Phillips 66
For the period ended May 15, 2024. Filed Apr 3, 2024.
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May 15, 2024 · Filed Apr 3, 2024
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
| ☑ | Filed by the Registrant | ☐ | Filed by a party other than the Registrant |
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| CHECK THE APPROPRIATE BOX: | |
|---|---|
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☑ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under §240.14a-12 |
Phillips 66
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
| PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY): | |
|---|---|
| ☑ | No fee required |
| ☐ | Fee paid previously with preliminary materials |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
Notice of 2024 Annual Meeting of Shareholders
| Date and time:Wednesday, May 15, 2024 9:00 a.m. Central TimePlace:by live audio webcast at virtualshareholdermeeting.com/PSX2024Who can vote:Shareholders of record at the close of business on March 20, 2024 may vote at the meeting and any adjournments or postponements of the Annual Meeting.How to vote:Online before the meetingwww.proxyvote.comOnline at the meetingSee page 102 for instructions regarding how to vote online during the meeting at virtualshareholdermeeting.com/PSX2024. If you hold your shares in an employee benefit plan, you must vote your shares prior to the Annual Meeting.By phoneDial toll-free to (800) 690-6903By mailComplete, sign and return your proxy card or voting instruction form in the provided postage-paid envelope. Important Notice Regarding the Availability of Proxy Materials for the Meeting:The Notice and accompanying Proxy Statement, Annual Report on Form 10-K for the year ended December 31, 2023, and form of proxy card are available at www.proxyvote.com. We are making these materials available beginning on or about April 3, 2024, to shareholders as of the record date. · Matters to be voted on: | ||
|---|---|---|
| At the meeting, shareholders will be asked to vote on the following proposals: | ||
| PROPOSALS · DETAILS | ||
| 1 | Election of the four Class III Directors named in this Proxy Statement to hold office until the 2027 Annual Meeting | Page 16 |
| 2 | Board proposal to approve, on an advisory basis, named executive officer compensation | Page 48 |
| 3 | Ratification of the appointment of our independent registered public accounting firm, Ernst & Young LLP | Page 92 |
| 4 | A shareholder proposal, if properly presented at the meeting, for the production of a report analyzing the impact of the "System Change Scenario" on the Chemicals business | Page 96 |
| The 2024 Annual Meeting of Shareholders (the "Annual Meeting") will be held exclusively online. To join the meeting as a shareholder, you must enter the 16-digit control number printed on your proxy card, voting instruction form, Notice of Internet Availability, or legal proxy provided to you by the broker that holds your shares. During the meeting, shareholders may ask questions. Other interested parties may join the meeting as a guest, in which case no control number is required. For more information, please see the section ADDITIONAL INFORMATION in this Proxy Statement. We encourage you to carefully review the proxy materials and vote your shares promptly, even if you plan to virtually attend the annual meeting. For the Board of Directors, | ||
| Vanessa Allen SutherlandExecutive Vice President, Government Affairs, General Counsel and Corporate SecretaryApril 3, 2024 | ||
| Notice of 2024 Annual Meeting of Shareholders | 1 |
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Letters from Leadership
| From our Executive Chairman and President and Chief Executive Officer | |
|---|---|
| Dear Fellow Shareholders,With a relentless focus on operational excellence, we achieved strong operating, safety and financial results in 2023. Through our diversified, integrated portfolio, we generated $7.2 billion of net income and returned $5.9 billion to our shareholders through dividends and share repurchases. Consistent with our core values, we kept safety top of mind and finished the year with our lowest-ever combined employee and contractor total recordable incident rate.We began the year with a drive to make significant progress toward delivering on our multi-year strategic priority targets, and by October, we raised the bar and increased many of the targets we initially set in late 2022. We are pleased to report on our progress and our expectations for the future.