Strong corporate governance and accountability support Devon’s efforts to live out our core values, which include doing the right thing and delivering results.
Composing and compensating our board for effective oversight
Devon’s board of directors follows our Corporate Governance Guidelines, the framework for effective oversight to serve our stakeholders’ interests and create shareholder value.
As required by the Corporate Governance Guidelines, a majority of our board members qualify as independent, based on New York Stock Exchange (NYSE) listing standards and Securities and Exchange Commission (SEC) regulations. Devon meets these requirements, with 10 of 11 board members, all committee members and our board chair qualifying as independent as of June 2019. Our president and chief executive officer (CEO) was the only non-independent director.
The charters of the board’s four committees – Audit, Compensation, Governance and Reserves – require all committee members to be independent. The right are brief descriptions of the purpose and responsibilities of each committee, along with links to their charters.
Our board is committed to maintaining a diverse and inclusive membership with varying experience, characteristics and expertise that align with our business strategy. As of June 2019, three women served on Devon’s board, and nine of 11 directors had at least five of the six key skills and experience we believe are highly relevant to an upstream company like Devon. Our directors ranged in age from 42 to 70, all under the mandatory retirement age of 73. When searching for new director nominees, the Governance Committee and the third-party search firm it engages are committed to considering qualified candidates with a diversity of experience, perspective, age, gender, race, ethnicity, geography and other factors.
Under our Corporate Governance Guidelines, the compensation of our non-management directors is determined annually by the board acting on the Governance Committee’s recommendation. To align directors’ interests and actions with the interests of our shareholders, directors are expected to maintain a significant ownership stake in Devon stock. While Devon executives receive no additional compensation for serving on our board, independent directors are compensated based on current market norms and receive a combination of retainers, meeting fees and equity awards. With the exception of adding a separate retainer for our board chair, there have been no changes to board compensation in the last few years.
Shareholders elect Devon directors at the annual meeting for a one-year term. Our bylaws require that a director offer to resign if he or she does not receive the required plurality of votes in an uncontested election, but this has not occurred in Devon’s history. In fact, our directors received an average approval rating of 98% at our 2019 annual meeting.
Director skills and experience
The matrix below provides a summary of certain key skills and experience of our directors. Individually and as a group, they possess numerous skills and experience that are highly relevant for an upstream energy company. Our directors are strategic thinkers with high expectations for Devon’s performance; they are attuned to the demands of proper Board oversight and good governance practices.
Additional skills and experience:
- Six of our directors have an educational background or work experience in petroleum engineering or other engineering professions.
- Five of our directors have experience with technology or cybersecurity.
- Eight of our directors have experience in regulatory and policy matters.
- Three of our directors have an educational background or work experience with environmental matters.
- All of our directors have experience in corporate governance and risk management.
Aligning executive compensation with company performance
Devon’s senior leaders are accountable for generating operating returns by managing a premier asset portfolio, delivering superior execution and allocating capital with discipline. The leadership team updates the board regularly on the economic and operational risks and opportunities facing Devon, with increasing emphasis on ESG performance.
We seek a strong tie between company performance and executive pay through our compensation program and the Compensation Committee’s processes and decision-making. Our executive compensation philosophy recognizes near-term operational and financial success and encourages decision-making that supports long-term value creation. The objectives of our executive compensation program are to motivate and reward executives for increasing stockholder value; to allocate incentives to achieve near- and long-term objectives, without taking excessive risk; and to attract and retain highly trained, experienced and committed executives. Approximately 89% of the value of total direct compensation awarded to our president and CEO, and an average of approximately 83% for other executive officers, was delivered through performance bonuses dependent on 2018 performance and long-term incentives aligned with total shareholder return.
To drive continuous improvement, Devon sets challenging performance goals each year. We are committed to delivering strong returns on our investments through a highly engaged culture focused on innovation, safety, operational excellence, environmental stewardship and social responsibility. Our performance score was 90% of the target for 2018, reflecting strong performance on several operational measures in a very challenging commodity-price environment but disappointing results on important criteria such as total shareholder return and certain environmental, health and safety measures. Detailed information about Devon’s executive compensation philosophy, practices and decisions is available in our 2019 proxy statement.
Devon contacted the majority of our 50 largest stockholders in 2018 and had productive interactions to ensure we’re aware of and responsive to the issues of importance to them. Many of these engagements were face-to-face meetings with Devon personnel who are directly involved with our ESG efforts.