DEF 14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

 

  

Preliminary Proxy Statement

  

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

  

Definitive Proxy Statement

  

Definitive Additional Materials

  

Soliciting Material Pursuant to §240.14a-12

Encana Corporation

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

 

Title of each class of securities to which transaction applies:

 

 

(2)

 

Aggregate number of securities to which transaction applies:

 

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

 

Proposed maximum aggregate value of transaction:

 

 

(5)

 

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

 

Amount Previously Paid:

 

 

(2)

 

Form, Schedule or Registration Statement No.:

 

 

(3)

 

Filing Party:

 

 

(4)

 

Date Filed:

 

 

 

 


Table of Contents

 

 
                                                                                  

 

Notice of Annual

Meeting of Shareholders and

2019 Proxy Statement

 

                                                                                  

 

 

Tuesday, April 30, 2019

10:00 a.m. MDT (12:00 p.m. EDT)

 

Oddfellows Building

Ballroom (Floor 4)

100 – 6th Avenue S.W.

Calgary, AB, Canada

 

 

 

LOGO


Table of Contents

 

Letter to Shareholders

 

March 14, 2019

Dear Fellow Shareholders,

On behalf of the Board and management of Encana Corporation, we thank you for your continued support.

Since launching our strategy in 2013, Encana has been relentlessly focused on becoming a leading North American, multi-basin, unconventional resource company.

Our recent acquisition of Newfield Exploration Company accelerated execution of this objective by adding a highly desirable entry into the core oil window of the Anadarko basin. Combined with our existing growth assets in the Permian and Montney, this large-scale, liquids-weighted growth asset significantly enhances our premium inventory, investment optionality and resilience, which we believe represent key drivers of shareholder value. The transaction also enhanced our ability to return capital to shareholders through a corresponding 25 percent increase to our dividend and $1.25 billion share buyback program.

Please join us at our Annual Meeting of Shareholders on Tuesday, April 30, 2019 at 10:00 a.m. MDT. The meeting will be held in Calgary, Alberta at the Oddfellows Building, Ballroom (Floor 4), 100 – 6th Avenue S.W. Live coverage will be available on our website at www.encana.com. Audio recording will be available on our website after the meeting.

As a shareholder, you have the right to participate in and vote your common shares on items of business at the meeting. This proxy statement describes business to be conducted at the meeting and provides important information about our nominated directors, corporate governance practices and approach to executive compensation. This information is to assist you in deciding how to vote your common shares. In addition to ordinary business, two special items will be proposed to shareholders at the meeting: (i) introduction of a new Omnibus Long-Term Incentive Plan; and (ii) amendment and reconfirmation of our Shareholder Rights Plan.

Your vote and participation at the meeting are important. Please review this proxy statement before the meeting.

We look forward to your participation at the meeting on April 30, 2019.

Sincerely,

 

LOGO

 

  

LOGO

 

Clayton H. Woitas

Chairman of the Board

  

Douglas J. Suttles

President & Chief Executive Officer


Table of Contents

 

Notice of 2019 Annual Meeting of Shareholders

 

 

When:

  Where:
Tuesday, April 30, 2019   Oddfellows Building, Ballroom (Floor 4)
10:00 a.m. Mountain Daylight Time (“MDT”)   100 – 6th Avenue S.W., Calgary, Alberta

The 2019 Annual Meeting of Shareholders (the “Meeting”) of Encana Corporation (“Encana” or the “Company”) will be held on Tuesday, April 30, 2019, at 10:00 a.m. MDT in Calgary, Alberta at the Oddfellows Building, Ballroom (Floor 4), 100 – 6th Avenue S.W., Calgary, Alberta. The Meeting has been convened for the following purposes:

 

   

to receive our Consolidated Financial Statements, together with the auditors’ report thereon, for the year ended December 31, 2018;

 

   

to vote on the following matters, each described in the Proxy Statement:

 

ITEM 1:

  

Election of the 12 director nominees (“Nominees”) identified in the Proxy Statement to serve as directors until close of the next annual meeting of shareholders

ITEM 2:

  

Appointment of PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent auditors until close of the next annual meeting of shareholders

ITEM 3:

  

Consider, and if deemed appropriate, pass an ordinary resolution amending and reconfirming our Shareholder Rights Plan

ITEM 4:

  

Consider, and if deemed appropriate, pass an ordinary resolution approving a new Omnibus Long-Term Incentive Plan

ITEM 5:

  

A non-binding advisory vote to approve the compensation of our Named Executive Officers (“NEOs”)

 

   

to consider such other business as may be properly brought before the Meeting or any adjournment or postponement thereof.

The Proxy Statement is dated March 14, 2019 and information is as of February 28, 2019, unless otherwise stated. The Proxy Statement is being mailed to shareholders on or about March 26, 2019.

Record Date

The Board of Directors has set March 6, 2019 (the “Record Date”) as the record date for the Meeting. Only Encana shareholders at close of business on that date are entitled to receive this notice of Meeting (“Meeting Notice”) and to vote at the Meeting (including any adjournments or postponements thereof). As at the Record Date, there were 1,490,900,208 Encana common shares (“Common Shares”) issued and outstanding and entitled to vote at the Meeting.

Your Vote is Important

Your vote is important to us. You can vote your Common Shares by proxy or in person at the Meeting. See “If I am a REGISTERED Shareholder, How Do I Vote?” or “If I am a NON-REGISTERED Shareholder, How Do I Vote?” beginning on page four for details.

Webcast of Meeting

You can access the Meeting (but not vote) via live webcast at www.encana.com/investors/shareholder/
meeting.html
. You can also access our proxy materials, submit questions for the Meeting and learn more about Encana on our website.

The Board of Directors has approved the contents of the Proxy Statement and authorized us to send it to you.

By Order of the Board of Directors,

 

 

LOGO

Nancy L. Brennan

Corporate Secretary

Encana Corporation

Calgary, Alberta

March 14, 2019


Table of Contents

 

Table of Contents

 

 

Letter to Shareholders

  

Notice of 2019 Annual Meeting of Shareholders

  

Proxy Statement

     1  

Proxy Summary

     1  

Business of the Meeting

     1  

Proxy Materials and Voting Information

     3  

Meeting Information

     3  

Corporate Governance Highlights

     7  

Director Nominees

     8  

Corporate Governance

     8  

Item 1 – Election of Directors

     8  

Director Nominee Profiles

     13  

Board and Committee Governance

     21  

Director Compensation

     28  

Director Independence and Related Person Transactions

     30  

Security Ownership of Certain Beneficial Owners and Management

     32  

Ownership of Equity Securities of the Company

     32  

Section 16(a) Beneficial Ownership Reporting Compliance

     33  

Indebtedness of Directors and Executive Officers

     33  

Audit Matters

     33  

Report of the Audit Committee

     33  

Item  2 – Appoint PricewaterhouseCoopers LLP as Independent Auditors

     34  

Special Business of the Meeting

     36  

Item  3 – Amend and Reconfirm the Company’s Shareholder Rights Plan

     36  

Item 4 – Approve the Omnibus Incentive Plan

     37  

Item  5 – Advisory Vote to Approve Compensation of Named Executive Officers

     45  

Compensation Discussion and Analysis

     47  

Executive Summary

     47  

Executive Compensation Philosophy

     51  

2018 Compensation Program and Metrics

     53  

2018 Compensation Decisions

     56  

Compensation Governance – Administering Compensation to the Highest Standards

     62  
2018 Detailed Compensation Disclosure      66  

Summary Compensation Table

     66  

HRC Committee Report

     74  

Communications and Shareholder Engagement

     74  

Shareholder Proposals and Director Nominations

     74  

Other Matters

     75  

Schedule A Omnibus Incentive Plan of Encana Corporation

  

Schedule B Purpose and Principal Terms of the Shareholder Rights Plan

  

Schedule C Board of Directors’ Mandate

  

Schedule D Employee Stock Option Plan

  

Schedule E Summary of Certain Income Tax Consequences of LTI Awards

  

Schedule F Advisory Regarding Non-GAAP Measures

  


Table of Contents
 

 

Proxy Statement

 

This Proxy Statement is provided to you on behalf of the Board of Directors (the “Board”) to solicit proxies to be voted at the Meeting (including any adjournments or postponements thereof). All properly executed written proxies and properly completed proxies submitted by telephone or Internet delivered in accordance with this solicitation will be voted at the Meeting consistent with directions found in the proxy, unless the proxy is revoked prior to completion of voting at the Meeting.

Each shareholder of record on the Record Date is entitled to one vote for each Common Share held.

 

 

Proxy Summary

This summary is provided for your convenience. We encourage you to read this entire Proxy Statement before voting. For additional information about our 2018 performance, please see Encana’s 2018 Annual Report on Form 10-K dated February 28, 2019 (the “Annual Report”)1.

 

 

Business of the Meeting

You are requested to vote on the following matters at the Meeting:

 

Item 1

  

Election of Directors

Each of our Nominees have the necessary attributes, experience and skills to provide effective oversight of Encana and steward the interests of our shareholders. Each director is elected annually and in accordance with our Policy on Majority Voting.

 

Information about each Nominee is provided in the “Director Skills and Experience” section on page 11 and “Director Nominee Profiles” beginning on page 13.

   Board Recommendation
FOR

each Nominee

   LOGO

Item 2

 

  

Appoint PricewaterhouseCoopers LLP (“PwC”) as Independent Auditors

The Board and the Audit Committee believe retention of PwC as our independent auditors for the fiscal year ending December 31, 2019 is in the best interests of Encana and its shareholders and therefore propose that PwC be reappointed to serve in this capacity until close of the next annual meeting of shareholders.

 

Information about PwC and its responsibilities as Encana’s independent auditors is found beginning on page 34.

   Board Recommendation

FOR

   LOGO

Item 3

 

  

Amend and Reconfirm the Shareholder Rights Plan

The Board believes it is in the best interests of shareholders that the Company’s Shareholder Rights Plan be reconfirmed for an additional three years and be amended and restated to reflect the amendments outlined in the “Special Business of the Meeting” section beginning on page 36. The Plan was last reconfirmed by shareholders at our 2016 annual meeting of shareholders.

 

Further information regarding the Plan, including its purpose and principal terms, is found in Schedule B.

   Board Recommendation

FOR

   LOGO

Item 4

 

  

Approve the New Omnibus Long-Term Incentive Plan

On February 13, 2019, the Board adopted, subject to shareholder approval, a new Omnibus Long-Term Incentive Plan (the “Omnibus Incentive Plan”) intended to enable the grant of long-term equity, equity-based and cash awards to directors, officers and eligible employees of Encana and its affiliates. The Plan is designed to enhance alignment with shareholder interests by encouraging equity ownership among our directors, officers and eligible employees. If approved, the Plan would also help streamline the administration of the Company’s long-term incentive awards, as all new grants would be governed by a single plan. Shareholders will also be asked to approve reservation and allotment of 30,000,000 Common Shares for issuance for long-term incentive awards granted under the Plan, and to ratify certain prior grants to be governed by the Plan.

 

Information about the Omnibus Incentive Plan is found in the “Special Business of the Meeting” section beginning on page 36.

   Board Recommendation

FOR

   LOGO

 

1 

Unless stated otherwise, references to “Encana”, the “Company”, “we”, “us” and “our” in this Proxy Statement means Encana Corporation and its consolidated subsidiaries and partnerships. Similarly, references to our “ELT”, “management”, “executive officers” and “executives” means our Executive Leadership Team.

 

1


Table of Contents

Item 5

 

  

Advisory Vote to Approve Compensation of Named Executive Officers

For the ninth consecutive year, Encana is holding a non-binding advisory vote to approve compensation of our NEOs. Shareholder feedback about our compensation program, including received via our ongoing engagement efforts or advisory vote, is carefully considered by the Board and our Human Resources and Compensation Committee when making decisions regarding our program.

 

Information about our compensation program is found in the “Compensation Discussion and Analysis” section beginning on page 47. Information about our shareholder engagement efforts is found at page 50.

   Board Recommendation

FOR

   LOGO

The 12 nominated directors receiving the highest number of “FOR” votes duly cast at the Meeting will be duly elected to the Board. Each of Items 2 to 5 above must receive an affirmative majority of votes duly cast at the Meeting to be approved.

 

2


Table of Contents

 

Proxy Materials and Voting Information

 

 

Meeting Information

Please read this section carefully for important information on how to vote your Common Shares.

Encana is sending Meeting materials directly to registered shareholders and indirectly to all non-registered shareholders through their intermediaries. Encana will pay for an intermediary to deliver Meeting materials to “non-objecting beneficial owners”. Encana is not sending Meeting materials directly to “objecting beneficial owners”.

When and Where is the Meeting?

The Meeting will be held at 10:00 a.m. MDT on April 30, 2019 at the Oddfellows Building, Ballroom (Floor 4), 100 – 6th Avenue S.W., Calgary, Alberta.

How many Common Shares are Outstanding and Who are the Company’s Principal Shareholders?

As of March 6, 2019, there were 1,490,900,208 issued and outstanding Common Shares. Information about the share ownership status of our directors and officers is provided at “Ownership of Equity Securities of the Company” on page 32.

What Vote is Required to Elect Directors?

The 12 nominated directors receiving the highest number of FOR votes duly cast at the Meeting will be elected to the Board.

What Vote is Required to Approve the Other Matters to be Voted on at the Meeting?

