement and misconduct. Executives are not permitted to engage in short selling in Suncor shares or purchase financial instruments (including, for greater certainty, puts, options, calls, prepaid variable forward contracts, equity swaps, collars or units of exchange funds) that are designed to hedge or offset a change in the market value of Suncor's common shares or other Suncor securities held by an executive. |
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2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 27
Conclusion
Given the oversight procedures and the key risk mitigation features of Suncor's compensation policies and programs described above, the HR&CC does not believe that there are any identified risks arising from the company's compensation policies and practices that are reasonably likely to have a material adverse impact on the company.
Our Approach to Executive Compensation
Pay-for-Performance Philosophy. Suncor maintains a strong pay-for-performance philosophy that is demonstrated in the mix of compensation provided to executives and the way we measure success. Compensation plans and practices are tied closely to our strategy, performance, talent and risk management business objectives.
A significant portion of the total direct compensation of our senior executives is provided in variable performance contingent pay designed to reward superior business performance and increasing shareholder returns. This approach reinforces our pay philosophy and ensures alignment with shareholder interests. Incentive-based pay is designed to reward successful short-, medium- and long-term performance in key areas. These areas include safety, sustainability, base business and growth, FFO, ROCE, relative share price performance, absolute share price performance and leveraging our integrated strategy, all of which enable results that are important to our shareholders.
Achieving the Right Balance. To deliver sustained and profitable long-term performance, it is essential that Suncor attracts, engages and retains talented, capable executives who can execute on current priorities and help position Suncor over the long-term for sustained success. To do this, programs are designed to provide an attractive and competitive total compensation opportunity. Suncor believes it provides the right balance in its overall rewards program to achieve this through "total direct compensation", consisting of salary, annual incentive, mid- and long-term equity-based incentives, and "indirect compensation", consisting of benefits and retirement-related programs. These programs are complemented with excellent career development opportunities and careful succession planning.
Defining Our Marketplace. Our senior executives are responsible for managing a large, global enterprise with multiple operating units and significant capital expenditures.
As the largest integrated energy company in Canada and fourth largest in North America by market capitalization at December 31, 2018, size and business scope are key criteria in defining the marketplace and peer companies used to establish competitive compensation levels for our senior executives. This means we must look beyond Canadian energy companies and include U.S. energy companies in our peer group in order to capture a sufficient number of companies of comparable size and complexity.
The peer group used to benchmark compensation levels for Suncor's senior executives in 2018, including the NEOs identified on page 21, is approved by the HR&CC. The peer group and selection criteria are regularly reviewed by the HR&CC and include energy sector specific companies, financial and operational comparability, nature and scope of operations and represent a primary market for executive talent.
Our peer group for 2018 is comprised of the 16 North American based energy companies listed below and provides a robust sample to ensure that compensation changes made by a single company do not unduly influence benchmark data. In Canada, we include pipeline companies, since there are fewer comparable large upstream and integrated energy companies and because pipeline companies form part of our competitive labour market. In the U.S., where there are many more large upstream and integrated companies, we limit the peer companies to comparable upstream and integrated energy companies.
28 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
For our NEOs and other senior executives, Suncor's 2018 total direct compensation structure is targeted at the median of the Suncor Compensation Peers, which are identified below. The same peer group is used for benchmarking director compensation.
Canada | U.S. | |
Canadian Natural Resources Limited (CNQ) |
Anadarko Petroleum Corporation (APC) |
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Cenovus Energy Inc. (CVE) | Apache Corporation (APA) | |
Enbridge Inc. (ENB) | Chesapeake Energy Corporation (CHK) | |
Encana Corporation (ECA) | Chevron Corporation (CVX) | |
Husky Energy Inc. (HSE) | ConocoPhillips (COP) | |
Imperial Oil Limited (IMO) | Devon Energy Corporation (DVN) | |
TransCanada Corporation (TRP) | EOG Resources Inc. (EOG) | |
Hess Corporation (HES) | ||
Marathon Oil Corporation (MRO) |
A similar peer group of companies is used in determining the relative TSR performance for our PSU grants as described on page 53. Differences in the two peer groups reflect the specific purpose of each group (i.e., benchmarking of executive pay versus comparing company shareholder return performance).
Suncor ranks as one of the largest companies, as compared to the Suncor Compensation Peers, in relation to revenues, market capitalization and assets.
The chart below shows Suncor's ranking as compared to the Suncor Compensation Peers.
Looking Ahead to 2019:
The HR&CC approved an amendment to the Suncor Compensation Peers following its annual review of the peer group companies. Effective in 2019, Chesapeake Energy Corporation will be removed from the Suncor Compensation Peers and replaced by Occidental Petroleum Corporation. This amendment is in line with our peer group selection criteria and ensures that the peer group continues to represent comparable organizations.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 29
Executive Share Ownership Guidelines. Suncor strongly believes that executives' interests should be aligned with the interests of Suncor's shareholders. One of the key ways we reinforce this is by requiring executives to have personal holdings in Suncor common shares or share equivalents equal to a multiple of their annual base salary.
The share ownership guidelines for our executives are reviewed periodically to ensure they continue to be market competitive and consistent with good governance practice. These guidelines visibly demonstrate alignment of executives' interests with those of Suncor's shareholders and are supported by market data.
2018 and 2019 Guidelines. The share ownership guideline level must be achieved by the end of the fifth year after appointment to an executive position or promotion to a more senior executive position. On promotion to a more senior executive position, the prior guideline level must be maintained at the new base salary level.
Only Suncor common shares and DSUs count toward fulfillment of the guidelines; PSUs, restricted share units (RSUs) and stock options do not. Where share ownership guidelines have not been met within the prescribed period, executives must use the cash payout from their annual incentive award, a current vested PSU grant payout, or other cash resources to immediately satisfy any shortfall to the current share ownership guideline for their level.
The share ownership guidelines for 2018 remained competitive with the Suncor Compensation Peers and no changes have been made for 2019.
The following table sets forth the compliance of each NEO with the share ownership guidelines as a multiple of annual salary as at December 31, 2018. All NEOs are in compliance with their current share ownership guideline.
Holdings(2) |
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NEO |
Executive Share Ownership Guideline Level |
Compliance Date for achieving Guideline Level |
Current Requirement at December 31, 2018(1) |
Shares | DSUs |
Holding Value ($) |
Multiple of Annual Salary held in Shares and DSUs |
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S.W. WILLIAMS | 6 × | December 31, 2020 | 5 × | 470 864 | 46 791 | 19 738 170 | 13.4 × | ||||||||
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A. COWAN(3) | 3 × | December 31, 2019 | N/A | 57 973 | 47 538 | 4 023 126 | 6.3 × | ||||||||
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M.S. LITTLE(4) | 4 × | December 31, 2021 | 3 × | 55 744 | 56 285 | 4 271 649 | 4.1 × | ||||||||
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M.R. MACSWEEN | 3 × | December 31, 2017 | 3 × | 39 378 | 64 349 | 3 955 106 | 6.6 × | ||||||||
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S.D.L. REYNISH | 3 × | December 31, 2017 | 3 × | 16 707 | 57 700 | 2 837 129 | 4.7 × | ||||||||
CEO Hold Requirement. The CEO must maintain his share ownership level for one year following his retirement, which aligns with current good governance practices and shareholder interests.
Total Direct Compensation Components. Total direct compensation, made up of base salary, an annual incentive and mid- to long-term incentives, is designed to reward short-term results and achievement of sustained longer-term performance in key business areas that enable the operational and financial results important to our shareholders.
Incentive or variable performance contingent compensation represents a significant portion of total direct compensation for senior executives. The percentage of variable performance contingent total direct compensation increases with greater levels of responsibility. The following chart outlines the elements of total direct compensation, as well as other compensation and benefit related elements.
30 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 31
Key LTI Plan Terms. Suncor's business involves strategic investments over long periods of time. With stock options and PSUs as key elements of long-term incentive (LTI) compensation, NEOs are fully aligned with the economic interests of our shareholders over a medium- and long-term horizon, are significantly leveraged to Suncor's share price performance from an ultimate compensation standpoint and are rewarded based on a balance between relative TSR performance (PSUs) and absolute share price performance (stock options). The following table provides the key LTI plan features for equity awards provided to the NEOs and other executives as part of their competitive compensation.
Performance Share Units (PSUs) | Stock Options | |||
Term | Three years | Seven years | ||
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Description | Share units with a value that mirrors common shares and a performance condition that determines the vesting level (between 0% and 200% of grant) | Options to acquire common shares | ||
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Frequency | Granted annually | Granted annually | ||
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Performance Condition | TSR performance relative to peers | Value is only realized when the common share price exceeds the exercise price | ||
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Vesting | After a three year performance period Vesting level is subject to performance condition achievement and HR&CC approval |
1/3 vest each year starting on January 1 of the year following the annual grant and are based on the share price at the time of grant | ||
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Payout | Paid out in cash following the end of the three year performance period based on units held, vesting level and market value of a common share | On exercise, acquire common shares at the price determined at the time of grant | ||
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Employment Termination(1) |
Resignation share units are cancelled Involuntary Termination share units are cancelled Retirement share units are held to end of the performance period and paid out based on vesting level |
Resignation unvested options are cancelled; vested options may be exercised for up to the earlier of three months or expiry Involuntary Termination unvested options are cancelled; vested options may be exercised for up to the earlier of three months or expiry Retirement unvested options vest immediately and all options held may be exercised up to the earlier of three years or expiry |
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Executive Equity Compensation Hedging. Pursuant to Suncor's policies, executives are not permitted to engage in short selling in shares or purchase financial instruments (including, for greater certainty, puts, options, calls, prepaid variable forward contracts, equity swaps, collars or units of exchange funds) that are designed to hedge or offset a change in the market value of Suncor's common shares or other Suncor securities held by an executive.
