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: March, 2017 |
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):
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):
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: March 1, 2017 |
By: |
"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 March 1, 2017 | ||
99.2 |
Form of Proxy | ||
99.3 |
Notice of Annual General Meeting and Notice of Availability of Proxy Materials |
EXHIBIT 99.1
Notice of Meeting, Invitation to Shareholders and Management Proxy Circular,
dated March 1, 2017
CONTENTS |
1 | Invitation to Shareholders | |
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2 | About this Management Proxy Circular | |
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3 | Voting and Proxies: Questions and Answers | |
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6 | Business of the Meeting | |
6 | Financial Statements | |
6 | Election of Directors | |
14 | Appointment of Auditors | |
15 | Increase in Common Shares Reserved for Issuance under the Suncor Energy Inc. Stock Option Plan | |
16 | Advisory Vote on Approach to Executive Compensation | |
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17 | Board of Directors Compensation | |
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24 | Executive Compensation | |
24 | Letter to Shareholders | |
27 | Compensation Discussion and Analysis | |
53 | Compensation Disclosure of Named Executive Officers | |
59 | Termination Agreements and Change of Control Arrangements | |
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61 | Indebtedness of Directors, Executive Officers and Senior Officers | |
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61 | Summary of Incentive Plans | |
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66 | Claw Back Policy | |
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66 | Directors' and Officers' Insurance | |
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66 | Advance Notice By-Law | |
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67 | Corporate Governance | |
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67 | Additional Information | |
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68 | Advisories | |
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A-1 | Schedule A: Directors' Outstanding Option-Based Awards | |
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B-1 | Schedule B: Named Executive Officers' Outstanding Option-Based Awards and Grant Date Fair Values for Share-Based Awards | |
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C-1 | Schedule C: Corporate Governance Summary | |
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D-1 | Schedule D: Position Description for Independent Board Chair | |
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E-1 | Schedule E: Director Independence Policy and Criteria | |
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F-1 | Schedule F: Board Terms of Reference | |
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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 April 27, 2017, at The Metropolitan Centre, 333 Fourth 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 25, 2017 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 7, 2017 will be entitled to receive notice of and vote at the meeting.
By order of the Board of Directors of Suncor Energy Inc.
Janice B. Odegaard
Senior Vice President, General Counsel and Corporate Secretary
March 1, 2017
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 April 27, 2017, to be held at The Metropolitan Centre, 333 Fourth 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 accompanying management proxy circular. The contents of this 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 during 2016 and provide an outlook on priorities for 2017 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 2016 Annual Report, are available in the Investor Centre on our web site located at www.suncor.com. We encourage you to visit our web site during the year for information about the Corporation, including news releases and investor presentations. To ensure you receive all the latest news on the Corporation, including the speeches of senior executives, you can use the 'Email Alerts' subscribe feature on the Corporation's web site. Additional information relating to the Corporation is available on SEDAR at www.sedar.com.
We look forward to seeing you at the meeting.
Yours sincerely,
James W. Simpson Chair of the Board |
Steven W. Williams President and Chief Executive Officer |
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 1
ABOUT THIS MANAGEMENT PROXY CIRCULAR
You are invited to attend the annual general meeting of shareholders of Suncor Energy Inc. to be held at The Metropolitan Centre, 333 Fourth Avenue S.W., Calgary, Alberta, on April 27, 2017, 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 annual general 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 27) for the year ended December 31, 2016.
This management proxy circular is dated March 1, 2017, 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 plans, 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, 2016 (the "AIF"), Suncor's Management's Discussion and Analysis for the year ended December 31, 2016 (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 our forward-looking information. The company's financial and operational performance is potentially 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") and Oil Sands operations cash operating costs 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 included because management uses the 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. 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. FFO was previously referred to as cash flow from operations with the calculation being unchanged from prior years. 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 "mbbls/d" mean thousands of barrels per day and "mboe/d" mean thousands of barrels of oil equivalent per day. Website References Information contained in or otherwise accessible through Suncor's web site and other web sites, though referenced herein, does not form part of this management proxy circular and is not incorporated by reference into this management proxy circular by reference. |
2 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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, 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 25, 2017 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 7, 2017, 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 7, 2017, during usual business hours at the offices of Computershare, 600, 530 8th Avenue SW, 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 securities 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 securities 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 agents at a nominal cost, and all of these costs are paid by Suncor.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 3
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.
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 form 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 company?
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 company 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:
4 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
If you are a non-registered shareholder, contact your nominee.
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 common shares are outstanding?
A. As of February 24, 2017, there were 1,668,994,047 common shares outstanding. We have no other class or series of voting shares outstanding.
As of February 24, 2017, there was no person 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 on line 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 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 web site. If you wish, you may elect to be notified by e-mail when documentation is posted on our web site. 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 web site 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 holders 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 April 27, 2017. Shareholders may view the meeting and ask questions on line, but will not be able to vote via the webcast.
Shareholder Proposals
Eligible shareholders should direct any proposals they plan to present at the 2018 annual meeting to our Corporate Secretary. To be included in our 2018 management proxy circular, the proposal must be received at Suncor Energy Inc. at P.O. Box 2844, 150 6th Avenue S.W., Calgary, Alberta, Canada T2P 3E3 by December 1, 2017.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 5
Financial Statements
The audited consolidated financial statements for the year ended December 31, 2016 and the report of the auditors thereon will be placed before the meeting. These audited consolidated financial statements form part of our 2016 Annual Report. Copies of the 2016 Annual Report may be obtained from the Corporate Secretary upon request and will be available at the meeting. The full text of the 2016 Annual Report is available on Suncor's web site at www.suncor.com and has been filed with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission.
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 11 non-employee directors, including James W. Simpson, our Board chair, and one member of management, Steven W. Williams, our President and Chief Executive Officer ("CEO").
After almost 13 years of service to Suncor, Mr. Simpson, our current Board chair, will be retiring from the Board this year and will not stand for re-election. Mr. Simpson has served as our Board chair since 2014 and Suncor has benefitted greatly from Mr. Simpson's unwavering commitment and sound business judgment as well as his focus on good governance and sustainability. Mr. Simpson brought a strong spirit of collaboration, discipline and integrity to Board discussions and the Board and management would like to thank Mr. Simpson for his significant contributions to the company. Mr. Simpson's retirement will take effect at the conclusion of the annual general meeting when Michael M. Wilson, a current member of the Board, will become Board chair.
In accordance with our by-laws, the Board has determined that 11 directors will be elected at the meeting. Following the annual general meeting, and assuming that all proposed nominees for director are elected as contemplated in this management proxy circular, the Board will be composed of 10 non-employee directors and Mr. Williams. 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 12. 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 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. This 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. A news release will be issued promptly by Suncor announcing the Board's determination, including, if applicable, the reasons for rejecting the resignation. Absent exceptional circumstances, the Board shall accept the resignation which will be effective upon such acceptance. 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.
6 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
The Persons Nominated for Election as Directors Are*:
Patricia M. Bedient 63 |
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Sammamish, Washington, USA | |
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Director from February 24, 2016 to present(5) | |
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Independent | |
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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. 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 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 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. |
Suncor Board and Board Committees(8) | Meeting Attendance | ||||
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Board of Directors | 4 of 4 | 100% | |||
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Audit | 5 of 5 | 100% | |||
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Environment, Health, Safety and Sustainable Development | 3 of 3 | 100% | |||
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Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
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Year | Votes in Favour | Alaska Air Group | |||||||||||
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2016 | 99.78% | Park Hotels & Resorts Inc. | |||||||||||
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2015 | N/A | ||||||||||||
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Common Shares and Share Units Held as at December 31 | |||||||||||||
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Total Common |
Total Value of Common |
Share Ownership Target(4) |
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Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3) |
Meets Target |
Current Status |
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2016 | Nil | 13 607 | 13 607 | 597 347 | N/A | 0.7x | |||||||
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2015 | Nil | N/A | Nil | Nil | |||||||||
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Mel E. Benson 68 |
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Calgary, Alberta, Canada | |
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Director from April 19, 2000 to present | |
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Independent | |
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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. |
Suncor Board and Board Committees | Meeting Attendance | ||||
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Board of Directors | 8 of 8 | 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% | |||
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Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
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Year | Votes in Favour | None | |||||||||||
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2016 | 97.21% | ||||||||||||
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2015 | 96.73% | ||||||||||||
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Common Shares and Share Units Held as at December 31 | |||||||||||||
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Total Common |
Total Value of Common |
Share Ownership Target(4) |
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Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3)(6) |
Meets Target |
Current Status |
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2016 | 17 548 | 89 034 | 106 582 | 4 678 950 | Yes | 5.8x | |||||||
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2015 | 17 548 | 80 532 | 98 080 | 3 503 418 | |||||||||
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2014 | 17 548 | 72 143 | 89 691 | 3 309 598 | |||||||||
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SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 7
Jacynthe Côté 58 |
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Candiac, Québec, Canada | |
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Director from February 3, 2015 to present(5) | |
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Independent | |
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Jacynthe Côté was president and chief executive officer of Rio Tinto Alcan, a metals and mining company, from February 2009 until June 2014 and she continued to serve in an advisory role until her retirement on September 1, 2014. Prior to 2009, she served as president and chief executive officer of Rio Tinto Alcan's Primary Metal business group, following Rio Tinto's acquisition of Alcan Inc. in October 2007. Ms. Côté joined Alcan Inc. in 1988 and she served in a variety of progressively senior leadership roles during her career, including positions in human resources, environment, health and safety, business planning and development and production/managerial positions in Québec and England. Ms. Côté is a director of Finning International Inc., the Royal Bank of Canada and TransContinental Inc. She also serves as a member of the advisory board of the Montreal Neurological Institute and of the board of directors of École des Hautes Études Commereciales Montréal. Ms. Côté has a bachelor's degree in chemistry from Laval University. |
Suncor Board and Board Committees | Meeting Attendance | ||||
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Board of Directors | 8 of 8 | 100% | |||
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Audit | 7 of 7 | 100% | |||
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Environment, Health, Safety and Sustainable Development | 4 of 4 | 100% | |||
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Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
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Year | Votes in Favour | Finning International Inc. | |||||||||||
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2016 | 99.60% | Royal Bank of Canada | |||||||||||
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2015 | 99.76% | TransContinental Inc. | |||||||||||
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Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | Nil | 23 202 | 23 202 | 1 018 568 | Yes | 1.3x | |||||||
|
|||||||||||||
2015 | Nil | 14 210 | 14 210 | 507 581 | |||||||||
|
|||||||||||||
2014 | Nil | N/A | Nil | Nil | |||||||||
|
Dominic D'Alessandro 70 |
|
|
|
Toronto, Ontario, Canada | |
|
|
Director from November 12, 2009 to present | |
|
|
Independent | |
|
|
Dominic D'Alessandro was president and chief executive officer of Manulife Financial Corporation from 1994 to 2009 and is currently a director of CGI Group Inc. For his many business accomplishments, Mr. D'Alessandro was recognized as Canada's Most Respected CEO in 2004 and CEO of the Year in 2002, and was inducted into the Insurance Hall of Fame in 2008. Mr. D'Alessandro is an Officer of the Order of Canada and has been appointed as a Commendatore of the Order of the Star of Italy. In 2009, he received the Woodrow Wilson Award for Corporate Citizenship and in 2005 was granted the Horatio Alger Award for community leadership. Mr. D'Alessandro is a FCA, and holds a Bachelor of Science from Concordia University in Montreal. He has also been awarded honorary doctorates from York University, the University of Ottawa, Ryerson University and Concordia University. |
Suncor Board and Board Committees | Meeting Attendance | ||||
|
|||||
Board of Directors | 8 of 8 | 100% | |||
|
|||||
Audit | 7 of 7 | 100% | |||
|
|||||
Governance (Chair) | 6 of 6 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | CGI Group Inc. | |||||||||||
|
|||||||||||||
2016 | 99.58% | ||||||||||||
|
|||||||||||||
2015 | 99.31% | ||||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 10 000 | 71 872 | 81 872 | 3 594 181 | Yes | 4.5x | |||||||
|
|||||||||||||
2015 | 10 000 | 61 167 | 71 167 | 2 542 085 | |||||||||
|
|||||||||||||
2014 | 10 000 | 50 701 | 60 701 | 2 239 867 | |||||||||
|
8 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
John D. Gass 64 |
|
|
|
Palm Coast, Florida, USA | |
|
|
Director from February 3, 2014 to present | |
|
|
Independent | |
|
|
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 Co. and Weatherford International plc. He is also on the board of visitors for the Vanderbilt School of Engineering and is 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. |
Suncor Board and Board Committees(8) | Meeting Attendance | ||||
|
|||||
Board of Directors | 7 of 8 | 88% | |||
|
|||||
Environment, Health, Safety and Sustainable Development | 2 of 2 | 100% | |||
|
|||||
Governance | 3 of 3 | 100% | |||
|
|||||
Human Resources and Compensation (Chair) | 5 of 5 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | Southwestern Energy Co. | |||||||||||
|
|||||||||||||
2016 | 98.08% | Weatherford International plc | |||||||||||
|
|||||||||||||
2015 | 97.68% | ||||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 6 698 | 28 483 | 35 181 | 1 544 446 | Yes | 1.9x | |||||||
|
|||||||||||||
2015 | 6 698 | 20 500 | 27 198 | 971 513 | |||||||||
|
|||||||||||||
2014 | 6 698 | 12 670 | 19 368 | 714 679 | |||||||||
|
John R. Huff 70 |
|
|
|
Houston, Texas, USA | |
|
|
Director from January 30, 1998 to present | |
|
|
Independent | |
|
|
John Huff has served as chairman of the board of directors of Oceaneering International, Inc. ("Oceaneering") since 1990 and served as its chief executive officer from 1986 to 2006. Prior to joining Oceaneering, he served as chairman, president and chief executive officer of Western Oceanic, Inc. from 1972 to 1986. Mr. Huff is also a director of Hi-Crush Partners LP and serves on the boards of trustees of Baylor College of Medicine and the Georgia Tech Foundation. Mr. Huff is a member of the National Academy of Engineering, a past member of the National Petroleum Council and a past director of the National Ocean Industries Association and the International Association of Drilling Contractors, and served on the U.S. Department of Transportation's National Offshore Safety Advisory Committee. Mr. Huff attended Rice University and received a bachelor's degree in civil engineering from the Georgia Institute of Technology, as well as attended the Harvard Business School's Program for Management Development. Mr. Huff is a registered professional engineer in the state of Texas and a member of The Explorers Club. |
Suncor Board and Board Committees | Meeting Attendance | ||||
|
|||||
Board of Directors | 8 of 8 | 100% | |||
|
|||||
Environment, Health, Safety and Sustainable Development | 4 of 4 | 100% | |||
|
|||||
Human Resources and Compensation | 5 of 5 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | Hi-Crush Partners LP | |||||||||||
|
|||||||||||||
2016 | 97.20% | Oceaneering International, Inc. | |||||||||||
|
|||||||||||||
2015 | 96.75% | ||||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3)(6) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 30 019 | 135 978 | 165 997 | 7 287 268 | Yes | 9.1x | |||||||
|
|||||||||||||
2015 | 30 019 | 123 618 | 153 637 | 5 487 914 | |||||||||
|
|||||||||||||
2014 | 43 256 | 111 424 | 154 680 | 5 707 692 | |||||||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 9
Maureen McCaw 62 |
|
|
|
Edmonton, Alberta, Canada | |
|
|
Director from April 27, 2004 to present(7) | |
|
|
Independent | |
|
|
Maureen McCaw was most recently executive vice-president of Leger Marketing (Alberta) and formerly president of Criterion Research, a company she founded in 1986. Ms. McCaw is chair of the Edmonton International Airport and CBC Pension Fund Plan board of trustees and is a director of the Canadian Broadcasting Corporation. She also serves on a number of other boards and advisory committees, including the Institute of Corporate Directors, the Nature Conservancy of Canada and MacEwan University, Faculty of Business, as well as being 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. |
Suncor Board and Board Committees | Meeting Attendance | ||||
|
|||||
Board of Directors | 8 of 8 | 100% | |||
|
|||||
Audit | 7 of 7 | 100% | |||
|
|||||
Governance | 6 of 6 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | None | |||||||||||
|
|||||||||||||
2016 | 99.21% | ||||||||||||
|
|||||||||||||
2015 | 99.14% | ||||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 5 774 | 74 245 | 80 019 | 3 512 834 | Yes | 4.4x | |||||||
|
|||||||||||||
2015 | 5 574 | 64 898 | 70 472 | 2 517 260 | |||||||||
|
|||||||||||||
2014 | 5 419 | 57 001 | 62 420 | 2 303 298 | |||||||||
|
Michael W. O'Brien 72 |
|
|
|
Canmore, Alberta, Canada | |
|
|
Director from April 26, 2002 to present | |
|
|
Independent | |
|
|
Michael O'Brien served as executive vice president, corporate development, and chief financial officer of Suncor Energy Inc. before retiring in 2002. Mr. O'Brien is a director and chair of the Audit Committee of Shaw Communications Inc. In addition, he is past chair of the board of trustees for the Nature Conservancy Canada, past chair of the Canadian Petroleum Products Institute and past chair of Canada's Voluntary Challenge for Global Climate Change. He has previously served on the boards of Terasen Inc., Primewest Energy Inc. and CRA International. |
Suncor Board and Board Committees | Meeting Attendance | ||||
|
|||||
Board of Directors | 8 of 8 | 100% | |||
|
|||||
Audit (Chair) | 7 of 7 | 100% | |||
|
|||||
Governance | 6 of 6 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | Shaw Communications Inc. | |||||||||||
|
|||||||||||||
2016 | 98.88% | ||||||||||||
|
|||||||||||||
2015 | 98.90% | ||||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3)(6) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 11 308 | 81 504 | 92 812 | 4 074 447 | Yes | 5.1x | |||||||
|
|||||||||||||
2015 | 11 308 | 73 234 | 84 542 | 3 019 840 | |||||||||
|
|||||||||||||
2014 | 11 308 | 65 075 | 76 383 | 2 818 533 | |||||||||
|
10 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Eira M. Thomas 48 |
|
|
|
West Vancouver, British Columbia, Canada | |
|
|
Director from April 27, 2006 to present | |
|
|
Independent | |
|
|
Eira Thomas is a Canadian geologist with over 20 years of experience, including her previous roles as chief executive officer and director of Kaminak Gold Corporation, a mineral exploration company, vice president of Aber Resources, now Dominion Diamond Corp., and as founder and CEO of Stornoway Diamond Corp. Currently, Ms. Thomas is a director of Lucara Diamond Corp. |
Suncor Board and Board Committees | Meeting Attendance | ||||
|
|||||
Board of Directors | 7 of 8 | 88% | |||
|
|||||
Environment, Health, Safety and Sustainable Development (Chair) | 4 of 4 | 100% | |||
|
|||||
Human Resources and Compensation | 5 of 5 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | Lucara Diamond Corp. | |||||||||||
|
|||||||||||||
2016 | 95.16% | ||||||||||||
|
|||||||||||||
2015 | 97.08% | ||||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3)(6) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 4 000 | 77 144 | 81 144 | 3 562 222 | Yes | 4.5x | |||||||
|
|||||||||||||
2015 | 4 000 | 67 756 | 71 756 | 2 563 124 | |||||||||
|
|||||||||||||
2014 | 4 000 | 59 770 | 63 770 | 2 353 113 | |||||||||
|
Steven W. Williams 61 |
|
|
|
Calgary, Alberta, Canada | |
|
|
Director from December 1, 2011 to present | |
|
|
Non-independent Management |
|
|
|
Steve Williams is president and chief executive officer of Suncor. Steve's career with Suncor began in May 2002 when he was appointed executive vice president, corporate development and chief financial officer. He has also served as executive vice president, oil sands and chief operating officer. Steve has more than 39 years of international energy industry experience, including 18 years at Esso/Exxon. Steve holds a Bachelor of Science degree (Hons.) in chemical engineering from Exeter University and is a fellow of the Institution of Chemical Engineers. He is a graduate of the business economics program at Oxford University as well as the advanced management program at Harvard Business School. Steve has been named to the board of directors of the new Alcoa Corporation. He is a board member of the Business Council of Canada, a member of the Institute of Directors and a member of the McKinsey & Company Canada Advisory Council. He is one of 12 founding CEOs of Canada's Oil Sands Innovation Alliance ("COSIA") and is a member of the advisory board of Canada's Ecofiscal Commission. Steve also serves as vice-chair of the Alberta Premier's Advisory Committee on the Economy. He is active in the community in the support of not-for-profit organizations including serving as co-chair of Indspire's "Building Brighter Futures" campaign. Steve attended the COP21 sessions as an official member of the Government of Canada delegation. In November 2015, he was chosen as the Canadian CEO of the Year by the Globe and Mail, Report on Business Magazine and in July 2016, was named one of Alberta's 50 most influential people (Alberta Venture Magazine). In January 2017, he was named CEO of the Year by Alberta Oil Magazine. |
Suncor Board and Board Committees | Meeting Attendance | ||||
|
|||||
Board of Directors | 8 of 8 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | Alcoa Corporation | |||||||||||
|
|||||||||||||
2016 | 99.74% | ||||||||||||
|
|||||||||||||
2015 | 99.67% | ||||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3)(6) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 404 810 | 43 957 | 448 767 | 19 700 873 | Yes | 2.4x | |||||||
|
|||||||||||||
2015 | 398 249 | 42 605 | 440 854 | 15 747 302 | |||||||||
|
|||||||||||||
2014 | 391 803 | 41 258 | 433 061 | 15 979 951 | |||||||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 11
Michael M. Wilson 65 |
|
|
|
Bragg Creek, Alberta, Canada | |
|
|
Director from February 3, 2014 to present | |
|
|
Independent | |
|
|
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, which is headquartered in Calgary, a position he held from 2003 until his retirement in 2013. He previously 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, Celestica Inc. and Finning International Inc. He is also the vice chair of the Calgary Prostate Cancer Centre. |
Suncor Board and Board Committees(8) | Meeting Attendance | ||||
|
|||||
Board of Directors | 8 of 8 | 100% | |||
|
|||||
Audit | 3 of 3 | 100% | |||
|
|||||
Governance | 6 of 6 | 100% | |||
|
|||||
Human Resources and Compensation | 2 of 2 | 100% | |||
|
Annual General Meeting Voting Results | Other Public Company Boards(9) | ||||||||||||
|
|||||||||||||
Year | Votes in Favour | Air Canada | |||||||||||
|
|||||||||||||
2016 | 99.48% | Celestica Inc. | |||||||||||
|
|||||||||||||
2015 | 99.77% | Finning International Inc. | |||||||||||
|
|||||||||||||
Common Shares and Share Units Held as at December 31 | |||||||||||||
|
Total Common |
Total Value of Common |
Share Ownership Target(4) |
|||||||||||
Fiscal Year |
Common Shares(1) |
DSUs(2) |
Shares and DSUs |
Shares and DSUs ($)(3) |
Meets Target |
Current Status |
|||||||
|
|||||||||||||
2016 | 10 000 | 31 717 | 41 717 | 1 831 376 | Yes | 2.3x | |||||||
|
|||||||||||||
2015 | 10 000 | 22 587 | 32 587 | 1 164 008 | |||||||||
|
|||||||||||||
2014 | 10 000 | 13 566 | 23 566 | 869 585 | |||||||||
|
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
12 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 13
Management and the Board propose that PricewaterhouseCoopers LLP be re-appointed as Suncor's auditors until the close of the next annual meeting. PricewaterhouseCoopers LLP have been Suncor's auditors for more than five years. Unless authority to do so is withheld, the persons named in the form of proxy intend to vote FOR the appointment of PricewaterhouseCoopers LLP.