To be approved, each of Items 2 to 5 must receive an affirmative majority of votes duly cast at the Meeting.

What Quorum is Required at the Meeting?

At least two persons present in person, each being a shareholder or duly appointed proxyholder of such shareholder, together holding at least 25 percent of the total outstanding Common Shares.

Who is Entitled to Vote at the Meeting? How many Votes does each Common Share have?

Only shareholders of record at close of business on the Record Date can vote at the Meeting (including any adjournments or postponements thereof). For each Common Share held, shareholders are entitled to one vote on each matter to be voted upon at the Meeting.

Our shareholders do not have dissenters’ rights or similar rights of appraisal regarding matters described in this Proxy Statement and do not have cumulative voting rights with respect to election of directors.

Who is Soliciting my Proxy?

Encana management is soliciting your proxies in connection with this Proxy Statement and the Meeting. Proxies will be solicited by mail, in person, by telephone or by electronic communications. The cost of this solicitation is borne by the Company. Encana has retained Kingsdale Advisors (“Kingsdale”) as our strategic shareholder advisor and proxy solicitation agent, to assist with our communications with shareholders and solicitation of proxies. For these services, Kingsdale will receive a fee of $55,000 and will be reimbursed by Encana for reasonable disbursements and out-of-pocket expenses. Encana may also reimburse brokers and other persons holding Common Shares in their name or in the name of nominees for costs incurred in sending proxy materials to their principals to obtain their proxies.

Encana may also use Broadridge Financial Solution Inc.’s (“Broadridge”) QuickVote™ service to assist non-registered shareholders with voting their Common Shares. Kingsdale may contact non-registered shareholders to directly obtain a vote over the telephone.

How Do I Appoint a Proxyholder?

Shareholders wishing to be represented by proxy at the Meeting must return a properly executed proxy to Encana or its agent, AST Trust Company (Canada) (“AST”), by 10:00 a.m. MDT on April 26, 2019 or, in the case of any

 

3


Table of Contents

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 the deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion without notice. All Common Shares represented by a properly executed proxy will be voted or withheld from voting in accordance with the shareholder’s instructions on any ballot that may be called for. If the shareholder specifies a choice with respect to any matter to be acted upon, the Common Shares will be voted accordingly.

If I Return a Proxy without Voting Instructions, How Will My Common Shares Be Voted?

Shareholders who have appointed a named appointee of management to act and vote on their behalf, as provided in the enclosed form of proxy or voting instruction form, and who do not provide instructions concerning any matter identified in the Notice of the Meeting, will have the Common Shares represented by such form of proxy or voting instruction form voted FOR each Nominee, FOR the appointment of PwC as the Company’s independent auditors, FOR the amendment and reconfirmation of the Shareholder Rights Plan, FOR the approval of the Omnibus Incentive Plan and FOR the resolution to approve compensation of NEOs (Say-on-Pay).

The form of proxy or voting instruction form used in connection with the Meeting also gives a named appointee or appointees discretionary authority to vote on any amendment or variation to the matters identified in the Notice of the Meeting and on any other matter properly coming before the Meeting. Management is not aware of any such amendment, variation or other matter. If, however, any such amendment, variation or other matter properly comes before the Meeting, proxies will be voted at the discretion of the appointee or appointees named on the enclosed form of proxy or voting instruction form.

Abstentions are not considered votes cast on any proposal. “Broker non-votes” are not considered votes cast on Item 1, 3, 4 or 5, and will have no effect on the vote outcome. Brokers will have discretionary voting power regarding Item 2 in the event beneficial owners, who own their Common Shares in “street name,” do not provide voting instructions regarding Item 2.

What if I Receive More than One Form of Proxy or Voting Instruction Form?

If some of your Common Shares are registered in your name and some are held in the name of one or more nominees, you will need to return more than one proxy or voting instruction form in order to vote all of your Common Shares. Please follow the instructions carefully. The voting process is different for registered and non-registered shareholders.

If I am a REGISTERED Shareholder, How Do I Vote?

If your name appears on a Common Share certificate, you are a registered shareholder. If this is the case, this Proxy Statement will be accompanied by a form of proxy. If you are a registered shareholder, there are two ways that you can vote your Common Shares:

 

1.

Voting by Proxy

To be valid, a proxy must be signed by the shareholder or his or her attorney authorized in writing. There are several ways to submit your form of proxy, indicated on the form of proxy. Carefully review your form of proxy for these instructions.

You can vote your Common Shares by proxy in any of the following ways:

 

Internet:

 

Visit www.astvotemyproxy.com and follow the instructions. You will need your 13-digit control number on the back of the proxy form

Phone:

 

Call 1-888-489-5760 from a touch-tone phone and follow the voice instructions. You will need your 13-digit control number on the back of the proxy form. You cannot appoint a proxyholder via the telephone voting system

Mail:

 

Complete, sign and date your proxy form and return it in the business-reply envelope included in your package

Fax:

 

Complete, sign and date your proxy form and fax both sides of the proxy form to 1-866-781-3111 (toll free in North America) or 1-416-368-2502 (outside of North America)

You may also appoint the management appointee or someone else (who need not be a shareholder) to vote for you as your proxyholder by using the form of proxy. A shareholder has the right to appoint a person or company other than the named appointee of management to represent them at the Meeting. To appoint a

 

4


Table of Contents

person or company other than the named appointee, write their name in the space provided. If you appoint a non-management proxyholder, please ensure they are aware of this appointment and can attend the Meeting to vote on your behalf.

 

2.

Voting in Person

If you are a registered shareholder, you may attend and vote your Common Shares at the Meeting. Upon arriving at the Meeting, report to the desk of AST, our registrar and transfer agent, to sign in and revoke any proxy previously given. You do not need to complete or return your form of proxy if you intend to vote at the Meeting.

If I am a NON-REGISTERED Shareholder, How Do I Vote?

You are a non-registered shareholder if your Common Shares are not registered in your name and are held in the name of a nominee such as a trustee, financial institution or securities broker. If your Common Shares are listed in an account statement provided to you by your broker, those Common Shares will not likely be registered in your name, but instead are likely registered under the name of your broker or its agent.

Without specific instructions, Canadian brokers and their agents or nominees cannot vote Common Shares for a broker’s client. Without specific instructions, U.S. brokers and their agents or nominees cannot vote Common Shares for a broker’s client on “non-routine” matters, including election of directors, amendment and reconfirmation of the Shareholder Rights Plan, approval of the Omnibus Incentive Plan and non-binding advisory vote to approve compensation of NEOs, but may vote on “routine” matters which, in this case, is the appointment of PwC only. When a broker is unable to vote on a “non-routine” proposal and the owner of the Common Shares does not provide voting instructions, a “broker non-vote” occurs. In these circumstances, the broker non-vote has no effect on the vote because it is not considered present and entitled to vote.

If you are a non-registered shareholder, you can vote your Common Shares in the two ways listed below.

 

1.

Give Your Voting Instructions

To vote your Common Shares, your nominee must receive your voting instructions in advance of the Meeting. Your nominee should therefore either provide one of the following for your completion: (i) a voting instruction form, or (ii) a form of proxy, signed by the nominee and restricted to the number of Common Shares you own. These procedures enable non-registered shareholders to direct voting of Common Shares they beneficially own.

Each nominee has its own procedures to ensure Common Shares of non-registered shareholders are voted at the Meeting. Please contact your nominee for instructions. You may vote using any of the methods outlined on the applicable voting instruction form or form of proxy.

 

2.

Vote in Person

To vote in person at the Meeting, insert your name on the voting instruction form or form of proxy to appoint yourself as proxyholder and follow the instructions of your nominee.

Non-registered shareholders who instruct their nominee to appoint themselves as proxyholders should present themselves to an AST representative at the Meeting. Do not complete the voting instruction form or form of proxy, as your vote will be taken and counted at the Meeting.

Can I revoke or change my proxy once I have given it?

Yes. A shareholder can revoke a proxy by depositing an instrument in writing executed by the shareholder or his or her attorney authorized in writing (or, in the case of a corporation, by a duly authorized officer or attorney), either: (i) at the office of the Corporate Secretary, Encana Corporation, 500 Centre Street S.E., Calgary, Alberta, T2G 1A6 prior to the Meeting; (ii) on the day of the Meeting; or (iii) in any other manner permitted by law.

In addition to any other manner permitted by law, a shareholder can also change a previously submitted proxy or voting instruction form by submitting a new proxy or conveying new voting instructions by any of the means described under “If I am a REGISTERED Shareholder, How Do I Vote?” or “If I am a NON-REGISTERED

 

5


Table of Contents

Shareholder, How Do I vote?”, as applicable. Non-registered shareholders must ensure any change in voting instructions is communicated to the applicable nominee sufficiently in advance of voting at the Meeting. Non-registered shareholders who have voted and wish to change their voting instructions should contact their nominee promptly if assistance is required.

What is the deadline to submit my form of proxy or voting instruction form?

To be effective, AST must receive your proxy by 10:00 a.m. MDT on April 26, 2019 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 the deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion without notice. The Company reminds shareholders that only the most recently dated voting instructions will be counted, and any prior dated instructions will be disregarded.

How are votes tabulated?

Proxies are counted and tabulated by the Company’s registrar and transfer agent, AST. AST maintains the confidentiality of individual shareholder votes however, proxies will be submitted to management where they contain comments clearly intended for management or to meet legal requirements.

Who do I contact if I have questions?

If you have questions about information in this Proxy Statement or require assistance in completing your form of proxy or voting instruction form, please contact Kingsdale at:

 

Telephone:

 

1-866-229-8166 (toll free in North America)

1-416-867-2272 (Outside North America, Banks and Brokers call collect)

Email:

  contactus@kingsdaleadvisors.com

Mail:

  The Exchange Tower, 130 King Street West, Suite 2950, P.O. Box 361, Toronto, Ontario, M5X 1E2.

How do I contact the registrar and transfer agent?

You may contact the Company’s registrar and transfer agent AST by telephone, Internet or mail, as follows:

 

Telephone:

 

1-866-580-7145 (toll free in North America)

1-416-682-3863 (outside North America)

Internet:

  www.astfinancial.com/ca-en

Mail:

  AST Trust Company (Canada), Proxy Department, P.O. Box 721, Agincourt, Ontario M1S 0A1.

 

6


Table of Contents

 

Corporate Governance Highlights

Strong corporate governance practices are key to driving and maintaining shareholder value. Effective corporate governance enhances transparency, strengthens Board and management accountability and maintains public trust in the Company and our industry. Our Board and management regularly monitor corporate governance developments as well as best practices to assess our own program and ensure we maintain alignment with shareholder interests. A snapshot of some of our current governance practices is below.

 

 

LOGO

 

7


Table of Contents

 

Director Nominees

Each of our Nominees have the professional experience, skills and attributes to oversee the Company’s long-term sustainability and steward shareholder interests. With the exception of our two new Nominees, Messrs. Steven Nance and Thomas Ricks,2 each Nominee is a current member of our Board and received over 97 percent support of shareholders at our 2018 annual shareholder meeting. With the exception of our President & Chief Executive Officer (“CEO”), Doug Suttles, each Nominee is independent.

Summary information about each Nominee is provided below. More detailed information is provided in the “Director Nominee Profiles” beginning on page 13.

 

Name   Age    

Director  

Since  

 

Positions Held for

Past Five Years

  Committee
Memberships
 

2018  

Board and  

Committee  

Attendance  

 

Other Public

Company

Boards

Peter A. Dea

  65   2010  

Executive Chairman, Confluence Resources LP

President & Chief Executive Officer, Cirque Resources LP

  CREHS*/NCG/ RESERVES     100%   2
             

Fred J. Fowler

  72   2010   Corporate Director   CREHS/HRC   100%   2
             

Howard J. Mayson

  66   2014   Independent Businessman and Corporate Director   CREHS/NCG/ RESERVES*     100%   0
             

Lee A. McIntire

  70   2014  

Corporate Director

Chief Executive Officer, TerraPower, LLC

  CREHS/HRC   89%   0
             

Margaret A. McKenzie  

  57   2015   Corporate Director   AUDIT/HRC   95%   2
             

Steven W. Nance2

  62   2019   Corporate Director   RESERVES/CREHS   n/a   1
             

Suzanne P. Nimocks

  59   2010   Corporate Director   AUDIT/HRC*/NCG   100%   3
             

Thomas G. Ricks2

  65   2019   Corporate Director   AUDIT/HRC   n/a   0
             

Brian G. Shaw

  65   2013   Corporate Director   AUDIT/RESERVES   100%   1
             

Douglas J. Suttles

  58   2013   President & Chief Executive Officer of Encana     100%   0
             

Bruce G. Waterman

  68   2010   Corporate Director   AUDIT*/HRC/NCG   100%   0
             

Clayton H. Woitas3

  70   2008   Corporate Director   NCG*   100%   0

* Chairperson

       

AUDIT

   Audit Committee   CREHS    Corporate Responsibility, Environment, Health and Safety Committee

NCG

   Nominating and Corporate Governance Committee   HRC    Human Resources and Compensation Committee

RESERVES

   Reserves Committee     

 

 

Corporate Governance

 

 

Item 1. Election of Directors

Directors are elected annually and hold office until earlier of close of the next annual meeting of shareholders (“Next Meeting”) or a successor is elected or appointed. Under our Articles of Incorporation (“Articles”), our Board must consist of a minimum of eight and maximum of 17 directors. The Board may appoint additional directors between shareholder meetings, to hold office until close of the Next Meeting. Appointed directors may not exceed one-third of directors elected at the previous annual meeting.