32 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Compensation of the Named Executive Officers
Compensation Decision-Making. The compensation of the CEO and the other NEOs is determined through a structured annual process followed by the HR&CC to ensure it aligns with shareholder interests, rewards executives for performance achieved and enables Suncor to attract and retain talented executives.
The steps below illustrate the performance and compensation planning process which includes consideration of market information, governance practices, trends and advice from our executive compensation consultants.
Step 1: Review pay philosophy, peer group and program design. Benchmark compensation levels and assess trends. Determine pay mix, pay at risk and establish the compensation structure for the upcoming year.
Step 2: Review and approve corporate and business unit goals and metrics and CEO personal goals. Review and approve annual and longer term compensation program results. Review disclosure of prior year compensation decisions and program results.
Step 3: Monitor company progress and evaluate in-year performance under compensation programs.
Step 4: Evaluate company and CEO performance and determine compensation that will be recommended to the Board. Review compensation for other senior executives.
2018 Total Direct Compensation. The 2018 base salary, annual incentive and long-term incentive awards for each NEO are covered in the tables that follow in this section. Information on Suncor's AIP and performance in 2018 is provided on pages 33 to 35. Details on each NEO's performance, and their total direct compensation for 2016 to 2018 are provided on pages 36 to 40.
Base Salary. During 2018, NEO base salaries were increased by the percentages displayed in the following table. The increases reflect their demonstrated capabilities and ensure that their base salaries are competitive with the market for their positions. Mr. Little's increase in 2018 was associated with his appointment of the President position on November 14, 2018. This pay increase aligns to the significant expansion in the scope and responsibilities of Mr. Little's new portfolio and with market levels for similarly complex roles among the Suncor Compensation Peers.
Base Salary 2018 ($) |
Increase from 2017 (%) |
Base Salary 2017 ($) |
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S.W. WILLIAMS | 1 475 000 | 3.5 | 1 425 000 | ||||
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A. COWAN | 635 000 | 1.6 | 625 000 | ||||
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M.S. LITTLE | 1 050 000 | 16.7 | 900 000 | ||||
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M.R. MACSWEEN | 600 000 | 7.1 | 560 000 | ||||
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S.D.L. REYNISH | 600 000 | 5.3 | 570 000 | ||||
Annual Incentive Plan (AIP). Suncor's AIP rewards our NEOs and other AIP participants based on performance achieved versus the measures and targets approved for the corporate and business unit components and the annual goals approved for the individual component. The chart to the right displays the weight for each of the AIP performance components and provides a further breakdown of the business unit component of AIP showing the guideline weight for each value driver. Awards under the AIP are determined based on the combination of the weighted performance for the components. |
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2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 33
The AIP calculation and targets for the 2018 performance period are as follows:
Corporate component: The 30% corporate component is comprised of two key corporate-wide financial measures, 20% FFO and 10% ROCE, which Suncor believes are important indicators of the company's financial strength and profitability. Target performance for the corporate component of the AIP represents levels of FFO and ROCE that are determined based on key influencers such as production guidance, capital and operating costs, and the budgeted price for Brent crude, among others.
In 2018, performance on the key corporate measures (FFO & ROCE) was above target. The table below shows the level of performance needed to achieve the minimum, target and maximum payouts established for each financial goal, as well as the actual 2018 results, highlights and payout percentages.
Business unit component: The 50% business unit component consists of four business unit scorecards, each following standard performance measures across four of the value driver areas base business, safety, growth and sustainability. The overall score for the weighted average business unit component of the AIP for NEOs is determined on the combination of performance of each of the four business units and the weighting assigned to each unit.
The business unit results reflect an overall strong operating performance. The table below shows the level of performance needed to achieve the minimum, target and maximum payouts established for each business unit goal, as well as the actual 2018 results, highlights and payout percentages.
Governance of the AIP is comprehensive. Reviews of performance measures, weightings, targets and results are carried out at the business unit, corporate and HR&CC level.
Individual component: Information on the performance of the NEOs under the 20% individual component can be found beginning on page 36 and information on the calculation of their 2018 AIP awards can be found on the following page.
34 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
2018 AIP Awards. The table below displays the calculation of the AIP award for each NEO based on the three AIP components and the final award amounts approved for 2018 performance. The AIP awards for Mr. Williams and Mr. Little were determined by the HR&CC and approved by the Board. The AIP awards for the other NEOs were determined by Mr. Williams and Mr. Little with review by the HR&CC.
The calculations to determine the awards displayed in the tables below are comprised of two steps: first determine the Overall Performance Factor based on the AIP components, and second determine the AIP Award Payout.
2018 AIP Awards Performance Factor | ||||||||||||||||||||
Corporate Performance [A] | Business Unit Performance [B] | Individual Performance [C] |
Overall Performance Factor [F] |
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Name | Weight × Corporate Factor |
Total Factor [A] |
Weight × Business Unit Factor(1) |
Total Factor [B] |
Weight × Individual Factor |
Total Factor [C] |
[A+B+C] | |||||||||||||
S.W. WILLIAMS | 1.65 | 0.50 | 1.21 | 0.61 | 2.80 | 0.56 | 1.66 | |||||||||||||
A. COWAN | 1.65 | 0.50 | 1.21 | 0.61 | 1.59 | 0.32 | 1.42 | |||||||||||||
M.S. LITTLE | 30% | 1.65 | 0.50 | 50% | 1.21 | 0.61 | 20% | 1.24 | 0.25 | 1.35 | ||||||||||
M.R. MACSWEEN | 1.65 | 0.50 | 1.23 | 0.61 | 1.74 | 0.35 | 1.46 | |||||||||||||
S.D.L. REYNISH | 1.65 | 0.50 | 1.21 | 0.61 | 1.72 | 0.34 | 1.44 | |||||||||||||
2018 AIP Awards Payout |
Payout % vs Target Opportunity |
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Name | Annualized Base Salary December 31, 2018 [D] |
AIP Target [E] |
Overall Performance Factor [F] |
Calculated AIP Award [D × E × F](2) |
Approved AIP Award Payout |
Target (100%) |
Maximum (220%) |
Approved AIP Award as a % of Target |
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S.W. WILLIAMS | $1 475 000 | 125% | 1.66 | $3 061 000 | $3 061 000 | $1 843 750 | $4 056 250 | 166% | ||||||||
A. COWAN | $635 000 | 75% | 1.42 | $675 000 | $675 000 | $476 250 | $1 047 750 | 142% | ||||||||
M.S. LITTLE | $1 050 000 | 103%(3) | 1.35 | $1 450 000 | $1 450 000 | $1 076 250 | $2 367 750 | 135% | ||||||||
M.R. MACSWEEN | $600 000 | 75% | 1.46 | $655 000 | $655 000 | $450 000 | $990 000 | 146% | ||||||||
S.D.L. REYNISH | $600 000 | 75% | 1.44 | $650 000 | $650 000 | $450 000 | $990 000 | 144% | ||||||||
Long-Term Incentive (LTI) Awards. The table below displays the 2018 equity award of stock options and PSUs and the value at grant in February 2018 for each of the NEOs. Mr. Little did not receive an additional LTI award for his appointment to President in November 2018. The equity awards considered: the market target value for the equity awards at the median of the Suncor Compensation Peers; individual performance as determined by the Board in the case of Mr. Williams; individual performance as determined by Mr. Williams in the case of the other NEOs; and the previous year's equity award received by each NEO under the stock option plan (SOP) and the PSU Plan.
For more information on Suncor's equity plans, see "Summary of Incentive Plans". For further details on each NEO's 2018 equity award and total compensation for 2018, see the "Summary Compensation Table".
Name | Options | PSUs | RSUs(1) |
Option Value ($) |
PSU Value ($) |
RSU Value ($) |
Total ($) |
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S.W. WILLIAMS | 736 500 | 117 840 | | 4 933 692 | 5 065 942 | | 9 999 634 | ||||||||
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A. COWAN | 210 000 | 33 600 | | 1 406 755 | 1 444 464 | | 2 851 219 | ||||||||
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M.S. LITTLE | 375 000 | 60 000 | | 2 512 063 | 2 579 400 | | 5 091 463 | ||||||||
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M.R. MACSWEEN | 205 000 | 32 800 | | 1 373 261 | 1 410 072 | | 2 783 333 | ||||||||
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S.D.L. REYNISH | 205 000 | 32 800 | | 1 373 261 | 1 410 072 | | 2 783 333 | ||||||||
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 35
2018 Performance
Steven W. Williams, CEO
Steve Williams ensured Suncor continued to deliver value to shareholders in 2018 through optimized cash flow, profitability and return on capital. He effectively led the company in advancing the Fort Hills project to production, driving cost reductions and taking advantage of strategic acquisition and divestiture opportunities. He remains firmly focused on operational excellence, capital discipline and profitable growth. In November 2018 he announced his planned retirement in May 2019 following the meeting.
