SEC Company Response from DEVON ENERGY (DVN) — Oct 3, 2007
DEVON ENERGY CORP/DE (DVN) (CIK 0001090012)
Date: Oct. 3, 2007 · CIK: 0001090012 · Accession: 0000950134-07-020826
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-32318
Letter
Via EDGAR and Division of Corporation Finance Division of Corporate Finance Devon Energy Corporation Definitive 14A Filed April 27, 2007 File No. 001- 32318
Dear Ms. Duru:
This letter responds to the staff’s comment letter of August 21, 2007, regarding the Definitive 14A, filed April 27, 2007 (File No. 001-32318).
Director Compensation for the Year Ended December 31, 2006, page 12
SEC Comment
1.
Revise to specify the aggregate grant date fair value of the awards made in fiscal 2006. See Items 402(k)(2)(iii) and (iv) of Regulation S-K.
Response
The requested disclosure will be included in future filings.
U.S. Securities and Exchange Commission
October 3, 2007
Page 2
Compensation Discussion and Analysis, page 19
SEC Comment
2.
Please revise your disclosure to provide an analysis regarding how material decisions regarding compensation for each of the named executive officers are made. For example, provide analysis of how the compensation committee’s consideration of the bullet points listed under the heading “Pay for Performance resulted in the incentive awards to each of the named executive officers during the last fiscal year. Please see Item 402(b)(2)(vii) of Regulation S-K and Instruction 1 to Item 402(b). Additionally, rather than stating that you “[g]enerallly try to reward executives with incentive pay when [you] are ‘successful’...,” discuss what constitutes success and explain how that success determined the levels of compensation awarded during a given year to the named executive officers. To the extent awards are made outside of the “general” circumstances you reference, discuss this fact and address any discretion the compensation committee exercises with respect to such rewards. See Item 402(b)(2)(vi) of Regulation S-K.
Response
In preparing the 2006 Proxy Statement, the Company followed the SEC’s guidance regarding Compensation Discussion and Analysis (“CD&A”) as set forth in Release 8732A at Section II.B.1. This guidance provides that, although the CD&A should be sufficiently precise to identify material differences in compensation policies and decisions for individual named executive officers where appropriate, where policies or decisions are materially similar, named executive officers can be grouped together.
The Company respectfully submits that, where there were material differences in the way decisions were made regarding compensation for individual named executive officers, the 2006 Proxy Statement generally identified such material differences appropriately. In preparing the 2006 Proxy Statement, the Company was cognizant of the requirement to discuss material differences amongst its named executive officers, and therefore included those differences it felt were material. Examples of such disclosures include the following:
•
the discussion under the caption “Compensation Weighted Toward Incentive Pay,” which addresses the different percentages of total direct compensation, for the Chief Executive Officer and for the other named executive officers, that was at risk against performance goals;
•
the discussion of the compensation committee’s process for reviewing and determining annually the Chief Executive Officer’s base salary, in the second full paragraph under the caption “Base Salary;”
•
the discussion of how the Chief Executive Officer’s and the other named executive officers’ base salaries compare to the market medians, also in the “Base Salary” section; and
•
the discussion of the compensation committee’s process for determining the amount of the Chief Executive Officer’s annual bonus for 2006, in the last paragraph under the caption “Annual Incentive Plan.”
U.S. Securities and Exchange Commission
October 3, 2007
Page 3
The Company notes that the Staff’s comment 4, discussed below, also asks for greater detail regarding material differences in compensation policies and decisions for specified named executive officers. As noted more fully in our response to comment 4, the Company intends to provide additional detail regarding the differences noted by the Staff in comment 4, to the extent applicable in future filings. Further, the Company will endeavor, in future filings, to identify and discuss material differences in compensation policies and decisions for individual named executive officers where appropriate.
Also in response to the Staff’s comments, to the extent the Company uses the term “success” in future filings in the context cited in the Staff’s comment, the Company will clarify the meaning of such term. In addition, in future filings the Company will provide discussion, where material, of awards made outside of the “general” circumstances referenced in the comment.