The Board has fixed the number of directors to be elected at the Meeting at 12 directors.

Individuals named in the “Director Nominee Profiles” will be presented for election at the Meeting. Each Nominee is a current member of our Board and (excluding Mr. Suttles, our CEO) is independent.

 

 

2 

Messrs. Nance and Ricks were appointed to the Board effective February 13, 2019 in accordance with the Agreement and Plan of Merger (the “Merger Agreement”) dated October 31, 2018, by and among Encana, Neapolitan Merger Corp., an indirect, wholly-owned subsidiary of Encana, and Newfield Exploration Company (“Newfield”) under which Encana completed its acquisition of Newfield. Other than the Merger Agreement, there are no arrangements or understandings between Messrs. Nance and Ricks and any other person pursuant to which Messrs. Nance and Ricks were selected as directors.

3 

Mr. Woitas, our Chairman of the Board, is Chair of the NCG Committee and serves as an ex officio, non-voting, member of all other Board Committees.

 

8


Table of Contents

The Company has no reason to believe any Nominee will be unable to serve as a director. In the event a Nominee withdraws his or her name or indicates at or prior to the Meeting he or she is unable to serve as director, you or your proxyholder will have the right to use your discretion in voting for such other properly qualified nominee(s).

Vote Required for Approval

Subject to our Policy on Majority Voting, the 12 nominated directors who receive the highest number of FOR votes duly cast at the Meeting will be elected to the Board.

 

 

The Board Recommends You Vote “FOR” the Election of each Nominee

 

Board Composition

An overview of our Board’s composition, including average age and tenure, is illustrated below:

 

 

LOGO

Role of the Board

The Board is responsible for providing oversight of Encana’s overall business and financial strength and for stewarding long-term sustainability, consistent with shareholder interests. Among the Board’s fundamental responsibilities is the appointment of a skilled and committed executive team charged with managing the operational, financial and organizational effectiveness of the business. The Board is also responsible for ensuring principled and ethical corporate conduct is observed through appropriate governance and internal controls, as well as promotion and reinforcement of a strong corporate culture.

Specific responsibilities of the Board are contained in our Board of Directors’ Mandate, attached as Schedule C and available at www.encana.com/about/board-governance/mandates-guidelines.html.

Strategic Planning

The Board performs an integral and ongoing role in the Company’s strategic planning and evaluation processes. Strategy is discussed at each regularly scheduled Board meeting. On an annual basis, the Board also holds a dedicated offsite strategy session to engage in a comprehensive evaluation of our strategy, including challenges and opportunities relative to our key strategic objectives. For 2018, the Board’s annual strategy session focused on re-testing the analysis of the elements of a premium North American exploration and production company. Through ongoing dialogue with management and its technical teams, along with external advisors, who conducted in-depth analyses of various North American basins, these strategic discussions led to the decision to proceed with the acquisition of Newfield.

Supervision of Management

The Board is responsible for appointing our CEO, approving annual objectives and rigorously evaluating CEO performance relative to these objectives at the conclusion of the year. The Board is responsible for approving the appointment of our executive leadership team (“ELT”) members, as well as reviewing their respective annual objectives and the CEO’s evaluation of their performance relative to these objectives. The HRC Committee is responsible for reviewing (for Board approval) annual compensation for each ELT member.

The Board is also responsible for establishing clear authority limits for the CEO. These primarily relate to his financial authority, approval of significant transactions, and departures from the Board-approved strategic plan.

Risk Management

The Board is also responsible for risk management oversight, including regular monitoring to ensure Encana’s key risk management programs and control processes are functioning as intended. To assist in discharging this

 

9


Table of Contents

responsibility, the Board delegates limited non-management oversight, including in respect of financial reporting and accounting, environment, health and safety, human resources, reserves and corporate responsibility matters, to its Committees. The Committees review policies and practices relevant to their respective risk management areas, and work closely with management to ensure key controls and processes are in place to identify, monitor and mitigate risks. This structured risk oversight is reflected in our current Committee structure, which is as follows:

 

   

Board Committee

  Risk Oversight Responsibilities
   

Audit Committee

 

Oversight of principal financial risks by ensuring and monitoring implementation and observance of appropriate risk management policies, processes and internal controls; review and examination of material financial disclosure; and direct engagement with Encana’s internal and external auditors on financial risk matters

   

Corporate Responsibility, Environment,

Health and Safety (“CREHS”) Committee

 

Stewardship of Encana’s environment, health and safety (“EH&S”) program, including key policies, practices, systems and reporting. Monitors EH&S performance, management systems and audit protocols. Oversees corporate responsibility, government relations and ethics and compliance program, including Business Code of Conduct

   
Human Resources and Compensation (“HRC”) Committee  

Ensures appropriate compensation governance, monitors compensation-related risk to ensure program does not encourage or incent unnecessary or undue risk taking that could materially adversely impact Encana or execution of its strategic objectives and oversees CEO and ELT annual compensation and succession planning

   
Nominating and Corporate Governance (“NCG”) Committee  

Oversight of Encana’s corporate governance framework, director appointment, annual Board, Committee and director performance evaluation processes, director education and Company corporate governance practices

   

Reserves Committee

 

Oversight of Encana’s internal qualified reserves evaluators, preparation and disclosure of Encana’s oil and gas reserves and resources data and engagement of independent qualified reserves evaluators or auditors, if any

Each Committee reports to the Board, which coordinates and oversees Encana’s overall risk management approach. This structure encourages specialized, in-depth examination and risk assessment at the Committee level to support the Board’s ultimate organizational risk management oversight.

Sustainability

Encana’s strategy is to be among the most efficient producers of oil and natural gas. We continually strive to improve our operational efficiency and conduct our business in an ethically, environmentally and socially responsible manner. We believe our approach delivers strong performance for our shareholders, as well as responsibly sourced, affordable energy to consumers.

We believe our portfolio and strategy are both resilient and inherently sustainable. Our risk-based approach is focused on identifying environmental, social and governance (“ESG”) issues important to our key stakeholders and with potential to impact our strategy.

The Board, supported by the CREHS Committee, is responsible for oversight of sustainability and ESG-related issues and ensuring overall corporate responsibility. The CREHS Committee is responsible for:

 

   

reviewing actions and initiatives undertaken by management to mitigate corporate responsibility, sustainability and ESG-related risk and/or related matters that may adversely affect our activities, strategy or reputation; and

 

   

reviewing and making recommendations regarding corporate responsibility matters, including policies, standards and practices, as well as ESG-related issues, occupational health, safety, business conduct and ethics.

 

10


Table of Contents

Sustainability and ESG-related issues and risks are reviewed and discussed by the Board on a quarterly basis, including those relative to our internal Corporate Risk Report. The Board also engages directly with external stakeholders on topics relevant to ESG-related issues including those relative to Company strategy.

Internal Controls

The Board is responsible for overseeing the integrity of Encana’s internal controls and management information systems. Effective oversight to monitor controls over accounting and financial reporting systems has been delegated by the Board to the Audit Committee.

Management is responsible for maintaining appropriate internal controls over financial reporting and providing quarterly overviews to the Audit Committee. Quarterly reporting provides the Board and Audit Committee reasonable assurance that our public disclosure of financial information is reliable and accurate, our transactions are appropriately accounted for, and our assets are appropriately safeguarded. Encana also follows a quarterly organization-wide certification process to reinforce accountability for key internal controls at all levels, with results reported to the Board.

Board Assessment Process

The Board, assisted by the NCG Committee, assesses overall Board, Committee and individual director effectiveness and performance on an annual basis.

The Board regularly conducts a comprehensive evaluation to assess overall Board and Committee functioning, as well as the effectiveness of our individual directors. Overseen by the Chairman of the Board, this evaluation includes a detailed effectiveness questionnaire and individual in-person interviews with each independent director. Assessment results are discussed at the NCG Committee and subsequently presented to the full Board for review and discussion, as well as identification of any necessary action items.

Assessment results are used to identify areas requiring performance enhancement, process improvement or individual professional development. Key learnings are captured by the NCG Committee which initiates appropriate follow-up action, as required. The NCG Committee also regularly reviews the respective Board and Committee mandates to identify and address any gaps or necessary amendments due to organizational or regulatory changes or other developments.

 

Board Tenure

 

Encana does not have a mandatory retirement age or formal term limits for our directors. The Board believes our focus on regular and structured Board assessment and evaluation, ongoing succession planning and strong corporate governance practices create an engaged and dynamic Board. The Board also seeks to maintain an effective balance between the retention of experienced and skilled incumbent directors and regular renewal. This balance is reflected in the relatively short average tenure of our current directors of six years.

        LOGO  

Director Skills and Experience

To be considered for nomination to our Board, directors must possess strong commercial acumen, professional expertise and a history of business achievement. Board members must also be highly skilled and possess the requisite personal attributes to ensure effective stewardship of the Company and its future growth.

The NCG Committee is responsible for identifying prospective Board members and ensuring a robust Board renewal process. Potential director candidates are evaluated by the Committee based on a skills matrix and factors including professional experience, geographic representation and other diversity-related considerations. The Board also regularly assesses its composition to ensure an optimal balance of skills, experience and breadth of perspective is maintained.

 

11


Table of Contents

The skills and expertise of each of the Nominees is summarized below. The Board has identified the respective skills and expertise areas below as critical to ensuring effective stewardship of Encana and its future. Detailed information about each Nominee is provided in the “Director Nominee Profiles” beginning on page 13.

 

                         
SKILLS AND EXPERTISE   Dea   Fowler   Mayson   McIntire   McKenzie   Nance   Nimocks   Ricks   Shaw   Suttles   Waterman   Woitas
Accounting, Finance and/or Audit(1)                                    
Environment, Health & Safety(2)                                  
Financial Expert(3)                                          
Governance(4)                                
Human Resources/Compensation(5)                                
Mergers/Acquisitions and Divestitures(6)                              
Natural Gas, Oil and Natural Gas Liquids Development/Operations(7)                                
Public Policy/Government Relations(8)                                    
Reserves(9)                                    
Risk Management(10)                                

Notes:

(1)

Experience in financial services area or overseeing complex financial transactions or on an audit committee.

(2)

Experience in EH&S related matters.

(3)

Audit committee financial expert as defined by the US Securities and Exchange Commission (see definition in “Audit Committee – Independence and Financial Literacy” on page 24).

(4)

Experience overseeing governance practices gained through corporate governance committee or public company senior executive experience.

(5)

Experience overseeing compensation design gained through public company senior executive experience or on a human resources and compensation committee.

(6)

Experience with mergers, acquisitions and/or divestitures.

(7)

Experience with various aspects of natural gas, oil and natural gas liquids development and operations, including exploration, marketing and production.

(8)

Experience working with local, provincial, national or international governments or public relations or related experience as public company senior executive.

(9)

Experience with reviewing externally disclosed natural gas and oil reserves and resources data and reports prepared by independent qualified reserves evaluators or auditors.

(10)

Experience identifying principal corporate risks to ensure implementation of appropriate management and mitigation steps, including as public company senior executive or risk committee member.

 

12


Table of Contents

 

Director Nominee Profiles

 

The following provides detailed information about each Nominee, including residence, principal occupations, recent public directorships, and 2018 Committee membership and attendance record. Common Shares, Restricted Share Units (“RSUs”) and Deferred Share Units (“DSUs”) directly or indirectly held, controlled or directed at February 28, 2019 and March 1, 2018 are also provided on page 19. Current directorships are indicated by “*”.