2018 Key Performance Results
2018 Total Direct Compensation
Mr. Williams received a base salary increase of 3.5% effective March 1, 2018, increasing his annual salary to $1,475,000. The AIP award of $3,061,000 represents 166% of his target opportunity and is based on Suncor's and Mr. Williams' performance. Mr. Williams' long term incentive grant value was $9,999,634, in the form of stock options and PSUs, as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2016-2018) ($) | |
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36 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Alister Cowan, Executive Vice President and Chief Financial Officer
Mr. Cowan was appointed Executive Vice President and Chief Financial Officer in July 2014. He is responsible for directing Suncor's financial operations, including controllers, investor relations, treasury, tax, internal audit and enterprise risk management. His efforts are focused on the integrity and reporting of all financial, management and risk information, ensuring that Suncor has the financial strength necessary to execute the company's strategic plans and engaging with shareholders and the broader investment community.
2018 Key Performance Results
2018 Total Direct Compensation
Mr. Cowan received a base salary increase of 1.6% effective March 1, 2018, increasing his annual salary to $635,000. The AIP award of $675,000 represents 142% of his target opportunity and is based on Suncor's and Mr. Cowan's performance. Mr. Cowan's long term incentive grant value was $2,851,219, in the form of stock options and PSUs, as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2016-2018) ($) | |
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2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 37
Mark S. Little, President and Chief Operating Officer
Mr. Little was appointed Suncor's President in November 2018, in addition to his role as Chief Operating Officer which he was appointed to in 2017. In his role as Chief Operating Officer, he has accountabilities for all of the company's operations and many of its corporate services. Prior to assuming this role, he was President of Suncor's Upstream organization, which included all of Suncor's operated and non-operated production, including oil sands, in situ and conventional exploration and production assets worldwide. Mr. Little will assume the role of Chief Executive Officer in May 2019 following the meeting.
2018 Key Performance Results
2018 Total Direct Compensation
Mr. Little received a 16.7% base salary increase effective November 14, 2018 on his appointment to President, increasing his salary to $1,050,000. This increase ensured his base salary was competitively positioned in line with the scope and responsibilities of his new position. Mr. Little did not receive a base salary increase on March 1, 2018 as he was given a base salary increase in late 2017 to position him well to market upon his appointment to Chief Operating Officer.
The AIP award of $1,450,000 represents 135% of his target opportunity and is based on Suncor's and Mr. Little's performance. Mr. Little's long term incentive grant value was $5,091,463, in the form of stock options and PSUs, as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2016-2018) ($) | |
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38 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Michael R. MacSween, Executive Vice President, Upstream
Mr. MacSween was appointed Suncor's Executive Vice President, Upstream in December 2017. In this role, he leads all of Suncor's operated and non-operated oil sands, in situ, and exploration and production assets. Mr. MacSween most recently served as Executive Vice President, Major Projects where he was accountable for the safe and cost-effective engineering, procurement and construction activities for Suncor's growth projects in the upstream, downstream and renewable energy portfolios.
2018 Key Performance Results
2018 Total Direct Compensation
Mr. MacSween received a base salary increase of 7.1% effective March 1, 2018, increasing his annual salary to $600,000. The AIP award of $655,000 represents 146% of his target opportunity and is based on Suncor's and Mr. MacSween's performance. Mr. MacSween's long term incentive grant value was $2,783,333, in the form of stock options and PSUs as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2016-2018) ($) | |
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2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 39
Stephen D.L. Reynish, Executive Vice President, Strategy & Operations Services
Mr. Reynish was appointed Executive Vice-President, Strategy & Operations Services in December 2017. In this role, he leads commercial and business development, which includes the creation and execution of long range business plans, acquisitions and divestment initiatives, as well as the oversight of other large-scale commercial activities. He continues to guide Suncor's portfolio optimization and represent Suncor's interests in operated (Fort Hills) and non-operated joint venture oil sands projects. He also is responsible for Suncor's operations services, which include Environment, Health and Safety; Enterprise and Digital Technology; Enterprise Technical; Projects; and Supply Chain and Field Logistics. Mr. Reynish previously served as Suncor's Executive Vice-President, Strategy & Corporate Development.
2018 Key Performance Results
2018 Total Direct Compensation
Mr. Reynish received a base salary increase of 5.3% effective March 1, 2018, increasing his annual salary to $600,000. The AIP award of $650,000 represents 144% of his target opportunity and is based on Suncor's and Mr. Reynish's performance. Mr. Reynish's long term incentive grant value was $2,783,333, in the form of stock options and PSUs as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2016-2018) ($) | |
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40 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Looking Ahead to 2019:
The HR&CC did not make any changes to the 2018 executive compensation structure for 2019.
A 2.5% base salary increase budget was approved for executives in 2019 based on competitive benchmarking.
On February 12, 2019, the Board approved a grant of options and PSUs to the NEOs effective February 15, 2019, as displayed in the table below, under the terms of the SOP and the PSU Plan. The exercise price of these options is $43.01 and the grant price of the PSUs is $43.01.
Name | Options | PSUs | |||
S.W. WILLIAMS | 753 500 | 116 250 | |||
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A. COWAN | 217 800 | 33 590 | |||
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M.S. LITTLE | 538 700 | 83 120 | |||
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M.R. MACSWEEN | 212 600 | 32 790 | |||
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S.D.L. REYNISH | 212 600 | 32 790 | |||
Executive Compensation Alignment with Shareholder Value
In an industry subject to commodity price cycles, Suncor continues to focus on long-term value growth and returns for shareholders. The following performance graph shows Suncor's cumulative TSR for the past five years against equity market benchmarks. For the measurement period, the aggregate realizable total direct compensation of our NEOs, as seen in the Realizable Pay graph on page 43, has been generally consistent with TSR. A substantial portion of NEO total direct compensation is linked to Suncor's share price and therefore is aligned with shareholders.
Performance Graph(1)(2)
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 41
CEO Realizable Pay. The aggregate five-year realizable pay chart shows the CEO's realizable total direct compensation compared to his pay opportunity at December 31, 2018 for the five-year period from 2014 to 2018. The realizable pay value is approximately 8.4% higher than the pay opportunity level. The realizable pay level supports pay for performance alignment, as the mid- to long-term incentive value is in line with TSR performance compared to peers and absolute share price performance.
The table below compares the grant date value of total direct compensation (pay opportunity), as reflected in the Summary Compensation Table, to the CEO's realizable total direct compensation for the period from 2014 to 2018. Over the same period, the current value of $100 invested in Suncor's common shares is $119, which exceeds the actual value earned and outstanding to Mr. Williams for $100 awarded in total direct compensation of $109.
Year |
Total Direct Compensation (Pay Opportunity)(1) ($000s) |
Realizable Total Direct Compensation as at Dec. 31, 2018(2) ($000s) |
Performance Period | ||||
2014 | 12 266 | 16 912 | Dec 31, 2013 to Dec 31, 2018 | ||||
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2015 | 12 811 | 15 784 | Dec 31, 2014 to Dec 31, 2018 | ||||
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2016 | 11 865 | 20 140 | Dec 31, 2015 to Dec 31, 2018 | ||||
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2017 | 14 529 | 9 509 | Dec 31, 2016 to Dec 31, 2018 | ||||
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2018 | 14 526 | 9 165 | Dec 31, 2017 to Dec 31, 2018 | ||||
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2014-2018 | 65 997 | 71 511 | Dec 31, 2013 to Dec 31, 2018 | ||||
CEO Look Back. The HR&CC annually reviews a broader analysis of the total compensation earned and accruing to the CEO since his appointment and comparing it to the TSR during the same period.
In its recent review, the HR&CC compared the total accrued compensation earned by the CEO since his appointment in 2012 up to December 31, 2018 to both the absolute increase in market capitalization, and the relative increase in market capitalization versus a relevant index over the same period, and found it to be reasonable.
NEO Realizable Pay. The pay opportunity and realizable pay for total direct compensation for the NEOs over the period from 2014 to 2018 are shown in the chart below. For this five year period, the realizable pay value, which is a snapshot at December 31, 2018, for total direct compensation for the NEOs was approximately 10.8% higher than the pay opportunity, as determined in accordance with the methodology described in the footnotes for the Realizable Pay Total Direct Compensation chart below. The higher realizable pay value of total direct compensation for the NEOs for the measurement period is generally consistent with the trend of total return on investment indicated for Suncor in the TSR performance graph provided on page 41.
Suncor's strong operational performance during the five year period resulted in above target payouts under the AIP component of total direct compensation. The realizable value of total direct compensation demonstrates the
42 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
pay-for-performance design of Suncor's programs that reward TSR performance achieved relative to peer companies under the PSU Plan and Suncor's absolute share price performance over the applicable five year period.
Realizable Pay Total Direct Compensation in millions ($)(1)(2)(3)
Cost of Management. The following table includes the aggregate total direct compensation for all NEOs compared to Suncor's FFO for the years ended, and market capitalization as at, December 31, 2018 and 2017.
2018 | 2017 | ||||
Total direct compensation of all NEOs(1) | $34.2 | $33.4 | |||
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Total direct compensation as a percentage (%) of FFO(2) for the year ended December 31 | 0.34% | 0.37% | |||
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Total direct compensation as a percentage (%) of Suncor's market capitalization as at December 31 | 0.06% | 0.04% | |||
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 43
COMPENSATION DISCLOSURE OF NAMED EXECUTIVE OFFICERS
Aggregate Equity Holdings. The following table provides the aggregate equity holdings of the NEOs for the years ended December 31, 2017 and 2018, indicating the net change during 2018 and the total value at risk as at December 31, 2018.