Fees paid and payable to PricewaterhouseCoopers LLP for the years ended December 31, 2015 and 2016 are detailed below.
($ thousands) | 2016 | 2015 | |||
|
|||||
Audit Fees | 5 758 | 5 886 | |||
|
|||||
Audit-Related Fees | 415 | 483 | |||
|
|||||
Tax Fees | 15 | 15 | |||
|
|||||
All Other Fees | 25 | 25 | |||
|
|||||
Total | 6 213 | 6 409 | |||
|
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 auditors 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 auditors 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.
Tax Fees. Tax Fees for corporate tax filings and tax planning were paid in a foreign jurisdiction where Suncor has limited activity.
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", "Tax 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 auditors is provided in our AIF under the heading "Audit Committee Information".
14 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Increase in Common Shares Reserved for Issuance under the Suncor Energy Inc. Stock Option Plan
As part of the merger with Petro-Canada, effective August 1, 2009, Suncor adopted the SOP, which provides for the grant of options to purchase Suncor common shares, as well as the grant of Stock Appreciation Rights ("SARs"). For further details relating to the SOP, see "Summary of Incentive Plans Suncor Energy Stock Option Plan".
The purpose of the SOP is to align the interests of the officers, employees and, if designated by the Board, certain other persons providing services on an ongoing basis to Suncor and its subsidiaries with the profitability, growth and future success of Suncor by providing eligible plan participants with the opportunity to acquire an ownership interest in Suncor. The Board believes that the granting of options is an important part of Suncor's overall compensation program. As a long-term incentive, it also serves to ensure Suncor delivers market competitive compensation to plan participants and supports attracting and retaining talented employees.
The Board of Directors has approved, subject to shareholder approval, an amendment to increase the total number of common shares reserved for issuance under the SOP by 25,000,000.
The purpose of the additional reservation is to ensure that a sufficient number of common shares remain reserved for issuance under the SOP to enable the Corporation to continue its current practice of granting options to eligible plan participants as a component of Suncor's long-term incentive program. The long-term incentive program, consisting of options and performance share units at the executive level and options and restricted share units at the senior manager level, aligns eligible participants' interests with shareholders by rewarding them for increases in Suncor's share price and for shareholder returns that exceed those of our peers.
Shareholders are being requested to approve an increase in the number of common shares reserved for issuance under the SOP by 25,000,000. The following table sets forth the number of common shares which are subject to awards granted under the SOP and would be available for future awards under the SOP, both before and after the proposed amendment, as of February 24, 2017.
Common Shares Subject to Outstanding Awards |
Common Shares Available for Future Award Grants |
Maximum Common Shares Subject to and Available to Award Grants |
|||||
|
|||||||
Currently Approved | 34 766 991 | 3 834 239 | 38 601 230 | ||||
|
|||||||
Proposed Increase | N/A | 25 000 000 | 25 000 000 | ||||
|
|||||||
Total | 34 766 991 | 28 834 239 | 63 601 230 | ||||
|
|||||||
Percentage of Outstanding Common Shares | 2.1% | 1.7% | 3.8% | ||||
|
If the proposed increase is not approved, the SOP would have 3,834,239 common shares reserved for future option grants and, once this remaining reserve is used, Suncor would no longer be permitted to grant options under the SOP. This would limit Suncor's ability to continue its current practice of granting options to eligible plan participants as a component of the long-term incentive program and would require Suncor to provide an alternate form of long-term incentive compensation. This additional reservation has been conditionally approved by the TSX and must be approved by a majority of votes cast by shareholders at the meeting. Accordingly, at the meeting, shareholders will be asked to consider and, if deemed fit, to approve, by a simple majority of votes cast at the meeting, the following resolution:
"RESOLVED as an ordinary resolution of Suncor Energy Inc. (the "Corporation") that:
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 15
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 24 and our "Compensation Discussion and Analysis" beginning on page 27 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 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 2017 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 93.1% of votes "for", including 91.6% of the votes cast in favour in 2016.
16 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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 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 2016 consisted of annual retainers, meeting fees 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 and downside risk. Non-employee directors are required to meet robust share ownership guidelines.
Structure
Suncor's North American energy peers, identified on page 35 (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 35.
The following tables display the compensation structure for 2016 for all non-employee directors, including the Board chair.
Compensation Structure Components for Non-Employee Directors (excluding Board chair) | ($) | |||
|
||||
Retainer and Fees |
||||
|
||||
Annual Retainer(1) | 50 000 | |||
|
||||
Annual Committee Chair Retainer: | ||||
|
||||
Audit Committee | 25 000 | |||
|
||||
HR&CC | 15 000 | |||
|
||||
EHS&SD Committee and Governance Committee | 10 000 | |||
|
||||
Annual Committee Member Retainer: | ||||
|
||||
Audit Committee | 6 000 | |||
|
||||
EHS&SD Committee, Governance Committee and HR&CC | 5 000 | |||
|
||||
Board Meeting Fee and Committee Meeting Fee | 1 500 | |||
|
||||
Travel within continental North America (Per Round Trip)(2) | 1 500 | |||
|
||||
Travel originating from outside continental North America (Per Round Trip)(3) | 3 000 | |||
|
||||
Annual Equity |
||||
|
||||
Annual DSU target value(4) | 217 500 | |||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 17
Compensation Structure for Board chair(5) | ($) | ||
|
|||
Retainer and Fees |
|||
|
|||
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 | ||
|
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 | ü | ü | |||||||
|
|||||||||
Mel E. Benson | ü | ü | |||||||
|
|||||||||
Jacynthe Côté | ü | ü | |||||||
|
|||||||||
Dominic D'Alessandro | ü | Chair | |||||||
|
|||||||||
John D. Gass | ü | Chair | |||||||
|
|||||||||
John R. Huff | ü | ü | |||||||
|
|||||||||
Maureen McCaw | ü | ü | |||||||
|
|||||||||
Michael W. O'Brien | Chair | ü | |||||||
|
|||||||||
Eira M. Thomas | Chair | ü | |||||||
|
|||||||||
Michael M. Wilson | ü | 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 2016, share ownership guidelines were $1,400,000 for the Board chair and $800,000 for all other non-employee directors. The level of ownership must be attained by each director within five years of when he or she is first elected or appointed or from the date an increase in the share ownership guidelines is approved. Suncor common shares and DSUs count toward the share ownership guideline.
As at December 31, 2016, all non-employee directors, including the Board chair, have met or are on track to meet the share ownership guidelines.
Share ownership guidelines are reviewed periodically based on survey data.
18 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Total Compensation
Total Compensation Summary. The following table provides information on the total compensation paid to the non-employee directors for the year ended December 31, 2016.
($) | |||||||
|
|||||||
Name(1) |
Total Fees Paid |
Share-Based Awards(2) |
Total Compensation(3) |
||||
|
|||||||
Patricia M. Bedient | 78 083 | 396 552 | 474 635 | ||||
|
|||||||
Mel E. Benson(4) | 132 250 | 220 838 | 353 088 | ||||
|
|||||||
Jacynthe Côté | 95 500 | 220 838 | 316 338 | ||||
|
|||||||
Dominic D'Alessandro | 103 500 | 220 838 | 324 338 | ||||
|
|||||||
W. Douglas Ford(5) | 39 500 | 52 508 | 92 008 | ||||
|
|||||||
John D. Gass | 101 500 | 220 838 | 322 338 | ||||
|
|||||||
John R. Huff | 91 500 | 220 838 | 312 338 | ||||
|
|||||||
Maureen McCaw(4) | 145 250 | 220 838 | 366 088 | ||||
|
|||||||
Michael W. O'Brien | 116 000 | 220 838 | 336 838 | ||||
|
|||||||
James W. Simpson | 250 000 | 284 332 | 534 332 | ||||
|
|||||||
Eira M. Thomas | 95 000 | 220 838 | 315 838 | ||||
|
|||||||
Michael M. Wilson | 90 333 | 220 838 | 311 171 | ||||
|
|||||||
Total | 1 338 416 | 2 720 934 | 4 059 350 | ||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 19
Fees Paid. The following table provides a detailed breakdown of the fees paid to our non-employee directors for the year ended December 31, 2016. Fees are paid quarterly.
($) | |||||||||||||||||||
|
|||||||||||||||||||
Name |
Retainer Fee |
Committee Retainer Fee |
Committee Chair Retainer Fee |
Board Attendance Fee |
Committee Attendance Fee |
Travel Fees |
Total Fees Paid(1) |
Fees Taken in DSUs |
Fees Taken in Cash |
||||||||||
|
|||||||||||||||||||
Patricia M. Bedient | 45 833 | 8 250 | | 7 500 | 12 000 | 4 500 | 78 083 | 78 083 | | ||||||||||
|
|||||||||||||||||||
Mel E. Benson(2) | 89 250 | 10 000 | | 19 500 | 13 500 | | 132 250 | | 132 250 | ||||||||||
|
|||||||||||||||||||
Jacynthe Côté | 50 000 | 11 000 | | 12 000 | 16 500 | 6 000 | 95 500 | 95 500 | | ||||||||||
|
|||||||||||||||||||
Dominic D'Alessandro | 50 000 | 6 000 | 10 000 | 12 000 | 19 500 | 6 000 | 103 500 | 103 500 | | ||||||||||
|
|||||||||||||||||||
W. Douglas Ford(3) | 16 667 | 3 333 | | 7 500 | 9 000 | 3 000 | 39 500 | 28 500 | 11 000 | ||||||||||
|
|||||||||||||||||||
John D. Gass | 50 000 | 5 000 | 15 000 | 10 500 | 15 000 | 6 000 | 101 500 | 50 750 | 50 750 | ||||||||||
|
|||||||||||||||||||
John R. Huff | 50 000 | 10 000 | | 12 000 | 13 500 | 6 000 | 91 500 | 91 500 | | ||||||||||
|
|||||||||||||||||||
Maureen McCaw(2) | 89 250 | 11 000 | | 19 500 | 19 500 | 6 000 | 145 250 | 49 250 | 96 000 | ||||||||||
|
|||||||||||||||||||
Michael W. O'Brien | 50 000 | 5 000 | 25 000 | 12 000 | 19 500 | 4 500 | 116 000 | | 116 000 | ||||||||||
|
|||||||||||||||||||
James W. Simpson | 250 000 | | | | | | 250 000 | | 250 000 | ||||||||||
|
|||||||||||||||||||
Eira M. Thomas | 50 000 | 5 000 | 10 000 | 10 500 | 13 500 | 6 000 | 95 000 | 47 500 | 47 500 | ||||||||||
|
|||||||||||||||||||
Michael M. Wilson | 50 000 | 10 333 | | 12 000 | 16 500 | 1 500 | 90 333 | 90 333 | | ||||||||||
|
|||||||||||||||||||
Total | 841 000 | 84 916 | 60 000 | 135 000 | 168 000 | 49 500 | 1 338 416 | 634 916 | 703 500 | ||||||||||
|
20 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Equity Based Compensation
Annual DSU Grant. Non-employee directors participate in the Suncor Deferred Share Unit Plan (previously defined herein as the "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 current governance best practice.
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, including any new Board chair, who join the Board during the year, will receive a pro-rated annual DSU grant based on the date they join the Board.
Each non-employee director, other than Mr. Simpson, the Board chair, Ms. Bedient, who became a member of the Board on February 24, 2016, and Mr. Ford, who retired from the Board on April 28, 2016, received 5,880 DSUs in 2016. The Board chair received 7,570 DSUs. Ms. Bedient received 11,270 DSUs, comprised of a prorated annual grant of 5,390 DSUs and a joining grant of 5,880. Mr. Ford received 1,470 DSUs. In 2016, non-employee directors, including the Board chair, received an aggregate of 73,230 DSUs.
Fees Paid in DSUs. Until share ownership guidelines for non-employee directors are met (see page 18 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, or on a date elected by that director prior to November 30 of the following calendar year. 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 practice, stock option grants to non-employee directors were discontinued effective January 1, 2009. For additional information on any remaining stock options awarded prior to 2009 and held by certain non-employee directors, see Schedule A.
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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 21
Option-Based and Share-Based Awards. The following table provides information about option-based and share-based awards outstanding for our non-employee directors as at December 31, 2016. For further details, including the exercise price and expiration date, of any option-based award held by non-employee directors as at December 31, 2016, see Schedule A.
Option-Based Awards(1) |
Share-Based Awards |
||||||
|
|
||||||
Name |
Aggregate number of securities underlying unexercised options |
Aggregate value of unexercised "in-the-money" options(2) ($) |
Aggregate market or payout value of vested share-based awards not paid out or distributed(3) ($) |
||||
|
|||||||
Patricia M. Bedient | | | 597 347 | ||||
|
|||||||
Mel E. Benson | 8 000 | | 3 908 593 | ||||
|
|||||||
Jacynthe Côté | | | 1 018 568 | ||||
|
|||||||
Dominic D'Alessandro | | | 3 155 181 | ||||
|
|||||||
W. Douglas Ford(4) | 8 000 | | 4 530 392 | ||||
|
|||||||
John D. Gass | | | 1 250 404 | ||||
|
|||||||
John R. Huff | 8 000 | | 5 969 434 | ||||
|
|||||||
Maureen McCaw | | | 3 259 356 | ||||
|
|||||||
Michael W. O'Brien | 8 000 | | 3 578 026 | ||||
|
|||||||
James W. Simpson | | | 3 088 365 | ||||
|
|||||||
Eira M. Thomas | 8 000 | | 3 386 622 | ||||
|
|||||||
Michael M. Wilson | | | 1 392 376 | ||||
|
|||||||
Total | 40 000 | | 35 134 664 | ||||
|
Share-Based Awards Value Vested or Earned During the Year. The following table provides the value vested in relation to share-based awards held by our non-employee directors during the year ended December 31, 2016.
Name |
Share-based awards Value vested during the year(1) ($) |
||
|
|||
Patricia M. Bedient | 396 552 | ||
|
|||
Mel E. Benson | 220 838 | ||
|
|||
Jacynthe Côté | 220 838 | ||
|
|||
Dominic D'Alessandro | 220 838 | ||
|
|||
W. Douglas Ford(2) | 52 508 | ||
|
|||
John D. Gass | 220 838 | ||
|
|||
John R. Huff | 220 838 | ||
|
|||
Maureen McCaw | 220 838 | ||
|
|||
Michael W. O'Brien | 220 838 | ||
|
|||
James W. Simpson | 284 332 | ||
|
|||
Eira M. Thomas | 220 838 | ||
|
|||
Michael M. Wilson | 220 838 | ||
|
|||
Total | 2 720 934 | ||
|
22 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Director Value at Risk. The following table provides the aggregate equity holdings of current non-employee directors for the years ended December 31, 2015 and 2016 as well as the net change during 2016 and the total value at risk as at December 31, 2016.
December 31, 2015 |
December 31, 2016 |
Net Change During 2016 |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
Name | Shares |
Share- based awards (1) |
Options | Shares |
Share- based awards (1) |
Options | Shares |
Share- based awards (2) |
Options |
Total value at risk (3)(4) ($) |
|||||||||||
|
|||||||||||||||||||||
Patricia M. Bedient | | | | | 13 607 | | | 13 607 | | 597 347 | |||||||||||
|
|||||||||||||||||||||
Mel E. Benson | 17 548 | 80 532 | 16 000 | 17 548 | 89 034 | 8 000 | | 8 502 | (8 000 | ) | 4 678 950 | ||||||||||
|
|||||||||||||||||||||
Jacynthe Côté | | 14 210 | | | 23 202 | | | 8 992 | | 1 018 568 | |||||||||||
|
|||||||||||||||||||||
Dominic D'Alessandro | 10 000 | 61 167 | | 10 000 | 71 872 | | | 10 705 | | 3 594 181 | |||||||||||
|
|||||||||||||||||||||
John D. Gass | 6 698 | 20 500 | | 6 698 | 28 483 | | | 7 983 | | 1 544 446 | |||||||||||
|
|||||||||||||||||||||
John R. Huff | 30 019 | 123 618 | 16 000 | 30 019 | 135 978 | 8 000 | | 12 360 | (8 000 | ) | 7 287 268 | ||||||||||
|
|||||||||||||||||||||
Maureen McCaw | 5 574 | 64 898 | | 5 774 | 74 245 | | 200 | 9 347 | | 3 512 834 | |||||||||||
|
|||||||||||||||||||||
Michael W. O'Brien | 11 308 | 73 234 | 16 000 | 11 308 | 81 504 | 8 000 | | 8 270 | (8 000 | ) | 4 074 447 | ||||||||||
|
|||||||||||||||||||||
James W. Simpson | 4 736 | 60 766 | | 4 736 | 70 350 | | | 9 584 | | 3 296 275 | |||||||||||
|
|||||||||||||||||||||
Eira M. Thomas | 4 000 | 67 756 | 24 000 | 4 000 | 77 144 | 8 000 | | 9 388 | (16 000 | ) | 3 562 222 | ||||||||||
|
|||||||||||||||||||||
Michael M. Wilson | 10 000 | 22 587 | | 10 000 | 31 717 | | | 9 130 | | 1 831 376 | |||||||||||
|
Looking Ahead to 2017:
At its meeting in November 2016, the Governance Committee determined that no change to target total compensation for non-employee directors or the Board chair would be recommended to the Board for 2017.