 

 

PETER A. DEA

 

 

 

 

   LOGO                                        

 

INDEPENDENT

 

Age: 65

 

Denver, Colorado, USA

 

Director since 2010

 

 

MR. DEA brings over 30 years of oil and gas exploration and production experience, as well as involvement in state and national energy policies to the Board. With broad industry expertise and public company board experience, Mr. Dea provides perspective and valuable insight to the Board on energy, oil and natural gas operations and energy-related policy. His business experience includes:

  Executive Chairman, Confluence Resources LP, a private oil and gas company, since September 2016

  President & Chief Executive Officer, Cirque Resources LP, a private oil and gas company, since May 2007

  Director, Liberty Oilfield Services Inc., a public hydraulic fracturing services company, since January 2018

  Director, Antero Midstream GP LP, a public midstream energy partnership, since April 2018

  President & Chief Executive Officer and a director, Western Gas Resources, Inc., a public natural gas company (which was sold in 2006 for approximately US$5.3 billion), from November 2001 through August 2006

  Chief Executive Officer, Barrett Resources Corporation, a public natural gas company (which was sold in 2001 for approximately US$2.7 billion), from November 1999 and served as Chairman from February 2000 through August 2001

  Various managerial and geologic positions with Exxon Company, U.S.A. prior to 1993

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Liberty Oilfield Services Inc.*

  Antero Midstream GP LP*

 

Awards and Accomplishments

  Named “Wildcatter of the Year” for 2010 by Independent Petroleum Association of Mountain States

  Rocky Mountain Oil & Gas Hall of Fame inductee in 2009

  Inducted into All American Wildcatters in 2014

  Fellow National Member, The Explorers Club

  American Association of Petroleum Geologists “Heritage of the Petroleum Geologist” honoree in 2017

  COGA Fred Julander Lifetime Achievement Award in 2018

 

Education

  Bachelor of Arts in  Geology (Western Colorado University)

  Master of Science in Geology (University of Montana)

  Harvard Business School, Advanced Management Program

  Certified Professional Geologist

 

Non-Profit Sector Affiliations

  Trustee, Denver Museum of Nature & Science

  Trustee, The Nature Conservancy-Colorado

 

Board/Committees (2018)

  Board (9 of 9 meetings)

  Corporate Responsibility, Environment, Health and Safety – Chairman (3 of 3 meetings)

  Nominating and Corporate Governance (3 of 3 meetings)

  Reserves (3 of 3 meetings)

 

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 98.71 percent in Favour

 

 

13


Table of Contents

 

FRED J. FOWLER

 

 

 

    LOGO

 

INDEPENDENT

 

Age: 72

 

Houston, Texas, USA

 

Director since 2010

 

 

 

MR. FOWLER brings extensive experience in oil, natural gas liquids and natural gas processing and transportation, as well as corporate governance expertise to the Board. With over 20 years of executive leadership experience, as well as service on other public company boards, Mr. Fowler provides valuable perspective on midstream and marketing, hedging, safety, corporate responsibility and governance to the Board. His business experience includes:

  Director, PG&E Corporation, a public natural gas and electric utility company, since March 2012 (10)

  Director, DCP Midstream Partners, LP, a public master limited partnership engaged in natural gas and natural gas liquids transport, storage, production and sale, since March 2015

  Chairman, Spectra Energy Partners, LP, a public natural gas pipeline and storage entity, from October 2008 to November 2013 and was a director of that company until February 27, 2017

  President & Chief Executive Officer, Spectra Energy Corp., a natural gas gathering, processing and mainline transportation company, from December 2006 to December 2008 and served as a director from December 2006 to May 2009

  President & Chief Executive Officer, Duke Energy Gas Transmission, LLC, a subsidiary of Duke Energy Corporation, from April 2006 through December 2006

  President and Chief Operating Officer, Duke Energy Corporation, a public electric and gas company, from November 2002 to April 2006

  Various executive positions with Duke Energy Corporation prior to 2002

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Spectra Energy Partners, LP

  DCP Midstream Partners, LP*

  PG&E Corporation*

 

Education

  Bachelor of Finance (Oklahoma State University)

 

Board/Committees (2018)

  Board (9 of 9 meetings)

  Corporate Responsibility, Environment, Health and Safety (3 of 3 meetings)

  Human Resources and Compensation (6 of 6 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 98.18 percent in Favour

 

 

 

HOWARD J. MAYSON

 

 

 

LOGO

 

INDEPENDENT

 

Age: 66

 

Breckenridge, Colorado, USA

 

Director since 2014

 

 

  

 

MR. MAYSON is an independent businessman and Corporate Director. With over 40 years of North American and international oil and gas exploration, development and production experience, Mr. Mayson provides broad expertise and perspective to the Board in respect of domestic and international oil and gas operations, safety, as well as reserves oversight and reporting to the Board. His business experience includes:

  Advisory Board member and part-time Operating Partner with Azimuth Capital Management LLC, since 2014

  Various senior leadership roles with BP Exploration & Production, PLC, including Chief Executive Officer of BP Russia, President of BP Angola, Director of BP’s Exploration & Production Technology Group and leader of BP’s Global Subsurface Function

  Prior to joining BP, engineer with Schlumberger Limited from 1977-1981

  Non-executive director of several private U.K. and North American energy-related companies from 2010 to present (9)

 

Awards and Accomplishments

  Honorary Doctor of Engineering (Heriot-Watt University)

 

Education

  Bachelor of Engineering (1st Class Honours), University of Sheffield

  Master of Science (Mechanical Engineering), MIT

  Advanced Management Program, Wharton Business School

 

Non-Profit Sector Affiliations

  Chairman, Industry Advisory Board, Institute of Petroleum Engineering, Edinburgh, 1997-2009

 

Board/Committees (2018)

  Board (9 of 9 meetings)

  Corporate Responsibility, Environment, Health and Safety (3 of 3 meetings)

  Nominating and Corporate Governance (3 of 3 meetings)

  Reserves – Chairman (3 of 3 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 98.98 percent in Favour

 

 

14


Table of Contents

 

LEE A. MCINTIRE

 

 

 

LOGO

 

INDEPENDENT

 

Age: 70

 

Denver, Colorado, USA

 

Director since 2014

 

 

 

MR. MCINTIRE brings extensive executive leadership, risk management and corporate governance experience to the Board. With over 35 years of leadership experience, Mr. McIntire provides broad management, strategy, finance, safety and compensation expertise and insights to the Board. His business experience includes:

  Chief Executive Officer, TerraPower, LLC, a private nuclear energy technology company, from August 2015 to December 2018

  Chief Executive Officer and President, CH2M HILL, a private consulting company, from January 2009 to January 2014, Chairman from 2010 through 2014 and Executive Chairman of the Board from January 2014 to October 2014. Mr. McIntire previously served as CH2M HILL’s Chief Operating Officer and President

  Partner, Executive Vice-President, and served on the Board of Directors of the Bechtel Group of Companies from 1989 to 2004. Mr. McIntire served on the Chairman’s Leadership Council and was President of several of Bechtel’s multibillion-dollar companies

 

Awards and Accomplishments

  Woodrow Wilson Award, 2011

  Josef Korbel Award, 2012

  Elected to Presidents’ Circle of National Academy of Science in 2015

 

Education

  Bachelor of Science in Civil Engineering (University of Nebraska College of Civil Engineering)

  Master’s from the Thunderbird School of Global Management in Arizona

  Executive Management Program at Dartmouth’s Tuck School of Business

 

Board/Committees (2018)

  Board (8 of 9 meetings)

  Corporate Responsibility, Environment, Health and Safety (3 of 3 meetings)

  Human Resources and Compensation (5 of 6 meetings)

 

 

2018 Annual Meeting of Shareholders Voting Results: 98.22 percent in Favour

 

 

 

MARGARET A. MCKENZIE

 

 

 

   LOGO                                  

 

INDEPENDENT

 

Age: 57

 

Calgary, Alberta, Canada

 

Director since 2015

 

 

 

 

MS. MCKENZIE is a Corporate Director and brings extensive energy-related and accounting-related experience to the Board. She has been a Chartered Professional Accountant since 1985, including 14 years as a CFO. With over 20 years of industry and finance-related expertise, as well as experience on other public company Boards, Ms. McKenzie provides valuable perspective in respect of finance, accounting, compensation and business strategy to the Board. Her business experience includes:

  Director, Inter Pipeline Ltd., a public petroleum pipeline company, since August 2015

  Director, PrairieSky Royalty Ltd., a public oil and gas company, since December 2014

  Director, Bonavista Energy Corporation from May 2006 to March 2018

  Director of two private energy-related companies

  Chief Financial Officer, Range Royalty Management Ltd., a private oil and gas royalty company, from 2006 to December 2014

  Vice President, Finance and Chief Financial Officer, Profico Energy Management Ltd., a private oil and gas royalty company, from 2000 to 2006(9)

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Bonavista Energy Corporation

  PrairieSky Royalty Ltd.*

  Zargon Oil and Gas Ltd.

  Inter Pipeline Ltd.*

 

Education

  Bachelor of Commerce (University of Saskatchewan)

  Chartered Professional Accountant (CPA, CA)

  ICD.D (Institute of Corporate Directors)

 

Board/Committees (2018)

  Board (8 of 9 meetings)

  Human Resources and Compensation (6 of 6 meetings)

  Audit (5 of 5 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 98.33 percent in Favour

 

 

15


Table of Contents

 

STEVEN W. NANCE

 

 

 

   LOGO

 

 

INDEPENDENT

 

Age: 62

 

Houston, Texas, USA

 

Director since 2019

 

 

MR. NANCE brings over 40 years of experience in the oil and gas industry ranging from various engineering assignments to C-level executive. Since 2007, Mr. Nance has also provided consulting services on matters such as oil and gas investments, succession planning, coaching and leadership development. Mr. Nance began his career in 1978 as an engineer with The Superior Oil Company. His business experience includes:

  Director, Cloud Peak Energy, Inc., a public U.S. coal producer, since January 2010

  Lead Director, Newfield Exploration Company, a public petroleum, natural gas, and natural gas liquids exploration and production company, from June 2013 to February 2019

  Director, The Williams Companies, Inc., a public energy company, from 2012 to 2016

  President and Manager, Steele Creek Energy, LLC, a private oil and gas investment company, since 2010

  Meridian Oil, Inc., the predecessor company to Burlington Resources, Inc., from 1985, where he held positions of increasing responsibility until his departure in 1997 as Vice President of Burlington’s Gulf Coast division

  President, Chairman and CEO, XPLOR Energy and its predecessor company, from 1997 to 1999. XPLOR Energy was acquired by Harken Energy Corporation in 1999

  President, Peoples Energy Production Company (until it was acquired by El Paso Corporation), from 2000 to 2007

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Newfield Exploration Company

  The Williams Companies, Inc.

  Cloud Peak Energy, Inc.*

 

Awards and Accomplishments

  Recognized as a Distinguished Engineer from the College of Engineering at Texas Tech University

 

Education

  Bachelor of Science in Petroleum Engineering (Texas Tech University)

 

Board/Committees (2018)

  N/A

 

 

 

    

 

 

 

SUZANNE P. NIMOCKS

 

 

 

   LOGO

 

INDEPENDENT

 

Age: 59

 

Houston, Texas, USA

 

Director since 2010

 

 

 

MS. NIMOCKS is a Corporate Director with broad energy, strategy and risk management expertise. With over 30 years of senior leadership and strategic consulting experience, as well as her experience on other public company boards, Ms. Nimocks provides the Board with broad perspective and insights in respect of business strategy, operations, human resources and compensation and corporate governance. Her business experience includes:

  Director, Rowan Companies plc, a public international contract drilling services company, since December 2010

  Director, ArcelorMittal, the world’s largest public steel company, since January 2011

  Director, Owens Corning, a leading global producer of residential and commercial building materials, since September 2012

  Director (senior partner), McKinsey & Company, a private global management consulting firm, from June 1999 to March 2010 and was with the firm in various other capacities since 1989, including as a leader in the firm’s Global Petroleum Practice, Electric Power & Natural Gas Practice, Organization Practice and Risk Management Practice. She served as a member of the firm’s worldwide personnel committees for many years and as the Manager of the Houston office for eight years

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Rowan Companies plc*

  ArcelorMittal*

  Owens Corning*

 

Education

  Bachelor of Arts in Economics (Tufts University)

  Master of Business Administration (Harvard Graduate School of Business)

 

Non-Profit Sector Affiliations

  Director, Houston Zoo, Inc.

  Trustee, Texas Children’s Hospital

  Executive Council, KBH Center for Energy, Law and Business, University of Texas

 

Board/Committees (2018)

  Board (9 of 9 meetings)

  Audit (5 of 5 meetings)

  Human Resources and Compensation – Chairperson (6 of 6 meetings)

  Nominating and Corporate Governance (3 of 3 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 97.81 percent in Favour

 

 

16


Table of Contents

 

THOMAS G. RICKS

 

 

 

   LOGO

 

 

INDEPENDENT

 

Age: 65

 

Austin, Texas, USA

 

Director since 2019

 

 

MR. RICKS is a Corporate Director and brings over 30 years experience in various domestic and international finance positions in the oil and gas and financial industries, providing him with investment and financial experience combined with accounting and audit expertise. His business experience includes:

  Chief Investment Officer, H&S Ventures L.L.C., a private investment firm, from May 2001 to May 2018

  Director, Newfield Exploration Company, a public petroleum, natural gas, and natural gas liquids exploration and production company, from May 1992 to February 2019

  Director, Sensei Biotherapeutics, Inc., a private clinical-stage biopharmaceutical company, since 2015

  Chief Executive Officer, The University of Texas Investment Management Company, from March 1996 to May 2001

  Vice Chancellor, Asset Management for The University of Texas System from August 1992 through February 1996 and as Executive Director of Finance and Private Investments from 1988 to 1992

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Newfield Exploration Company

 

Education

  Bachelor of Arts in Economics (Trinity College)

  Master of Business Administration (University of Chicago)

  Certified Public Accountant (not licensed)

 

Board/Committees (2018)

  N/A

 

 

 

    

 

 

 

BRIAN G. SHAW

 

 

   LOGO

 

 

INDEPENDENT

 

Age: 65

 

Toronto, Ontario, Canada

 

Director since 2013

 

 

 

MR. SHAW is a Corporate Director and brings extensive experience as a financial services executive and also in energy, oil and natural gas to his role as a member of the Board. With over 40 years of management, finance and business strategy experience, Mr. Shaw brings extensive expertise and insight to the Board in respect of banking, finance, investor relations and corporate governance. His business experience includes:

  Director, NuVista Energy Ltd., a public oil and gas company, since August 2014

  Director, Manulife Bank of Canada, a private chartered bank, since February 2012

  Director, Manulife Trust Company, a private trust company, since February 2012

  Director, Lakeview Mortgage Funding Inc., a private structured credit company, since January 2016

  Director, Patheon Inc., a pharmaceutical development and manufacturing company, from December 2009 until March 2014

  Director, PrairieSky Royalty Ltd., a public oil and gas company, from April 2014 until December 2014

  Chairman and Chief Executive Officer, CIBC World Markets Inc., from 2005 through 2008

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Patheon Inc.