•Deliver shareholder returns. In 2023, we honored our commitment to deliver value to our shareholders through a secure, competitive and growing dividend and share repurchases. Supported by our plan to return at least 50% of cash flows from operations to our shareholders, we raised our original shareholder distributions target, and now expect to return between $13 billion to $15 billion to our shareholders through dividends and share repurchases in the period from July 2022 through year-end 2024. •Enhance refining performance. The execution of our plan to enhance refining performance resulted in crude utilization rates above the industry average in each quarter of 2023. In addition, we completed high-return, low-capital projects to improve market capture. We remain focused on improving performance, increasing market capture and reducing costs to enhance earnings per barrel.•Maximize value from wellhead to market. In Midstream, we bolstered our NGL wellhead-to-market strategy with the acquisition of the public common units of DCP Midstream, LP (DCP). The team has done a remarkable job integrating DCP, and captured run-rate synergies of $250 million as of year-end 2023. We expect to capture an additional $150 million or more in synergies by 2025.•Execute our business transformation. Through our business transformation, we delivered $1.2 billion in run-rate cost and capital reductions in 2023. We are now targeting $1.4 billion in run-rate savings by the end of 2024 as our employees continue to challenge the status quo and leverage technology to improve our ways of working.•Maintain financial resilience. Our commitment to financial resilience includes a targeted net debt-to-capital ratio range of 25% to 30%. We prioritize our investment-grade credit ratings to enhance our long-term competitiveness and protect the integrity of our balance sheet. In alignment with our strategic priorities, we plan to monetize assets that no longer fit our long-term strategy and expect to generate over $3 billion in proceeds from these asset sales.•Pursue strategic growth. We selectively pursued growth opportunities that will provide attractive returns. Notably, through our Rodeo Renewed project, we advanced the conversion of our San Francisco refinery into one of the world’s largest renewable fuels facilities. We are confident that we are focused on the right priorities to maximize value for our shareholders, and we look forward to updating you on our progress throughout the year. We thank you for your continued support and investment in Phillips 66. In safety, honor and commitment, | |
| Greg C. GarlandExecutive ChairmanApril 3, 2024 | Mark E. LashierPresident and Chief Executive OfficerApril 3, 2024 |
| 2 | Phillips 66 2024 Proxy Statement |
From Our Lead Independent Director
“Above all, the Board remains committed to building long-term value and returning capital to our shareholders. This is particularly evident in the tremendous progress that our management team has made over the past year executing the Company’s strategic priorities to meet its financial and operational targets.”
Dear Fellow Shareholders,On behalf of the entire Board, I extend my sincere gratitude to Greg Garland for his dedicated commitment and exceptional leadership of the Company during his recent tenure as Executive Chairman and, prior to that, as Chairman and CEO. Pursuant to our planned leadership succession process, he will step down from the Board immediately prior to the Annual Meeting, at which point Mark Lashier will take on the additional role of Chairman of the Board while I remain in the role of Lead Independent Director. The Board has been actively involved in this transition process and is confident in Mark's capabilities.Over the past year, I had the opportunity to sit down with many of our shareholders to learn more about their priorities and share the Board's perspectives on these topics. Many of these conversations touched upon the energy transition and matters of energy security, the Board's oversight of the Company's sustainability initiatives, and our approach to human capital management matters. I discussed the input that I received in these meetings with the entire Board, which considered these viewpoints in our discussions and decisions. Shareholders also expressed an interest in learning more about governance in the boardroom, including our oversight of the recent CEO transition, Board refreshment and the upcoming Board leadership transition. This Proxy Statement includes greater discussion of these matters that I hope you will find informative. Additionally, we were pleased to