December 31, 2017 |
December 31, 2018 |
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Name | Shares | DSUs(1)(2) | PSUs(1)(3) | Options | RSUs(1) | Shares | DSUs(1)(2) | PSUs(1)(3) | Options | RSUs(1) | |||||||||||
S.W. WILLIAMS | 411 666 | 45 336 | 268 370 | 3 783 000 | | 470 864 | 46 791 | 250 261 | 4 249 500 | | |||||||||||
|
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A. COWAN | 16 873 | 46 060 | 77 901 | 812 800 | | 57 973 | 47 538 | 72 163 | 1 022 800 | | |||||||||||
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M.S. LITTLE | 51 435 | 47 657 | 94 624 | 1 225 600 | | 55 744 | 56 285 | 112 945 | 1 345 600 | | |||||||||||
|
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M.R. MACSWEEN | 34 850 | 54 439 | 78 885 | 963 000 | 7 000 | 39 378 | 64 349 | 70 485 | 1 045 000 | 7 226 | |||||||||||
|
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S.D.L. REYNISH | 14 371 | 40 432 | 77 076 | 723 333 | 7 000 | 16 707 | 57 700 | 70 485 | 501 666 | 7 226 | |||||||||||
Net change during 2018 |
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Name | Shares | DSUs(1) | PSUs(1) | Options | RSUs(1) | ||||||
S.W. WILLIAMS | 59 198 | 1 455 | (18 109 | ) | 466 500 | | |||||
|
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A. COWAN | 41 100 | 1 478 | (5 739 | ) | 210 000 | | |||||
|
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M.S. LITTLE | 4 309 | 8 627 | 18 321 | 120 000 | | ||||||
|
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M.R. MACSWEEN | 4 528 | 9 910 | (8 400 | ) | 82 000 | 226 | |||||
|
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S.D.L. REYNISH | 2 336 | 17 268 | (6 591 | ) | (221 667 | ) | 226 | ||||
Value at Risk |
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Name |
Value of Shares(4) ($) |
Value of DSUs(4) ($) |
Value of PSUs(4) ($) |
Value of Options(5) ($) |
Value of RSUs(4) ($) |
Total Value at Risk ($) |
Multiple of Salary (#) |
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S.W. WILLIAMS | 17 954 044 | 1 784 126 | 9 542 470 | 11 792 850 | | 41 073 490 | 27.8 | ||||||||
|
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A. COWAN | 2 210 510 | 1 812 615 | 2 751 558 | 1 821 600 | | 8 596 284 | 13.5 | ||||||||
|
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M.S. LITTLE | 2 125 519 | 2 146 130 | 4 306 592 | 2 418 900 | | 10 997 141 | 10.5 | ||||||||
|
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M.R. MACSWEEN | 1 501 483 | 2 453 623 | 2 687 592 | 2 132 250 | 275 536 | 9 050 483 | 15.1 | ||||||||
|
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S.D.L. REYNISH | 637 038 | 2 200 091 | 2 687 592 | 1 214 397 | 275 536 | 7 014 654 | 11.7 | ||||||||
44 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Summary Compensation Table. The following table provides information concerning compensation paid to the NEOs for the years ended December 31, 2018, 2017 and 2016.
Name and Principal | Salary |
Share- Based Awards(1) |
Option- Based Awards(2) |
Non-equity incentive plan compensation ($) |
Pension Value(4) |
All Other Compensation(5) |
Total Compensation |
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Position | Year | ($) | ($) | ($) | Annual(3) | Long-Term | ($) | ($) | ($) | ||||||||||
S.W. WILLIAMS | 2018 | 1 465 577 | 5 065 942 | 4 933 692 | 3 061 000 | | 100 800 | 162 396 | 14 789 407 | ||||||||||
|
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Chief Executive Officer(6) | 2017 | 1 415 769 | 5 077 224 | 4 847 100 | 3 189 000 | | 117 600 | 173 309 | 14 820 002 | ||||||||||
|
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2016 | 1 375 000 | 4 082 882 | 3 657 000 | 2 750 000 | | (545 100 | ) | 162 561 | 11 482 343 | ||||||||||
A. COWAN | 2018 | 633 115 | 1 444 464 | 1 406 755 | 675 000 | | 772 500 | 44 336 | 4 976 170 | ||||||||||
|
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Executive Vice President | 2017 | 625 000 | 1 479 456 | 1 412 400 | 720 000 | | 627 800 | 46 875 | 4 911 531 | ||||||||||
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and Chief Financial Officer | 2016 | 625 000 | 1 181 211 | 1 058 000 | 665 000 | | 585 300 | 46 875 | 4 161 386 | ||||||||||
M.S. LITTLE | 2018 | 915 000 | 2 579 400 | 2 512 063 | 1 450 000 | | 2 996 300 | 68 700 | 10 521 463 | ||||||||||
|
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President and Chief | 2017 | 687 404 | 2 031 935 | 1 948 364 | 1 200 000 | | 4 837 500 | 51 682 | 10 756 885 | ||||||||||
|
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Operating Officer(6) | 2016 | 650 000 | 1 283 925 | 1 150 000 | 765 000 | | 600 900 | 48 750 | 4 498 575 | ||||||||||
M.R. MACSWEEN | 2018 | 592 461 | 1 410 072 | 1 373 261 | 655 000 | | 417 500 | 33 335 | 4 481 629 | ||||||||||
|
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Executive Vice President, | 2017 | 556 308 | 1 753 762 | 1 380 300 | 690 000 | | 695 800 | 32 757 | 5 108 927 | ||||||||||
|
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Upstream | 2016 | 540 000 | 1 232 568 | 1 104 000 | 560 000 | | 453 700 | 29 700 | 3 919 968 | ||||||||||
S.D.L. REYNISH | 2018 | 594 364 | 1 410 072 | 1 373 261 | 650 000 | | 885 900 | 41 152 | 4 954 749 | ||||||||||
|
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Executive Vice President, | 2017 | 566 308 | 1 753 762 | 1 380 300 | 675 000 | | 728 500 | 34 418 | 5 138 288 | ||||||||||
|
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Strategy & Operations | 2016 | 550 000 | 1 181 211 | 1 058 000 | 570 000 | | 552 000 | 41 514 | 3 952 725 | ||||||||||
Services | |||||||||||||||||||
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 45
Share-Based Awards and Option-Based Awards. The following table provides certain information about option-based awards and share-based awards outstanding for the NEOs as at December 31, 2018. For further details, including the exercise price and expiration date, of each option-based award held by the NEOs as at December 31, 2018, see Schedule A.
Option-Based Awards |
Share-Based Awards |
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Name |
Aggregate number of securities underlying unexercised options |
Aggregate value of unexercised "in-the-money" options(1) ($) |
Aggregate number of shares or units of shares that have not vested(2) |
Aggregate market or payout value of share- based awards that have not vested(2)(3) ($) |
Aggregate market or payout value of vested share-based awards not paid out or distributed(4) ($) |
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S.W. WILLIAMS | 4 249 500 | 11 792 850 | 250 261 | 9 542 470 | 11 502 586 | ||||||
|
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A. COWAN | 1 022 800 | 1 821 600 | 72 163 | 2 751 558 | 4 624 245 | ||||||
|
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M.S. LITTLE | 1 345 600 | 2 418 900 | 112 945 | 4 306 592 | 5 202 249 | ||||||
|
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M.R. MACSWEEN | 1 045 000 | 2 132 250 | 77 711 | 2 963 127 | 5 387 497 | ||||||
|
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S.D.L. REYNISH | 501 666 | 1 214 397 | 77 711 | 2 963 127 | 5 011 721 | ||||||
46 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Incentive Plan Awards Value Vested or Earned During the Year. The following table provides the value of option-based awards on the vesting date, the value of share-based awards that vested during the year ended December 31, 2018, and the value of non-equity incentive plan compensation earned during the year ended December 31, 2018, for the NEOs.
Name |
Option-Based awards Value vested during the year (as at vesting date)(1) ($) |
Share-Based awards Value vested during the year(2)(3) ($) |
Non-equity incentive plan compensation Value earned during the year(4) ($) |
||||
S.W. WILLIAMS | 6 710 968 | 9 718 460 | 3 061 000 | ||||
|
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A. COWAN | 2 031 688 | 2 811 630 | 675 000 | ||||
|
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M.S. LITTLE | 2 225 409 | 3 356 120 | 1 450 000 | ||||
|
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M.R. MACSWEEN | 2 077 968 | 3 278 875 | 655 000 | ||||
|
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S.D.L. REYNISH | 1 517 324 | 3 486 630 | 650 000 | ||||
Option Exercises Value Realized During the Year. The following table provides the number of Suncor common shares acquired upon the exercise of options as well as the aggregate value realized upon the exercise of these options during the year ended December 31, 2018 for the NEOs.