  NuVista Energy Ltd.*

  PrairieSky Royalty Ltd.

 

Education

  Bachelor of Commerce (University of Alberta)

  Master of Business Administration (University of Alberta)

  Chartered Financial Analyst

 

Non-Profit Sector Affiliations

  Member, CFA Society Toronto

  Chairman, TMX IP Governance Committee

  Director, Toronto Symphony Orchestra

 

Board/Committees (2018)

  Board (9 of 9 meetings)

  Audit (5 of 5 meetings)

  Reserves (3 of 3 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 99.38 percent in Favour

 

 

17


Table of Contents

 

DOUGLAS J. SUTTLES

 

 

 

   LOGO

 

NOT INDEPENDENT

 

Age: 58

 

Denver, Colorado, USA

 

Director since 2013

 

 

 

MR. SUTTLES has over 35 years of North American and international experience in the oil and gas industry. Prior to joining Encana, Mr. Suttles served in various senior leadership roles with British Petroleum (“BP”) in its North American and international operations. Mr. Suttles was appointed Encana’s President & Chief Executive Officer in June 2013. His business experience includes:

  Independent businessman from March 2011 until June 2013

  Chief Operating Officer, BP Exploration & Production, from January 2009 until March 2011

  President, BP Alaska, from December 2006 until December 2008

  Member of the board of BP America, as well as the BP America Operations Advisory Board

  President, BP Sakhalin Inc., responsible for BP’s activities in Sakhalin, Russia, as well as other senior leadership roles in BP, including Vice-President, North Sea operations and President of BP’s Trinidadian oil business

  Engineer, Exxon, from 1983 to 1988

 

 

Awards and Accomplishments

  Recipient of University of Texas at Austin Mechanical Engineering Distinguished Alumni Award, 2008

  “Mr. Spindletop Award” Honoree by Spindletop Charities, Inc., 2013

 

Education

  Bachelor of Science in Mechanical Engineering (University of Texas, Austin)

 

Non-Profit Sector Affiliations

  Spindletop Charities Advisory Board

  University of Texas Engineering Advisory Board

  Member, National Petroleum Council

  Director, American Petroleum Institute

  Director, American Exploration & Production Council

  Director, Independent Petroleum Association of America

  Director, National Association of Manufacturers

  Executive Committee, Canadian Association of Petroleum Producers (CAPP)

 

Board/Committees (2018)

  Board (9 of 9 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 99.42 percent in Favour

 

 

 

BRUCE G. WATERMAN

 

 

 

       LOGO

 

INDEPENDENT

 

Age: 68

 

Calgary, Alberta, Canada

 

Director since 2010

 

 

 

MR. WATERMAN is a Corporate Director and brings a wealth of finance, energy industry and government relations experience to the Board. With over 22 years of executive leadership experience, Mr. Waterman brings extensive finance, business development, strategy and corporate governance expertise and perspective to the Board. His business experience includes:

  Retired in 2013 as Executive Vice-President, having held senior roles as Chief Financial Officer, as well as in Business Development and Strategy at Agrium Inc. (now known as Nutrien Ltd.), a public agricultural company, since April 2000

  Director, Irving Oil Limited, a private oil and gas company, since 2012

  Director, Prairie Storm Energy Corp., a private oil and gas company, since 2015

  Director, PrairieSky Royalty Ltd., a public oil and gas company, from April 2014 until December 2014

  Director, Enbridge Income Fund Holdings Inc., and a Trustee of Enbridge Commercial Trust, from January 2014 until December 2017

  Vice-President and Chief Financial Officer, Talisman Energy Inc., a public oil and gas company, from January 1996 to April 2000

  Mr. Waterman also has extensive expertise in oil and gas exploration and production operations, having spent 15 years (1981 to 1996) at Amoco Corporation, including Dome Petroleum Limited, a predecessor company. At Amoco (a global chemical, oil and gas company which merged with British Petroleum in 1998), his roles included various positions in finance, accounting and business development

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Enbridge Income Fund Holdings Inc.

  PrairieSky Royalty Ltd.

 

Awards and Accomplishments

  Named Canada’s CFO of the YearTM in 2008

  Fellow of the Chartered Accountants

 

Education

  Bachelor of Commerce (Honours) (Queen’s University)

  Chartered Professional Accountant (FCPA)

  ICD.D (Institute of Corporate Directors)

 

Non-Profit Sector Affiliations

  Selection Committee Chairman, Canada’s CFO of the YearTM

  FEI Canada Advisory Board

 

Board/Committees (2018)

  Board (9 of 9 meetings)

  Audit – Chairman (5 of 5 meetings)

  Human Resources and Compensation (6 of 6 meetings)

  Nominating and Corporate Governance (3 of 3 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 97.36 percent in Favour

 

 

18


Table of Contents

 

CLAYTON H. WOITAS

 

 

 

        LOGO

 

 

 

INDEPENDENT

 

Age: 70

 

Calgary, Alberta, Canada

 

Director since 2008

 

 

 

MR. WOITAS is a Corporate Director and brings extensive experience in the areas of exploration, production, business development, strategy and corporate governance to the Board. He has been Chairman of the Board since July 22, 2013. Mr. Woitas acted as Interim President & Chief Executive Officer of Encana from January 11, 2013 to June 10, 2013. His business experience includes:

  Director, Gibson Energy Inc., a public oil and gas midstream company, from June 2010 until May 2018

  Chairman & Chief Executive Officer, Range Royalty Management Ltd., a private oil and gas royalty company, from 2006 to December 2014

  Director, NuVista Energy Ltd., a public oil and gas company, from July 2003 to May 2013

  Director of several private energy-related companies and advisory boards

  Founder, Chairman, and President & Chief Executive Officer, Profico Energy Management Ltd., a private company (focused on natural gas exploration and production in Western Canada), from January 2000 to June 2006

  Director and President & Chief Executive Officer, Renaissance Energy Ltd., a public company (focused on the Western Canadian energy sector), prior to April 2000

 

 

PAST FIVE YEARS OF PUBLIC COMPANY DIRECTORSHIPS

  Gibson Energy Inc.

 

Education

  Bachelor of Science in Civil Engineering (University of Alberta)

 

Board/Committees (2018)(8)

  Board – Chairman (9 of 9 meetings)

  Nominating and Corporate Governance – Chairman (3 of 3 meetings)

 

 

 

2018 Annual Meeting of Shareholders Voting Results: 97.30 percent in Favour

 

Securities Held

 

Director       Year       Common
    Shares (#)(1)     
            DSUs (#) and                 
Market or Payout Value(2,4)
          RSUs (#) and             
Market or Payout Value(3,5)
  Total Market
    Value of Common    
Shares/DSUs and
RSUs(1,2,3,6)
 

        Minimum Share    
Ownership Required

(Value Equivalent)(7)

Peter A. Dea

  2019     34,303     112,086 ($1,082,751)   16,317 ($157,622)   $1,571,740   $675,000
    2018     135     105,385 ($1,424,805)   16,215 ($219,227)   $1,645,857   29,400 ($397,488)

Fred J. Fowler

  2019     25,000     87,837 ($848,505)   15,623 ($150,918)   $1,240,924   $675,000
    2018     15,000     87,291 ($1,180,174)   15,525 ($209,898)   $1,592,872   29,400 ($397,488)

Howard J. Mayson

  2019     45,488     40,887 ($394,968)   16,317 ($157,622)   $992,005   $675,000
    2018     25,317     40,632 ($549,345)   16,215 ($219,227)   $1,110,857   29,400 ($397,488)

Lee A. McIntire

  2019     60,800     52,599 ($508,106)   15,623 ($150,918)   $1,246,353   $675,000
    2018     17,100     46,525 ($629,018)   15,525 ($209,898)   $1,070,108   29,400 ($397,488)

Margaret A. McKenzie

  2019     22,000     28,123 ($271,668)   15,623 ($150,918)   $635,106   $675,000
    2018     22,000     27,948 ($377,857)   15,525 ($209,898)   $885,195   29,400 ($397,488)

Steven W. Nance (11)

  2019     98,146     0   0   $948,090   $675,000
    2018     n/a     n/a   n/a   n/a   n/a

Suzanne P. Nimocks

  2019     15,684     92,735 ($895,820)   16,664 ($160,974)   $1,208,302   $675,000
    2018     10,648     92,159 ($1,245,990)   16,560 ($223,891)   $1,613,842   29,400 ($397,488)

Thomas G. Ricks (11)

  2019     196,157     0   0   $1,894,877   $675,000
    2018     n/a     n/a   n/a   n/a   n/a

Brian G. Shaw

  2019     20,000     68,317 ($659,942)   15,623 ($150,918)   $1,004,060   $675,000
    2018     10,000     62,143 ($840,173)   15,525 ($209,898)   $1,185,271   29,400 ($397,488)

Douglas J. Suttles

  2019     188,793     0   0   $1,823,740   n/a
    2018     105,994     0   0   $1,433,039   n/a

Bruce G. Waterman

  2019     200,000     120,704 ($1,166,001)   17,012 ($164,336)   $3,262,337   $675,000
    2018     125,000     113,695 ($1,537,156)   16,905 ($228,556)   $3,455,712   29,400 ($397,488)

Clayton H. Woitas

  2019     389,390     180,746 (1,746,006)   27,773 ($268,287)   $5,775,801   $1,200,000
    2018     289,390     169,404 ($2,290,342)   27,599 ($373,138)   $6,576,033   54,000 ($730,080)

Notes:

(1)

Information as to Common Shares held provided by each Nominee as of February 28, 2019 and March 1, 2018, respectively.

(2)

Information as to DSUs held is as of February 28, 2019 and March 1, 2018, respectively. For more information, see “Director Compensation”.

(3)

Information as to RSUs held is as of February 28, 2019 and March 1, 2018, respectively. For more information, see “Director Compensation”.

(4)

“Market or Payout Value” represents value (expressed in Canadian dollars) of vested DSUs not paid out or distributed and determined by multiplying the number of DSUs held by each Nominee as of February 28, 2019 for 2019 and as of March 1, 2018 for 2018, by the closing price of Common Shares on the Toronto Stock Exchange (“TSX”) on those dates (C$9.66 and C$13.52, respectively).

(5)

“Market or Payout Value” represents value (expressed in Canadian dollars) of vested RSUs not paid out or distributed and determined by multiplying the number of RSUs held by each Nominee as of February 28, 2019 for 2019 and as of March 1, 2018 for 2018, by the closing price of Common Shares on the TSX on those dates (C$9.66 and C$13.52, respectively).

(6)

Expressed in Canadian dollars and determined by multiplying number of Common Shares, DSUs and RSUs held by each Nominee as of February 28, 2019 for 2019 and as of March 1, 2018 for 2018 by closing price of Common Shares on TSX on those dates (C$9.66 and C$13.52, respectively).

(7)

Effective May 2, 2018, director share ownership guidelines were updated to require each independent director to purchase Common Shares or hold DSUs or Director RSUs received pursuant to the Director DSU Plan or Director RSU Plan, respectively, with an aggregate value of at least three times his or her annual director compensation (excluding Committee Chair retainer) by the later of: (i) December 31, 2018; or (ii) the fifth anniversary of the director joining the Board. Prior to May 2, 2018, the director share ownership guidelines required each director, other than the CEO, within three years following the individual becoming a director, to purchase Common Shares or hold DSUs totaling in number at least three times the annual grant of DSUs which the director receives in his or her capacity as a director pursuant to the Director DSU Plan. See “Director Compensation” for more information. Dollar values indicate value of minimum number of Common Shares/DSUs and RSUs in Canadian dollars as at February 28, 2019. Mr. Suttles is subject to executive share ownership guidelines and has achieved his required share ownership level. Please see page 65 for more information. As of February 28, 2019, each of our directors meets the ownership requirements set out in the current guidelines except for Ms. McKenzie, who is required to be in compliance by March 15, 2020.

 

19


Table of Contents
(8)

In addition to serving as Chair of the NCG Committee, Mr. Woitas serves as ex officio, non-voting member of all other Committees. As ex officio non-voting member, Mr. Woitas attends Committee meetings as his schedule permits and may vote when necessary to achieve a quorum.

(9)

Mr. Mayson was a director of Endurance Energy Ltd. (“Endurance”) from March 2012 until his resignation in December 2015. Ms. McKenzie was a director of Endurance from November 2008 until her resignation in March 2016. On May 30, 2016, Endurance obtained an Initial Order under the Companies’ Creditors Arrangement Act (“CCAA”) seeking a stay of proceedings and other relief provided under the CCAA. On July 4, 2017, FTI Consulting Canada Inc., Endurance’s court-appointed monitor, sought and obtained an order approving, among other things, a final distribution to Endurance’s lenders and a termination of CCAA proceedings.

(10)

Mr. Fowler has been a director of PG&E Corporation since March 2012. On January 29, 2019, PG&E Corporation and its primary operating subsidiary, Pacific Gas and Electric Company, filed petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code.

(11)

Mr. Nance and Mr. Ricks were appointed to the Board effective February 13, 2019, following completion of the Company’s acquisition of Newfield.