SEC Comment
3.
Please disclose what is meant by your reference to the “cyclical nature” of this business and why and how this would impact compensation awarded.
Response
To the extent the Company includes a reference to the cyclical nature of its business in future filings, such disclosure will explain what is meant by such reference and why and how the cyclical nature of the business impacts compensation awarded.
SEC Comment
4.
The Compensation Discussion and Analysis should be sufficiently precise to identify material differences in compensation policies with respect to individual executive officers. We refer you to Section II.B.1 of Commission Release 8’.32A. Please supplement your disclosure to discuss the discrepancies in type and amount of compensation awarded to the named executive officers. For example,
a.
identify the reasons for the significant gap in total compensation recorded with respect to the chief executive officer and other currently employed executive officers;
b.
explain, by discussion and analysis of specific and/or unique duties performed by your president or his achievements during the fiscal year, why his compensation is significantly higher than the other named executive officers and any material factors the compensation committee considers in structuring his total compensation relative to that of the chief executive officer;
c.
disclose how the base salary component paid to Mr. Healy was structured, giving consideration to his current position as vice-president and acting chief financial officer; and
d.
explain why the post-termination benefits to Mr. Healy, pursuant to the terms of his severance agreement, are less than or subject to less favorable terms than those that may be provided to executives who are party to an employment agreement as disclosed on pages 43-44.
U.S. Securities and Exchange Commission
October 3, 2007
Page 4
Response
As noted in our response to comment 2, in preparing the 2006 Proxy Statement, the Company followed the SEC’s guidance regarding CD&A as set forth in Release 8732A at Section II.B.1. As discussed in greater detail in our response to comment 2 above, where there were material differences in the way in which decisions were made regarding compensation for individual named executive officers, the Company believes the 2006 Proxy Statement appropriately identified and discussed such material differences. Further, as noted in our response to comment 2 above, the Company will endeavor, in future filings, to identify and discuss material differences in compensation policies and decisions for individual named executive officers where appropriate.
In response to the specific items noted by the Staff:
a. In future filings, to the extent applicable, the Company will provide additional detail regarding the reasons for the significant gap in total compensation recorded with respect to the Chief Executive Officer and other currently employed executives. Such reasons may include, by way of example only, factors such as the Chief Executive Officer’s seniority, long tenure with the Company, status as a founder of the Company, level of compensation in comparison to levels for comparable officers at similar companies, and greater influence over and responsibility for the entire organization (as opposed to a distinct division/function), as well as other factors contributing to the discrepancy in compensation, such as the relatively large increase in pension benefit for the Chief Executive Officer in 2006 as compared to the other named executive officers, which reflects both his long tenure with the Company and his comparatively higher compensation.
b. In future filings, to the extent applicable, the Company will provide additional detail regarding the reasons why the compensation of the President is significantly higher than other named executive officers and any material factors the compensation committee considers in structuring his total compensation relative to that of the Chief Executive Officer. Such reasons may include, by way of example only, factors such as the President’s seniority, experience and stature in the industry, reporting relationship to the Chief Executive Officer, level of compensation in comparison to levels for comparable officers at similar companies, and greater influence over and responsibility for the entire organization (as opposed to a distinct division/function), as well as other factors contributing to the discrepancy in compensation.
c. and d. In future filings, to the extent applicable, the Company will provide some additional detail regarding Mr. Heatly’s compensation. By way of background for the Staff’s information, just prior to the end of the fiscal year, the Company’s Chief Financial Officer (Mr. Jennings) was terminated. Mr. Heatly, the Company’s vice president of accounting, therefore was deemed the principal financial officer at the end of the year and was included in the group of named executive officers solely because of his designation as the Company’s principal financial officer (and not because he was one of the most highly paid executive officers). Mr. Heatly was not a senior executive officer in 2006, and his compensation arrangements, including his post-termination benefits, are therefore more in line with non-senior executive officers.
U.S. Securities and Exchange Commission
October 3, 2007
Page 5
Base Salary, page 21
SEC Comment
5.