Name |
Common Shares Acquired on Option Exercise |
Aggregate Value Realized(1) ($) |
|||
S.W. WILLIAMS | 200 000 | 459 968 | |||
|
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A. COWAN | | | |||
|
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M.S. LITTLE | 255 000 | 4 414 347 | |||
|
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M.R. MACSWEEN | 115 000 | 2 042 631 | |||
|
|||||
S.D.L. REYNISH | 426 667 | 4 706 690 | |||
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 47
Suncor Retirement Arrangements. The Suncor Energy Pension Plan is a registered pension plan that provides retirement income to Suncor employees and former employees, including Messrs. Williams, Cowan, Little, MacSween and Reynish. Retirement income is based on a defined contribution account balance, or depending upon the employees' eligibility, based on a combination of a defined benefit pension payment, including an employee-paid benefit feature, and a defined contribution account balance. All of the NEOs participate in the combination provision of the plan.
In addition to the pension provided under the Suncor Energy Pension Plan, certain executive officers may receive supplemental retirement payments under the terms of the SERP. Under the terms of the SERP, any new participants must be approved by the HR&CC. Nine persons who are currently members of Suncor senior executive management were participants in the SERP as at December 31, 2018.
The SERP is a non-registered supplemental retirement arrangement designed to attract mid-career executives with a competitive career based pension that features an up-front accrual. This attraction element is balanced by features that limit the executive pension by: (i) requiring that an executive provide five years of service to be entitled to SERP benefits, which is five years more than the service required under the Suncor Energy Pension Plan; (ii) limiting service to Suncor related experience only, both for vesting and benefit accrual purposes; (iii) limiting the executive's total pension to 50%, unless there is total service greater than 25 years, in which case the maximum is 70% of executive remuneration; and (iv) limiting executive remuneration to a maximum of two times base salary (base salary plus annual incentive target bonus of up to 100% of base salary). All of the NEOs are members of the SERP. Additional details of the SERP follow.
48 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Defined Benefit Plans. The following table summarizes the retirement income of each of the NEOs under the defined benefit provisions of Suncor's pension arrangements.
Annual Benefits Payable(2) |
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Name |
Number of years credited service(1) |
As at December 31, 2018 ($) |
At age 65 ($) |
Defined Benefit Obligation as at January 1, 2018(3) ($) |
Compensatory change(4) ($) |
Non- compensatory change(5) ($) |
Defined Benefit Obligation as at December 31, 2018(3) ($) |
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S.W. WILLIAMS | 17 | 1 417 147 | 1 416 919 | 23 165 658 | 98 931 | (948 934 | ) | 22 315 655 | |||||||
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A. COWAN | 4 | 241 694 | 545 625 | 2 870 707 | 770 631 | 63 259 | 3 704 597 | ||||||||
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M.S. LITTLE | 10 | 704 101 | 702 961 | 13 168 725 | 2 994 431 | (634 892 | ) | 15 528 264 | |||||||
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M.R. MACSWEEN | 23 | 482 534 | 657 192 | 7 624 949 | 415 631 | (570 417 | ) | 7 470 163 | |||||||
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S.D.L. REYNISH | 7 | 345 871 | 495 532 | 4 917 905 | 884 031 | (217 131 | ) | 5 584 805 | |||||||
Defined Contribution Plans. Under the combination provision of the Suncor Energy Pension Plan, applicable to all of the NEOs, Suncor makes contributions to the defined contribution accounts for all employees of 1% of basic earnings, plus up to an additional 1.5% of basic earnings on a 50% matching basis. All contributions to the defined contribution accounts are subject to maximum levels.
Under the Suncor Energy Pension Plan, employees may invest the balance of their accounts in a broad range of investment funds made available by the plan; an employee's investment return is based upon the market returns earned by each fund in which the employee has chosen to invest his or her contributions. At retirement, employees may transfer the balance of their accounts to a pension account as prescribed by law or the company may purchase an annuity on behalf of the employee.
The following table summarizes the defined contributions accounts of each of the NEOs.
Name |
Accumulated value as at January 1, 2018 ($) |
Compensatory ($) |
Accumulated value as at December 31, 2018 ($) |
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S.W. WILLIAMS | 35 490 | 1 869 | 37 873 | ||||
|
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A. COWAN | 26 505 | 1 869 | 28 032 | ||||
|
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M.S. LITTLE | 41 048 | 1 869 | 42 602 | ||||
|
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M.R. MACSWEEN | 234 694 | 1 869 | 229 647 | ||||
|
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S.D.L. REYNISH | 46 583 | 1 869 | 48 247 | ||||
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 49
TERMINATION AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Termination Agreements
Suncor has employment termination agreements with each of the NEOs.
If NEOs are terminated by Suncor, other than for just cause, or resign within 120 days following a constructive dismissal event (each a Termination Event), NEOs are compensated based on their remuneration.
Notice Period Provisions. For the NEOs, should a Termination Event occur, the termination agreements provide a 24-month notice period. Cash payments are provided (i) for base salary and annual incentive during the notice period, (ii) for SOP options which, but for the Termination Event, would have become exercisable during the notice period unless the NEO is eligible for retirement, in which case, under the terms of the SOP, unvested options would vest immediately and the option term would be reduced to the earlier of three years or expiry, and (iii) for PSUs and RSUs that would pay out during the notice period based on a performance factor calculated as at the date of termination unless the NEO is eligible for retirement, in which case the PSUs and RSUs would be held until the end of the performance or maturity period (in the case of RSUs) and paid per the terms of the PSU and RSU plans, and for Mr. Cowan that are pro-rated for the period he was employed during the performance or maturity period. The NEOs receive credited service under the SERP for the notice period.
Double Trigger Provisions and Change of Control. Suncor's termination agreements with the NEOs are "double trigger", and as such provide for payments based only upon involuntary termination or constructive dismissal following a change of control.
Under the SOP, the PSU Plan and the RSU Plan, a change of control generally includes a transaction or series of transactions whereby any person or combination of persons, acting jointly or in concert, beneficially owns, directly or indirectly, or exercises control or direction over, 35% or more of the outstanding voting securities of Suncor or its successor.
NEOs with less than five years of executive service may become eligible to receive supplemental retirement payments under the SERP in the event of a change of control of Suncor, after the occurrence of certain specified corporate changes, or for certain executives, after a substantial decrease in such executive's responsibilities. In addition, Suncor has entered into certain trust arrangements for non-U.S. taxpayers to secure its obligations under the SERP upon a change in control of Suncor.
Governance. The HR&CC annually reviews the status of termination agreements and change of control arrangements for Suncor's senior executives and periodically reviews current governance trends and market practices. Based on the HR&CC's review of governance trends and market practices, amendments may be made to agreement terms for new participants.
50 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Termination and Change of Control Benefits
The table below shows the incremental amounts to which the NEOs would be entitled under the circumstance of a termination and/or change of control on December 31, 2018.
Type of Termination(1) |
Base Salary ($) |
Short-Term Incentive(2) ($) |
Long-Term Incentive(3)(4) ($) |
Pension(5) ($) |
Total Payout ($) |
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S.W. WILLIAMS | |||||||||||
|
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Resignation(6) | | | 2 098 800 | | 2 098 800 | ||||||
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Retirement | | | 2 098 800 | | 2 098 800 | ||||||
|
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Termination (Without Cause)(7) | 2 950 000 | 3 687 500 | 2 098 800 | 892 718 | 9 629 018 | ||||||
|
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Change of Control(8) | 2 950 000 | 3 687 500 | 2 098 800 | 892 718 | 9 629 018 | ||||||
|
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Change of Control(9) | | | 2 098 800 | | 2 098 800 | ||||||
A. COWAN | |||||||||||
|
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Resignation | | | | | | ||||||
|
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Retirement(10) | | | | | | ||||||
|
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Termination (Without Cause)(7) | 1 270 000 | 952 500 | 607 203 | 3 880 721 | 6 710 424 | ||||||
|
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Change of Control(8) | 1 270 000 | 952 500 | 2 621 570 | 3 880 721 | 8 724 791 | ||||||
|
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Change of Control(9) | | | | 2 441 603 | 2 441 603 | ||||||
M.S. LITTLE | |||||||||||
|
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Resignation(6) | | | 659 997 | | 659 997 | ||||||
|
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Retirement | | | 659 997 | | 659 997 | ||||||
|
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Termination (Without Cause)(7) | 2 100 000 | 2 415 000 | 659 997 | 4 398 045 | 9 573 042 | ||||||
|
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Change of Control(8) | 2 100 000 | 2 415 000 | 659 997 | 4 398 045 | 9 573 042 | ||||||
|
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Change of Control(9) | | | 659 997 | | 659 997 | ||||||
M.R. MACSWEEN | |||||||||||
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Resignation | | | | | | ||||||
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Retirement(10) | | | | | | ||||||
|
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Termination (Without Cause)(7) | 1 200 000 | 900 000 | 4 140 111 | 831 121 | 7 071 232 | ||||||
|
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Change of Control(8) | 1 200 000 | 900 000 | 4 140 111 | 831 121 | 7 071 232 | ||||||
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Change of Control(9) | | | | | | ||||||
S.D.L. REYNISH | |||||||||||
|
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Resignation(6) | | | 607 203 | | 607 203 | ||||||
|
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Retirement | | | 607 203 | | 607 203 | ||||||
|
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Termination (Without Cause)(7) | 1 200 000 | 900 000 | 607 203 | 2 120 785 | 4 827 987 | ||||||
|
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Change of Control(8) | 1 200 000 | 900 000 | 607 203 | 2 120 785 | 4 827 987 | ||||||
|
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Change of Control(9) | | | 607 203 | | 607 203 | ||||||
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 51
incremental value of all "in-the-money" unvested option-based awards and the incremental value of PSUs held that vest at termination, calculated as in the case of a termination (without cause) noted above.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
No current or proposed director, executive officer or employee of Suncor, or any former director, executive officer or employee of Suncor, or any associate of any of the foregoing, is, or has been at any time during 2018, excluding routine indebtedness, indebted to Suncor or its subsidiaries, either in connection with the purchase of Suncor securities or otherwise.