 

20


Table of Contents

 Board and Committee Governance

Board Leadership Structure

Our Board leadership framework consists of an independent Chairman of the Board, independent Committee Chairs and active engagement by all directors. The Board believes this structure encourages effective balance between a strong and coordinated Board with effective risk management oversight.

Independent Chairman of the Board

The Board believes Encana is best served by separating the roles of the Chairman of the Board and CEO. The Chairman of the Board must be an independent Board member and is appointed by the remaining independent directors. The Chairman of the Board is responsible for leading and ensuring effective functioning of the Board as a whole, while serving as primary liaison with our CEO, Mr. Suttles. Our current Chairman of the Board, Clayton H. Woitas, is a non-executive, independent director, and has served in this capacity since July 2013.

Duties and Responsibilities of the Chairman of the Board

Responsibilities of the Chairman of the Board include the following:

 

   

ensure effective functioning and overall operation of the Board;

 

   

facilitate active participation and encourage perspective of all directors;

 

   

serve as liaison between independent directors, the CEO and management;

 

   

assist Committee Chairs in fulfilling their designated roles and responsibilities to the Board;

 

   

lead and oversee the Board’s annual Board and Committee effectiveness and director evaluation process;

 

   

monitor and coordinate with management on corporate governance issues and developments;

 

   

consult and communicate with shareholders as appropriate;

 

   

attend all Committee meetings (as his or her schedule permits);

 

   

call meetings of the independent directors; and

 

   

perform such other functions as the Board or other independent directors may request.

Position Descriptions

The Board has approved position descriptions for the Chairman of the Board, Committee Chairs and CEO. These are available on our website at www.encana.com.

Director Orientation

The NCG Committee is responsible for director orientation and continued education and evaluation of existing directors. Encana’s director orientation provides new directors with detailed information on Encana’s strategy, assets and operations, financial information and culture, and the role and expectations of the Board and its Committees. Directors are provided with access to orientation materials and Encana’s policies and governance practices via an online director portal. New directors are encouraged to meet directly with the Chairman of the Board, other independent directors and the CEO.

Directors are provided regular opportunities to interact with management and key personnel on an informal basis. At Board and Committee meetings, such interaction includes review and discussion of key financial, operational and industry matters. Informally, such opportunities are provided at director education or Board events scheduled by management immediately following regular Board meetings. Board and Committee meetings alternate between Encana’s offices in Canada and the United States, and directors participate in annual field tours of key operations in each country.

 

21


Table of Contents

Director Attendance

Directors are expected to attend each meeting of the Board and Committee which he or she is a member. In 2018, Encana held five regularly scheduled Board meetings, four special meetings and 20 Committee meetings. Overall combined director attendance at Board and Committee meetings in 2018 was 98 percent. All directors attended the 2018 annual meeting of shareholders. Individual director attendance is included in the “Director Nominee Profiles” beginning on page 13.

Executive Sessions

The independent directors meet without management present during executive (or “in-camera”) sessions at each regularly scheduled Board and Committee meeting. Independent sessions are presided over by the Chairman of the Board or respective Committee Chair, as applicable. Independent advisors to the Board or its Committees, such as the compensation advisor to the HRC Committee, FW Cook, may also be invited by the Chairman of the Board or respective Committee Chair to attend all or a portion of an executive session. In 2018, there were six Board meetings and 18 Committee meetings that held executive sessions.

Continuing Education

Continuing education provides directors an opportunity to enhance their understanding of our business and remain current on relevant or emerging corporate governance issues. Board materials provided in advance of each regularly scheduled meeting include detailed director pre-reading and background analyses. Analyses on emerging industry, regulatory and governance matters are regularly provided at Board and Committee meetings.

Encana supports continuing director education through individual paid subscriptions to leading national director education associations in the U.S. and Canada. Through these memberships, directors receive access to continuing education resources and are encouraged to attend conferences, seminars and webinars on board governance and related industry matters. Examples of continuing education sessions attended by Board members and/or hosted by Encana in 2018 include:

 

   

Continuing education and seminars via the Institute of Corporate Directors (Canada) and National Association of Corporate Directors (U.S.);

 

   

Quarterly updates on the Company’s operations;

 

   

Quarterly overviews of enterprise risks, including formal enterprise risk management report;

 

   

Quarterly management overviews of key initiatives and risk management processes, including in respect of treasury, tax, audit, corporate risk management and litigation;

 

   

Regular market fundamentals overviews, including in respect of commodity price, basis differentials, geopolitical and other macro environmental considerations and risks; and

 

   

Regular analysis and review for all independent directors on key executive compensation matters, including key governance matters, by management and the HRC Committee’s independent compensation consultant.

Succession Planning

The Board, HRC Committee and NCG Committee are actively involved in the Company’s succession planning processes. Succession planning for directors, including the Chairman of the Board and Committee Chairs, is the responsibility of the NCG Committee. Succession planning for the CEO and ELT members is annually reviewed by the HRC Committee and entire Board. The HRC Committee annually assesses the Company’s overall organizational leadership and talent development framework, including succession planning program.

Encana has a robust succession planning framework which assesses the competencies, experience, leadership capabilities and development opportunities of each succession candidate. Succession planning and professional development is directed at all levels of the organization to maintain a strong pipeline of talent to execute on our strategic objectives over the long term.

 

22


Table of Contents

Other Board Memberships and Interlocks

Several Nominees are also directors of other reporting issuers. The Board does not impose express limits on the number of other public company boards upon which our directors may serve. Expectations and time commitments of Board members are, however, discussed by the Chairman of the Board with prospective candidates, and incumbent directors on an ongoing basis. The respective board memberships of each Nominee are found under “Director Nominee Profiles” beginning on page 13.

The Board does not have a formal policy on interlocking directorships, however the NCG Committee considers it good governance to avoid interlocking relationships, if possible. No Nominee sits on the same board of directors of any other reporting issuer.

Independent Advisors

The Board and its Committees retain independent financial, legal, compensation and other advisors as it considers appropriate to assist in the discharge of its duties. To assist in its oversight of Encana’s executive compensation program, the HRC Committee has retained FW Cook, an independent compensation consultant, to provide advice and perspective to both the Committee and the Board.

Director Selection Process

The NCG Committee is responsible for identifying prospective director candidates and recommending Committee membership (including potential Chairpersons) to the Board. When evaluating director candidates, the NCG Committee assesses the professional experience and personal attributes of each individual relative to the specific needs of the Board or Committee and its respective oversight responsibilities.

While the NCG Committee considers a range of individual attributes as part of its evaluation, it does not disproportionately weigh any single one. Individual candidates are assessed overall to ensure our Board comprises the necessary expertise, as well as a diversity of perspectives, to discharge its duties. In this regard, the NCG Committee seeks to ensure our Board includes a complementary mix of professional expertise, backgrounds, geographic representation and personal experiences. The Committee also refers to our Director Skills and Experience matrix on page 12 and criteria contained in our Corporate Governance Guidelines, available at http://www.encana.com/about/board-governance/documents-filings.html.

Potential Board candidates may be referred to the NCG Committee by professional search firms, current directors, shareholders or other persons. The NCG Committee will consider candidates identified at regular or special meetings, or nominees recommended by shareholders in accordance with “Shareholder Proposals and Director Nominations” on page 74. Such nominees will be evaluated by the NCG Committee according to the same criteria, and in the same manner, as any other director nominee.

Board Composition

Our current Board composition is consistent with requirements found in our Articles and Corporate Governance Guidelines. Although the Board has no immediate plans to change its composition or increase its size beyond 12 directors, potential candidates will be evaluated consistent with the above considerations. As the Board currently does not have term limits, the NCG Committee annually reviews each prospective nominee for re-election, as well as current Board composition, to ensure each continues to meet Encana’s governance needs.

Board Committees

The Board has five standing committees to assist in carrying out its responsibilities:

 

   

Audit Committee

 

   

Corporate Responsibility, Environment, Health and Safety Committee

 

   

Human Resources and Compensation Committee

 

23


Table of Contents
   

Nominating and Corporate Governance Committee

 

   

Reserves Committee

Each Committee is comprised solely of independent directors and chaired by an independent director. Special ad hoc committees may also be appointed by the Board from time to time for important matters.

The mandate and responsibilities of each Committee are summarized below. Written mandates for Committee Chairs and each standing Committee are available on Encana’s website at www.encana.com/about/board-governance/mandates-guidelines.html.

Audit Committee

At year-end 2018, the members of our Audit Committee were Bruce G. Waterman (Chairman), Margaret A. McKenzie, Suzanne P. Nimocks and Brian G. Shaw. If elected to the Board at the Meeting, Thomas G. Ricks will join the Audit Committee.

The Audit Committee is responsible for oversight of Encana’s internal financial control systems, including quarterly and annual financial reporting by management, Encana’s internal auditors and external auditors, and providing corresponding recommendations to the Board. In discharging its duties, the Audit Committee regularly meets in-camera (without management present) and with external auditors.

Independence and Financial Literacy

Each Audit Committee member must be independent and financially literate in accordance with applicable securities laws and stock exchange rules. All current members of our Audit Committee are both independent and financially literate.

The United States Securities and Exchange Commission (the “SEC”) requires the Board to annually determine if the Audit Committee includes at least one “audit committee financial expert” and, if so, to name such individual(s). For this purpose, an “audit committee financial expert” must have the following attributes:

 

   

an understanding of financial statements and generally accepted accounting principles;

 

   

ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;

 

   

experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities;

 

   

an understanding of internal controls and procedures for financial reporting; and

 

   

an understanding of audit committee functions.

In 2018, the Board determined Ms. McKenzie and Mr. Waterman to be “audit committee financial experts” as defined by the SEC. The Audit Committee held five meetings in 2018. For further information about the Audit Committee, please see our Annual Report.

Corporate Responsibility, Environment, Health and Safety Committee

At year-end 2018, our CREHS Committee members were Peter A. Dea (Chairman), Fred J. Fowler, Howard J. Mayson and Lee A. McIntire. If elected to the Board at the Meeting, Steven W. Nance will join the CREHS Committee.

The CREHS Committee oversees Encana’s EH&S, corporate responsibility and government relations matters, including related policies, practices and reporting. The Committee also oversees Encana’s business conduct and ethics program, including its Business Code of Conduct, compliance training, investigations and integrity hotline reporting. The CREHS Committee held three meetings in 2018.

 

24


Table of Contents

Human Resources and Compensation Committee

At year-end 2018, the members of our HRC Committee were Suzanne P. Nimocks (Chairperson), Fred J. Fowler, Lee A. McIntire, Margaret A. McKenzie and Bruce G. Waterman. If elected to the Board at the Meeting, Thomas G. Ricks will join the HRC Committee.

The HRC Committee is responsible for oversight of Encana’s executive compensation program. Responsibilities of the HRC Committee include reviewing and recommending to the Board, for approval:

 

   

annual compensation for the CEO and ELT members;

 

   

annual performance goals relevant to compensation for the CEO and ELT members and evaluating executive performance relative to such goals;

 

   

performance metrics for the Company’s annual bonus and long-term incentive plans; and

 

   

succession planning for the CEO and ELT members.

In addition to the above, the HRC Committee is responsible for evaluating and approving the compensation and performance peer groups used for benchmarking purposes under our executive compensation program, as well as monitoring executive equity ownership under our share ownership guidelines.

The HRC Committee retains an independent advisor to provide advice and perspective on executive compensation matters. The advisor reports directly to the HRC Committee Chairperson and performs no services on behalf of management. For more information, see “Independent Compensation Advisor” on page 62.

Each of our HRC Committee members qualify as “Non-Employee Directors” under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as “outside directors” as defined in Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended. The HRC Committee held four regularly scheduled meetings and two special meetings in 2018.

HRC Committee: Interlocks and Insider Participation

During 2018, no HRC Committee member: (i) is a current or was a former officer or employee of Encana or any of its subsidiaries; or (ii) had a relationship that must be described under the SEC rules relating to disclosure of related person transactions. None of Encana’s executive officers served on the board of directors or compensation committee of any entity that had one or more of its executive officers serving on Encana’s Board or HRC Committee during 2018.

Compensation Risk

Compensation-related risk is mitigated by the Board and HRC Committee using a structured decision-making process and program safeguards. All compensation matters impacting our executive officers, including the CEO, are subject to review and approval by the independent members of our Board.

To ensure our program does not encourage our executives to take unnecessary risks that could materially adversely impact the Company, the HRC Committee conducts annual compensation risk assessments. These assessments are reviewed and/or conducted by the HRC Committee’s independent compensation consultant. The most recent risk assessment of our compensation program and practices conducted in April 2018 recognized Encana’s strong governance practices and concluded “it was not reasonably likely the Company’s executive pay programs will have a material adverse impact on the Company, its business or its value”. More information regarding how the HRC Committee and the Board oversee compensation-related risk is found at “Compensation Risk Management” on page 64.

Nominating and Corporate Governance Committee

At year-end 2018, our NCG Committee members were Clayton H. Woitas (Chairman), Peter A. Dea, Howard J. Mayson, Suzanne P. Nimocks and Bruce G. Waterman.

 

25


Table of Contents

The NCG Committee is responsible for providing oversight of corporate governance matters, monitoring regulatory developments, director recruitment and annual Board, Committee and director evaluation processes. The NCG Committee is responsible for reviewing and recommending director compensation to the Board for approval. The NCG Committee held three meetings in 2018.