Please include in your discussion of base salary determinations an analysis of how the “scope of responsibility...experience...leadership” and the other factors listed on page 22 resulted in the actual base salary awarded to each named executive officer during the fiscal year. Refer to Item 402(b)(1)(v) of Regulation S-K.
Response
As noted in our responses to comments 2 and 4, in preparing the 2006 Proxy Statement, the Company followed the SEC’s guidance regarding CD&A as set forth in Release 8732A at Section II.B.1. As discussed in greater detail above in our response to comment 2, where there were material differences in the way in which decisions were made regarding compensation for individual named executive officers, the Company believes the 2006 Proxy Statement appropriately identified and discussed such material differences. By way of example only, see the discussion of the compensation committee’s process for reviewing and determining annually the Chief Executive Officer’s base salary, in the second full paragraph under the caption “Base Salary,” and the discussion of how the Chief Executive Officer’s and the other named executive officers’ base salaries compare to the market medians, also in that section.
Further, the Company notes that the primary factor in setting base salary levels for named executive officers is a comparison to comparable salary levels for comparable officers at similar companies with whom the Company competes for talent. Although, as explained in the 2006 Proxy Statement, the base salary level may be adjusted from the level determined by reference to competitive levels on account of other relevant factors, normally competitive salary levels in the market are the material factor in determining base salary levels. In that sense, the analysis for the named executive officers is materially similar.
As noted above in our response to comment 4, in future filings, to the extent applicable, the Company will endeavor to identify and discuss material differences in the factors considered, and the application of such factors, by the compensation committee in setting the base salaries for individual named executive officers.
Annual Incentive Plan, page 22
SEC Comment
6.
You disclose that specific targets and maximum award levels are not assigned, but you also indicate that an executive’s contribution to meeting “specific financial and other key goals” established for the company are considered in determining incentive awards. Moreover, you state that although the approach to annual incentives is “not strictly formulaic, it is highly structured...” You also disclose that an executive’s performance is rated against approved goals. Your disclosure suggests that specific quantitative targets as well as other factors are considered. Please revise to disclose all quantitative and qualitative targets both on an aggregate basis and with respect to each individual officer’s contribution, as measured or determined by the committee during the last fiscal year. To the extent you believe that disclosure of these targets is not required because it would result in competitive harm such that you may exclude this information under Instruction 4 to Item 402(b) of Regulation S-K,
U.S. Securities and Exchange Commission
October 3, 2007
Page 6
please provide on a supplemental basis a detailed explanation supporting your conclusion. Please also disclose how difficult it will be for the named executive officers or how likely it will be for you to achieve the undisclosed target levels or other factors.
Response
As an initial matter, the Company notes that, although the Staff’s comment states that the Company should disclose “all quantitative and qualitative targets,” the applicable rules require the Company to explain all “material elements” of the named executive officers’ compensation, including how the Company determines the amount (and, where applicable, the formula) for each element to pay. See Item 402(b)(1)(v). Item 402(b)(2) sets forth an illustrative list of topics that should be considered for inclusion in the CD&A, if relevant and material, but it does not constitute a list of mandatory topics. The list of non-mandatory, illustrative topics in Item 402(b) includes the “specific items of corporate performance” taken into account in setting compensation. See Item 402(b)(2)(v). The Company respectfully submits that Item 402(b) requires a discussion and analysis of the material factors necessary to an understanding of the compensation awarded (in this case, the annual bonus). Item 402(b) does not necessarily require disclosure of specific performance targets, if such specific performance targets are not material to an understanding of the compensation awarded.
In preparing the 2006 Proxy Statement, the Company carefully considered the requirements of Item 402(b) and whether a discussion of specific performance targets would be material to an understanding of the annual bonus awards and the compensation committee’s process for determining such awards. Based on its consideration of these requirements, the Company determined, and continues to believe, that the specific performance targets are not material to a
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CORRESP
1
filename1.htm
corresp
Devon Energy Corporation
20 North Broadway
Oklahoma City, Oklahoma 73102-8260
Janice A. Dobbs
Corporate Secretary
Direct Phone: 405/552-7844
Direct Fax:
405/552-8171
Email: janice.dobbs@dvn.com
October 3, 2007
Via EDGAR and
Facsimile No. 202-772-9220
Division of Corporation Finance
Mellissa Campbell Duru
Attorney Advisor
U.S. Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:
Devon Energy Corporation
Definitive 14A
Filed April 27, 2007
File No. 001- 32318
Dear Ms. Duru:
This letter responds to the staff’s comment letter of August 21, 2007, regarding the
Definitive 14A, filed April 27, 2007 (File No. 001-32318).
