The Devon board of directors mandates our commitment to strong corporate governance and accountability, and our core values to do the right thing and deliver results.
Board balances stakeholder interests
The board follows our Corporate Governance Guidelines with the aim of enhancing shareholder value, while considering the interests of other stakeholders over the long term. Our directors also have primary responsibility for risk oversight for the company.
As required by the Corporate Governance Guidelines, a majority of our board members qualify as independent, based on New York Stock Exchange (NYSE) listing standards and Securities and Exchange Commission (SEC) regulations. As of June 2018, we met these requirements, with eight of our 10 board members, all committee members and the lead director who oversees board executive sessions all qualified as independent. Our board chairman and our president and chief executive officer (CEO) were the only non-independent directors.
The charters of the board’s four committees – Audit, Compensation, Governance and Reserves – require all committee members to be independent. Following are brief descriptions of each committee’s purpose and responsibilities along with links to their charters.
Since 2014, two of Devon's directors have been women. In June 2018, when the board expanded from nine members to 10, all were under the mandatory retirement age of 73.
Each director is expected to own a specific quantity of Devon stock in order to further align his or her interests and actions with the interests of Devon shareholders. While Devon executives receive no additional compensation for serving on our board, independent directors are compensated based on current market norms and receive a combination of retainers, meeting fees and equity awards.
Directors are elected at the annual meeting of shareholders for a one-year term. If a director does not receive the required plurality of votes in an uncontested election, our bylaws require the director to offer to resign. This has not happened in Devon’s history. In fact, our directors received an average approval of 98 percent at our 2018 meeting of shareholders.
Management incentivized by long-term value
Devon’s senior leaders are accountable for the company’s operational and financial results, asset portfolio management and shareholder returns. The leadership team provides the board with regular updates and assessments of the economic and operational risks and opportunities facing the company, with increasing emphasis on environmental, social and governance (ESG) matters.
Our executive compensation philosophy recognizes near-term operational and financial success and encourages decision-making that supports long-term value creation. Approximately 89 percent of the value of total direct compensation awarded to the chief executive, and an average of approximately 83 percent for other executive officers was delivered through performance bonuses and long-term incentives aligned with total shareholder return, dependent on 2017 performance, or both.
Each year, the company sets challenging performance goals designed to drive continuous improvement. Devon is committed to delivering strong returns on our investments through a highly engaged culture focused on innovation, safety, operational excellence, environmental stewardship and social responsibility. Despite commodity price challenges, Devon met or exceeded most of our 2017 corporate goals, resulting in a company performance bonus score of 115 percent of target. Details about Devon’s executive compensation, philosophy, practices and decisions are available in our 2018 proxy statement.
Devon reached out to shareholders in 2017 and engaged with many of them on a variety of issues. In response to their feedback suggesting Devon and others in our industry should increase the emphasis on returns, we removed the reserves-addition metric and added new measures for cash return on capital employed and all-in rate of return to determine cash bonuses in 2018. We seek ongoing dialogue with shareholders to understand the executive compensation incentives they see as most appropriate.