SUMMARY OF INCENTIVE PLANS
The following table sets forth information in respect of securities authorized for issuance under our equity compensation plans as at December 31, 2018.
Plan Category |
Number of securities to be issued upon exercise of outstanding options (a) |
Percentage of issued and outstanding |
Weighted-average exercise price of outstanding options ($) (b) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
Percentage of issued and outstanding |
|||||
Equity compensation plans approved by security holders | 28 922 116 | 1.83% | 38.25 | 21 929 260 | 1.38% | |||||
|
||||||||||
Equity compensation plans not approved by security holders | 12 850 | 0.001% | 24.50 | | | |||||
Total | 28 934 966 | 1.83% | 38.25 | 21 929 260 | 1.38% | |||||
The numbers shown beside "Equity compensation plans approved by security holders" refer to options granted under the SOP and the closed Suncor Executive Stock Plan. The numbers shown beside "Equity compensation plans not approved by security holders" refer to the closed Suncor Key Contributor Stock Option Plan. In 2018, there were 7,926,904 options exercised pursuant to Suncor's incentive plans.
Suncor Energy Stock Option Plan. The SOP provides for the grant of stock options to purchase Suncor common shares, as well as the grant of stock appreciation rights (SARs) to eligible employees of Suncor. Eligible employees are persons who provide services to Suncor or any of its subsidiaries or partnerships and for whom we are required by law to make income source withholdings. The maximum number of common shares issuable pursuant to the SOP is 50,786,376 common shares (or 3.2% of the total issued and outstanding common shares on December 31, 2018).
Options entitle the holder to purchase Suncor common shares at a price not less than the Market Value (as defined below) of the shares on the date of grant. Where SARs are granted on a stand-alone basis, each SAR entitles the holder to receive, upon exercise, payment equal to the difference between the Market Value of a share on exercise and the Market Value of a Suncor common share on the date of grant. The options and SARs generally have a term of seven years with a vesting schedule of one third per year over three years. "Market Value" means the simple average of the daily high and low prices at which Suncor common shares were traded in one or more board lots on the TSX over the five trading days immediately preceding the date of grant or exercise date, as the case may be. The exercise price of each option granted cannot be less than the fair market value of a common share at the time of grant.
52 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Due to legislative changes in 2010 under the Income Tax Act (Canada), Suncor no longer grants SARs or tandem SARs to Canadian employees.
Performance Share Unit Plan. PSUs form a minimum of 50% of the equity component of total direct compensation for executives. A PSU award may pay out based on a vesting level between 0% and 200% of the number of PSUs awarded contingent upon Suncor's performance relative to a peer group of companies over a three-year period. PSUs provide for notional dividend re-investment.
The selection of peer group companies for a PSU grant is based on a number of criteria including size (revenue and market capitalization), industry and business scope (integrated and exploration and production companies), oil weighting, peers of peers (the companies most often used as peer companies) and stock behavior and volatility. The selection criterion is reviewed periodically and approved by the HR&CC. The PSU peer group is reviewed annually for new grants, adjusted as appropriate and approved by the HR&CC.
The peer group and related information for the 2017 and 2018 PSU awards are displayed below.
Anadarko Petroleum Corporation | Chevron Corporation | Husky Energy Inc. | |||
Apache Corporation | ConocoPhillips | Imperial Oil Limited | |||
BP plc | Devon Energy Corporation | Marathon Oil Corporation | |||
Canadian Natural Resources Limited | EOG Resources Inc. | Occidental Petroleum Corporation | |||
Cenovus Energy Inc. | Hess Corporation | Total SA | |||
Vesting of PSU awards is determined based on Suncor's TSR relative to peer companies and its resulting company grouping rank as displayed in the table below.
Company TSR Rank |
Performance Factor (% of PSUs vesting) |
||
1-3 | 200% | ||
|
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4-5 | 175% | ||
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6-7 | 150% | ||
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8-9 | 100% | ||
|
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10-11 | 75% | ||
|
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12-13 | 50% | ||
|
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14 and below | 0% | ||
Following a robust process, at the end of the three-year PSU grant performance period, TSR is measured, company grouping rank and performance factor are determined and, if applicable, a payout is made to participants in cash. The final payout value is based on the number of vested PSUs (including dividend equivalents) multiplied by the market price of a Suncor common share, as calculated under the PSU Plan provisions.
Since inception in 2004, 31% of PSU grant vesting levels have been below target, including three which were at 0%, 15% were at target and 54% have been above target based on relative TSR performance compared to the peer group. The last three PSU grant vesting levels have been above target, reflecting Suncor's consistently strong TSR relative to peer companies.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 53
PSUs do not count towards the assessment of executive share ownership levels for purposes of the share ownership guidelines. Upon payout, executives must use the cash payout, or other cash resources, to purchase Suncor common shares on the open market toward satisfying any unmet share ownership guidelines at the compliance date.
Looking Ahead to 2019:
The HR&CC approved an amendment to remove Marathon Oil Corporation from the PSU peer group for grants made in 2019. This change follows the HR&CC's annual review of the peer group companies and maintains alignment with Suncor's peer group selection criteria.
The HR&CC also approved amendments in the vesting conditions of PSU awards for PSU grants made in 2019 (and going forward). First, vesting of PSU awards will now be determined by performance on the relative TSR (70%) and ROCE (30%). Second, the company rank methodology, and the associated performance factor, has been adjusted to the new number of peer companies and ensures that a 100% payout requires no less than median performance ranking. These amendments are in line with best practices and closely aligns with Suncor's strategic drivers of operational excellence and capital discipline.
Restricted Share Unit Plan. The RSU Plan was established in January 2009 by the HR&CC. Under the plan, RSUs are granted to middle management as part of their competitive compensation and may be granted on a targeted basis and to support attraction and retention of individuals with key skills at the professional, middle management and executive levels. As RSU value is tied directly to Suncor's share price, RSUs serve to further align participants with shareholder interests.
Each RSU is a right to a cash payment, equivalent in value to one Suncor common share based on the value of Suncor's average common share price for the last 20 trading days of the restricted period. Grants under the RSU Plan are administered by the HR&CC or its delegate. RSUs do not count towards the assessment of executive share ownership levels for purposes of the share ownership guidelines. The RSU Plan provides for notional dividend reinvestment.
Closed Plans. The following table provides the key terms of the Suncor equity-based plans that are closed to new grants.
Year Approved |
Plan Name(1) |
Award Type |
No. Outstanding at December 31, 2018 (% of outstanding shares) |
Vesting Schedule |
Expiry(2) |
Performance Conditions |
|||||||
1992 | Suncor Executive Stock Plan (ESP) | Option | 65,000 (0.004%) |
1/3 per yr over 3 yrs | 10 years | No | |||||||
|
|||||||||||||
2000 | Petro-Canada Deferred Stock Unit Plans (Eligible Employees of Petro-Canada) (PCDSU)(3) | DSU | 2 084 | | | No | |||||||
|
|||||||||||||
2004 | Suncor Key Contributor Stock Option Plan (SKCSO) | Option | 12 850 (0.001%) |
1/3 per yr over 3 yrs | 10 years | No | |||||||
|
|||||||||||||
2004 | Petro-Canada Deferred Stock Unit Plan (Non-Employee Directors of Petro-Canada) (PCCDSU)(4) | DSU | 17 348 | | | No | |||||||
Aggregate Potential Dilution. The aggregate potential dilution of all issued, outstanding and authorized options under Suncor stock option plans was 3.21% at December 31, 2018. Suncor has no other equity compensation plans involving newly issued securities.
Burn Rate. In 2018 there were 7,231,080 stock options granted under the SOP which resulted in a burn rate of 0.45%. In 2017 there were 7,400,900 stock options granted under the SOP which resulted in a burn rate of 0.45%, and in 2016 there were 8,145,400 stock options granted under the SOP which resulted in a burn rate of 0.51%.
54 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Additional Terms of Equity Compensation Plans.
Issuance of Shares under Plans
Amendment
Impact of Change of Control, Reorganization or Other Events Affecting the Corporation
Termination of Employment
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 55
The Board approved the adoption of a claw back policy for Suncor in 2012. Under the claw back policy, in situations where: (i) the amount of incentive compensation received by an executive officer or former executive officer to whom the policy applies was calculated based or contingent upon the achievement of certain financial results that were subsequently the subject of, or affected by, a material restatement of all or a portion of the company's financial statements; (ii) the executive officer or former executive officer engaged in intentional misconduct or fraud that caused, or potentially caused, the need for the restatement, as admitted by the executive officer or, in the absence of such admission, as determined by a court of competent jurisdiction in a final judgment that cannot be appealed; and (iii) the incentive compensation payment received would have been lower had the financial results been properly reported, then the Board may, to the extent permitted by applicable laws and to the extent it determines that it is in the company's best interest to do so, require reimbursement of the amount by which the after-tax incentive compensation received by such executive officer under the company's annual and long-term incentive plans exceeded that which the executive officer would have received had the financial statements not been materially restated.