In keeping with the trend away from the payment of meeting fees, the Governance Committee also recommended to the Board that effective January 1, 2017, the payment of meeting fees to non-employee directors would be discontinued in favour of increasing the annual retainer by $22,500. This change does not apply to the Board chair, as this position does not receive meeting fees. The Board approved the recommendation of the Governance Committee effective January 1, 2017.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 23
Letter to Shareholders
To Our Fellow Shareholders:
On behalf of the Human Resources and Compensation Committee ("HR&CC") and the Board of Directors (the "Board") of Suncor Energy Inc. ("Suncor"), we're pleased to share with you how we manage senior executive compensation at Suncor and how the company's programs align with short- and long-term performance. The Compensation Discussion & Analysis section that follows this letter includes comprehensive information on our pay-for-performance philosophy, compensation programs, governance practices and the compensation of our Named Executive Officers ("NEOs").
Business Environment. In 2016, the energy industry continued to face a very challenging business environment. This was highlighted by ongoing volatility in crude prices, a "lower for longer" crude price outlook and evolving public policy on climate change. In addition, for Suncor and other operators in the Wood Buffalo Region of Northern Alberta, forest fires in the second quarter of 2016 had a significant impact on operations.
Through this period, Suncor maintained a strong focus on safety, capital discipline, cost management, asset reliability and technology development. In addition, we leveraged our sound balance sheet and financial strength to execute counter-cyclical acquisitions that provide significant production growth and attractive upside. We also entered into agreements to divest non-core assets, most notably entering into participation agreements for the sale of a combined 49% interest in the East Tank Farm Development with the Fort McKay First Nation and the Mikisew Cree First Nation and the sale of our Petro-Canada lubricants business, which closed on February 1, 2017.
Suncor took a leadership position and active role in discussions on evolving public policy on climate change. This includes the President and CEO's role as a member of Canada's Ecofiscal Commission, where he effectively advocated for public policy that promotes both economic prosperity and the health of the environment.
While the forest fire impact on our oil sands operations was considerable, we are very proud of Suncor's leadership in responding, demonstrating the company's strong culture of safety and social responsibility. Suncor shut down its entire oil sands production to focus on the safety of employees and community residents, hosting more than 14,000 guests in its lodges and helping to safely evacuate more than 10,000 people.
When the evacuation order was lifted, the company remobilized thousands of employees and contractors and returned to normal production by the middle of July. It is noteworthy that the entire effort was accomplished with no recordable injuries, nor damage to assets and a safe and rapid return to normal operating rates.
Company Performance. For 2012 through 2016, Suncor has demonstrated strong operational performance and has outperformed most of our North American energy peers, the TSX, and the S&P/TSX Capped Energy Index in total shareholder return ("TSR").
The charts below display Suncor's performance over the 2012 to 2016 period in two key metrics: Suncor's Recordable Injury Frequency ("RIF"), a key safety measure, as compared to available Canadian Association of Petroleum Producers ("CAPP") industry data; and Suncor's TSR for one, two, three and five years.
The TSR measure is compared to the median of our compensation peer group, to the TSX, and to the S&P/TSX Capped Energy Index. We use the TSR for 2012 through 2016 to show performance during Steve Williams' tenure as President and CEO.
24 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Safety is an important value driver for Suncor in support of sustainable development and achieving long-term operational and financial success. Our safety journey has resulted in continuing improvement in RIF over the 2012 2016 period, highlighted by a 27% year-over-year improvement in 2016.
Suncor's TSR during the 2012 through the 2016 period outperformed the median TSR of our peers and the S&P/TSX Capped Energy Index over the two, three and five year periods by a significant margin. While Suncor achieved continued strong TSR of almost 27% for 2016, the peer median TSR was higher reflecting a substantial recovery in TSR for peers that have faced a significant drop in share prices over the past few years in comparison to Suncor. Suncor's commitment to shareholder returns is also demonstrated in strong dividend growth over the five year period of 170%.
Compensation Governance. Suncor is a substantial company with global operations and multiple business units. We are the largest energy company by market capitalization in Canada, and the fifth largest in North America at the end of 2016. In order to ensure that executive pay programs are competitive and support attracting and retaining top executive talent, we benchmark pay levels for our senior executive team against a peer group of North American energy companies.
Compensation for senior executives and compensation governance practices and programs are reviewed regularly, with the assistance of external executive compensation consultants, to ensure they align with leading practices and shareholder interests and that compensation is within the competitive range of peer companies.
Senior executive performance is evaluated annually against well-defined goals that support and reinforce Suncor's value drivers. The value drivers include achieving and maintaining safe and reliable operations, environmentally and socially responsible business practices and industry leading shareholder return. We believe success in these areas will drive long-term value for our shareholders.
Our HR&CC reviewed senior executive programs and compensation during the fourth quarter of 2016 and decided to maintain the current total direct compensation structure. We believe the programs and the compensation structure support and reinforce Suncor's vision and business strategy and are strongly aligned with governance best practices.
President and CEO Pay. Over 85% of the President and CEO's 2016 total direct compensation varied with performance and approximately 65% was provided in the form of mid- to long-term incentives, tying a substantial portion of the President and CEO's compensation to relative and absolute share price performance.
In 2016, Mr. Williams' base salary was again held at his 2014 level and his total direct compensation (which includes his actual salary + actual bonus + the grant date fair value of his annual mid- to long-term incentive awards reported in the summary compensation table) was $11.9 million, down approximately 7% from $12.8 million for 2015.
Realizable Long-Term Pay Aligned With Shareholders' Interests. Our equity based and performance contingent mid- to long-term incentive programs are the largest component of total direct compensation and ensure that the value ultimately received by our NEOs is aligned with shareholders. For the 2014 to 2016 period, aggregate realizable total direct compensation of our NEOs was approximately 43% higher than the value reported in the summary compensation table. Over the same period Suncor's TSR was 30.1% and was significantly above the -16.4% median of our peers.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 25
The aggregate realizable value is a snapshot at December 31, 2016 showing both the "in-the-money" value of stock options based on the absolute share price increase from the date of the long-term compensation award and TSR performance relative to peers under the performance share unit plan.
The aggregate realizable value of the mid- and long-term incentive awards for the three year period ending December 31, 2016 was generally in line with Suncor's share price and relative TSR performance over the period, reinforcing Suncor's pay-for-performance philosophy and alignment with shareholder interests.
Looking Ahead. The business environment will continue to be challenging for energy companies in 2017 and we believe that Suncor is well positioned to continue to deliver strong operational performance, capitalize on our competitive differentiators, including our excellent reserves base, integrated business model, approach to sustainable development and financial strength, in order to build value for our shareholders.
Your Board, with the support of the HR&CC, remains committed to ensuring that Suncor's senior executive compensation is aligned with our shareholders' interests and supports Suncor's near-term and longer-term performance and future success.
We welcome shareholder feedback on Suncor's business operations, policies and practices, including executive compensation.
Sincerely,
John D. Gass Chair of the Human Resources & Compensation Committee |
James W. Simpson Chair of the Board |
26 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
COMPENSATION DISCUSSION AND ANALYSIS
Page | |||
|
|||
2016 Named Executive Officers | 27 | ||
|
|||
Pay and Performance Overview | 27 | ||
|
|||
Compensation Governance | 31 | ||
|
|||
Our Approach to Executive Compensation | 34 | ||
|
|||
Compensation of the Named Executive Officers | 39 | ||
|
|||
2016 Performance | 44 | ||
|
|||
Executive Compensation Alignment with Shareholder Value | 50 | ||
|
2016 Named Executive Officers
The persons (the "NEOs" or "Named Executive Officers") who are the focus of the Compensation Discussion and Analysis and who appear in the compensation tables are:
|
||||
STEVEN W. WILLIAMS | S.W. WILLIAMS | PRESIDENT AND CHIEF EXECUTIVE OFFICER | ||
|
||||
ALISTER COWAN | A. COWAN | EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER | ||
|
||||
MARK S. LITTLE | M.S. LITTLE | PRESIDENT, UPSTREAM(1) | ||
|
||||
MICHAEL R. MACSWEEN | M.R. MACSWEEN | EXECUTIVE VICE PRESIDENT, MAJOR PROJECTS | ||
|
||||
STEPHEN D.L. REYNISH | S.D.L. REYNISH | EXECUTIVE VICE PRESIDENT, STRATEGY & CORPORATE DEVELOPMENT | ||
|
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 is intended to provide a quick overview of some key points regarding pay and performance at Suncor.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 27
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 | ||||
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Funds from Operations ("FFO")(1) |
Safety Sustainability Base Business Growth Workforce & Organizational Performance |
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. |
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How Total Direct Compensation (TDC) is Delivered.
Component | Performance Orientation | Time Frame | |||
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Salary (15-35% of target compensation) |
Reflects the market competitive value of the position versus peers. Salary increases reflect performance demonstrated on the job. |
Annual review with adjustments as appropriate | |||
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Annual Incentive (15-17% of target compensation) |
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 (25-35% of target compensation) |
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 (25-35% of target compensation) |
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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28 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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, to ensure 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 | ||
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Static numbers reported in the Summary Compensation Table for total direct compensation in 2014 and 2015 and estimated pay for 2016. 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 current value of outstanding equity awards. The values ultimately received could be quite different than those in the Summary Compensation Table depending on future performance. |
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The charts below indicate the alignment between Suncor's President and 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 as identified on page 35.
Suncor's President and CEO's pay opportunity is positioned in the upper right of the first chart below, within the zone of reasonable alignment, indicating the company had strong relative TSR performance that exceeded its relative pay. Only three peers had better TSR performance over the three year period, while five peers had a higher pay opportunity.
When assessing pay outcomes versus performance, realizable pay for Suncor's President and CEO also falls within the zone of reasonable alignment compared to peers, as shown in the second chart below.
President and CEO Pay Multiple of Median Peer Group Pay. We also look at the pay opportunity for the President and CEO as a multiple of the median pay opportunity of the Suncor Compensation Peers. The 2016 pay for the President and CEO compared to the pay opportunity for our peer group based on current data is at a multiple of 1.4 times the median of the Suncor Compensation Peers, 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 President and CEO and market pay, given Suncor's size and performance versus peers. The pay multiple is well within the acceptable range based on institutional investor and governance practices.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 29
President and CEO Pay at a Glance. As displayed in the corresponding chart, Mr. Williams' actual 2016 total direct compensation, as indicated in the summary compensation table, is approximately 18% higher than Suncor's total direct compensation structure, which is targeted at the median of the Suncor Compensation Peers. The 2016 actual compensation level reflects Mr. Williams' personal performance for the past year as assessed by the Board and the corporate and business unit results for 2016. For more information on Mr. Williams' performance and compensation in 2016, see pages 44 to 45.
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 practice approaches, support our business objectives and align with shareholder interests.
Key Practices
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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 share ownership guidelines including 6 times salary for the President and CEO and 3 times salary for Executive Vice Presidents | |
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ü | Maintain 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 President and CEO | |
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ü | Provide at least fifty percent 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 President and CEO with over 85% 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 securities held by an executive | |
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ü | No excessive perquisites are provided | |
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30 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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 C to this management proxy circular.
Human Resources & Compensation Committee. Central to the role of the HR&CC is the alignment of executive compensation with the delivery of shareholder value. The capabilities, powers 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 2016.
All HR&CC members are independent directors. The HR&CC is currently comprised of the following members: John D. Gass (chair), Mel E. Benson, John R. Huff, Eira M. Thomas and Michael M. Wilson.
The HR&CC members have experience in top leadership roles (three of five in CEO roles), strong knowledge of the energy industry (three of five 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 C-11 of Schedule C to this management proxy circular.
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:
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 31
The decisions made by the HR&CC may reflect factors and considerations other than as provided or recommended by our executive compensation consultants. During 2016, Willis Towers Watson and Meridian met with the HR&CC chair and attended relevant sections of HR&CC meetings, as necessary.
Executive Compensation-Related Fees
Executive compensation-related fees paid by Suncor in 2016 and 2015 to Willis Towers Watson and Meridian are displayed in the table below.
Executive Compensation Consultant |
Fees Paid related to 2016 ($) |
Fees Paid related to 2015 ($) |
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Willis Towers Watson | 115 167 | 87 285 | |||
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Meridian | 20 602 | 22 024 | |||
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All Other Fees
In addition to the fees disclosed above, Willis Towers Watson 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 $860,707 in 2016 and $1,045,754 in 2015, which included all fees payable to Willis Towers Watson by Suncor not included under executive compensation related fees in 2016 and 2015, respectively. Other than the fees disclosed above, no other fees were paid by Suncor to Meridian in 2016 and 2015.
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.
32 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Oversight Procedures
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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. Its review in 2016 confirmed that Suncor's compensation policies and programs do not encourage excessive risk that could have a material adverse effect on Suncor. |
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Key Risk Mitigating Features
Plan and Program Design | |||
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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 62. 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 2016, the threshold was based on achievement of a cost reduction target. 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 2016 performance period, four of the NEOs elected to take a portion of their AIP payment in DSUs. |
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Policies and Guidelines |
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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 36. |
The President and 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 the discretion to reduce or increase payouts under certain programs in the past. |
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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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 33
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, growth and workforce and organizational performance, FFO, TSR performance relative to peers, 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 ($5.986 billion in 2016).
As the largest energy company in Canada and fifth largest in North America by market capitalization at December 31, 2016, 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 2016, including the NEOs identified on page 27, 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 2016 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 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.
34 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
For our NEOs and other senior executives, Suncor's 2016 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 62. 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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 35
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.
2016 and 2017 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 2016 remain competitive with the Suncor Compensation Peers and no changes have been made for 2017, other than the addition of a share ownership level for the new President, Upstream position.
The following table sets forth the compliance of each NEO with the share ownership guidelines as at December 31, 2016. 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, 2016(1) |
Shares | DSUs |
Holding Value ($) |
Multiple of Annual Salary held in Shares and DSUs |
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S.W. WILLIAMS | 6 × annual salary | December 31, 2020 | 4 × annual salary | 404 810 | 43 957 | 19 700 873 | 14.3 × annual salary | ||||||||
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A. COWAN | 3 × annual salary | December 31, 2019 | N/A | 16 873 | 28 945 | 2 011 425 | 3.2 × annual salary | ||||||||
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M.S. LITTLE(3) | 3 × annual salary | December 31, 2016 | N/A | 47 004 | 28 131 | 3 298 431 | 5.1 × annual salary | ||||||||
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M.R. MACSWEEN | 3 × annual salary | December 31, 2017 | 2 × annual salary | 30 264 | 46 167 | 3 355 326 | 6.2 × annual salary | ||||||||
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S.D.L. REYNISH | 3 × annual salary | December 31, 2017 | N/A | 12 079 | 25 733 | 1 659 942 | 3.0 × annual salary | ||||||||
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President and CEO Hold Requirement. The President and 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.
36 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 37
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 | |||
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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 formal contracts, equity swaps, collars or units of exchange funds) that are designed to hedge or offset a change in the market value of common shares or other securities held by an executive.
38 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Compensation of the Named Executive Officers
Compensation Decision-Making. The compensation of the President and CEO and the other NEOs is determined through a structured annual process followed by the HR&CC to ensure continued alignment to our pay-for-performance philosophy.
The chart below illustrates the performance and compensation planning process and includes consideration of market information, governance practices, trends and advice from our executive compensation consultants.
2016 Total Direct Compensation. The 2016 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 2016 is provided on pages 40 to 43. Details on each NEO's performance, and their total direct compensation for 2014 to 2016 are provided on pages 44 to 49.
Base Salary. No salary increases were provided to NEOs in 2016 and annual base salaries were again held at 2014 levels as part of Suncor's cost management focus in a challenging business environment.
Base Salary 2016 ($) |
Increase from 2015 (%) |
Base Salary 2015 ($) |
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S.W. WILLIAMS | 1 375 000 | 0.0 | 1 375 000 | ||||
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A. COWAN | 625 000 | 0.0 | 625 000 | ||||
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M.S. LITTLE | 650 000 | 0.0 | 650 000 | ||||
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M.R. MACSWEEN | 540 000 | 0.0 | 540 000 | ||||
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S.D.L. REYNISH | 550 000 | 0.0 | 550 000 | ||||
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SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 39
2016 Performance Highlights. Suncor's strong operational performance in 2016, including in the following key areas, supports the above target performance achieved under the AIP.
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 Personal component.
The charts to the right display the weight for each of the AIP performance components, and provide 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.
The 2016 Corporate component of the AIP is a key corporate-wide financial measure, FFO, which is important to Suncor's financial strength and profitability. Target performance for the FFO component of the AIP is based on the budget price for Brent crude, with the minimum and maximum performance ranges reflecting a price $6 lower and $10 higher than the budget price, respectively.
For the Business Unit component, each business unit scorecard under the AIP has between four and nine standard performance measures (for example, RIF) across the five value driver areas for a total of more than 25 measures across the four business units, along with business unit specific measures in each unit. The overall score for the Business Unit component of the AIP is determined on the combination of performance of each of the four business units and the weighting assigned to each unit.
Performance targets for the measures in each business unit are based on the budget (for example, production target) or on improvement (for example, 10% improvement over the prior three year average). The maximum 200% target for the performance range generally represents a 10% improvement on the best performance over the past three years, while the 0% target of the performance range generally represents performance equal to or better than the lowest result over the past three years (i.e. no payout for poor performance).
Governance of the AIP is comprehensive. Reviews of performance measures, weightings, targets, stretch and results are carried out at the business unit, corporate and HR&CC level.
Information on the performance of the NEOs under the Personal component of the AIP can be found beginning on page 44 and information on the calculation of their 2016 AIP awards can be found on page 43.
40 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Annual Incentive Plan Performance. In 2016, performance on the key corporate measure (FFO) was above target, while business unit results reflected continued improvement in safety and overall strong operating performance.
The following table summarizes the overall 2016 performance results for the Corporate and Business Unit components of the Suncor AIP and the aggregate scores achieved in each Performance Area, including performance highlights.
AIP Component Weight(1) |
Overall Score(3) |
Performance Area(5) | Key Measures(7) | Performance Highlights | Aggregate Component Score(3)(8)(9) |
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Corporate Measures (20%) |
126(4) |
Funds From Operations (FFO)(6) (20%) |
FFO(6) |
Achieved funds from operations of $6.0 billion vs. an AIP target of $5.5 billion reflecting strong operating performance, an increased share of Syncrude operating earnings and crude prices exceeding the budgeted amounts, partially offset by lower oil production due to the Fort McMurray forest fires |
126 |
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Safety |
RIF, Loss of Primary Containment and Other Business Unit Specific Measures |
Excellent safety performance across all business units, with three or four units achieving the maximum performance score for the RIF measure |
177 |
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Sustainability |
Number of Environmental Regulatory Non-Compliances, Energy Intensity and Other Business Unit Specific Measures |
Continued strong overall performance on Sustainability measures, with E&P and Downstream business unit scores well above target; Oil Sands & In Situ overall performance was lower than target due to the forest fires |
111 |
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Business Unit(2) (60%) |
135 |
Base Business |
Production, Cash Costs, Asset Availability and Other Business Unit Specific Measures |
E&P, Downstream and Major Projects business units achieved overall above target performance on most measures, partially offset by lower than target performance in Oil Sands & In Situ production measures due to the forest fires. The Oil Sands & In Situ business unit achieved the maximum score for performance versus the Operating Selling & General ("OS&G") cost target |
132 |
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Growth |
Execution of Growth Plan and Projects and Other Business Unit Specific Measures |
Very strong performance for the Oil Sands & In Situ business unit on growth projects measure and slightly above target performance for E&P was partially offset by lower than target performance in the Downstream and Major Projects business units |
117 |
||||||||
Workforce & Organizational Performance |
Business Unit Specific Measures (e.g. training, productivity, employee engagement) |
Oil Sands & In Situ business unit scores were well above target. E&P and Major Projects business unit scores were at target and the Downstream business unit was well below target |
122 |
||||||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 41
The resulting actual 2016 overall company target weightings for the five Performance Areas within the Business Unit component of AIP in the foregoing table were as follows: 18% for Safety, 13% for Sustainability, 42% for Base Business, 13% for Growth and 14% for Workforce & Organizational Performance.