Director Compensation for the Year Ended December 31, 2006, page 12
SEC Comment
1.
Revise to specify the aggregate grant date fair value of the awards made in fiscal
2006. See Items 402(k)(2)(iii) and (iv) of Regulation S-K.
Response
The requested disclosure will be included in future filings.
U.S. Securities and Exchange Commission
October 3, 2007
Page 2
Compensation Discussion and Analysis, page 19
SEC Comment
2.
Please revise your disclosure to provide an analysis regarding how material decisions
regarding compensation for each of the named executive officers are made. For example,
provide analysis of how the compensation committee’s consideration of the bullet points
listed under the heading “Pay for Performance resulted in the incentive awards to each of
the named executive officers during the last fiscal year. Please see Item 402(b)(2)(vii)
of Regulation S-K and Instruction 1 to Item 402(b). Additionally, rather than stating that
you “[g]enerallly try to reward executives with incentive pay when [you] are
‘successful’...,” discuss what constitutes success and explain how that success determined
the levels of compensation awarded during a given year to the named executive officers. To
the extent awards are made outside of the “general” circumstances you reference, discuss
this fact and address any discretion the compensation committee exercises with respect to
such rewards. See Item 402(b)(2)(vi) of Regulation S-K.
Response
In preparing the 2006 Proxy Statement, the Company followed the SEC’s guidance regarding
Compensation Discussion and Analysis (“CD&A”) as set forth in Release 8732A at Section II.B.1.
This guidance provides that, although the CD&A should be sufficiently precise to identify material
differences in compensation policies and decisions for individual named executive officers where
appropriate, where policies or decisions are materially similar, named executive officers can be
grouped together.
The Company respectfully submits that, where there were material differences in the way
decisions were made regarding compensation for individual named executive officers, the 2006 Proxy
Statement generally identified such material differences appropriately. In preparing the 2006
Proxy Statement, the Company was cognizant of the requirement to discuss material differences
amongst its named executive officers, and therefore included those differences it felt were
material. Examples of such disclosures include the following:
•
the discussion under the caption “Compensation Weighted Toward Incentive Pay,” which
addresses the different percentages of total direct compensation, for the Chief Executive
Officer and for the other named executive officers, that was at risk against performance
goals;
•
the discussion of the compensation committee’s process for reviewing and determining
annually the Chief Executive Officer’s base salary, in the second full paragraph under the
caption “Base Salary;”
•
the discussion of how the Chief Executive Officer’s and the other named executive
officers’ base salaries compare to the market medians, also in the “Base Salary” section;
and
•
the discussion of the compensation committee’s process for determining the amount of the
Chief Executive Officer’s annual bonus for 2006, in the last paragraph under the caption
“Annual Incentive Plan.”
U.S. Securities and Exchange Commission
October 3, 2007
Page 3
The Company notes that the Staff’s comment 4, discussed below, also asks for greater detail
regarding material differences in compensation policies and decisions for specified named executive
officers. As noted more fully in our response to comment 4, the Company intends to provide
additional detail regarding the differences noted by the Staff in comment 4, to the extent
applicable in future filings. Further, the Company will endeavor, in future filings, to identify
and discuss material differences in compensation policies and decisions for individual named
executive officers where appropriate.
Also in response to the Staff’s comments, to the extent the Company uses the term “success” in
future filings in the context cited in the Staff’s comment, the Company will clarify the meaning of
such term. In addition, in future filings the Company will provide discussion, where material, of
awards made outside of the “general” circumstances referenced in the comment.
SEC Comment
3.
