Our executive compensation program aligns pay with performance. Our compensation philosophy provides for a competitive base salary to attract strong talent, an annual bonus to align and motivate all employees around near-term company targets, plus a long-term incentive plan that focuses senior management on strategic multi-year delivery and long-term value creation through share-based rewards.
Our annual bonus metrics are rigorously vetted and reflect the building blocks that support long-term value creation. We incorporate sustainability metrics into our corporate score card as environment, social and governance matters are a top priority of the Board. Strong safety and environmental performance are critical to maintaining a well-managed company. From our ongoing dialog with investors and other stakeholders, we know they share the importance we place on this topic. Starting in 2023, we have added an additional safety metric to our Company Scorecard.
We continue to drive environment, social and governance progress and have committed to reduce our Scope 1 & 2 GHG intensity by 50% by 2030 from 2019 levels. This goal was included in Ovintiv’s annual incentive compensation program for all employees beginning in 2022. Due to the strength of our team and their commitment to innovation and continuous improvement, we are confident we can achieve these milestone reductions by focusing on efficiency and utilizing new technology. We are well on our way to reaching our target, having achieved a >30% reduction in Scope 1 & 2 GHG intensity at year end 2022 (benchmarked against 2019 results).
The long-term incentive awards tie to both total shareholder return and specific strategic milestones over a longer horizon. Executive compensation is substantially “at risk,” plus the Board retains discretion to ensure our pay programs produce outputs that align closely with changes in shareholder value.
The HRC Committee believes that direct feedback from shareholders is an important part of the compensation-setting process. We regularly solicit feedback from shareholders as well as input from independent compensation advisors to maintain a competitive executive compensation program that attracts and retains top talent and encourages sustainable performance.
Our compensation program continues to evolve and the Board remains attuned to shareholder feedback, changing shareholder expectations and evolving market standards. Reflecting that feedback, the HRC Committee made several changes to the compensation program for 2021-22.
2022 Compensation Program Changes
The HRC Committee approved the following changes to our 2022 compensation program to strengthen the alignment of executive compensation with Company performance and shareholder experience and expectations. These changes are a result of Board engagement with shareholders and reflect the Board’s compensation consultant’s review of pay practices and programs across a broad range of industries.
Annual Bonus Changes
- Approved more rigorous 2022 payout curves, which make above target payouts more difficult to obtain
Long-Term Incentive Changes
- Added both the S&P 400 and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) indices to our Peer Group to measure our performance against the general industry and a larger group of E&P peers
- All earned LTI awards were settled in shares of our common stock, creating stronger alignment to market practice and increasing employee share ownership