42 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
2016 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 2016 performance. The AIP award for Mr. Williams was determined by the HR&CC and approved by the Board. The AIP awards for the other NEOs were determined by Mr. Williams 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.
2016 AIP Awards Performance Factor | ||||||||||||||||||||
Corporate Performance [A] | Business Unit Performance [B] | Individual Performance [C] |
Overall Performance Factor [F] |
|||||||||||||||||
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 | 1.26 | 0.25 | 1.35 | 0.81 | 2.69 | 0.54 | 1.60 | |||||||||||||
A. COWAN | 1.26 | 0.25 | 1.35 | 0.81 | 1.79 | 0.36 | 1.42 | |||||||||||||
M.S. LITTLE | 20% | 1.26 | 0.25 | 60% | 1.34 | 0.81 | 20% | 2.54 | 0.51 | 1.57 | ||||||||||
M.R. MACSWEEN | 1.26 | 0.25 | 1.31 | 0.79 | 1.71 | 0.34 | 1.38 | |||||||||||||
S.D.L. REYNISH | 1.26 | 0.25 | 1.35 | 0.81 | 1.60 | 0.32 | 1.38 | |||||||||||||
2016 AIP Awards Payout |
Payout % vs Target Opportunity |
|||||||||||||||
Name | Annualized Base Salary December 31, 2016 [D] |
AIP Target [E] |
Overall Performance Factor [F] |
Calculated AIP Award [D x E x F](2) |
Approved AIP Award Payout |
Target (100%) |
Maximum (220%) |
Approved AIP Award as a % of Target |
||||||||
S.W. WILLIAMS | $1 375 000 | 125% | 1.60 | $2 750 000 | $2 750 000 | $1 718 750 | $3 781 250 | 160% | ||||||||
A. COWAN | $625 000 | 75% | 1.42 | $664 688 | $665 000 | $468 750 | $1 031 250 | 142% | ||||||||
M.S. LITTLE | $650 000 | 75% | 1.57 | $764 400 | $765 000 | $487 500 | $1 072 500 | 157% | ||||||||
M.R. MACSWEEN | $540 000 | 75% | 1.38 | $559 710 | $560 000 | $405 000 | $891 000 | 138% | ||||||||
S.D.L. REYNISH | $550 000 | 75% | 1.38 | $569 250 | $570 000 | $412 500 | $907 500 | 138% | ||||||||
Long-Term Incentive (LTI). The table below displays the 2016 equity award of stock options and PSUs and the value at grant in February 2016 for each of the NEOs. The equity awards considered: the market target value for the equity awards at the median of the Suncor Compensation Peers; individual performance as determined by the Board in the case of Mr. Williams; individual performance as determined by Mr. Williams in the case of the other NEOs; and the previous year's equity award received by each NEO under the SOP and the PSU Plan.
For more information on Suncor's equity plans, see "Summary of Incentive Plans". For further details on each NEO's 2016 equity award and total compensation for 2016, see the "Summary Compensation Table".
Name | Options | PSUs |
Option Value ($) |
PSU Value ($) |
Total ($) |
||||||
|
|||||||||||
S.W. WILLIAMS | 795 000 | 135 150 | 3 657 000 | 4 082 882 | 7 739 882 | ||||||
|
|||||||||||
A. COWAN | 230 000 | 39 100 | 1 058 000 | 1 181 211 | 2 239 211 | ||||||
|
|||||||||||
M.S. LITTLE | 250 000 | 42 500 | 1 150 000 | 1 283 925 | 2 433 925 | ||||||
|
|||||||||||
M.R. MACSWEEN | 240 000 | 40 800 | 1 104 000 | 1 232 568 | 2 336 568 | ||||||
|
|||||||||||
S.D.L. REYNISH | 230 000 | 39 100 | 1 058 000 | 1 181 211 | 2 239 211 | ||||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 43
2016 Performance
Steven W. Williams, President and CEO
Steve Williams, Suncor's President and CEO, successfully led the company in addressing challenges and taking advantage of opportunities in the 2016 business environment. His unwavering focus on capital discipline ensured Suncor maintained a strong balance sheet and was well-positioned to weather the challenging oil price environment. By ensuring Suncor's financial strength, Suncor returned value to shareholders and made strategic investments to grow the company. Suncor successfully responded to the forest fires in the Fort McMurray region, safely shutting down and restarting operations, as well as housing and transporting over 10,000 community members in the region. In evaluating Mr. Williams' performance in 2016, the Board recognized Mr. Williams' leadership and drive to ensure Suncor's ongoing success and its ability to return value to shareholders.
2016 Key Performance Results
44 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
2016 Total Direct Compensation (TDC)
Mr. Williams did not receive a base salary increase in 2016.
The AIP award of $2,750,000 represents 160% of his target opportunity and is based on Suncor's and Mr. Williams' performance.
Mr. Williams' long term incentive grant value was $7,739,882, in the form of stock options and PSUs, as indicated in the chart to the right. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Value of Long Term
Incentives (2014-2016)
Equity Plan |
LTI Pay Opportunity |
LTI Realizable Value |
||||
|
||||||
Options | $11 559 000 | $18 206 550 | ||||
|
||||||
PSUs | $13 706 382 | $24 077 135 | ||||
|
||||||
TOTAL | $25 265 382 | $42 283 685 | ||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 45
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 ensuring that Suncor has the financial strength necessary to execute the company's strategic plans.
2016 Key Performance Results
2016 Total Direct Compensation (TDC)
Mr. Cowan did not receive a base salary increase in 2016. The AIP award of $665,000 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 $2,239,211, 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.
Value of Long Term
Incentives (2014-2016)
Equity Plan |
LTI Pay Opportunity |
LTI Realizable Value |
||||
|
||||||
Options | $3 542 624 | $4 336 220 | ||||
|
||||||
PSUs | $4 457 525 | $7 125 650 | ||||
|
||||||
RSUs | $399 986 | $441 165 | ||||
|
||||||
DSUs | $399 983 | $439 383 | ||||
|
||||||
TOTAL | $8 800 118 | $12 342 417 | ||||
|
46 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Mark S. Little, President, Upstream
Mr. Little was appointed Executive Vice President, Oil Sands in 2011 and became Executive Vice President, Upstream in 2014. On January 1, 2017, Mr. Little was named President, Upstream. He is responsible for all current and future operated and non-operated production, including Oil Sands, In Situ, Fort Hills operations and E&P.
2016 Key Performance Results
2016 Total Direct Compensation (TDC)
Mr. Little did not receive a base salary increase in 2016.
The AIP award of $765,000 represents 157% of his target opportunity and is based on Suncor's and Mr. Little's performance.
Mr. Little's long term incentive grant value was $2,433,925, 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.
Value of Long Term
Incentives (2014-2016)
Equity Plan |
LTI Pay Opportunity |
LTI Realizable Value |
||||
|
||||||
Options | $4 039 600 | $6 123 100 | ||||
|
||||||
PSUs | $4 809 825 | $8 602 354 | ||||
|
||||||
TOTAL | $8 849 425 | $14 725 454 | ||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 47
Michael R. MacSween, Executive Vice President, Major Projects
Mr. MacSween was appointed Executive Vice President, Major Projects in early 2012. Mr. MacSween leads the safe and cost-effective engineering, procurement and construction activities for Suncor's growth projects in the upstream, downstream and renewable energy portfolios.
2016 Key Performance Results
2016 Total Direct Compensation (TDC)
Mr. MacSween did not receive a base salary increase in 2016.
The AIP award of $560,000 represents 138% of his target opportunity and is based on Suncor's and Mr. MacSween's performance.
Mr. MacSween's long term incentive grant value was $2,336,568, 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.
Value of Long Term
Incentives (2014-2016)
Equity Plan |
LTI Pay Opportunity |
LTI Realizable Value |
||||
|
||||||
Options | $3 639 600 | $5 593 200 | ||||
|
||||||
PSUs | $4 307 968 | $7 402 979 | ||||
|
||||||
TOTAL | $7 947 568 | $12 996 179 | ||||
|
48 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Stephen D.L. Reynish, Executive Vice President, Strategy & Corporate Development
Mr. Reynish was appointed Executive Vice-President, Strategy & Corporate Development in January 2014. His primary roles are to develop and communicate the optimal development strategy for the Corporation and to exercise executive management over Suncor's supply chain and purchasing function. His responsibilities include the development of long range business plans, acquisitions and divestment initiatives, and the oversight of other large-scale commercial activities. He continues to represent Suncor's interests in operated (Fort Hills) and non-operated oil sands projects.
2016 Key Performance Results
2016 Total Direct Compensation (TDC)
Mr. Reynish did not receive a base salary increase in 2016.
The AIP award of $570,000 represents 138% of his target opportunity and is based on Suncor's and Mr. Reynish's performance.
Mr. Reynish's long term incentive grant value was $2,239,211, 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.
Value of Long Term
Incentives (2014-2016)
Equity Plan |
LTI Pay Opportunity |
LTI Realizable Value |
||||
|
||||||
Options | $3 493 400 | $5 381 300 | ||||
|
||||||
PSUs | $4 139 911 | $7 185 730 | ||||
|
||||||
RSUs | $271 600 | $329 732 | ||||
|
||||||
DSUs | $261 432 | $345 482 | ||||
|
||||||
TOTAL | $8 166 343 | $13 242 244 | ||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 49
Looking Ahead to 2017:
The HR&CC did not make any changes to the 2016 executive compensation structure for 2017, other than adding the new President, Upstream level effective January 1, 2017.
A small base salary increase budget was approved for executives in 2017. The budget is targeted to executives who demonstrate strong performance and are positioned low in their salary range.
On February 8, 2017, the Board approved a grant of options and PSUs to the NEOs effective February 20, 2017, as displayed in the table below, under the terms of the SOP and the PSU Plan. The exercise price of these options is $42.03.
Name | Options | PSUs | |||
|
|||||
S.W. WILLIAMS | 755 000 | 120 800 | |||
|
|||||
A. COWAN | 220 000 | 35 200 | |||
|
|||||
M.S. LITTLE | 265 000 | 42 400 | |||
|
|||||
M.R. MACSWEEN | 215 000 | 34 400 | |||
|
|||||
S.D.L. REYNISH | 215 000 | 34 400 | |||
|
Executive Compensation Alignment with Shareholder Value
In an industry subject to commodity price cycles, Suncor's focus is on long-term shareholder value growth and ensuring returns to shareholders. Suncor's common shares were valued at $43.90 on the TSX at December 31, 2016, an increase of approximately 23% over the year before. From 2011 to 2016, Suncor's share price increased by approximately 49%. The following performance graph shows Suncor's cumulative TSR for the past five years. The graph also shows the total direct compensation of our NEOs (as reflected in the Summary Compensation Table on page 54) over this period. The total direct compensation of the NEOs has been generally consistent with TSR, as a substantial portion of NEO total direct compensation is linked to Suncor's share price and therefore is aligned with shareholders.
50 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
NEO Realizable Pay. The pay opportunity and realizable pay for total direct compensation for the NEOs over the period from 2014 to 2016 are shown in the chart below. For this three year period, the realizable pay value, which is a snapshot at December 31, 2016, for total direct compensation for the NEOs was approximately 43% 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 for total direct compensation for the NEOs is generally consistent with the trend of total return on investment indicated for Suncor in the TSR performance graph provided above.
Suncor's strong operational performance during the three year period resulted in above target payouts under the AIP component of total direct compensation.
At December 31, 2016, the value of annual mid- to long-term incentive awards granted between 2014 and 2016 was approximately 62% higher than the value reported in the summary compensation table, as determined in accordance with the methodology described in the footnotes for the Realizable Pay Total Direct Compensation chart below.
The realizable value of the annual mid- to long-term incentive awards demonstrates the 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 three year period.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 51
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, 2016 and 2015.
2016 | 2015 | ||||
|
|||||
Total direct compensation of all NEOs(1) | $26.0 | $29.9 | |||
|
|||||
Total direct compensation as a percentage (%) of FFO(2) for the year ended December 31 | 0.43% | 0.44% | |||
|
|||||
Total direct compensation as a percentage (%) of Suncor's Market Capitalization at December 31 | 0.04% | 0.06% | |||
|
President and CEO Look Back. The HR&CC follows good governance practice in annually reviewing a broader analysis of the total compensation earned and accruing to the President and CEO since his appointment and relating it to the TSR during the same period.
In its recent review, the HR&CC compared the total accrued compensation earned by the President and CEO since his appointment in 2012 up to December 31, 2016 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.
52 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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, 2015 and 2016, indicating the net change during 2016 and the total value at risk as at December 31, 2016.
December 31, 2015 |
December 31, 2016 |
||||||||||||||||||||
|
|
||||||||||||||||||||
Name | Shares | DSUs(1)(2) | PSUs(1)(3) | Options | RSUs(1) | Shares | DSUs(1)(2) | PSUs(1)(3) | Options | RSUs(1) | |||||||||||
|
|||||||||||||||||||||
S.W. WILLIAMS | 398 249 | 42 605 | 269 537 | 2 481 000 | | 404 810 | 43 957 | 267 217 | 3 228 000 | | |||||||||||
|
|||||||||||||||||||||
A. COWAN | 10 748 | 17 828 | 83 369 | 362 800 | 9 742 | 16 873 | 28 945 | 85 065 | 592 800 | 10 049 | |||||||||||
|
|||||||||||||||||||||
M.S. LITTLE | 43 014 | 21 205 | 98 972 | 818 000 | | 47 004 | 28 131 | 88 572 | 1 025 000 | | |||||||||||
|
|||||||||||||||||||||
M.R. MACSWEEN | 25 416 | 34 899 | 85 732 | 633 400 | | 30 264 | 46 167 | 86 818 | 831 400 | | |||||||||||
|
|||||||||||||||||||||
S.D.L. REYNISH | 9 420 | 15 547 | 82 635 | 452 934 | 7 281 | 12 079 | 25 733 | 81 870 | 585 000 | 7 511 | |||||||||||
|
Net change during 2016 |
|||||||||||
|
|||||||||||
Name | Shares | DSUs(1) | PSUs(1) | Options | RSUs(1) | ||||||
|
|||||||||||
S.W. WILLIAMS | 6 561 | 1 352 | (2 320 | ) | 747 000 | | |||||
|
|||||||||||
A. COWAN | 6 125 | 11 118 | 1 696 | 230 000 | 307 | ||||||
|
|||||||||||
M.S. LITTLE | 3 990 | 6 926 | (10 400 | ) | 207 000 | | |||||
|
|||||||||||
M.R. MACSWEEN | 4 848 | 11 269 | 1 086 | 198 000 | | ||||||
|
|||||||||||
S.D.L. REYNISH | 2 659 | 10 185 | (765 | ) | 132 066 | 230 | |||||
|
Value at Risk |
|||||||||||||||
|
|||||||||||||||
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 ($) |
Multiple of Salary (#) |
||||||||
|
|||||||||||||||
S.W. WILLIAMS | 17 771 159 | 1 929 714 | 11 730 832 | 29 437 930 | | 60 869 635 | 44.3 | ||||||||
|
|||||||||||||||
A. COWAN | 740 725 | 1 270 701 | 3 734 343 | 4 336 220 | 441 165 | 10 523 154 | 16.8 | ||||||||
|
|||||||||||||||
M.S. LITTLE | 2 063 476 | 1 234 956 | 3 888 311 | 9 030 700 | | 16 217 443 | 24.9 | ||||||||
|
|||||||||||||||
M.R. MACSWEEN | 1 328 590 | 2 026 736 | 3 811 327 | 7 245 012 | | 14 411 665 | 26.7 | ||||||||
|
|||||||||||||||
S.D.L. REYNISH | 530 268 | 1 129 674 | 3 594 078 | 5 381 300 | 329 732 | 10 965 052 | 19.9 | ||||||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 53
Summary Compensation Table. The following table provides information concerning compensation paid to the NEOs for the years ended December 31, 2016, 2015 and 2014.
Name and Principal | Salary |
Share- Based Awards(1) |
Option- Based Awards(2) |
Non-equity incentive plan compensation ($) |
Pension Value(4) |
All Other Compensation(5) |
Total Compensation |
||||||||||||
Position | Year | ($) | ($) | ($) | Annual(3) | Long-Term | ($) | ($) | ($) | ||||||||||
|
|||||||||||||||||||
S.W. WILLIAMS | 2016 | 1 375 000 | 4 082 882 | 3 657 000 | 2 750 000 | | (545 100 | ) | 162 561 | 11 482 343 | |||||||||
|
|||||||||||||||||||
President and Chief | 2015 | 1 375 000 | 4 668 000 | 4 008 000 | 2 760 000 | | (771 300 | ) | 160 795 | 12 200 495 | |||||||||
|
|||||||||||||||||||
Executive Officer | 2014 | 1 361 731 | 4 955 500 | 3 894 000 | 2 055 000 | | (37 500 | ) | 161 205 | 12 389 936 | |||||||||
|
|||||||||||||||||||
A. COWAN | 2016 | 625 000 | 1 181 211 | 1 058 000 | 665 000 | | 585 300 | 46 875 | 4 161 386 | ||||||||||
|
|||||||||||||||||||
Executive Vice President | 2015 | 625 000 | 1 633 800 | 1 402 800 | 675 000 | | 602 500 | 169 766 | 5 108 866 | ||||||||||
|
|||||||||||||||||||
and Chief Financial | 2014 | 274 038 | 2 442 483 | 1 081 824 | 300 000 | | 217 800 | 300 000 | 4 616 145 | ||||||||||
Officer(6) | |||||||||||||||||||
|
|||||||||||||||||||
M.S. LITTLE | 2016 | 650 000 | 1 283 925 | 1 150 000 | 765 000 | | 600 900 | 48 750 | 4 498 575 | ||||||||||
|
|||||||||||||||||||
President, | 2015 | 650 000 | 1 633 800 | 1 402 800 | 800 000 | | 543 100 | 49 070 | 5 078 770 | ||||||||||
|
|||||||||||||||||||
Upstream | 2014 | 642 923 | 1 892 100 | 1 486 800 | 575 000 | | 701 300 | 50 145 | 5 348 268 | ||||||||||
|
|||||||||||||||||||
M.R. MACSWEEN | 2016 | 540 000 | 1 232 568 | 1 104 000 | 560 000 | | 453 700 | 29 700 | 3 919 968 | ||||||||||
|
|||||||||||||||||||
Executive Vice President, | 2015 | 540 000 | 1 633 800 | 1 402 800 | 650 000 | | 467 800 | 29 700 | 4 724 100 | ||||||||||
|
|||||||||||||||||||
Major Projects | 2014 | 534 692 | 1 441 600 | 1 132 800 | 600 000 | | 594 600 | 29 971 | 4 333 663 | ||||||||||
|
|||||||||||||||||||
S.D.L. REYNISH | 2016 | 550 000 | 1 181 211 | 1 058 000 | 570 000 | | 552 000 | 41 514 | 3 952 725 | ||||||||||
|
|||||||||||||||||||
Executive Vice President, | 2015 | 550 000 | 1 517 100 | 1 302 600 | 620 000 | | 515 500 | 37 506 | 4 542 706 | ||||||||||
|
|||||||||||||||||||
Strategy & Corporate | 2014 | 545 577 | 1 974 632 | 1 132 800 | 550 000 | | 517 000 | 36 276 | 4 756 285 | ||||||||||
Development(7) | |||||||||||||||||||
|
54 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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, 2016. For further details, including the exercise price and expiration date, of each option-based award held by the NEOs as at December 31, 2016, see Schedule B.