Please disclose what is meant by your reference to the “cyclical nature” of this
business and why and how this would impact compensation awarded.
Response
To the extent the Company includes a reference to the cyclical nature of its business in future
filings, such disclosure will explain what is meant by such reference and why and how the cyclical
nature of the business impacts compensation awarded.
SEC Comment
4.
The Compensation Discussion and Analysis should be sufficiently precise to identify
material differences in compensation policies with respect to individual executive
officers. We refer you to Section II.B.1 of Commission Release 8’.32A. Please supplement
your disclosure to discuss the discrepancies in type and amount of compensation awarded to
the named executive officers. For example,
a.
identify the reasons for the significant gap in total compensation
recorded with respect to the chief executive officer and other currently employed
executive officers;
b.
explain, by discussion and analysis of specific and/or unique duties
performed by your president or his achievements during the fiscal year, why his
compensation is significantly higher than the other named executive officers and
any material factors the compensation committee considers in structuring his total
compensation relative to that of the chief executive officer;
c.
disclose how the base salary component paid to Mr. Healy was
structured, giving consideration to his current position as vice-president and
acting chief financial officer; and
d.
explain why the post-termination benefits to Mr. Healy, pursuant to the
terms of his severance agreement, are less than or subject to less favorable terms
than those that may be provided to executives who are party to an employment
agreement as disclosed on pages 43-44.
U.S. Securities and Exchange Commission
October 3, 2007
Page 4
Response
As noted in our response to comment 2, in preparing the 2006 Proxy Statement, the Company
followed the SEC’s guidance regarding CD&A as set forth in Release 8732A at Section II.B.1. As
discussed in greater detail in our response to comment 2 above, where there were material
differences in the way in which decisions were made regarding compensation for individual named
executive officers, the Company believes the 2006 Proxy Statement appropriately identified and
discussed such material differences. Further, as noted in our response to comment 2 above, the
Company will endeavor, in future filings, to identify and discuss material differences in
compensation policies and decisions for individual named executive officers where appropriate.
In response to the specific items noted by the Staff:
a. In future filings, to the extent applicable, the Company will provide additional
detail regarding the reasons for the significant gap in total compensation recorded with
respect to the Chief Executive Officer and other currently employed executives. Such
reasons may include, by way of example only, factors such as the Chief Executive
Officer’s seniority, long tenure with the Company, status as a founder of the Company,
level of compensation in comparison to levels for comparable officers at similar
companies, and greater influence over and responsibility for the entire organization (as
opposed to a distinct division/function), as well as other factors contributing to the
discrepancy in compensation, such as the relatively large increase in pension benefit
for the Chief Executive Officer in 2006 as compared to the other named executive
officers, which reflects both his long tenure with the Company and his comparatively
higher compensation.
b. In future filings, to the extent applicable, the Company will provide additional detail
regarding the reasons why the compensation of the President is significantly higher than
other named executive officers and any material factors the compensation committee
considers in structuring his total compensation relative to that of the Chief Executive
Officer. Such reasons may include, by way of example only, factors such as the
President’s seniority, experience and stature in the industry, reporting relationship to
the Chief Executive Officer, level of compensation in comparison to levels for
comparable officers at similar companies, and greater influence over and responsibility
for the entire organization (as opposed to a distinct division/function), as well as
other factors contributing to the discrepancy in compensation.
c. and d. In future filings, to the extent applicable, the Company will provide some
additional detail regarding Mr. Heatly’s compensation. By way of background for the
Staff’s information, just prior to the end of the fiscal year, the Company’s Chief
Financial Officer (Mr. Jennings) was terminated. Mr. Heatly, the Company’s vice
president of accounting, therefore was deemed the principal financial officer at the end
of the year and was included in the group of named executive officers solely because of
his designation as the Company’s principal financial officer (and not because he was one
of the most highly paid executive officers). Mr. Heatly was not a senior executive
officer in 2006, and his compensation arrangements, including his post-termination
benefits, are therefore more in line with non-senior executive officers.