DIRECTORS' AND OFFICERS' INSURANCE
Policies purchased by Suncor provide insurance for the directors and officers of Suncor against liability for any actual or alleged error, misstatement, misleading statement, act, omission, neglect or breach of duty in discharging their duties, individually or collectively. Suncor is insured under these policies in the event it is permitted or required by law to indemnify individual directors and officers, with a US$100 million limit. The policies are subject to certain exclusions, and provide for a corporate deductible of US$10 million in circumstances where Suncor indemnifies individual directors and officers. If Suncor is unable by law to indemnify individual directors and officers, including in an event of insolvency, there is no deductible and a US$200 million limit applies. In 2018, Suncor paid premiums of approximately US$1.727 million for directors and officers insurance for the 12-month period ending July 1, 2019.
ADVANCE NOTICE BY-LAW
In 2015, shareholders confirmed Amended and Restated By-Law No. 2, A By-Law Relating to Advance Notice of Nominations of Directors of the Corporation (By-Law No. 2), which establishes a framework for advance notice of nominations of persons for election to the Board. By-Law No. 2 sets deadlines for a certain number of days before a shareholders' meeting for a shareholder to notify the Corporation of his, her or its intention to nominate one or more directors, and explains the information that must be included with the notice for it to be valid. By-Law No. 2 applies at an annual meeting of shareholders or a special meeting of shareholders that was called to elect directors (whether or not also called for other purposes), and may be waived by the Board. It does not affect the ability of shareholders to requisition a meeting or make a proposal under the Canada Business Corporations Act.
In the case of an annual meeting of shareholders, notice must be given to the Corporation not less than 30 days prior to the date of the meeting; provided, however, that if the meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the meeting was made, notice shall be made not later than the close of business on the tenth day following such public announcement. In the case of a special meeting (which is not also an annual meeting) of shareholders, notice must be given not later than the close of business on the fifteenth day following the date on which the first public announcement of the date of the meeting was made. In the case of an annual meeting of shareholders or a special meeting of shareholders called for the purpose of electing directors (whether or not also called for other purposes) where notice and access is used for delivery of proxy related materials, notice must be given not less than 40 days prior to the date of the meeting (but in any event, not prior to the date on which the first public announcement of the date of the meeting was made); provided, however, that if the meeting is to be held on a date that is less than 50 days after the date of such public announcement, notice shall be made, in the case of an annual meeting of shareholders, not later than the close of business on the tenth day following the date on which the first public announcement of the date of the meeting was made and, in the case of a special meeting of shareholders, not later than the close of business on the fifteenth day following the date of such public announcement. Shareholders should consult the full text of By-Law No. 2, which is available on Suncor's website at www.suncor.com and has been filed under the company's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
As at the date of this management proxy circular, the Corporation had not received any additional director nominations.
56 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
The Board is committed to maintaining high standards of corporate governance, and regularly reviews and updates its corporate governance systems in light of changing practices, expectations and legal requirements.
Suncor is a Canadian reporting issuer. Our common shares are listed on both the TSX and the New York Stock Exchange (NYSE). Accordingly, our corporate governance practices reflect applicable rules and guidelines adopted by the Canadian Securities Administrators (the Canadian Requirements) and the SEC, including applicable rules adopted by the SEC to give effect to the provisions of the Sarbanes-Oxley Act of 2002 (collectively, the SEC Requirements). NYSE corporate governance requirements are generally not applicable to non-U.S. companies. However, Suncor has reviewed its practices against the requirements of the NYSE applicable to U.S. domestic companies (NYSE Standards). Based on that review, Suncor's corporate governance practices in 2017 and 2018 did not differ from the NYSE Standards in any significant respect, with the exceptions described in Schedule B under the heading, "Compliance with NYSE Standards".
Suncor's Statement of Corporate Governance Practices (Statement) this year is based on the Canadian Requirements, as set out in National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices. This Statement has been approved by the Board, on the recommendation of its Governance Committee. Suncor's Statement can be found in Schedule B.
ADDITIONAL INFORMATION
Additional information relating to Suncor, including financial information, is provided in Suncor's audited consolidated financial statements for the year ended December 31, 2018 and in its MD&A, which are included in our 2018 Annual Report. Copies of these documents are available without charge from Suncor at 150 6th Avenue S.W., Calgary, Alberta T2P 3E3, by calling 1-800-558-9071, or by e-mail request to info@suncor.com, or by referring to the company's profile on SEDAR at www.sedar.com or EDGAR at www.sec.gov.
ADVISORIES
This management proxy circular and the schedules hereto contain certain forward-looking statements and forward-looking information (collectively, forward-looking statements) within the meaning of applicable Canadian and U.S. securities laws and other information based on Suncor's current expectations, estimates, projections and assumptions that were made by the company in light of information available at the time the statement was made and consider Suncor's experience and its perception of historical trends, including expectations and assumptions concerning: the accuracy of reserves and resources estimates; commodity prices and interest and foreign exchange rates; the performance of assets and equipment; capital efficiencies and cost savings; applicable laws and government policies; future production rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour, services and infrastructure; the satisfaction by third parties of their obligations to Suncor; the development and execution of projects; and the receipt, in a timely manner, of regulatory and third-party approvals. All statements and information that address expectations or projections about the future, and statements and information about Suncor's strategy for growth, expected and future expenditures or investment decisions, commodity prices, costs, schedules, production volumes, operating and financial results, future financing and capital activities, and the expected impact of future commitments are forward-looking statements. Some of the forward-looking statements and information may be identified by words like "expects", "anticipates", "will", "estimates", "plans", "scheduled", "intends", "believes", "projects", "indicates", "could", "focus", "vision", "goal", "outlook", "proposed", "target", "objective", "continue", "should", "may", "potential", "future", "opportunity", "would", "priority" and similar expressions.
Forward-looking statements in this management proxy circular and the schedules hereto include references to: the business of and procedure for the meeting; the composition of the Board following the meeting; the belief that electronic delivery will save paper, reduce our impact on the environment and reduce costs; management's expectation that none of the nominees for director will be unable to serve as director; the intended aims of compensation for directors and NEOs; the belief that Suncor's integrated model will allow Suncor to partially offset the impact of wider crude price differentials and the belief that Suncor has secured sufficient takeaway capacity; the belief that Suncor's integration has positioned Suncor to continue to build on its financial strength and deliver long-term shareholder value; the commitment of the HR&CC to ensuring that senior executive compensation is aligned with shareholders' interests and supports Suncor's competitiveness and future success; the belief that an effective senior leadership team
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 57
and dedicated employees will allow Suncor to execute its strategy and deliver strong results; the HR&CC's belief that there is no excessive pay disparity between Suncor's CEO and market pay, given Suncor's relative size and performance versus peers; Suncor's belief that the key executive compensation governance practices are consistent with best practices, support Suncor's business objectives and align with shareholder interests; estimated values of compensation components and those of the Suncor Compensation Peers; that Suncor's compensation policies and programs do not encourage excessive risk that could have a material adverse effect on Suncor; the HR&CC's conclusion that it does not believe that there are any identified risks arising from the company's compensation policies and practices that are reasonably likely to have a material adverse impact on the company; Suncor's belief that it provides the right balance in its overall rewards program to attract, engage and retain talented, capable executives; Suncor's belief that FFO and ROCE are important indicators of the company's financial strength and profitability; statements surrounding Suncor's free funds flow target for 2020 to 2023, including the steps Suncor will take to achieve it; statements about the proposed interconnecting pipelines between Syncrude's Mildred Lake site and Suncor's Oil Sands Base plant; the belief that, as a result of cost management, Suncor will continue to generate significant cash, enabling its ongoing balance sheet strength as well as its ability to return value to shareholders; the expectation that the roll out of digital technology initiatives will accelerate through 2019; Suncor's belief that a diversity of backgrounds, opinions and perspectives and a culture of inclusion helps to create a healthy and dynamic workplace which improves overall business performance; the belief that the most effective way to achieve Suncor's goal of increasing the representation of women in leadership roles at all levels of the organization is to identify high-potential women within the Corporation and work with them to ensure they develop the skills, acquire the experience and have the opportunities necessary to become effective leaders; references to Suncor's social goal and the strategies to achieve such goal; the anticipated effects of Suncor's corporate governance practices and those of the Board of Directors; the anticipated timing of the retirement of directors from the Board; and Suncor's belief in diversity amongst Board members and its workforce and plans with respect to diversity.
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Suncor. Suncor's actual results may differ materially from those expressed or implied by its forward-looking statements, so readers are cautioned not to place undue reliance on them.