Option-Based Awards |
Share-Based Awards |
||||||||||
|
|
||||||||||
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) ($) |
||||||
|
|||||||||||
S.W. WILLIAMS | 3 228 000 | 29 437 930 | 267 217 | 11 730 832 | 14 276 017 | ||||||
|
|||||||||||
A. COWAN | 592 800 | 4 336 220 | 95 114 | 4 175 508 | 4 662 007 | ||||||
|
|||||||||||
M.S. LITTLE | 1 025 000 | 9 030 700 | 88 572 | 3 888 311 | 5 948 999 | ||||||
|
|||||||||||
M.R. MACSWEEN | 831 400 | 7 245 012 | 86 818 | 3 811 327 | 5 618 388 | ||||||
|
|||||||||||
S.D.L. REYNISH | 585 000 | 5 381 300 | 89 381 | 3 923 810 | 4 721 326 | ||||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 55
Incentive Plan Awards Value Vested or Earned During the Year. The following table provides the value of option-based awards on the vesting date, the value of share-based awards that vested during the year ended December 31, 2016, and the value of non-equity incentive plan compensation earned during the year ended December 31, 2016, for the NEOs.
Name |
Option-Based awards Value vested during the year (as at vesting date)(1) ($) |
Share-Based awards Value vested during the year(2)(3) ($) |
Non-equity incentive plan compensation Value earned during the year(4) ($) |
||||
|
|||||||
S.W. WILLIAMS | 412 934 | 12 346 303 | 2 750 000 | ||||
|
|||||||
A. COWAN | | 3 728 806 | 665 000 | ||||
|
|||||||
M.S. LITTLE | 135 834 | 4 914 043 | 765 000 | ||||
|
|||||||
M.R. MACSWEEN | 108 666 | 3 916 652 | 560 000 | ||||
|
|||||||
S.D.L. REYNISH | | 3 901 652 | 570 000 | ||||
|
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, 2016 for the NEOs.
Name |
Common Shares Acquired on Option Exercise |
Aggregate Value Realized(1) ($) |
|||
|
|||||
S.W. WILLIAMS | | | |||
|
|||||
A. COWAN | | | |||
|
|||||
M.S. LITTLE | 43 000 | 372 491 | |||
|
|||||
M.R. MACSWEEN | 30 000 | 339 268 | |||
|
|||||
S.D.L. REYNISH | 97 934 | 967 565 | |||
|
56 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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, 2016.
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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 57
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, 2016 ($) |
At age 65 ($) |
Defined Benefit Obligation as at January 1, 2016(3) ($) |
Compensatory change(4) ($) |
Non- compensatory change(5) ($) |
Defined Benefit Obligation as at December 31, 2016(3) ($) |
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|
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S.W. WILLIAMS | 15 | 1 368 876 | 1 368 457 | 20 880 810 | (546 935 | ) | 1 022 204 | 21 356 079 | |||||||
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A. COWAN | 2 | 131 824 | 543 560 | 904 748 | 583 465 | 240 903 | 1 729 116 | ||||||||
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M.S. LITTLE | 8 | 458 247 | 563 506 | 5 893 483 | 599 065 | 555 148 | 7 047 696 | ||||||||
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M.R. MACSWEEN | 21 | 408 074 | 628 415 | 5 062 006 | 451 865 | 439 393 | 5 953 263 | ||||||||
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S.D.L. REYNISH | 5 | 236 908 | 476 606 | 2 626 860 | 550 165 | 542 072 | 3 719 097 | ||||||||
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Defined Contribution Plans. Under the combination provision of the Suncor Energy Pension Plan, applicable to all of the NEOs, Suncor makes contributions to the defined contribution accounts for all employees of 1% of basic earnings, plus up to an additional 1.5% of basic earnings on a 50% matching basis. All contributions to the defined contribution accounts are subject to maximum levels.
Under the Suncor Energy Pension Plan, employees may invest the balance of their accounts in a broad range of investment funds made available by the plan; an employee's investment return is based upon the market returns earned by each fund in which the employee has chosen to invest his or her contributions. At retirement, employees may transfer the balance of their accounts to a pension account as prescribed by law or the company may purchase an annuity on behalf of the employee.
The following table summarizes the defined contributions accounts of each of the NEOs.
Name |
Accumulated value as at January 1, 2016 ($) |
Compensatory ($) |
Accumulated value as at December 31, 2016 ($) |
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S.W. WILLIAMS | 30 262 | 1 835 | 32 803 | ||||
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A. COWAN | 18 323 | 1 835 | 21 064 | ||||
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M.S. LITTLE | 32 505 | 1 835 | 36 416 | ||||
|
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M.R. MACSWEEN | 190 136 | 1 835 | 209 302 | ||||
|
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S.D.L. REYNISH | 38 012 | 1 835 | 41 977 | ||||
|
58 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
TERMINATION AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Termination Agreements
Suncor has employment termination agreements with each of the NEOs.
NEOs are compensated based on their remuneration, in the event of termination of employment ("Termination Event") by Suncor, other than for just cause, and by the individual within 120 days following a constructive dismissal event.
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 on 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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 59
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, 2016.
Type of Termination(1) |
Base Salary ($) |
Short-Term Incentive(2) ($) |
Long-Term Incentive(3)(4) ($) |
Pension(5) ($) |
Total Payout ($) |
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|
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S.W. WILLIAMS | |||||||||||
|
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Resignation(6) | | | 14 324 547 | | 14 324 547 | ||||||
|
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Retirement | | | 14 324 547 | | 14 324 547 | ||||||
|
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Termination (Without Cause) | 2 750 000 | 3 437 500 | 14 324 547 | 73 747 | 20 585 794 | ||||||
|
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Change of Control(7) | 2 750 000 | 3 437 500 | 14 324 547 | 73 747 | 20 585 794 | ||||||
|
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Change of Control(8) | | | 14 324 547 | | 14 324 547 | ||||||
|
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A. COWAN | |||||||||||
|
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Resignation | | | | | | ||||||
|
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Retirement(9) | | | | | | ||||||
|
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Termination (Without Cause) | 1 250 000 | 937 500 | 2 844 973 | 289 221 | 5 321 694 | ||||||
|
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Change of Control(7) | 1 250 000 | 937 500 | 7 665 099 | 2 568 329 | 12 420 928 | ||||||
|
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Change of Control(8) | | | | 1 272 323 | 1 272 323 | ||||||
|
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M.S. LITTLE | |||||||||||
|
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Resignation | | | | | | ||||||
|
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Retirement(9) | | | | | | ||||||
|
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Termination (Without Cause) | 1 300 000 | 975 000 | 10 360 362 | 2 000 951 | 14 636 314 | ||||||
|
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Change of Control(7) | 1 300 000 | 975 000 | 11 501 196 | 2 000 951 | 15 777 147 | ||||||
|
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Change of Control(8) | | | | | | ||||||
|
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M.R. MACSWEEN | |||||||||||
|
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Resignation | | | | | | ||||||
|
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Retirement(9) | | | | | | ||||||
|
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Termination (Without Cause) | 1 080 000 | 810 000 | 10 011 995 | 985 274 | 12 887 268 | ||||||
|
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Change of Control(7) | 1 080 000 | 810 000 | 11 107 195 | 985 274 | 13 982 468 | ||||||
|
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Change of Control(8) | | | | | | ||||||
|
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S.D.L. REYNISH | |||||||||||
|
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Resignation(6) | | | 4 217 897 | | 4 217 897 | ||||||
|
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Retirement | | | 4 217 897 | | 4 217 897 | ||||||
|
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Termination (Without Cause) | 1 100 000 | 825 000 | 4 217 897 | 4 997 402 | 11 140 300 | ||||||
|
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Change of Control(7) | 1 100 000 | 825 000 | 4 217 897 | 4 997 402 | 11 140 300 | ||||||
|
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Change of Control(8) | | | 4 217 897 | 3 360 300 | 7 578 197 | ||||||
|
60 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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 2016, 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, 2016.
Plan Category |
Number of securities to be issued upon exercise of outstanding options (a) |
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) |
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|
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Equity compensation plans approved by security holders | 29 266 304 | 35.27 | 10 937 104 | |||
|
||||||
Equity compensation plans not approved by security holders | 2 175 904 | 45.41 | | |||
|
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Total | 31 442 208 | 35.97 | 10 937 104 | |||
|
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 2016, there were 3,982,965 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 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 38,601,230 common shares (or 2.3% of the total issued and outstanding common shares on February 24, 2017). If the amendment to the SOP is approved at the meeting, the maximum number of common shares issuable pursuant to the SOP will be 63,601,230 common shares (or 3.8% of the total issued and outstanding common shares on February 24, 2017).
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
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 61
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.
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 beta and stock behavior. 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 2015 and 2016 PSU awards are displayed below.
|
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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 | |||
|
62 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
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) |
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1-3 | 200% | ||
|
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4-5 | 175% | ||
|
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6-7 | 150% | ||
|
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8-9 | 100% | ||
|
|||
10-11 | 75% | ||
|
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12-13 | 50% | ||
|
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14 and below | 0% | ||
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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, 36% of PSU grant vesting levels have been below target, including three which were at 0%, 18% were at target and 45% 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.
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.
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 was amended in 2009 to provide for notional dividend reinvestment for grants after January 1, 2010.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 63
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 February 24, 2017 (% of outstanding shares) |
Vesting Schedule |
Expiry(2) |
Performance Conditions |
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|
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1992 | Suncor Executive Stock Plan ("ESP") | Option | 440 260 (0.03%) |
1/3 per yr over 3 yrs | 10 years | No | |||||||
|
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2000 | Petro-Canada Deferred Stock Unit Plans (Eligible Employees of Petro-Canada) ("PCDSU")(3) | DSU | 11 972 | | | No | |||||||
|
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2004 | Suncor Key Contributor Stock Option Plan ("SKCSO") | Option | 1 315 016 (0.08%) |
1/3 per yr over 3 yrs | 10 years | No | |||||||
|
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2004 | Petro-Canada Deferred Stock Unit Plan (Non-Employee Directors of Petro-Canada) ("PCCDSU")(4) |
DSU | 31 152 | | | No | |||||||
|
Aggregate Potential Dilution. The aggregate potential dilution of all issued, outstanding and authorized options under Suncor stock option plans was 2.4% at February 24, 2017. Suncor has no other equity compensation plans involving newly issued securities.
2016 Grant Rate (Run Rate): Stock options granted under the SOP in 2016 of 8,145,400 totaled less than 1% (approximately 0.5%) of shares outstanding at the end of 2016.
Additional Terms of Equity Compensation Plans.
Issuance of Shares under Plans
64 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Amendment
Impact of Change of Control, Reorganization or Other Event Affecting the Corporation
Termination of Employment
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 65
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; and (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
Under policies purchased by Suncor, US$200 million of insurance is in effect 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 also insured under these policies in the event it is permitted or required by law to indemnify individual directors and officers. 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. In 2016, Suncor paid premiums of approximately US$1.73 million for directors and officers insurance for the 12-month period ending July 1, 2017.
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
66 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
should consult the full text of By-Law No. 2, which is available on Suncor's web site at www.suncor.com and has been filed 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.
CORPORATE GOVERNANCE
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 U.S. Securities and Exchange Commission ("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 2015 and 2016 did not differ from the NYSE Standards in any significant respect, with the exceptions described in Schedule C to this management proxy circular 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 C to this management proxy circular.
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, 2016 and in its MD&A, which are included in our 2016 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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 67
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, including royalty rates and tax laws; future production rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services; the satisfaction by third parties of their obligations to Suncor; and the receipt, in a timely manner, of regulatory and third-party approvals. In addition, all other statements and other information that address expectations or projections about the future, and other 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 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" 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 annual general meeting; the composition of the Board following the annual general meeting, including that Michael Wilson will become the Board chair at such time; 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 commitment of the HR&CC to ensuring that senior executive compensation is aligned with shareholders' interests and supports Suncor's near-term and longer-term competitiveness and future success; the HR&CC's belief that there is no excessive pay disparity between Suncor's President and CEO and market pay, given Suncor's size and performance peers; Suncor's belief that the key executive compensation governance practices are consistent with best practice approaches, support Suncor's business objectives and align with shareholder interests; that our counter cyclical acquisitions will provide significant production growth and attractive upside; Suncor's belief that success in its value drivers will drive long-term value for its shareholders; that Suncor is well positioned to continue to deliver strong operational performance and capitalize on competitive differentiators in order to build value for shareholders; 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; expectations regarding the Fort Hills project remaining on schedule with first oil in late 2017; statements relating to the participation agreements for the sale of a combined 49% interest in the East Tank Farm Development with the Fort McKay First Nation and the Mikisew Cree First Nation; the anticipated proceeds of divestments agreed to in 2016; the forecasted savings for the remaining scope of Suncor's in situ well pad program; that the contract re-negotiation and management initiatives which took place in 2016 will remain ongoing through 2017; that Suncor's acquisition of COS will provide substantial value creation for the company over many years; Suncor's efforts respecting environmental performance; Suncor's corporate governance practices and those of the Board of Directors; expectations of employees and Board members; 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
68 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
projects and regulatory projects; 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 and other government-imposed compliance costs; changes in environmental and other regulations and policies; the ability and willingness of parties with whom we have material relationships to perform their obligations to us; outages to third party infrastructure that could cause disruptions to production; the occurrence of 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 computer hackers or cyberterrorists, and the unavailability or failure of such systems to perform as anticipated as a result of such breaches; 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; 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 and uncertainties associated with closing a transaction for the purchase or sale of an 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 and the receipt of any required regulatory or other third party approvals outside of Suncor's control; risks associated with land claims and Aboriginal consultation; risks relating to litigation; 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, 2016 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. Except as required by applicable securities laws, Suncor disclaims any intention or obligation to publicly update or revise any 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, 2016 and the MD&A, which are included in our 2016 Annual Report. Production volumes are presented on a working-interest basis, before royalties, unless otherwise noted. Certain financial measures in this management proxy circular namely operating earnings, Oil Sands operations cash operating costs and FFO are not prescribed by Canadian GAAP. Operating earnings and Oil Sands operations cash operating costs are defined in the Advisories Non-GAAP Financial Measures section of the MD&A and reconciled to GAAP measures in the Financial Information and Segment Results and Analysis sections of the MD&A. FFO is defined and reconciled to GAAP measures in the Advisories Non-GAAP Financial Measures section of the MD&A. FFO was previously referred to as cash flow from operations with the calculation being unchanged from prior years. These non-GAAP financial measures are included because management uses the 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. 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.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 69
SCHEDULE A: DIRECTORS' OUTSTANDING OPTION-BASED AWARDS
The following table provides details of options held by non-employee directors as at December 31, 2016.
Option-Based Awards | |||||||||||
|
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Name | Grant Date |
Number of securities underlying unexercised options |
Option exercise price ($) |
Option expiration date(1) |
Value of unexercised "in-the-money" options(2) ($) |
||||||
|
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Mel E. Benson | Jul. 31, 2007 | 4 000 | 47.34 | Jul. 31, 2017 | | ||||||
|
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Jul. 29, 2008 | 4 000 | 55.86 | Jul. 29, 2018 | | |||||||
|
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W. Douglas Ford(3) | Jul. 31, 2007 | 4 000 | 47.34 | Jul. 31, 2017 | | ||||||
|
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Jul. 29, 2008 | 4 000 | 55.86 | Jul. 29, 2018 | | |||||||
|
|||||||||||
John R. Huff | Jul. 31, 2007 | 4 000 | 47.34 | Jul. 31, 2017 | | ||||||
|
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Jul. 29, 2008 | 4 000 | 55.86 | Jul. 29, 2018 | | |||||||
|
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Michael W. O'Brien | Jul. 31, 2007 | 4 000 | 47.34 | Jul. 31, 2017 | | ||||||
|
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Jul. 29, 2008 | 4 000 | 55.86 | Jul. 29, 2018 | | |||||||
|
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Eira M. Thomas | Jul. 31, 2007 | 4 000 | 47.34 | Jul. 31, 2017 | | ||||||
|
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Jul. 29, 2008 | 4 000 | 55.86 | Jul. 29, 2018 | | |||||||
|
A-1 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
SCHEDULE B: NAMED EXECUTIVE OFFICERS' OUTSTANDING OPTION-BASED AWARDS
AND GRANT DATE FAIR VALUES FOR SHARE-BASED AWARDS
The following table provides details of options held by the NEOs as at December 31, 2016. Details of options granted to NEOs subsequent to December 31, 2016 are included in the "Compensation Discussion and Analysis" section of the management proxy circular.
Option-Based Awards | |||||||||||
|
|||||||||||
Name | Grant Date |
Number of securities underlying unexercised options(1) |
Option exercise price ($) |
Option expiration date(2) |
Value of unexercised "in-the-money" options(3) ($) |
||||||
|
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S.W. WILLIAMS | Jan. 30, 2007 | 46 000 | 43.72 | Jan. 30, 2017 | 8 280 | ||||||
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President and Chief Executive | Mar. 19, 2007 | 24 000 | 40.29 | Mar. 19, 2017 | 86 640 | ||||||
|
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Officer | Feb. 4, 2008 | 70 000 | 47.52 | Feb. 4, 2018 | | ||||||
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Jan. 27, 2009 | 65 000 | 24.50 | Jan. 27, 2019 | 1 261 000 | |||||||
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Feb. 5, 2010 | 130 000 | 31.85 | Feb. 5, 2017 | 1 566 500 | |||||||
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Feb. 7, 2011 | 200 000 | 41.24 | Feb. 7, 2018 | 532 000 | |||||||
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Feb. 6, 2012 | 368 000 | 34.58 | Feb. 6, 2019 | 3 429 760 | |||||||
|
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Feb. 15, 2013 | 380 000 | 32.46 | Feb. 15, 2020 | 4 347 200 | |||||||
|
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Feb. 13, 2014 | 550 000 | 36.04 | Feb. 13, 2021 | 4 323 000 | |||||||
|
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Feb. 16, 2015 | 600 000 | 38.90 | Feb. 16, 2022 | 3 000 000 | |||||||
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Feb. 15, 2016 | 795 000 | 30.21 | Feb. 15, 2023 | 10 883 550 | |||||||
|
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A. COWAN | Aug. 12, 2014 | 152 800 | 43.00 | Aug. 12, 2021 | 137 520 | ||||||
|
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Executive Vice President and | Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | 1 050 000 | ||||||
|
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Chief Financial Officer | Feb. 15, 2016 | 230 000 | 30.21 | Feb. 15, 2023 | 3 148 700 | ||||||
|
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M.S. LITTLE | Feb. 7, 2011 | 100 000 | 41.24 | Feb. 7, 2018 | 266 000 | ||||||
|
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President, Upstream | Feb. 6, 2012 | 130 000 | 34.58 | Feb. 6, 2019 | 1 211 600 | ||||||
|
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Feb. 15, 2013 | 125 000 | 32.46 | Feb. 15, 2020 | 1 430 000 | |||||||
|
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Feb. 13, 2014 | 210 000 | 36.04 | Feb. 13, 2021 | 1 650 600 | |||||||
|
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Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | 1 050 000 | |||||||
|
|||||||||||
Feb. 15, 2016 | 250 000 | 30.21 | Feb. 15, 2023 | 3 422 500 | |||||||
|
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M.R. MACSWEEN | Jan. 30, 2007 | 8 400 | 43.72 | Jan. 30, 2017 | 1 512 | ||||||
|
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Executive Vice President, | Feb. 4, 2008 | 8 000 | 47.52 | Feb. 4, 2018 | | ||||||
|
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Major Projects | Feb. 7, 2011 | 55 000 | 41.24 | Feb. 7, 2018 | 146 300 | ||||||
|
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Feb. 6, 2012 | 100 000 | 34.58 | Feb. 6, 2019 | 932 000 | |||||||
|
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Feb. 15, 2013 | 50 000 | 32.46 | Feb. 15, 2020 | 572 000 | |||||||
|
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Feb. 13, 2014 | 160 000 | 36.04 | Feb. 13, 2021 | 1 257 600 | |||||||
|
|||||||||||
Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | 1 050 000 | |||||||
|
|||||||||||
Feb. 15, 2016 | 240 000 | 30.21 | Feb. 15, 2023 | 3 285 600 | |||||||
|
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 B-1
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) ($) |
||||||
|
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S.D.L. REYNISH | Feb. 13, 2014 | 160 000 | 36.04 | Feb. 13, 2021 | 1 257 600 | ||||||
|
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Executive Vice President, Strategy & | Feb. 16, 2015 | 195 000 | 38.90 | Feb. 16. 2022 | 975 000 | ||||||
|
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Corporate Development | Feb. 15, 2016 | 230 000 | 30.21 | Feb. 15, 2023 | 3 148 700 | ||||||
|
Grant Date Fair Values for Share-Based Awards
The following table provides the grant date fair values for share-based awards granted to NEOs in 2014, 2015 and 2016.