U.S. Securities and Exchange Commission
October 3, 2007
Page 5
Base Salary, page 21
SEC Comment
5.
Please include in your discussion of base salary determinations an analysis of how the
“scope of responsibility...experience...leadership” and the other factors listed on page 22
resulted in the actual base salary awarded to each named executive officer during the
fiscal year. Refer to Item 402(b)(1)(v) of Regulation S-K.
Response
As noted in our responses to comments 2 and 4, in preparing the 2006 Proxy Statement, the Company
followed the SEC’s guidance regarding CD&A as set forth in Release 8732A at Section II.B.1. As
discussed in greater detail above in our response to comment 2, where there were material
differences in the way in which decisions were made regarding compensation for individual named
executive officers, the Company believes the 2006 Proxy Statement appropriately identified and
discussed such material differences. By way of example only, see the discussion of the
compensation committee’s process for reviewing and determining annually the Chief Executive
Officer’s base salary, in the second full paragraph under the caption “Base Salary,” and the
discussion of how the Chief Executive Officer’s and the other named executive officers’ base
salaries compare to the market medians, also in that section.
Further, the Company notes that the primary factor in setting base salary levels for named
executive officers is a comparison to comparable salary levels for comparable officers at similar
companies with whom the Company competes for talent. Although, as explained in the 2006 Proxy
Statement, the base salary level may be adjusted from the level determined by reference to
competitive levels on account of other relevant factors, normally competitive salary levels in the
market are the material factor in determining base salary levels. In that sense, the analysis for
the named executive officers is materially similar.
As noted above in our response to comment 4, in future filings, to the extent applicable, the
Company will endeavor to identify and discuss material differences in the factors considered, and
the application of such factors, by the compensation committee in setting the base salaries for
individual named executive officers.
Annual Incentive Plan, page 22
SEC Comment
6.
You disclose that specific targets and maximum award levels are not assigned, but you
also indicate that an executive’s contribution to meeting “specific financial and other key
goals” established for the company are considered in determining incentive awards.
Moreover, you state that although the approach to annual incentives is “not strictly
formulaic, it is highly structured...” You also disclose that an executive’s performance is
rated against approved goals. Your disclosure suggests that specific quantitative targets
as well as other factors are considered. Please revise to disclose all quantitative and
qualitative targets both on an aggregate basis and with respect to each individual
officer’s contribution, as measured or determined by the committee during the last fiscal
year. To the extent you believe that disclosure of these targets is not required because
it would result in competitive harm such that you may exclude this information under
Instruction 4 to Item 402(b) of Regulation S-K,
U.S. Securities and Exchange Commission
October 3, 2007
Page 6
please provide on a supplemental basis a detailed explanation supporting your
conclusion. Please also disclose how difficult it will be for the named executive
officers or how likely it will be for you to achieve the undisclosed target levels or
other factors.
Response
As an initial matter, the Company notes that, although the Staff’s comment states that the Company
should disclose “all quantitative and qualitative targets,” the applicable rules require the
Company to explain all “material elements” of the named executive officers’ compensation, including
how the Company determines the amount (and, where applicable, the formula) for each element to
pay. See Item 402(b)(1)(v). Item 402(b)(2) sets forth an illustrative list of topics that should
be considered for inclusion in the CD&A, if relevant and material, but it does not constitute a
list of mandatory topics. The list of non-mandatory, illustrative topics in Item 402(b) includes
the “specific items of corporate performance” taken into account in setting compensation. See Item
402(b)(2)(v). The Company respectfully submits that Item 402(b) requires a discussion and analysis
of the material factors necessary to an understanding of the compensation awarded (in this case,
the annual bonus). Item 402(b) does not necessarily require disclosure of specific performance
targets, if such specific performance targets are not material to an understanding of the
compensation awarded.
In preparing the 2006 Proxy Statement, the Company carefully considered the requirements of
Item 402(b) and whether a discussion of specific performance targets would be material to an
understanding of the annual bonus awards and the compensation committee’s process for determining
such awards. Based on its consideration of these requirements, the Company determined, and
continues to believe, that the specific performance targets are not material to a