Reserves Committee

At year-end 2018, the members of our Reserves Committee were Howard J. Mayson (Chairman), Peter A. Dea and Brian G. Shaw. If elected to the Board at the Meeting, Steven W. Nance will join the Reserves Committee.

The Reserves Committee oversees our internal qualified reserves evaluators, as well as independent qualified reserves evaluators or auditors (if any) retained to evaluate and audit management’s procedures for determining and reporting our oil and gas reserves and resources data. The Committee also reviews Encana’s annual reserves and resources estimates prior to public disclosure. The Reserves Committee held three meetings in 2018.

Policies and Standards

Policy on Majority Voting

A director who receives more “withhold” than “for” votes at the Meeting must immediately tender their resignation to the Board, even though they may be duly elected under applicable law. The NCG Committee will review and make a recommendation to the Board whether to accept or reject the director’s resignation, having regard to Encana’s best interests and any other relevant factors in the circumstances. Absent exceptional circumstances, the Board will accept the resignation, deemed effective upon acceptance. The director may not participate in Board (or NCG Committee) deliberations on the issue.

A decision will be reached by the Board regarding the matter within 90 days following the Meeting. If it accepts the resignation, the Board may appoint a new director to fill the vacancy in accordance with our Articles, the Company’s By-laws (“By-laws”) and applicable law. The Company will promptly issue a news release with the Board’s decision. If the Board determines not to accept the resignation, the news release will fully state the reasons for that decision.

The Policy on Majority Voting only applies to uncontested elections where the number of nominated directors equals the number of directors to be elected at the Meeting. In a contested election (where the number of nominated directors exceeds the number of directors to be elected), directors with the highest number of Common Shares voted in their favour will be elected to the available Board seats.

Business Code of Conduct

The Board and NCG Committee are responsible for overseeing our corporate governance approach. This includes developing appropriate practices to ensure the Board functions independently of management and applicable legal, regulatory and other compliance matters are effectively addressed. Canadian and U.S. regulatory and corporate governance developments are regularly monitored by the Board to ensure our policies and practices remain consistent with best practices.

Encana has a comprehensive Business Code of Conduct (the “Code”) and other corporate governance policies which apply to our directors, officers, employees and contractor personnel. Based on our Foundational Values of Safety, Trust, Integrity and Respect, the Code outlines Encana’s expectations in respect of ethical business conduct, ensuring legal and regulatory compliance and how to report suspected or actual wrongdoing.

Formal annual recommitment to the Code and its related policies is required each year. Regular and extensive in-person training on the Code and key compliance issues is also provided to office and field staff and leaders throughout the year.

Reporting of concerns by staff or the public of actual or potential violations of the Code or applicable law or policy is strongly encouraged, including through our 24-7 Integrity Hotline (the “Hotline”). The Hotline enables confidential or anonymous reporting, online or by telephone, of suspected illegal, unethical or improper conduct. Hotline reports are received by an external third party and directed to Encana’s Ethics & Compliance Team for investigation and

 

26


Table of Contents

handling. Investigation and Hotline activities are regularly reported by management to the CREHS Committee. Concerns involving accounting, internal accounting control, auditing or other financial irregularity are reported to the Audit Committee. Any material items or investigations are reported directly to the Board. In addition to monitoring compliance with the Code, the Board also regularly reviews audit procedures conducted by Encana’s internal audit team to assess compliance with the Code.

Any waivers of the Code in respect of any officer or director may only be approved by the Board and must be promptly disclosed as required by law. The Board has not waived any aspect of the Code to date, and we have never been required to make filings in accordance with securities laws regarding a departure from the Code. The Code is available at www.encana.com/pdf/about/board-governance/policies/business-conduct.pdf.

Disclosure Policy

Our Disclosure Policy reflects Encana’s commitment to timely, balanced and accurate public disclosure regarding our business affairs and activities. The Policy provides guidance regarding the disclosure of material information, authorized corporate spokespersons, and interactions with analysts, investors and the media to avoid selective disclosure. The Policy describes the role and responsibilities of our internal Disclosure Committee to oversee public disclosure matters. The Policy, which applies to all directors, officers, employees and contract personnel is available at www.encana.com/about/board-governance/policies.

Securities Trading and Insider Reporting Policy

Our directors, officers, employees and contractors are subject to our Securities Trading and Insider Reporting Policy. The Policy prohibits insider trading, establishes a regular blackout period schedule, outlines the trading restrictions and reporting obligations of Company insiders, and related obligations to stock exchanges and regulators.

The Policy expressly prohibits our directors, officers and employees from engaging in any form of equity monetization transactions (including the purchase of financial instruments to hedge or offset a decrease in value), as well as the following activities, involving Encana securities:

 

   

selling securities they do not own, have not fully paid for or have no right to own (engaging in a “short sale”);

 

   

selling a “call option” or buying a “put option”;

 

   

entering into equity monetization transactions involving any securities subject to the Company’s share ownership guidelines or that is the equivalent of “short selling”; and

 

   

entering into brokerage arrangements that might result in a sale at a time when he or she is not permitted to trade.

The Policy is available at www.encana.com/about/board-governance/policies.

Diversity

Encana believes a diversity of experience and perspective enhances the effectiveness of our Board and management by enabling broader identification and examination of potential opportunities, risks and potential impacts to our business. Encana actively considers diversity, including gender diversity, when identifying qualified candidates for leadership opportunities. Encana is proud of its long history of female representation on its Board and ELT and robust succession and leadership development process, described below. Our commitment to consideration of diversity when evaluating director candidates is also expressly reflected in our Corporate Governance Guidelines.

Encana has a long history of strong representation of women on our Board. Since 2003, at least two of our Board members have been women. In 2018, 20 percent (or two) of our directors were women. For this Meeting, two of our Nominees are women.

At the executive level, three (or 43 percent) of our seven ELT members are women, each widely recognized for their professional accomplishments and industry contributions. Of our five NEOs, two (or 40 percent) are female

 

27


Table of Contents

executives occupying key executive leadership roles in our organization. Within Encana’s significant subsidiaries (disclosed in our Annual Report), approximately 63 percent of board positions and 47 percent of officer positions are held by women (as at December 31, 2018). Below the executive level, professional development for women is actively encouraged by Encana, including through our internal women’s network, targeted succession planning and formal mentoring programs.

Given our demonstrated commitment to diversity and related considerations in our appointment, hiring and promotion practices, we have not adopted a formal, standalone diversity policy or specific diversity targets for determining Board membership or executive appointments. Encana remains however committed to monitoring best practices and corporate governance developments in this area.

 

 

 Director Compensation

Philosophy and Objectives

Our director compensation program is designed to reflect current market practices and enhance alignment with shareholder interests. Independent directors do not receive performance-based compensation, benefits or other perquisites from the Company. Mr. Suttles receives no compensation from Encana in his capacity as a director. Our directors are also subject to share ownership guidelines, as described below.

Director Compensation Structure

Prior to December 31, 2017, directors received an initial DSU grant upon joining the Board. As part of their annual compensation, directors also received a fixed number of DSUs. In lieu of cash, directors could also elect to receive all or a portion of their annual retainer as DSUs.

In 2018, directors received annual compensation of $225,000 ($400,000 for the Chairman of the Board), comprised of (i) 75 percent Director RSUs under the Director Restricted Share Unit Plan (“Director RSU Plan”); and (ii) 25 percent either cash or DSUs under the Director DSU Plan, at the director’s election.

Committee Chairs also receive a retainer of $10,000 (CREHS and Reserves Committees), $15,000 (HRC Committee) or $20,000 (Audit Committee) and are subject to the same 75/25 percent distribution. Mr. Woitas, Chairman of the Board, does not receive any additional fees in his capacity as NCG Committee Chair. In 2018, annual retainers were paid to our directors in quarterly installments. Annual retainers and any initial DSU grants are pro-rated for periods of partial service. If elected, DSUs are granted quarterly as units. Cash, if elected, is payable on a quarterly basis. This structure is reflected in the tables below.

 

 

Annual Retainer

 

       

Chairman of the Board

     $400,000       

Board Member

     $225,000       

Audit Committee Chair

     $20,000       

HRC Committee Chair

     $15,000       

Other Committee Chairs(1)

     $10,000       

Note:

(1)

Our Chairman of the Board, Mr. Woitas, receives no Committee Chair retainer for serving as Chair of the NCG Committee.

 

Name

  

2018 Director RSU Grants(1)

 

Peter A. Dea

     16,215  

Fred J. Fowler

     15,525  

Howard J. Mayson

     16,215  

Lee A. McIntire

     15,525  

Margaret A. McKenzie

     15,525  

Steven W. Nance

     n/a  

Suzanne P. Nimocks

     16,560  

Thomas G. Ricks

     n/a  

Brian G. Shaw

     15,525  

Bruce G. Waterman

     16,905  

Clayton H. Woitas

     27,599  

Note:

(1)

Director RSUs granted based on the five-day volume weighted average price (VWAP) of US$10.87 on the New York Stock Exchange (“NYSE”) immediately prior to the February 26, 2018 grant date.

 

28


Table of Contents

Director RSUs are settled the earlier of three years from the grant date or retirement from the Board. Director RSUs are currently settled in cash, and subject to shareholder approval of the Omnibus Incentive Plan, may be settled in Common Shares.

Director DSU Plan

Although DSUs vest immediately, they cannot be redeemed until retirement from the Board. Redeemed DSUs are paid in cash, less applicable withholding taxes, with value determined by multiplying the number of DSUs by the current market value of a Common Share. For this purpose, market value is defined as the closing price of Common Shares on the day immediately prior to redemption. Directors may redeem DSUs all at once or in stages, provided they do so before the redemption deadline. Directors are credited with dividend equivalent DSUs whenever a dividend is paid on Common Shares. Information on the total number and market value of DSUs and the total market value of Common Shares and DSUs held by our directors is found in “Director Nominee Profiles” beginning on page 13.

Director Share Ownership Guidelines

To encourage alignment with shareholder interests, our independent directors must maintain an ownership stake in the Company. Each independent director is required to purchase Common Shares or hold DSUs or Director RSUs with an aggregate value of at least three times annual director compensation by the later of: (i) December 31, 2018; or (ii) the fifth anniversary of the director joining the Board. In the event of non-compliance solely due to share price decline, directors have one year to restore compliance. Our director share ownership guidelines are in the upper quartile for share ownership requirements among our Compensation Peer Group (on an absolute dollar value basis). Common Shares held directly or beneficially through a nominee, DSUs and RSUs count towards the guidelines and compliance with the guidelines is evaluated on an annual basis.

Director Compensation Table

Annual compensation of our directors for the year ended December 31, 2018 is summarized in the following table.

 

Name

Fees Earned(1)

($)

75% Share Based

Awards

($)

25% Cash/DSU

($)

All Other

Compensation(2)(3)

($)

Total

($)

Peter A. Dea(4)

235,000 176,250 58,750 404 235,404

Fred J. Fowler

225,000 168,750 56,250 323 225,323

Howard J. Mayson

235,000 176,250 58,750 404 235,404

Lee A. McIntire(4)

225,000 168,750 56,250 404 225,404

Margaret A. McKenzie

225,000 168,750 56,250 404 225,404

Suzanne P. Nimocks

240,000 180,000 60,000 404 240,404

Brian G. Shaw(4)

225,000 168,750 56,250 404 225,404

Douglas J. Suttles(5)

Bruce G. Waterman(4)

245,000 183,750 61,250 404 245,404

Clayton H. Woitas(4)

400,000 300,000 100,000 404 400,404

Notes:

(1)

Fees earned include annual Board and Committee retainers.

(2)

Represents cost of Company-provided life insurance coverage.

(3)

Amounts originally paid in Canadian dollars converted to U.S. dollars using exchange rate of C$1.00 = US$0.772, the average exchange rate for 2018, based on the daily buying rate published by the Bank of Canada.

(4)

Elected to receive all or a portion of fees in DSUs in lieu of cash.

(5)

Mr. Suttles receives no compensation in his capacity as a director. See “Incentive Plan Awards – Grants of Plan-Based Awards for 2018” on page 68 for Mr. Suttles’ grants of long-term incentive (“LTI”) awards as CEO.

 

29


Table of Contents

Trading and Hedging Restrictions

Directors are subject to Encana’s governance policies and practices, including our Securities Trading and Insider Reporting Policy. The Policy prohibits directors from directly or indirectly engaging in certain transactions involving Encana securities, including DSUs granted under the Director DSU Plan. See “Board and Committee Governance – Securities Trading and Insider Reporting Policy” on page 27.

 

 

Director Independence and Related Person Transactions

 

Our Corporate Governance Guidelines, consistent with applicable securities laws and stock exchange rules, require the Board consist of a majority of independent directors. To determine whether a director is “independent”, the Board observes the following criteria:

 

   

the director must not have a disqualifying relationship as specified by applicable securities laws and stock exchange rules; and

 

   

the Board must affirmatively determine the director otherwise has no material relationship with the Company directly, or as an officer, shareholder or partner of an organization that has a relationship with the Company.

When determining director independence, the Board does not consider transactions:

 

   

with entities for which a director or immediate family member served only as a director or trustee;

 

   

of less than $120,000; and

 

   

with entities in which director’s or an immediate family member’s only interest is less than a 10 percent ownership interest.