Name | Year |
PSUs ($) |
RSUs ($) |
DSUs ($) |
|||||
|
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S.W. WILLIAMS | 2016 | 30.21 | | | |||||
|
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President and Chief Executive Officer | 2015 | 38.90 | | | |||||
|
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2014 | 36.04 | | | ||||||
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A. COWAN | 2016 | 30.21 | | | |||||
|
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Executive Vice President and | 2015 | 38.90 | | | |||||
|
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Chief Financial Officer | 2014 | 43.00 | 43.00 | 43.19 | |||||
|
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M.S. LITTLE | 2016 | 30.21 | | | |||||
|
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President, Upstream | 2015 | 38.90 | | | |||||
|
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2014 | 36.04 | | | ||||||
|
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M.R. MACSWEEN | 2016 | 30.21 | | | |||||
|
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Executive Vice President, | 2015 | 38.90 | | | |||||
|
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Major Projects | 2014 | 36.04 | | | |||||
|
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S.D.L. REYNISH | 2016 | 30.21 | | | |||||
|
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Executive Vice President, Strategy & | 2015 | 38.90 | | | |||||
|
|||||||||
Corporate Development | 2014 | 36.04 | 38.80 | 36.31 | |||||
|
B-2 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
SCHEDULE C: CORPORATE GOVERNANCE SUMMARY
Throughout this summary, there are references to information available on the Suncor Energy Inc. ("Suncor" or the "Corporation") web site(1). All such information is available at www.suncor.com under the "About Us Governance" tab. In addition, shareholders may request printed copies of these materials by contacting Suncor at the address on the back of the circular, by calling 1-800-558-9071 or by email request to invest@suncor.com.
Board of Directors Composition and Independence
The cornerstone of Suncor's governance system is its board of directors (the "Board"), whose duty is to supervise the management of Suncor's business and affairs. The composition of the Board and its independence are important elements of this system. Steven W. Williams, Suncor's President and Chief Executive Officer ("CEO"), is the only member of the Board who is not independent. Following the annual general meeting and assuming that all nominees for director are elected as contemplated in the Circular, 10 of 11 members (91%) of the Board will be independent directors. A short biography of each individual standing for election to the Board can be found starting on page 7 of the Circular.
Suncor's independent directors meet in-camera at the beginning and end of each Board and committee meeting without Mr. Williams or any other member of management present. The Board sessions have been presided over by James W. Simpson, Suncor's independent Board chair, and, after Mr. Simpson's retirement following the annual general meeting, will be presided over by Michael M. Wilson who will assume the role of independent Board chair at such time. The committee sessions are presided over by the independent chairs of the respective committees. The applicable chair then communicates to management any issues or matters discussed at the in-camera meetings requiring management attention.
The Board has approved position descriptions for the Board chair and Board committee chairs, which are available on Suncor's web site. The position description for the Board chair is also set out in Schedule D. These position descriptions supplement the Terms of Reference, as defined below. The position descriptions are reviewed annually by the Governance Committee. Any changes to the position descriptions are recommended by that committee to the full Board.
On an annual basis, the Board reviews and assesses the independence of its members in accordance with criteria it has adopted for this purpose. The Board's independence policy and criteria include a description of certain relationships that operate as a complete bar to independence as well as additional requirements applicable to members of the Audit Committee. Suncor's independence criteria, which are set out in Schedule E, are consistent with the Canadian Requirements and the SEC Requirements (each defined on page 67 of the Circular).
In applying the independence criteria, the Board reviews and analyzes the existence, materiality and effect of any relationships between Suncor and each of its directors, either directly, through a family member or as a partner, shareholder or officer of another organization that has a relationship with Suncor. The Board determines in each case whether the relationships could, or could reasonably be perceived to, materially interfere with the director's ability to act independently.
Some of Suncor's directors sit on the boards of other public companies, the particulars of which are set out on pages 7 to 12 of the Circular. The only directors who sit together on the board of another entity are Mr. Wilson and Ms. Côté, who are both directors of Finning International Inc. The Board has determined that this board interlock does not impair the ability of these directors to exercise independent judgment as members of the Board.
Some members of the Board are involved with companies with which Suncor has business relationships. The Board has reviewed each of these relationships against the independence criteria and has determined that none of these relationships impair the independence of the individual directors: (i) as the directors do not serve as employees or executives of these other companies, their respective remuneration from these directorships is not personally material to them nor is it dependent on or variable with the nature or extent of the business relationship with Suncor; (ii) any business relationship with Suncor is not material to Suncor or the other company; and (iii) they are not personally involved in negotiating,
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 C-1
managing, administering or approving contracts between Suncor and the other entities on whose boards they serve.
The Board's conflict of interest policy precludes these directors from voting with respect to any contract or transaction where a potential conflict of interest could exist, should they be considered by the Board (see "Conflicts of Interest").
Terms of Reference
The Board has adopted terms of reference (the "Terms of Reference"), which serve as the charter of the Board. The Terms of Reference are reviewed by the Board at least annually. They include a general overview of the Board's role in Suncor's governance, a statement of key guidelines and policies applicable to the Board and its committees, and a mandate that describes its major responsibilities, goals and duties. These major responsibilities, goals and duties range from specific matters, including those that by law must be exercised by the Board, such as the declaration of dividends, to its general role to determine, in broad terms, the purposes, goals, activities and general characteristics of Suncor and its business. The Terms of Reference provide that the Board is responsible for the selection, monitoring and evaluation of executive management and for overseeing the ways in which Suncor's business and affairs are managed, thereby assuming responsibility for the stewardship of Suncor. The full text of the Terms of Reference is set out in Schedule F.
The Board discharges certain of its responsibilities through its four standing committees: the Audit Committee, the Environment, Health, Safety and Sustainable Development ("EHS&SD") Committee, the Governance Committee and the Human Resources and Compensation Committee ("HR&CC"). Each committee has a mandate, which it reviews annually and updates as appropriate. Any proposal to amend the mandates is reviewed by the Governance Committee for recommendation to the Board. There were no material amendments to any committee mandate in 2016.
The Governance Committee, with input from the Board chair, makes recommendations to the Board regarding committee appointments. In considering the appointment of members to Board committees, the Governance Committee and the Board endeavour to include directors of diverse backgrounds and at least one director with expertise and experience relevant to the committee's key roles.
Except where otherwise specified in the Terms of Reference, Suncor's by-laws or the relevant committee mandate, each committee has the power to determine its own rules of procedure. Subject to limited exceptions, the committees generally do not have decision making authority; rather, they convey their findings and recommendations on matters falling within their mandates to the full Board.
The committees also have the authority to conduct independent investigations into matters that fall within the scope of their responsibilities and may engage external advisors (as may the full Board or an individual director), at Suncor's expense, to assist them in fulfilling their mandate.
The Board delegates day-to-day management of Suncor's business to the CEO and other members of senior management. A management control process policy, adopted by the Board, defines and sets limits on the authority delegated by the Board.
The Board has developed and approved a position description for the CEO, which includes a general description of the role as well as specific accountabilities in the areas of strategic planning, financial results, leadership, safety, government, environment and social relations and management's relationship with the Board. A copy of the CEO position description is available on Suncor's web site.
The following is a description of some key duties of the Board as set out in the Terms of Reference. For more information, please refer to "Board Committees", the Terms of Reference and the mandates of the Board committees available on Suncor's web site.
Ethics. The Terms of Reference require the Board, through the CEO, to establish Suncor's standards of conduct, including the Corporation's general moral and ethical tone and compliance with applicable laws. The CEO in turn is accountable for setting a high ethical tone and fostering a culture of integrity throughout the organization. The Board plays an active role in ensuring a high standard of corporate ethics and integrity through its oversight of Suncor's standards of business conduct (the "Code") and compliance program (see "Ethical Business Conduct"), and through its assessment and evaluation of the performance of the CEO.
Strategic Planning. One of the Board's major duties is to review with management Suncor's mission, objectives and goals and the strategies and plans for achieving them. The Board also monitors Suncor's progress toward its strategic goals and plans, and revises Suncor's direction where warranted.
The Board is continually updated on the human, technological and capital resources required to implement Suncor's strategies and any regulatory, environmental, social, cultural or governmental constraints that may impact Suncor in carrying out its business objectives. Where instructive, this includes a competitive analysis of Suncor against its peers in different facets of its business. The Governance Committee acts as a sounding board for management on key strategic initiatives, and ensures that
C-2 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
timely Board reviews of these initiatives occur throughout the year.
In addition to the Board's ongoing stewardship over Suncor's strategy, the Board holds a meeting annually which is devoted solely to strategy. The Governance Committee works with management to design this annual strategy meeting, and following the meeting, assesses its effectiveness.
The Board is also responsible for ensuring Suncor has an effective strategic planning process, and on an annual basis reviews Suncor's annual business plan (including Suncor's annual capital budget) and in doing so endorses the strategies reflected in Suncor's long range plan. The Governance Committee provides assistance to the Board by annually assessing Suncor's planning and budgeting processes.
Risk Oversight. Suncor is committed to a proactive program of enterprise risk management intended to enable decision-making through consistent identification and assessment of risks inherent to its assets, activities and operations. Some of these risks are common to operations in the oil and gas industry as a whole, while some are unique to Suncor. The Board oversees Suncor's Enterprise Risk Management Program (the "ERM Program"). In accordance with the ERM Program, senior management, including the CEO, undertakes an entity-wide process to identify, assess and report on the significant risks to Suncor's business and management's strategies to address risk.
The Board ensures there are systems in place to effectively identify, monitor and manage the principal risks of Suncor's business, and to mitigate their impact. A principal risk is generally considered to be an exposure that has the potential to materially impact Suncor's ability to meet or support its strategic objectives.
Each year the Board reviews Suncor's principal risks. The Audit Committee annually reviews the governance of the ERM Program and ensures each principal risk is mapped to a Board committee or the full Board as appropriate for oversight. The Audit Committee also reviews and approves the appointment of the vice president responsible for Suncor's enterprise risk and internal audit function, who reports directly to the Audit Committee regarding enterprise risk management matters.
The following table sets forth Suncor's principal risks and the Board committee and/or full Board to which each principal risk is mapped for oversight, as well as highlighting the role of the Board and the Audit Committee in reviewing the principal risks.
Risk Category | Board of Directors |
Audit Committee |
Governance Committee |
EHS&SD Committee |
HR&CC | ||||||
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Principal Risk Review | ü | ü | |||||||||
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Commodity Price | ü | ||||||||||
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Government/Regulatory Policy and Effectiveness | ü | ||||||||||
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Major Operational Incident (Safety, Environmental and Reliability) | ü | ü | |||||||||
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Carbon Risk | ü | ü | |||||||||
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Market Access | ü | ||||||||||
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Information Security | ü | ||||||||||
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Project Execution | ü | ||||||||||
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Change Capacity | ü | ||||||||||
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Members of the Board question management at Board and committee meetings, as well as throughout the year, to ensure that risks are appropriately identified, assessed, mitigated and monitored. The high level of engagement of Board members, as well as their extensive experience, contributes to the effectiveness of the Board's risk oversight, and contributes to the Board's understanding of the interrelationship of risks and any pre-existing conditions
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 C-3
or vulnerabilities that could have a compounding impact on Suncor.
For a detailed explanation of the significant risks applicable to Suncor and its businesses, see "Risk Factors" in Suncor's Annual Information Form dated March 1, 2017, filed at www.sedar.com.
Succession Planning and Monitoring/Evaluating Senior Management. The Board ensures the continuity of executive management by appointing a CEO and overseeing succession planning. The HR&CC is specifically mandated to assist the Board in this regard by ensuring that appropriate executive succession planning and performance evaluation programs and processes (including development and career planning) are in place and operating effectively for executives. The HR&CC also reviews significant changes to the organization's structure as they arise and their impact on executive roles.
The HR&CC annually reviews the succession planning process and results for executive leadership, and reports to the Board on these matters. As part of this process, the CEO, supported by the Senior Vice President, Human Resources, reviews candidates for the CEO and other executive leadership positions, with the HR&CC. In its July 2016 meeting, the HR&CC reviewed and confirmed its support for Suncor's succession and development plans for its senior executive positions. The HR&CC also met in camera to discuss the CEO succession plan. Further, the Board has an emergency CEO succession plan in place, should it be required.
The Board also reviews Suncor's processes for identifying successors for its vice presidents, employees who directly report to its vice presidents, and managers. Successors are identified using a formal process that rigorously assesses leadership potential across Suncor using specific criteria, including employees' performance, aspirations, engagement, agility, experience and capabilities. For a discussion of how Suncor considers diversity in this process, see "Diversity".
The Board encourages the CEO to expose the Board to Suncor's executives and high potential employees, both for succession planning and career development and to provide the Board with a broader perspective on issues relevant to Suncor. Directors are provided with opportunities to meet with Suncor employees through attendance at events hosted by Suncor, such as Suncor's President's Operational Excellence Awards, or when they visit Suncor's facilities (see "Orientation and Continuing Education").
The HR&CC assists the Board in monitoring the CEO's performance by conducting an annual performance review against predetermined goals and criteria (including the goal of succession planning). The HR&CC also reviews with the CEO the performance of his direct reports.
Communication/Disclosure Policy and Stakeholder Feedback. Suncor has a disclosure policy that establishes guidelines for Suncor's communications with shareholders, investment analysts, other stakeholders and the public generally. This policy includes measures to avoid selective disclosure of material information, identifies designated Suncor spokespersons and establishes internal review processes for key public communications. The Code addresses Suncor's obligations for continuous and timely disclosure of material information and sets standards requiring directors, officers, employees and contract workers trading in Suncor shares and other securities to comply with applicable law.
Suncor has disclosure controls and procedures designed to ensure that material information relating to Suncor is made known to our CEO and Chief Financial Officer ("CFO"). Suncor has a Disclosure Committee, chaired by the Vice President and Controller, and has designed and implemented due diligence procedures to support the financial reporting process and the certification of financial reports by the CEO and CFO.
Suncor interprets its operations for its shareholders and other stakeholders through a variety of channels, including its periodic financial reports, securities filings, news releases, sustainability report, webcasts, external web site, social media posts, briefing sessions and group meetings. Suncor encourages and seeks stakeholder feedback through various channels including corporate communications and investor relations programs, including surveys of shareholders and analysts, and through participation in the regulatory process. The Board, either directly or through the activities of a designated Board committee, reviews and approves all quarterly and annual financial statements and related management's discussion and analysis ("MD&A"), the management proxy circular, the annual information form/Form 40-F and press releases containing significant new financial information, among other items.
The Board is specifically mandated to ensure systems are in place for communication with Suncor's shareholders and other stakeholders and that these systems are appropriately resourced. Suncor maintains a toll-free phone number as
C-4 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
well as email and regular mail addresses for stakeholder feedback and questions. In addition, Suncor encourages shareholders to attend Suncor's annual meeting and interested parties may attend in person or via webcast. The annual meeting provides a valuable opportunity to hear directly from Suncor's management about the results of Suncor's business and operations, as well as its strategic plans. Members of the Board are in attendance at annual meetings and the Board chair and the chair of each Board committee are available to answer questions as appropriate.
The Board recognizes that it is also important for the Board to communicate with shareholders, including organizations that represent or advise shareholders (collectively, "Interested Parties") on matters of governance, and to that end, has adopted a Shareholder Communication and Engagement Policy (the "Engagement Policy"). In accordance with the Engagement Policy, Interested Parties may communicate to the Board in writing to express their views on matters that are important to them, by addressing their correspondence to the Board in care of the Corporate Secretary at the address on the back page of the Circular, or via email at: invest@suncor.com, subject line: Attention: Chair of the Board / Chair of [Insert Board Committee Name] c/o Corporate Secretary. The Board has determined that questions or concerns related to the Board and senior management succession processes, executive and Board compensation, Board level corporate governance and other matters that are within the scope of the Board's supervisory and oversight duties, as set out in its Terms of Reference, may appropriately be addressed to, and by, the Board. In addition, the Engagement Policy recognizes that in certain circumstances it may be appropriate for Board members, generally through the Board chair or the chair of a committee, to meet with an Interested Party, and sets out criteria to be considered if the Board receives a meeting request and terms applicable to the conduct of any such meeting.
Expectations and Responsibilities of Directors. The Terms of Reference, supplemented by a Board approved accountability statement for directors (the "Accountability Statement"), which is available on Suncor's web site, identifies the key expectations placed on Board members. Board meeting dates are established well in advance and directors are expected to be prepared for and attend all meetings absent extenuating circumstances. Directors' attendance records for meetings held in 2016 are set out on page C-10.
Directors are required to devote sufficient time, effort and energy to their role as a Suncor director to effectively discharge their duties to Suncor and the Board. Pursuant to the Terms of Reference, Audit Committee members must not be members of the audit committees of more than two other public companies, unless the Board determines that simultaneous service on a greater number of audit committees would not impair the member's ability to effectively serve on Suncor's Audit Committee.
Internal Controls. The Board is specifically mandated to ensure processes are in place to monitor and maintain the integrity of Suncor's internal controls and management information systems. The Audit Committee assists the Board in this regard and monitors the effectiveness and integrity of Suncor's financial reporting, management information, internal controls of business processes and Internal Audit function (excluding operations integrity audit matters, which are specifically within the mandate of the EHS&SD Committee(1)).
The Audit Committee exercises general oversight over the Internal Audit function by reviewing the plans, activities and performance of the Internal Auditors. The appointment or termination of the vice president responsible for Internal Audit is reviewed and approved by the Audit Committee. This individual has a direct reporting relationship with the committee and meets with it, in the absence of other members of management, at least quarterly. The Audit Committee also reviews and approves appointees to the office of the CFO.
Board Committees
In addition to the responsibilities described elsewhere in this Schedule, the following provides a brief summary of the key functions, roles and responsibilities of Suncor's Board committees. The complete text of the mandate of each Board committee is available on Suncor's web site.
Governance Committee. The Governance Committee assists the Board in two main areas: corporate governance; and corporate strategy.
In its governance role, the Governance Committee is mandated to determine Suncor's overall approach to governance issues and key corporate governance principles. In doing so, it closely monitors emerging best practices in governance. In addition, the Corporate Secretary, or her delegate, attends seminars, conferences and meetings on governance and updates the committee on developing trends and practices. Suncor also reviews recommendations of governance and shareholder advisory organizations and participates in benchmarking studies undertaken by such organizations to assess its governance practices in relation to those of other issuers in a wide range of geographies and industries. The Corporation's legal function monitors changes in law, administrative policy and stock exchange
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 C-5
requirements relating to governance, and provides updates to the Governance Committee.
The Governance Committee also reviews matters pertaining to Suncor's values, beliefs and standards of ethical conduct and those principal risks that have been delegated to the committee for oversight, and assists the Board in its strategy role (see "Ethics" and "Strategic Planning", under the heading "Terms of Reference").
The Governance Committee reviews and reports to the Board on directors' compensation. In consultation with the HR&CC and outside advisors, the Governance Committee has developed guidelines for director compensation based on, among other factors, directors' roles and responsibilities and an analysis of the competitive position of Suncor's director compensation program. The Governance Committee annually reviews the competitiveness and form of Board compensation and makes recommendations to the full Board on Board compensation and share ownership guidelines for directors. The Board sets director compensation based upon these recommendations.
Audit Committee. The Audit Committee assists the Board in matters relating to Suncor's external auditors and the external audit process, oil and natural gas reserves reporting, financial reporting and public communication, risk management, security and certain other key financial matters. The Audit Committee also assists the Board in matters relating to internal controls of Suncor's business processes and the Internal Audit function (see "Internal Controls", under the heading "Terms of Reference").