welcome Bob Pease to the Board earlier this year. Bob brings broad energy industry experience to the Board, particularly in refining, and a global perspective on business affairs that will add to the Board's oversight of the Company as we advance our strategic priorities. Above all, the Board remains committed to building long-term value and returning capital to our shareholders. This is particularly evident in the tremendous progress that our management team has made over the past year executing the Company’s strategic priorities to meet its financial and operational targets. The Company's 2024 capital program underscores this focus, and demonstrates significant capital discipline in support of our strategic priorities. On behalf of the Board, I join Greg and Mark in thanking you for choosing to invest in Phillips 66. It is a great pleasure to serve as your Lead Independent Director, and I look forward to hearing from many of you again this year.Sincerely,
| Letters from Leadership | 3 |
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| Notice of 2024 Annual Meeting of Shareholders | 1 |
|---|---|
| Letters from Leadership | 2 |
| Resources and Defined Terms | 5 |
| Proxy Summary | 6 |
| Agenda Items and Voting Recommendations | 6 |
| Business Overview and Performance Highlights | 7 |
| Board and Governance Highlights | 9 |
| Board Overview | 10 |
| Executive Compensation Program Overview | 11 |
| Our Strategic Approach to Sustainability | 13 |
| Communicating with Stakeholders Regarding Sustainability | 13 |
| Spotlight on Our GHG Emissions Intensity Reduction Targets | 14 |
| Shareholder Outreach and Engagement | 14 |
| Forward-looking Statements, Website References and Links | 15 |
| Election of 4 Class III Directors to Hold Office until the 2027 Annual Meeting | 16 |
| Director Nominees | 16 |
| Majority Vote Standard & Director Resignation Policy | 16 |
| Director Experience, Qualifications and Core Skills | 16 |
| Class III Director Nominees Standing for Election | 17 |
| Continuing Directors | 21 |
| Director Demographics, Skills and Experiences Matrix | 30 |
| Board Composition and Qualifications | 31 |
| Corporate Governance | 35 |
| Board Leadership Structure | 35 |
| Board Independence | 37 |
| Board Committees | 37 |
| Overview of Board Committees and Primary Responsibilities | 37 |
| Shareholder Outreach and Responsiveness | 40 |
| Board Oversight of Our Company | 42 |
| Meetings and Attendance | 44 |
| Board Education | 44 |
| Related Person Transactions | 44 |
| Director Compensation | 45 |
| Advisory Approval of Executive Compensation | 48 |
|---|---|
| Compensation Discussion and Analysis | 49 |
| Executive Summary | 49 |
| Executive Compensation Program Summary | 52 |
| Executive Compensation Program Details | 55 |
| Participants in Compensation-Setting Process | 66 |
| Additional Compensation Practices | 69 |
| Executive Compensation Tables | 74 |
| CEO Pay Ratio | 86 |
| Pay versus Performance | 87 |
| Equity Compensation Plan Information | 91 |
| Ratification of the Appointment of Ernst & Young | 92 |
| Ernst & Young LLP Fees | 92 |
| Audit and Finance Committee Report | 94 |
| Shareholder Proposal | 95 |
| Shareholder Proposal Requesting Report Analyzing the Impact of the "System Change Scenario" on the Chemicals Business | 96 |
| Board of Directors' Response to Shareholder Proposal | 98 |
| Beneficial Ownership of Phillips 66 Securities | 99 |
| Securities Ownership of Certain Beneficial Owners | 99 |
| Securities Ownership of Officers and Directors | 100 |
| Delinquent Section 16(a) Reports | 101 |
| Additional Information | 102 |
| About the Annual Meeting | 102 |
| Virtual Meeting Information | 107 |
| General Information | 107 |
| Proxy Solicitation | 108 |
| Householding | 108 |
| Submission of Future Shareholder Proposals and Director Nominations | 108 |
| Appendix A: Non-GAAP Financial Measures | 110 |
NON-GAAP FINANCIAL MEASURES
This Proxy Statement contains certain financial measures, including “Adjusted PSP ROCE,” “Adjusted VCIP EBITDA,” and “Adjusted VCIP Controllable Costs,” that are not determined in accordance with generally accepted accounting principles (GAAP) and may not be defined and calculated by other companies using the same or similar terminology. Please see Appendix A, Non-GAAP Financial Measures, for further information on the non-GAAP financial measures used herein, including reconciliations to the most directly comparable GAAP financial measure when practicable.
| 4 | Phillips 66 2024 Proxy Statement |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.