Risks, uncertainties and other factors that could influence the financial and operating performance of all of Suncor's operating segments and activities include, but are not limited to, changes in general economic, market and business conditions, such as commodity prices, interest rates and currency exchange rates; fluctuations in supply and demand for Suncor's products; the successful and timely implementation of capital projects, including growth projects and regulatory projects; risks associated with the development and execution of Suncor's projects and the commissioning and integration of new facilities; the possibility that completed maintenance activities may not improve operational performance or the output of related facilities; the risk that projects and initiatives intended to achieve cash flow growth and/or reductions in operating costs may not achieve the expected results in the time anticipated or at all; competitive actions of other companies, including increased competition from other oil and gas companies or from companies that provide alternative sources of energy; labour and material shortages; actions by government authorities, including the imposition or reassessment of, or changes to, taxes, fees, royalties, duties, tariffs, quotas and other government-imposed compliance costs and mandatory production curtailment orders and changes thereto; changes to laws and government policies that could impact the company's business, including environmental (including climate change), royalty and tax laws and policies; the ability and willingness of parties with whom Suncor has material relationships to perform their obligations to us; the unavailability of, or outages to, third-party infrastructure that could cause disruptions to production or prevent the company from being able to transport its products; the occurrence of a protracted operational outage, a major safety or environmental incident, or unexpected events such as fires (including forest fires), equipment failures and other similar events affecting Suncor or other parties whose operations or assets directly or indirectly affect Suncor; the potential for security breaches of Suncor's information technology and infrastructure by malicious persons or entities, and the unavailability or failure of such systems to perform as anticipated as a result of such breaches; security threats and terrorist or activist activities; the risk that competing business objectives may exceed Suncor's capacity to adopt and implement change; risks and uncertainties associated with obtaining regulatory, third-party and stakeholder approvals outside of Suncor's control for the company's operations, projects, initiatives and exploration and development activities and the satisfaction of any conditions to approvals; the potential for disruptions to operations and construction projects as a result of Suncor's relationships with labour unions that represent employees at the company's facilities; our ability to find new oil and gas reserves that can be developed economically; the accuracy of Suncor's reserves, resources and future production estimates; market instability affecting Suncor's ability to borrow in the capital debt markets at acceptable rates or to issue other securities at acceptable prices;
58 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
maintaining an optimal debt to cash flow ratio; the success of the company's risk management activities using derivatives and other financial instruments; the cost of compliance with current and future environmental laws, including climate change laws; risks relating to increased activism and public opposition to fossil fuels and oil sands; risks and uncertainties associated with closing a transaction for the purchase or sale of a business, asset or oil and gas property, including estimates of the final consideration to be paid or received; the ability of counterparties to comply with their obligations in a timely manner; risks associated with joint arrangements in which the company has an interest; risks associated with land claims and Aboriginal consultation requirements; the risk that the company may be subject to litigation; the impact of technology and risks associated with developing and implementing new technologies; and the accuracy of cost estimates, some of which are provided at the conceptual or other preliminary stage of projects and prior to commencement or conception of the detailed engineering that is needed to reduce the margin of error and increase the level of accuracy. The foregoing important factors are not exhaustive.
Many of these risk factors and other assumptions related to Suncor's forward-looking statements are discussed in further detail in Suncor's AIF, its MD&A, Form 40-F and other documents it files from time to time with securities regulatory authorities. Copies of these documents and Suncor's audited consolidated financial statements for the year ended December 31, 2018 are available without charge from Suncor at 150 6th Avenue S.W., Calgary, Alberta T2P 3E3, by calling 1-800-558-9071, or by email request to info@suncor.com or by referring to the company's profile on SEDAR at www.sedar.com or EDGAR at www.sec.gov. The forward-looking statements contained in this management proxy circular and the schedules hereto are made as of the date hereof. Except as required by applicable securities laws, we assume no obligation to update publicly or otherwise revise any forward-looking statements or the foregoing risks and assumptions affecting such forward-looking statements, whether as a result of new information, future events or otherwise.
Financial information in this management proxy circular is reported in Canadian dollars, unless otherwise noted, and is provided in Suncor's audited consolidated financial statements for the year ended December 31, 2018 and the MD&A, which are included in our 2018 Annual Report. Production volumes are presented on a working-interest basis, before royalties, unless otherwise noted except Libya, which is on an entitlement basis. Certain financial measures in this management proxy circular namely operating earnings, ROCE, free funds flow and FFO are not prescribed by Canadian GAAP. Operating earnings is defined in the Advisories Non-GAAP Financial Measures section of the MD&A and reconciled to the most directly comparable GAAP measure in the Financial Information section of the MD&A. ROCE and FFO are defined and reconciled to the most directly comparable GAAP measures in the Advisories Non-GAAP Financial Measures section of the MD&A. Free funds flow is calculated by taking FFO and subtracting capital expenditures, including capitalized interest. These non-GAAP financial measures are included because management uses this information to analyze business performance, leverage and liquidity. These non-GAAP financial measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 59
SCHEDULE A: NAMED EXECUTIVE OFFICERS' OUTSTANDING OPTION-BASED AWARDS
AND GRANT DATE FAIR VALUES FOR SHARE-BASED AWARDS
The following table provides details of options held by the NEOs as at December 31, 2018. Details of options granted to NEOs subsequent to December 31, 2018 are included in the "Compensation Discussion and Analysis" section of the management proxy circular.
Option-Based Awards | |||||||||||
Name | Grant Date |
Number of securities underlying unexercised options(1) |
Option exercise price ($) |
Option expiration date(2) |
Value of unexercised "in-the-money" options(3) ($) |
||||||
S.W. WILLIAMS | Jan. 27, 2009 | 65 000 | 24.50 | Jan. 27, 2019 | 885 950 | ||||||
|
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Chief Executive Officer(4) | Feb. 6, 2012 | 368 000 | 34.58 | Feb. 6, 2019 | 1 306 400 | ||||||
|
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Feb. 15, 2013 | 380 000 | 32.46 | Feb. 15, 2020 | 2 154 600 | |||||||
|
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Feb. 13, 2014 | 550 000 | 36.04 | Feb. 13, 2021 | 1 149 500 | |||||||
|
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Feb. 16, 2015 | 600 000 | 38.90 | Feb. 16, 2022 | | |||||||
|
|||||||||||
Feb. 15, 2016 | 795 000 | 30.21 | Feb. 15, 2023 | 6 296 400 | |||||||
|
|||||||||||
Feb. 20, 2017 | 755 000 | 42.03 | Feb. 20, 2024 | | |||||||
|
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Feb. 22, 2018 | 736 500 | 42.99 | Feb. 22, 2025 | | |||||||
A. COWAN | Aug. 12, 2014 | 152 800 | 43.00 | Aug. 12, 2021 | | ||||||
|
|||||||||||
Executive Vice President and | Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | | ||||||
|
|||||||||||
Chief Financial Officer | Feb. 15, 2016 | 230 000 | 30.21 | Feb. 15, 2023 | 1 821 600 | ||||||
|
|||||||||||
Feb. 20, 2017 | 220 000 | 42.03 | Feb. 20, 2024 | | |||||||
|
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Feb. 22, 2018 | 210 000 | 42.99 | Feb. 22, 2025 | | |||||||
M.S. LITTLE | Feb. 13, 2014 | 210 000 | 36.04 | Feb. 13, 2021 | 438 900 | ||||||
|
|||||||||||
President and Chief | Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | | ||||||
|
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Operating Officer(4) | Feb. 15, 2016 | 250 000 | 30.21 | Feb. 15, 2023 | 1 980 000 | ||||||
|
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Feb. 20, 2017 | 265 000 | 42.03 | Feb. 20, 2024 | | |||||||
|
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Dec. 11, 2017 | 35 600 | 43.99 | Dec. 11, 2024 | | |||||||
|
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Feb. 22, 2018 | 375 000 | 42.99 | Feb. 22, 2025 | | |||||||
M.R. MACSWEEN | Feb. 6, 2012 | 25 000 | 34.58 | Feb. 6, 2019 | 88 750 | ||||||
|
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Executive Vice President, | Feb. 15, 2013 | 50 000 | 32.46 | Feb. 15, 2020 | 283 500 | ||||||
|
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Upstream | Feb. 13, 2014 | 160 000 | 36.04 | Feb. 13, 2021 | 334 400 | ||||||
|
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Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | | |||||||
|
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Feb. 15, 2016 | 180 000 | 30.21 | Feb. 15, 2023 | 1 425 600 | |||||||
|
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Feb. 20, 2017 | 215 000 | 42.03 | Feb. 20, 2024 | | |||||||
|
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Feb. 22, 2018 | 205 000 | 42.99 | Feb. 22, 2025 | | |||||||
S.D.L. REYNISH | Feb. 15, 2016 | 153 333 | 30.21 | Feb. 15, 2023 | 1 214 397 | ||||||
|
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Executive Vice President, Strategy & | Feb. 20, 2017 | 143 333 | 42.03 | Feb. 20, 2024 | | ||||||
|
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Operations Services | Feb. 22, 2018 | 205 000 | 42.99 | Feb. 22, 2025 | | ||||||
A-1 2019 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Grant Date Fair Values for Share-Based Awards
The following table provides the grant date fair values for share-based awards granted to NEOs in 2016, 2017 and 2018.
Name | Year |
PSUs ($) |
RSUs ($) |
DSUs ($) |
|||||
S.W. WILLIAMS | 2018 | 42.99 | | | |||||
|
|||||||||
Chief Executive Officer(2) | 2017 | 42.03 | | | |||||
|
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2016 | 30.21 | | | ||||||
A. COWAN | 2018 | 42.99 | | | |||||
|
|||||||||
Executive Vice President and | 2017 | 42.03 | | | |||||
|
|||||||||
Chief Financial Officer | 2016 | 30.21 | | | |||||
M.S. LITTLE | 2018 | 42.99 | | | |||||
|
|||||||||
President and Chief Operating Officer(2) | 2017 | 42.26 | (1) | | | ||||
|
|||||||||
2016 | 30.21 | | | ||||||
M.R. MACSWEEN | 2018 | 42.99 | | | |||||
|
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Executive Vice President, | 2017 | 42.03 | 43.99 | | |||||