The Audit Committee plays a key role in relation to Suncor's external auditors. It initiates and approves their engagement (including fees) or termination, subject to shareholder approval, and monitors and reviews their independence, effectiveness, performance and quality control processes and procedures.
The Audit Committee reviews with management and external auditors, and as appropriate approves, significant financial reporting matters, the conduct and results of the annual audit and significant finance and accounting policies and other financial matters. The Audit Committee also reviews Suncor's annual and quarterly financial statements, annual and quarterly MD&A and annual information form/Form 40-F. The Audit Committee approves quarterly financial statements and quarterly MD&A through authority delegated by the Board and makes recommendations to the Board with respect to approval of the annual disclosure documents.
The Audit Committee plays a key oversight role in the evaluation and reporting of Suncor's oil and natural gas reserves. This includes review of Suncor's procedures relating to reporting and disclosure, as well as those for providing information to Suncor's independent reserves evaluators. The Audit Committee reviews and approves the appointment and terms of engagement (including fees) of the reserves evaluators, including their qualifications and independence and any changes in their appointment. Suncor's reserves data and report of the reserves evaluators are annually reviewed by the Audit Committee prior to approval by the full Board.
The Audit Committee reviews Suncor's policies and practices with respect to cash management, financial derivatives, financing, credit, insurance, taxation, commodities trading and related matters. It also reviews the assets, financial performance, and funding and investment strategies of Suncor's registered pension plan. The Audit Committee oversees generally the Board's risk management governance model (see "Risk Oversight", under the heading "Terms of Reference") and also monitors components of Suncor's business conduct code compliance program (see "Ethical Business Conduct").
Members of the Audit Committee are required to be financially literate. All of Suncor's directors, including all members of the Audit Committee, are considered financially literate. In addition, at least one member of the Audit Committee must be determined by the Board to be an "audit committee financial expert". The Board has determined Messrs. O'Brien and D'Alessandro and Ms. Bedient to be such experts. The criteria for assessing the financial literacy of directors, and whether they qualify as an "audit committee financial expert", are set out in the Terms of Reference.
For additional information about Suncor's Audit Committee, including the Audit Committee Mandate and Pre-approval Policies and Procedures, see "Audit Committee Information" in Suncor's Annual Information Form dated March 1, 2017, filed at www.sedar.com.
Environment, Health, Safety and Sustainable Development Committee. The EHS&SD Committee reviews the effectiveness with which Suncor meets its obligations and achieves its objectives pertaining to the environment, health, safety and sustainable development. This includes the effectiveness of management's establishment and maintenance of appropriate EHS&SD policies, and monitoring the adequacy and effectiveness of Suncor's Operational Excellence Management System (an overarching framework to manage operational risk), and related business processes. The EHS&SD Committee also monitors management's performance and emerging trends and issues in these areas. In fulfilling its role, the EHS&SD Committee reviews management stewardship reports as well as the findings of significant external and internal environmental, health and safety investigations, assessments, reviews and audits. Suncor's annual Report on Sustainability, a detailed public disclosure document that includes reporting on Suncor's EHS&SD progress, plans and
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performance objectives as well as disclosure on lobbying and carbon risk, is also reviewed by the EHS&SD Committee.
The EHS&SD Committee assists the Board in matters pertaining to the integrity of Suncor's physical assets, by monitoring the adequacy of Suncor's internal controls as they relate to operational risks of its physical assets and matters of environment, health, safety and sustainable development.
Human Resources and Compensation Committee. The HR&CC assists the Board by annually reviewing the performance of the CEO and recommending his total compensation to the full Board. The corporate objectives for which the CEO is responsible include a combination of corporate goals and personal goals, set annually by the Board in consultation with the HR&CC and the Board chair. The HR&CC annually reviews the CEO's performance against these objectives and against the key accountabilities of his position, as set out in the CEO's position description. The HR&CC reports its assessment to the full Board which ultimately approves CEO compensation.
The HR&CC also reviews annually the CEO's evaluation of the other senior executives within the organization and his recommendation for their total compensation.
For more information about the HR&CC and the process and criteria for determining the CEO's total compensation, see "Compensation Discussion and Analysis" in the Circular. See also "Succession Planning and Monitoring/Evaluating Senior Management", under the heading "Terms of Reference".
Orientation and Continuing Education
Each new member of the Board participates in a formal orientation program. The orientation program includes in-person meetings with senior management on key legal, environmental, business, financial and operational topics central to Suncor's business and operations and a tour at the sites of some of Suncor's principal operations. The orientation program also focuses on the role of the Board, its committees and its directors and the nature and operation of Suncor's business.
A directors' handbook, containing information about the Board and Suncor, including Suncor's core governance documents, is made available to each director upon joining the Board. The handbook is continuously updated and is available for viewing by directors through a secure directors' portal.
Presentations and tours at the sites of Suncor's principal operations are provided to directors on a periodic basis, often in conjunction with Board meetings, for the purpose of directly acquainting directors with Suncor's operations and the communities in which they are located.
The Governance Committee oversees the Board's strategic education program. In conjunction with Board meetings, management presents focused information to directors on topics pertinent to Suncor's business, including the impact of significant new laws or changes to existing laws and opportunities presented by new technologies. In an annual survey, directors are asked to suggest topics of interest for future information sessions and topics are chosen annually for presentations from internal or external sources.
The Board's Director Continuing Education Policy also encourages directors to enroll in courses and programs that enhance and supplement their knowledge and skills in areas relevant to their role on the Board with the approval of the Board chair or chair of the Governance Committee.
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During 2016, the Board, its committees and individual directors participated in presentations and received educational information on a variety of topics, including those set out in the table below.
Date | Topic | Presented/Hosted By | Attended By | ||||
|
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February 2, 2016 | Macro environment overview (Canada/Alberta) | External Speaker | All directors | ||||
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March, May, September and December, 2016 | Various topics relating to compensation and performance metrics | National Association of Corporate Directors | John Gass | ||||
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April 26, 2016 | New director orientation | Management | Patricia Bedient | ||||
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April 27, 2016 | Fossil fuel reputational risk update | Management | All directors | ||||
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July 26, 2016 | Taxation and pensions overview | Management | Patricia Bedient | ||||
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September 17-20, 2016 | Global board leaders' summit | National Association of Corporate Directors | Patricia Bedient | ||||
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October 5, 2016 | Audit and nominating and governance committee chairs advisory council | National Association of Corporate Directors | Patricia Bedient | ||||
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November 13, 2016 | Tour of Fort Hills Project, including tour of relevant sites, meeting with Suncor management and detailed briefings on safety and productivity | Management and employees | All directors | ||||
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November 15, 2016 | Enterprise risk & audit | Management | Patricia Bedient | ||||
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Ethical Business Conduct
Sound, ethical business practices are fundamental to Suncor's business. Suncor's standards for the ethical conduct of our business are set forth in the Code, which applies to Suncor's directors, officers, employees and contract workers. The Code requires strict compliance with legal requirements and topics addressed in the Code include competition, conflicts of interest and the protection and proper use of corporate assets and opportunities, confidentiality, disclosure of material information, trading in shares and securities, communications to the public, improper payments, harassment, fair dealing in trade relations and accounting, reporting and business control. The Code is supported by detailed policy guidance and standards and a Code compliance program, under which every Suncor director, officer, employee and contract worker is required annually to complete a Code training course, read a summary of the Code, affirm that he or she understands the requirements of the Code and provide confirmation of compliance with the Code since their last affirmation, or confirmation that any instance of non-compliance has been discussed and resolved with the individual's supervisor. The summary provided includes a message from the President and CEO emphasizing Suncor's values and making it clear that all representatives of Suncor are expected to conduct business in a safe, fair, honest, respectful and ethical manner.
The Board exercises stewardship over the Code in several respects. Suncor's Internal Auditors audit the compliance program annually and the vice president responsible for Internal Audit, who has a direct reporting relationship with the Audit Committee, reports on the audit to that committee.
Moreover, at least once annually, the Code is reviewed and if appropriate, updated. Management reports to the Governance Committee annually on this process. The Governance Committee reviews any changes and ensures the Code continues to reflect Suncor's commitment to ethics and integrity, and addresses all related legal requirements and best practices. Any waivers of Code requirements for Suncor's executive officers or members of the Board must be approved by the Board or appropriate committee thereof and disclosed. No such waivers were granted in 2016.
Suncor encourages employees to raise ethical concerns with Suncor management and Suncor's legal, corporate
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security, human resources and Internal Audit departments, without fear of retaliation. In addition, Suncor's "Integrity Hotline" provides a means for Suncor employees to raise issues of concern anonymously, with a third-party service provider. The Integrity Hotline is available 24 hours a day, seven days a week. Any issues of a serious nature are investigated pursuant to Suncor's internal investigations policy and protocols. The Audit Committee receives regular updates on activities relating to the Integrity Hotline. Pursuant to the Code, the vice president responsible for Internal Audit is charged with responsibility for maintaining the Integrity Hotline and ensuring that all alleged Code violations are investigated in conjunction with the Chief Compliance Officer and legal counsel.
Suncor provides additional specialized training for employees for matters governed by the Code where it is determined such training would be beneficial. For example, certain employees directly involved with Suncor's international and offshore operations are required to periodically attend focused workshops, which address, among other items, compliance with sanctions and anti-bribery and anti-corruption legislation and best practices for operating in international jurisdictions where Suncor operates.
The Code is available on Suncor's web site.
Conflicts of Interest
The Board has a policy relating to directors' conflicts of interest. Pursuant to this policy, directors are required to maintain with the Corporate Secretary a current list of all other entities in which they have a material interest, or on which they serve as a director, trustee or in a similar capacity. This list is made available to all directors through the directors' portal. Directors must immediately advise the Corporate Secretary of any deletions, additions or other changes to any information in their declaration of interest.
If the change involves a change in the director's principal occupation or an appointment as director, officer or trustee of any for-profit or not-for-profit organization, the director must also notify the Board chair, who will determine whether the change would be inconsistent with the director's duties as a member of the Board. In appropriate circumstances, the director's resignation may be required.
The policy sets out clear procedures applicable in the event conflicts arise. If a director is a party to, or has an interest in any party to, a contract or transaction before the Board (regardless of the materiality of the contract or transaction), the director must immediately advise the Board chair or the particular committee chair. The director's conflict or potential conflict is recorded in the minutes of the meeting and the director is required to absent himself or herself from the meeting for any material discussions or deliberations concerning the subject matter of the contract or transaction. The director is required to abstain from voting on any resolution in respect of such contract or transaction.
The Corporate Secretary ensures that directors do not receive Board materials in situations where the subject matter of those materials could involve an actual or potential conflict of interest.
Board and Committee Meetings
The Board chair, in consultation with the Corporate Secretary, has the responsibility of establishing a schedule for meetings of the Board and its committees each year, which is approved by the Board. Board and committee meeting dates are established sufficiently in advance where possible (at least one year and longer if practical) to minimize conflict with other commitments on directors' schedules. The Board holds at least five meetings per year, one of which is dedicated to strategy. If during the course of the year circumstances require Board or committee action or consideration, additional meetings are called.
The Board chair works with the CEO to establish the agenda for each Board meeting. The chair of each committee, in consultation with the committee secretary, determines the agenda for each committee meeting. Each Board member is free to suggest inclusion of items on any Board or committee agenda. Whenever feasible, important issues for decision are dealt with over the course of two meetings. The first meeting allows for a thorough briefing and the second allows for the final discussion and decision.
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The following provides details about Board and committee meetings held during 2016 and the attendance of the directors at these meetings.
Board and Committees | Number of Meetings Held in 2016 | ||
|
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Board | 8 | ||
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Audit Committee | 7 | ||
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EHS&SD Committee | 4 | ||
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Governance Committee | 6 | ||
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HR&CC | 5 | ||
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Number of Meetings and Number of Meetings Attended
Director | Board(1) |
Audit Committee |
EHS&SD Committee |
Governance Committee |
HR&CC |
Committees (total) |
Overall Attendance(4) |
||||||||
|
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Patricia M. Bedient(2) | 4/4 | 5/5 | 3/3 | | | 8/8 | 12/12 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
|
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Mel E. Benson | 8/8 | | 4/4 | | 5/5 | 9/9 | 17/17 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
|
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Jacynthe Côté(3) | 8/8 | 7/7 | 4/4 | | | 11/11 | 19/19 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
|
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Dominic D'Alessandro | 8/8 | 7/7 | | 6/6 | | 13/13 | 21/21 | ||||||||
(100%) | (Chair) | (100%) | (100%) | ||||||||||||
|
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John D. Gass(2) | 7/8 | | 2/2 | 3/3 | 5/5 | 10/10 | 17/18 | ||||||||
(88%) | (Chair) | (100%) | (94%) | ||||||||||||
|
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John R. Huff | 8/8 | | 4/4 | | 5/5 | 9/9 | 17/17 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
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Maureen McCaw | 8/8 | 7/7 | | 6/6 | | 13/13 | 21/21 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
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Michael W. O'Brien | 8/8 | 7/7 | | 6/6 | | 13/13 | 21/21 | ||||||||
(100%) | (Chair) | (100%) | (100%) | ||||||||||||
|
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James W. Simpson(3) | 8/8 | | | | | | 8/8 | ||||||||
(100%) | (100%) | ||||||||||||||
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Eira M. Thomas | 7/8 | | 4/4 | | 5/5 | 9/9 | 16/17 | ||||||||
(88%) | (Chair) | (100%) | (94%) | ||||||||||||
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Steven W. Williams(3) | 8/8 | | | | | | 8/8 | ||||||||
(100%) | (100%) | ||||||||||||||
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Michael M. Wilson(2) | 8/8 | 3/3 | | 6/6 | 2/2 | 11/11 | 19/19 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
|
C-10 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
Nomination of Directors
The Governance Committee conducts the selection process for new nominees to the Board. The Board endeavours to be comprised of individuals representing a diversity of backgrounds, experience and skills. Directors are selected for their integrity, character, sound and independent judgment, breadth of experience, insight and knowledge and business acumen. See "Diversity" for a discussion of the Board Diversity Policy (the "Diversity Policy") and how the Board considers diversity in the selection process for nominees to the Board.
Pursuant to the policies of the Board, the assessment and selection process is undertaken by the Governance Committee as needed and consists of several steps, including: (i) maintaining and updating an inventory of capabilities, competencies, skills and qualities of current Board members and of the Board as a whole; and (ii) identifying capabilities, competencies, skills and qualities desired to be added to the Board, taking pending retirements and the Board's current needs and priorities into account. The role of the CEO in that process is limited and appropriate. The Board has determined that the industry background and functional experience of the Board currently maps well to Suncor's business strategy, as well as its vision to be a trusted steward of valuable natural resources.
The table below lists the competencies of the non-executive directors standing for re-election at the annual meeting, together with their retirement dates in accordance with Suncor's Retirement and Change of Circumstance Policy (the "Retirement Policy"), assuming an annual meeting in late April of their retirement year, based on their ages.
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The above inventory is assessed as required to identify any capabilities, competencies, skills and qualities desired to be added to the Board in light of the Board's current needs and priorities. The Governance Committee uses this assessment as a basis for selection criteria describing the skills, experiences, qualifications, diversity (gender, ethnicity/Aboriginal status, age, business experience, professional expertise, personal skills, stakeholder perspectives and geographic background) and personal qualities desired in potential new Board members. The Governance Committee identifies candidates from a number of sources, including executive search firms and referrals from existing directors. When a vacancy occurs or is pending, the Governance Committee identifies a short list of potential candidates to pursue further, considering, in addition to the factors listed above, whether each candidate can devote sufficient time and resources to his or her duties as a Board member. The Governance Committee is required to retain an executive search firm or other third party expert to assist in completing reference and background checks on Board candidates. The Governance Committee may also engage these firms and experts to assist in carrying out any of its duties in relation to recruitment. Pursuant to Board policies, the Governance Committee is required to maintain and update as needed, a list of potential Board candidates for planned and unplanned vacancies through the form of an ever-green list.
Throughout the process, the Governance Committee provides updates to the Board and solicits input on candidates. Candidates are interviewed by members of the Governance Committee and other directors as deemed appropriate. The Governance Committee ultimately provides its recommendation on Board candidates to the full Board. Candidates may be appointed by the Board to hold office for a term expiring not later than the close of the next annual meeting of shareholders.
Mechanisms of Board Renewal
The Board's goal is to be a balanced board made up of members with diverse characteristics, experience and tenure. In furtherance of that goal, the Board has implemented two primary mechanisms of board renewal: the Retirement Policy; and an annual evaluation process, each of which is described in detail below. The Board has not adopted term limits for directors, as it believes the Retirement Policy and the annual board evaluation process are effective in achieving the appropriate level of renewal of the Board's membership.
Retirement Policy. The Board has adopted the Retirement Policy, which provides that all directors, other than management directors, must retire from the Board upon completion of their term of office at the annual meeting of shareholders following their 72nd birthday. The Governance Committee, in consultation with the Board chair, has the authority under exceptional circumstances to recommend extension of the term of a Board member if the retirement of such director would not be in the best interests of Board continuity and effectiveness. Any such extension must be granted by the Board. The CEO and other management directors are required to leave the Board when they cease to be employees of Suncor.
In February 2017, in light of Suncor's business needs and the period of significant renewal the Board has experienced in recent years, which is expected to continue in the coming years as a result of upcoming retirements, the Board approved an extension of Michael O'Brien's term, for one additional year, until the close of the 2018 annual general meeting.
Annual Evaluation Process. Suncor's Board Effectiveness Policy establishes an annual process (the "Evaluation Process") whereby directors are provided with an opportunity to evaluate the effectiveness of the Board, its committees, the Board chair, committee chairs and individual directors and to identify areas where effectiveness may be enhanced. The Evaluation Process carried out in 2016 showed that all directors and committees, and the Board as a whole, effectively fulfilled their responsibilities.
The Evaluation Process involves the solicitation of input from individual directors through an annual on-line survey presented in two parts: (i) an evaluation form that explores the directors' views and solicits feedback on how well they believe the Board and its committees, including their chairs, are performing (the "Board Effectiveness Survey"); and (ii) a peer feedback survey (the "Peer Survey") that explores the directors' views and solicits feedback on their assessment of other directors' performance, including their contributions and participation in Board discussions and debate, accountability, knowledge, experience, demonstration of high ethical standards and communication and persuasion skills.
The Evaluation Process includes open-ended questions to allow directors to elaborate on their responses and to suggest improvements. The Board Effectiveness Survey asks each director whether he or she believes the Board and each of its committees are functioning as they should in accordance with their mandates. Consideration of the
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appropriateness of the Board's size is also addressed and the size of the Board was confirmed to be appropriate by the directors in 2016. Information obtained from the answers to these questions assists the Board in determining whether any of the Board or committee mandates or Board processes or policies should be revised.
Board Effectiveness Review
Confidential responses are tabulated and analyzed by the Corporate Secretary and presented in a report which is circulated to the chair of the Governance Committee and Board chair, who then work with the Corporate Secretary to summarize key items and recommendations for enhancing or strengthening effectiveness (including any recommendations arising from the one-on-one meetings described under "Peer Review" below). The recommendations are tabled, discussed and finalized at the first Governance Committee meeting in each calendar year and timelines and action items are assigned at the meeting to track any follow-up to effect the recommendations. The chair of the Governance Committee reports to the full Board on the survey results and action items at the first meeting of the Board in each calendar year and reports on the progress made on the recommendations throughout the year. All materials distributed to the Governance Committee are made available for review by all directors.
Peer Review
The results of the Peer Survey are tabulated and consolidated by the Corporate Secretary and a summary report is circulated to the chair of the Governance Committee and Board chair. Individual directors receive their personal results.
The Board chair sets up one-on-one meetings with each director to discuss his or her peer review results and to receive input on governance, risk and strategy. The Board chair discusses his own peer review results with the chair of the Governance Committee. The one-on-one meetings are completed prior to the first Board and committee meetings held in each calendar year. This allows any input provided on governance, risk and strategy to be incorporated in the action plans arising from the Evaluation Process. Once the peer review meetings are completed, the Board chair prepares a summary of key items arising from these discussions which are discussed in-camera at the Governance Committee and at the meeting of the full Board.
Diversity
Board of Directors. A fundamental belief of Suncor's Board is that a Board comprised of women and men representing diverse points of view can add greater value than a Board comprised solely of directors with similar backgrounds. The Board aims to be comprised of directors who have a range of perspectives, insights and views in relation to the issues affecting Suncor. This belief in diversity was confirmed in the Diversity Policy adopted by the Board. The Diversity Policy states that the Board should include individuals from diverse backgrounds, having regard to gender, ethnicity/Aboriginal status, age, business experience, professional expertise, personal skills, stakeholder perspectives and geographic background. Accordingly, consideration of whether the diverse attributes highlighted in the policy are sufficiently represented on the Board, including consideration of the number of women who are directors, is an important component of the selection process for new members of Suncor's Board.
The Board has ensured that the Diversity Policy will be effectively implemented by embedding it into its policy for the selection process for new Board members (the "Selection Process Policy"). The Selection Process Policy requires the Governance Committee to conduct periodic assessments to consider the level of representation on the Board of the various attributes enumerated in the Diversity Policy, including the number of women on the Board. The Governance Committee has emphasized the Board's commitment to the recruitment of women in recent years by making the identification of candidates who are women a key search criterion in the director selection and nomination processes it has undertaken. The Board members also have the opportunity to evaluate, on an annual basis, the effectiveness of the director selection and nomination process, including compliance with the Diversity Policy, through the Evaluation Process.
The Board recognizes the value of the contribution of members with diverse attributes on the Board and is committed to ensuring that there is significant representation of women on the Board. Suncor is a proud supporter of the 30% Club Canada, a not-for-profit organization that is focused on the continued drive towards achieving greater gender balance at all levels, including an aspirational objective of 30% women on boards by 2020. The Board has not, however, established a target regarding the number of women on the Board. The Board has determined that, at this time, a target would not be the most effective way of ensuring it is comprised of individuals with diverse attributes and backgrounds and believes its current make up reflects the principles of diversity set out in the Diversity Policy. The Board is proud that, with 33% women on the Board, it currently exceeds
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 C-13
the aspirational objective of the 30% Club Canada. Further, following the annual general meeting and assuming that all nominees for director are elected as contemplated in the Circular, 4 of 11 directors (36%) on the Board will be women.
Suncor Management. Suncor believes 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.
Suncor recognizes the value of ensuring that the Corporation's employees have diverse attributes, including that it has a substantial number of employees who are women. The Corporation has developed an execution plan to work towards increasing the number of employees who are women throughout the organization, including in leadership positions. One of the objectives of this plan is to ensure there will be highly qualified women within Suncor available to fill vacancies in executive officer and other leadership positions. A particular focus of this work has been to increase the representation of women in operations and maintenance roles, two areas in which women have been traditionally underrepresented in Suncor's industry.
In appointing individuals to its senior leadership team, which is comprised of Suncor's executive officers and senior leaders reporting directly to executive officers, Suncor weighs a number of factors, including the skills and experience required for the position and the personal attributes of the candidates. The level of representation of women in senior leadership roles is also considered as one such factor.
Currently, one out of nine members (11%) of Suncor's executive leadership team, which is comprised of Suncor's executive officers, is a woman and 15 out of 45 (33%) Suncor senior leaders are women.
At the present time, Suncor has not adopted a target for the number of women in executive officer or senior leadership positions. Instead of adopting a target, Suncor believes the most effective way to achieve its 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. This includes regularly assessing formal processes to identify and remove barriers to women's advancement, as well as taking action to build a culture of inclusion throughout the organization.
As part of these efforts, Suncor has formed a Diversity and Inclusion Council which has a mandate of providing cross-enterprise leadership and mentorship in support of increasing diversity and inclusion at Suncor. As part of these efforts, in 2016 Suncor implemented Unconscious Bias and Leadership training to bring awareness to inclusion strategies and principles that can help achieve greater diversity. Suncor also continues to support female employees in networking and development opportunities.
Suncor is committed to other aspects of diversity in addition to its initiatives to foster gender diversity. The Corporation is building a strategy aimed at increasing the participation of Aboriginal Peoples in energy development, including improving Aboriginal workforce development at Suncor as part of Suncor's social goal of building greater mutual trust and respect with the Aboriginal Peoples of Canada.
Compliance with NYSE Standards
Suncor's corporate governance practices meet or exceed all applicable Canadian Requirements and SEC Requirements. Except as disclosed below, Suncor's corporate governance practices are in compliance with NYSE Standards in all significant respects.
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SCHEDULE D: POSITION DESCRIPTION FOR INDEPENDENT BOARD CHAIR
The following principles shape the position description and duties for the Chair of the Board of Directors of Suncor Energy Inc.:
With the foregoing in mind, the framework for Board Chair will be:
The accountabilities of the Chair include:
Shareholder Meetings
Manage the Board
Develop a More Effective Board
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 D-1
Work with Management
Serve as an advisor to the CEO concerning the interests of the Board and the relationship between management and the Board.
Liaise with Stakeholders
D-2 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
SCHEDULE E: DIRECTOR INDEPENDENCE POLICY AND CRITERIA
Background:
Corporate governance guidelines provide that boards of directors should have a majority of independent directors, and that the board chair should be independent.
The purpose of this independence policy and criteria is to state the criteria by which the Board of Directors (the "Board") of Suncor Energy Inc. ("Suncor") determines whether each of its directors is or is not independent.
Independence Policy:
Pursuant to the terms of reference for the Board, a majority of the Board must be independent, and in addition, the Audit, Governance, and Human Resources and Compensation Committees, shall be comprised solely of independent directors. The Governance Committee will conduct an annual review of the status of each director and director nominee in light of the following criteria for independence, and will recommend to the Board in order that the Board may affirmatively determine the status of each such individual. In making independence determinations, the Board shall consider all relevant facts and circumstances. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. The key concern when assessing independence is independence from management.
Independence Criteria:
A director of Suncor will be considered independent only if the Board has affirmatively determined that the director has no material relationship with Suncor, either directly or as a partner, shareholder or officer of an organization that has a material relationship with Suncor. A "material relationship" is one which could, in the view of the Board, be reasonably expected to interfere with the exercise of the director's independent judgment (CSA National Instrument 52-110).
Notwithstanding the foregoing, a director will NOT be considered independent if(1):
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 E-1
A director of Suncor will not be considered to have a material relationship with Suncor solely because the individual or his or her immediate family member:
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SCHEDULE F: BOARD TERMS OF REFERENCE
Part I: Overview
The Canada Business Corporations Act (the Act), Suncor's governing statute, provides "that the directors shall manage or supervise the management of the business and affairs of a corporation...". In practice, as a Board of Directors cannot "manage" a corporation such as Suncor in the sense of directing its day-to-day operations, the overarching role and legal duty of Suncor's Board of Directors is to "supervise" the management of Suncor's business and affairs. Accordingly, the Board of Directors oversees development of the overall strategic direction and policy framework for Suncor. This responsibility is discharged through Board oversight of Suncor's management, which is responsible for the day-to-day conduct of the business. The Board, through the Chief Executive Officer (CEO), sets standards of conduct, including the Corporation's general moral and ethical tone, compliance with applicable laws, standards for financial practices and reporting, qualitative standards for operations and products and other standards that reflect the views of the Board as to the conduct of the business in the best interests of the Corporation.
In general, then, the Board is responsible for the selection, monitoring and evaluation of executive management, and for overseeing the ways in which Suncor's business and affairs are managed. In this way, the Board assumes responsibility for the stewardship of the Corporation. Specific responsibilities which facilitate the discharge of the Board's stewardship responsibilities include: the strategic planning process, risk identification and management, ensuring that effective stakeholder communication policies are in place, and ensuring the integrity of internal controls and management information systems. These responsibilities, and others, are addressed in more detail in the Board's Mandate, comprising Part IV of these Terms of Reference.
The Board of Directors discharges its responsibilities with the assistance of Board committees. The committees advise and formulate recommendations to the Board, but do not, except in limited and specifically identified circumstances, have the authority to approve matters on behalf of the Board of Directors. General guidelines relating to Board committees comprise Part III of these Terms of Reference. In addition, each committee has a written mandate, setting out the scope of its operations, and its key roles and responsibilities. Position descriptions of the Board Committee Chairs and the Board Chair set out the related principles, framework and accountabilities for those key roles in Suncor's Board governance.
The CEO of Suncor is delegated the responsibility for the day-to-day management of the Corporation and for providing the Corporation with leadership. The CEO discharges these responsibilities by formulating Corporation policies and proposed actions, and, where appropriate, presenting them to the Board for approval. The Corporation's Management Control Process Policy explicitly identifies actions which have been specifically delegated to the CEO, and those which are reserved to the Board of Directors. In addition, the Board has plenary power, and has the power to specify and modify the authority and duties of management as it sees fit with a view to Suncor's best interests and in accordance with current standards. The Act also identifies certain matters which must be considered by the Board as a whole and may not be delegated to a committee or to management. These matters include:
One of the key stewardship responsibilities of the Board is to approve the Corporation's goals, strategies and plans, and the fundamental objectives and policies within which the business is operated, and evaluate the performance of executive management. Once the Board has approved the goals, strategies and plans, it acts in a unified and cohesive manner in supporting and guiding the CEO. The CEO keeps the Board fully informed of the progress of the Corporation toward the achievement of its goals, strategies and plans, in a timely and candid manner, and the Board of Directors continually evaluates the performance of executive management toward these achievements.
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 F-1
Part II: Board Guidelines
The following have been adopted by the Board as the guidelines applicable to the Board and its operations:
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Part III: Committee Guidelines
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Part IV: Mandate of the Board of Directors
Goals of the Board. The major goals and responsibilities of the Board are to:
Major Duties. The major duties of the Board are to:
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SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 F-5
F-6 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017
APPENDIX A TO THE TERMS OF REFERENCE FINANCIAL LITERACY AND EXPERTISE
For the purpose of making appointments to the Corporation's Audit Committee, and in addition to the independence requirements, all Directors nominated to the Audit Committee must meet the test of Financial Literacy as determined in the judgment of the Board of Directors. Also, at least one director so nominated must meet the test of Financial Expert as determined in the judgment of the Board of Directors.
Financial Literacy
Financial Literacy can be generally defined as the ability to read and understand a balance sheet, an income statement and a cash flow statement. In assessing a potential appointee's level of Financial Literacy the Board of Directors must evaluate the totality of the individual's education and experience including:
Audit Committee Financial Expert
An "Audit Committee Financial Expert" means a person who in the judgment of the Corporation's Board of Directors, has following attributes:
A person shall have acquired the attributes referred to in items (a) through (e) inclusive above through:
SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2017 App-1
If you are looking for Suncor's 2016 annual report and you haven't
received it in the mail, you may not have confirmed you wanted to
receive it. Our 2016 annual report is available electronically on
Suncor's web site at www.suncor.com. Or if you would like to
receive a printed copy, please call 1 800 558 9071.
Suncor Energy Inc.
150 - 6 Avenue S.W., Calgary, Alberta, Canada T2P 3E3
T: 403 296 8000
suncor.com
Exhibit 99.2
8th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
www.computershare.com
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Form of Proxy - Annual General Meeting of Suncor Energy Inc. to be held on April 27, 2017 |
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This Form of Proxy is solicited by and on behalf of Management.
Notes to proxy
1. Every holder has the right to appoint some other person or company of their choice, who need not be a holder, to attend and act on their behalf at the meeting or any adjournment or postponement thereof. If you wish to appoint a person or company other than the persons whose names are printed herein, please insert the name of your chosen proxyholder in the space provided (see reverse).
2. If the securities are registered in the name of more than one owner (for example, joint ownership, trustees, executors, etc.), then all those registered should sign this proxy. If you are voting on behalf of a corporation or another individual, you must sign this proxy with signing capacity stated, and you may be required to provide documentation evidencing your power to sign this proxy.
3. This proxy should be signed in the exact manner as the name(s) appear(s) on the proxy.
4. If this proxy is not dated, it will be deemed to bear the date on which it is mailed by Management to the holder.
5. The securities represented by this proxy will be voted as directed by the holder, however, if such a direction is not made in respect of any matter, this proxy will be voted as recommended by Management.
6. The securities represented by this proxy will be voted in favour or withheld from voting or voted against each of the matters described herein, as applicable, in accordance with the instructions of the holder, on any ballot that may be called for and, if the holder has specified a choice with respect to any matter to be acted on, the securities will be voted accordingly.
7. This proxy confers discretionary authority in respect of amendments or variations to matters identified in the Notice of Annual General Meeting or other matters that may properly come before the meeting or any adjournment or postponement thereof.
8. In order for this proxy to be effective, it must be validly signed and submitted so that it is received by Suncor Energy Inc. not less than 48 hours (excluding Saturdays, Sundays and holidays) before the Annual General Meeting or any adjournment or postponement thereof.
9. This proxy should be read in conjunction with the Notice of Annual General Meeting, the Notice of Availability of Proxy Materials and the Management Proxy Circular of Suncor Energy Inc. dated March 1, 2017.
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Proxies submitted must be received by 10:30 am, Mountain Daylight Time, on Tuesday, April 25, 2017.
VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK!
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· Call the number listed BELOW from a touch tone telephone.
1-866-732-VOTE (8683)Toll Free |
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· Go to the following web site: www.investorvote.com · Smartphone? Scan the QR code to vote now. |
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· You can enroll to receive future securityholder communications electronically by visiting www.investorcentre.com and clicking at the bottom of the page. |
If you vote by telephone or the Internet, DO NOT mail back this proxy.
Voting by mail may be the only method for securities held in the name of a corporation or securities being voted on behalf of another individual.
Voting by mail or by Internet are the only methods by which a holder may appoint a person as proxyholder other than the Management nominees named on the reverse of this proxy. Instead of mailing this proxy, you may choose one of the two voting methods outlined above to vote this proxy.
To vote by telephone or the Internet, you will need to provide your CONTROL NUMBER listed below.
CONTROL NUMBER
01AIAA
Appointment of Proxyholder |
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I/We, being holder(s) of Suncor Energy Inc. hereby appoint: James W. Simpson, or failing him, Steven W. Williams |
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Print the name of the person you are appointing if this person is someone other than the Management Nominees listed herein. |
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as my/our proxyholder with full power of substitution and to attend, act and to vote for and on behalf of the shareholder in accordance with the following direction (or if no directions have been given, as the proxyholder sees fit) and all other matters that may properly come before the Annual General Meeting of shareholders of Suncor Energy Inc. to be held at The Metropolitan Centre, 333 Fourth Avenue S.W., Calgary, Alberta on April 27, 2017 at 10:30 AM (Mountain Daylight Time) and at any adjournment or postponement thereof.
VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES. |
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1. Election of Directors - The election of the following nominees as directors of Suncor Energy Inc. until the close of the next annual general meeting. |
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01. Patricia M. Bedient |
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02. Mel E. Benson |
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03. Jacynthe Côté |
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04. Dominic DAlessandro |
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05. John D. Gass |
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06. John R. Huff |
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07. Maureen McCaw |
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08. Michael W. OBrien |
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09. Eira M. Thomas |
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10. Steven W. Williams |
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11. Michael M. Wilson |
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2. Appointment of Auditors Re-appointment of PricewaterhouseCoopers LLP as auditor of Suncor Energy Inc. for the ensuing year. |
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3. Increase in Common Shares Reserved for Issuance under Suncor Energy Inc. Stock Option Plan To consider and, if deemed fit, approve an amendment to the Suncor Energy Inc. Stock Option Plan to increase the number of common shares reserved for issuance thereunder by 25,000,000 common shares. |
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4. Advisory Resolution on Executive Compensation To accept the approach to executive compensation disclosed in the Management Proxy Circular of Suncor Energy Inc. dated March 1, 2017. |
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To vote in the proxy holders discretion on any amendments or variations to the matters identified above or such other business as may properly be brought before the meeting or any continuation of the meeting after an adjournment or postponement.
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Authorized Signature(s) - This section must be completed for your instructions to be executed. |
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I/We authorize you to act in accordance with my/our instructions set out above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting instructions are indicated above, this Proxy will be voted as |
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recommended by Management. |
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Interim Financial Statements Mark this box if you would like to receive interim financial statements and accompanying Managements Discussion and Analysis by mail. |
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Annual Report Mark this box if you would NOT like to receive the Annual Financial Statements and accompanying Managements Discussion and Analysis by mail. |
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If you are not mailing back your proxy, you may register online to receive the above financial report(s) by mail at www.computershare.com/mailinglist.
SUNQ |
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AR2 |
01AIBC
EXHIBIT 99.3
Notice of Annual General Meeting and Notice of Availability of Proxy Materials
Exhibit 99.3
Have questions about this notice? Call the Toll Free Number below or scan the QR code to find out more. Toll Free 1-866 964-0492 www.computershare.com/ noticeandaccess Notice of Annual General Meeting and Notice of Availability of Proxy Materials You are receiving this notice as a shareholder of Suncor Energy Inc. (Suncor). Suncor has decided to use notice and access to deliver its Management Proxy Circular dated March 1, 2017 (the Management Proxy Circular) to you by providing you with electronic access to the document, instead of mailing paper copies. You will receive a form of proxy with this notice so you can vote your shares. Fold Notice and access is a more environmentally friendly and cost effective way to deliver the Management Proxy Circular, as it will help reduce paper use and also will reduce the cost of printing and mailing materials to shareholders. Notice is hereby given that an annual general meeting of Suncor will be held: When: April 27, 2017 10:30 am (Mountain Daylight Time) Where:The Metropolitan Centre 333 Fourth Avenue S.W. Calgary, AB T2P 0H9 for the following purposes, as further described in the Business of the Meeting section of the Management Proxy Circular and other applicable sections listed below: i. To receive the consolidated financial statements of Suncor for the year ended December 31, 2016 together with the auditors report thereon. Fold ii. To elect directors of Suncor to hold office until the close of the next annual meeting. iii. To appoint auditors of Suncor to hold office until the close of the next annual meeting. iv. To consider and, if deemed fit, approve an amendment to the Suncor Energy Inc. Stock Option Plan to increase the number of common shares reserved for issuance thereunder by 25,000,000 common shares. v. To consider and, if deemed fit, approve an advisory resolution on Suncors approach to executive compensation. See also the Compensation Discussion and Analysis section of the Management Proxy Circular. vi. To transact such other business as may properly be brought before the meeting or any continuation of the meeting after an adjournment or postponement. CPUQC01.E.INT/000001/i1234 01AICC
How to Request a Paper Copy of the Management Proxy Circular Shareholders may request to receive a paper copy of the Management Proxy Circular by mail at no cost for up to one year from the date the Management Proxy Circular was filed on SEDAR. Requests for paper copies may be made using your Control Number as it appears on your enclosed form of proxy. If you do request a paper copy, please note that you will not receive another form of proxy; please retain your current one for voting purposes. To request a paper copy before the meeting date, please call the number below and follow the instructions: Toll Free, within North America: 1-866-962-0498 Outside of North America: (514) 982-8716 To request a paper copy after the meeting date, please call 1-800-558-9071. To ensure you receive the paper copy in advance of the voting deadline and meeting date, we estimate that your request must be received no later than 5:00 pm Eastern Daylight Time on Tuesday, April 11, 2017. Fold Suncor will only 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. Voting PLEASE NOTE YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote using the methods reflected on your enclosed form of proxy. Internet: www.investorvote.com Telephone: 1-866-732-8683 Facsimilie: 1-866-249-7775 Mail: Computershare Trust Company of Canada, Proxy Department 135 West Beaver Creek, P.O. Box 300 Richmond Hill, Ontario, L4B 4R5 Fold Your form of proxy must be received by 10:30 am Mountain Daylight Time on Tuesday, April 25, 2017 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. PLEASE REVIEW THE MANAGEMENT PROXY CIRCULAR PRIOR TO VOTING The Management Proxy Circular and other relevant materials are available at: www.suncor.com/annual-disclosure or www.sedar.com Suncors 2016 annual report and annual financial statements will be delivered to all registered shareholders who did not opt out of receiving such documents. If you have any questions about notice and access, please call Investor Relations at 1-800-558-9071. 01AIDB
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