The Board, assisted by the NCG Committee, annually reviews all relevant business relationships each director nominee and any person who served as a director during that year may have with the Company. Following its annual review, the Board determined none of the Nominees has a material relationship with the Company and, as a result, all Nominees (excluding the CEO) are independent.

All directors who serve as members of each of the Audit, HRC and NCG Committees are independent in accordance with applicable securities laws and stock exchange rules. SEC regulations and NYSE rules for listed companies require the Audit, HRC and NCG Committees meet additional independence criteria, all of which were satisfied during the 2018 fiscal year. Information regarding Encana’s definition of director independence is available at http://www.encana.com/about/board-governance/documents-filings.html.

Related Person Transaction Policy and Process

A “Related Person Transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its subsidiaries) was, is or will be a participant and, as it relates to directors or shareholders who have an ownership interest in the Company of more than five percent, the amount involved exceeds $120,000, and in which any “Related Person” (as defined below) had, has or will have a direct or indirect material interest.

A “Related Person” means (i) a director, nominee director or executive officer of the Company, (ii) an immediate family member of a director, nominee director or executive officer or (iii) a beneficial holder of greater than five percent of the Common Shares or an immediate family member of such holder.

In general, the Company will enter into or ratify Related Person Transactions only when the Board, acting through the NCG Committee, determines that the Related Person Transaction is reasonable and fair to the Company. When considering whether a Related Person Transaction is reasonable and fair to the Company, among other things, the NCG Committee considers the evaluation of the transaction by employees directly involved and the recommendation of the Chief Financial Officer. In addition, any Related Person Transaction involving an executive officer must be pre-approved by the CEO and any Related Person Transaction involving the CEO or a beneficial owner of more than five percent of the outstanding Common Shares must be submitted to the Audit Committee for

 

30


Table of Contents

approval. If a Related Person Transaction is ongoing, any amendments or changes are reviewed and the transaction is reviewed annually for reasonableness and fairness to the Company.

To identify potential Related Person Transactions, directors and officers must complete annual questionnaires and annually verify information about (i) where the director is an employee, director or executive officer, (ii) each entity where an immediate family member of a director is an executive officer, (iii) each firm, corporation or other entity in which the director or an immediate family member is a partner or principal or in a similar position or in which such person has a five percent or greater beneficial ownership interest and (iv) each charitable or non-profit organization where the director or an immediate family member is an employee, executive officer, director or trustee.

Any Related Person Transaction would be reviewed on an ongoing basis by the Audit Committee to identify and prevent any conflict of interest.

 

31


Table of Contents

 

Security Ownership of Certain Beneficial Owners and Management

 

 

 

Ownership of Equity Securities of the Company

The following table provides information regarding beneficial ownership of Common Shares by each director, each individual named in the Summary Compensation Table on page 66, and the directors and executive officers as a group, all as of February 28, 2019. Unless otherwise noted, voting power and investment power in Common Shares are exercisable solely by the named person and no Common Shares were pledged as security by such person.

 

Name of Beneficial Owner

Aggregate Number of Common

Shares Beneficially Owned

Percentage of Outstanding

Common Shares5

Sherri A. Brillon

145,900 *

Peter A. Dea

34,303 *

Fred J. Fowler

25,000 *

David G. Hill

43,801 *

Howard J. Mayson

45,488 *

Michael G. McAllister

40,167 *

Lee A. McIntire

60,800 *

Margaret A. McKenzie

22,000 *

Steven W. Nance

98,146 *

Suzanne P. Nimocks

15,684 *

Thomas G. Ricks

196,157 *

Brian G. Shaw

20,000 *

Douglas J. Suttles

188,793 *

Bruce G. Waterman

200,000 *

Clayton H. Woitas

389,390 *

Renee E. Zemljak

32,722 *

All Directors and executive officers as a group6

1,613,009 *

 

*

Less than 1 percent of issued and outstanding Common Shares.

Principal Shareholders

The table below provides the number of Common Shares held by persons known by the Company to be the beneficial owners of more than five percent of issued and outstanding Common Shares, as of February 28, 2019.

 

Name and  Address   

   Amount and Nature of   

Beneficial Ownership

    

  Percentage of Outstanding  

Common Shares

 

   1   

  

Wellington Management Group LLP

c/o Wellington Management Company LLP,

280 Congress St., Boston MA 02210

                 107,083,582                                  11.24%                

   2   

  

Causeway Capital Management LLC

11111 Santa Monica Blvd., 15th Floor, Los Angeles, CA 90025

                 90,161,289                                  9.47%                

 

(1)

Information based upon a Schedule 13G/A filing on February 11, 2019, available at www.sec.gov.

(2)

Information based upon a Schedule 13G/A filing on February 14, 2019, available at www.sec.gov.

 

5 

Share units credited under the Director DSU Plan are not included as outstanding Common Shares in calculating these percentages. Unvested performance share units (“PSUs”) and RSUs that may be settled in Common Shares upon vesting are also not included.

6 

Included are Common Shares beneficially owned by unlisted executive officers Joanne Alexander (32,625) and Mike Williams (22,033).

 

32


Table of Contents

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who own more than 10 percent of a registered class of the Company’s equity securities to file initial reports of ownership and reports of changes in ownership of the Common Shares with the SEC. SEC regulations require executive officers, directors and greater than 10 percent shareholders to furnish the Company with copies of all forms they file pursuant to Section 16(a). Based on a review of such forms, the Company believes that all Section 16(a) filing requirements were timely met during the fiscal year ended December 31, 2018, except that the Form 4 filed by Lee A. McIntire on February 4, 2019 reported one late transaction.

As a matter of practice, the Company’s administrative staff assists the Company’s executive officers and directors in preparing initial reports of ownership and reports of changes in ownership and filing such reports with the SEC.

 

 

Indebtedness of Directors and Executive Officers

 

As at the date of this Proxy Statement, there is no, and has not been since January 1, 2018, any, indebtedness outstanding by, or any guarantees, support agreements, letters of credit or other similar arrangements or understandings provided by, the Company or its subsidiaries to any of the Company’s current or former directors (including the Nominees) or executive officers or any of their associates.

 

 

Audit Matters

 

 

Report of the Audit Committee

 

The Audit Committee operates under an Audit Committee Mandate adopted by the Board that outlines its responsibilities and practices, available at www.encana.com/pdf/about/board-governance/mandate-audit.pdf. The Audit Committee reviews and assesses the adequacy of its mandate on an annual basis and, when appropriate, recommends to the Board, for approval, changes that reflect the Audit Committee’s evolving role. In 2018, the Audit Committee was composed of four directors, each of whom is independent as defined by applicable securities laws and stock exchange rules and that at least one member is an “audit committee financial expert”.

Responsibilities

Management is responsible for preparing the Company’s consolidated financial statements, managing accounting and financial reporting processes, devising and maintaining systems of internal controls over financial reporting, and assessing the effectiveness of internal controls over financial reporting. The independent auditor is responsible for performing an independent audit of the Company’s consolidated financial statements and internal controls over financial reporting. The Audit Committee’s primary responsibility is to monitor and oversee these processes and procedures on behalf of the Board.

Oversight of Independent Auditors

The Audit Committee monitors the qualifications, performance and independence of the Company’s independent auditors and recommends to the Board on an annual basis whether to propose the reappointment of the Company’s current independent auditors at the next annual meeting of shareholders or propose the appointment of another auditor. PricewaterhouseCoopers LLP were the Company’s independent auditors for the year ended December 31, 2018 and, subject to an affirmative majority of the votes duly cast at the Meeting, will be reappointed in such capacity at the Meeting until the close of the next annual meeting of shareholders.

The Audit Committee has discussed with the independent auditors those matters required to be discussed by the auditors with the Audit Committee under the standards of the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee has also received written disclosures and the letter from the independent auditors required by the PCAOB regulating the independent auditors’ communication with the Audit Committee concerning independence and has discussed with the independent auditors their independence from the Company’s management and the Company as well as whether the provision of non-audit services by PricewaterhouseCoopers LLP is compatible with maintaining auditor independence.

 

33


Table of Contents

2018 Audited Consolidated Financial Statements

The Audit Committee has reviewed and discussed together with management and the independent auditors the audited consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018, the results of management’s assessment of the effectiveness of the Company’s internal controls over financial reporting, and the independent auditors’ audit of the Company’s internal controls over financial reporting.

In reliance on these reviews and discussions, and the reports of the independent auditors, the Audit Committee has recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for filing with the SEC.

 

 

The Audit Committee

 

Bruce G. Waterman, Chairman

 

Margaret A. McKenzie

 

Suzanne P. Nimocks

 

Brian G. Shaw

 

 

Item 2. Appoint PricewaterhouseCoopers LLP as Independent Auditors

 

The Audit Committee has authority and responsibility to review and evaluate the Company’s independent auditors and to recommend to the Board whether to propose the reappointment of such auditors at the Meeting, or regarding the discharge of such auditors, if necessary, and to recommend alternate independent auditors. Subject to applicable law and the rights of shareholders, the Audit Committee is also responsible for compensation, retention and general oversight of the work of the independent auditors.

Shareholders are being asked to appoint PwC, a registered public accounting firm, to serve as the Company’s independent auditors until the close of the next annual meeting of shareholders. PwC (including its predecessors) has served as the Company’s independent auditors for over 10 years.

Annual Evaluation and Selection of Independent Auditors

The Audit Committee annually evaluates the performance of the Company’s independent auditors, including the senior audit engagement team, and recommends to the Board whether to propose the reappointment of the current independent auditors at the Meeting or to consider other audit firms. Factors considered by the Audit Committee in deciding whether to recommend to the Board retaining PwC include:

 

   

PwC’s independence;

   

PwC’s global capabilities;

   

PwC’s technical expertise and knowledge of the Company’s global operations and industry;

   

Quality and candor of PwC’s communications with the Audit Committee and management;

   

Quality and efficiency of services provided by PwC, including input from management on PwC’s performance and how effectively PwC demonstrated its independent judgment, objectivity and professional skepticism;

   

External data on audit quality and performance, including recent PCAOB reports on PwC and its peer firms; and

   

Appropriateness of PwC’s fees, PwC’s tenure as independent auditor, including benefits of a longer tenure, and controls and processes in place to help ensure PwC’s continued independence.

 

34


Table of Contents

Audit Fees and All Other Fees

The Audit Committee is responsible for approving audit and permissible non-audit services provided by the independent auditors and associated fees. The following table provides information about fees for audit and other services rendered by PwC during fiscal years 2018 and 2017.

 

(C$ thousands)      2018        2017  

Audit Fees(1)

       2,858          2,897  

Audit-Related Fees(2)

       401          205  

Tax Fees(3)

       292          264  

All Other Fees(4)

       6          5  

Total

       3,557          3,371  

Notes:

(1)

Audit fees consist of fees for the audit of the Company’s annual financial statements (including required quarterly reviews), subsidiary audits, or services that are normally provided in connection with statutory and regulatory filings or engagements.

(2)

Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported as Audit Fees. During fiscal 2018 and 2017, the services provided in this category included reviews in connection with acquisitions and divestitures, research of accounting and audit-related issues, review of new accounting standards, preparation of quarterly French translations, review of reserves disclosures and other regulatory filings.

(3)

Tax fees consist of fees for tax compliance services, tax advice and tax planning. During fiscal 2018 and 2017, the services provided in this category included assistance and advice in relation to the preparation of corporate income tax returns.

(4)

During fiscal 2018 and 2017, the services provided in this category included the payment of maintenance fees associated with a research tool that grants access to a comprehensive library of financial reporting and assurance literature.

All audit, audit-related, tax and other services were pre-approved by the Audit Committee, which concluded the provision of such services by PwC was compatible with the firm’s independence in conduct of its auditing functions. The Audit Committee has taken into consideration whether the provision of non-audit services by PwC is compatible with maintaining auditor independence.

The Company did not rely on the de minimis exemption provided by Section (c)(7)(i)(C) of Rule 2-01 of SEC Regulation S-X in 2018 or 2017.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee approves all audit and non-audit services to be provided by our independent auditors prior to the receipt of such services. The Company has adopted policies and procedures with respect to the pre-approval of audit and permitted non-audit services to be provided by PwC. The Audit Committee has established a budget for the provision of a specified list of audit and permitted non-audit services that the Audit Committee believes to be typical, recurring or otherwise likely to be provided by PwC. The budget generally covers the period between the adoption of the budget and the next meeting of the Audit Committee, but at the option of the Audit Committee it may cover a longer or shorter period. The list of services is sufficiently detailed as to the particular services to be provided to ensure that: (i) the Audit Committee knows what services it is being asked to pre-approve; and (ii) it is not necessary for any member of management to make a judgment as to whether a proposed service fits within the pre-approved services.

Subject to the next paragraph, the Audit Committee has delegated authority to the Chair of the Audit Committee (or if the Chair is unavailable, any other member of the Committee) to pre-approve provision of permitted services by PwC which have not otherwise been pre-approved by the Audit Committee, including the fees and terms of the proposed services (“Delegated Authority”). All pre-approvals granted pursuant to Delegated Authority must be presented by the member(s) who granted the pre-approvals to the full Audit Committee at its next meeting. The fees payable in connection with any particular service to be provided by PwC that has been pre-approved pursuant to Delegated Authority: (i) may not exceed C$200,000, in the case of pre-approvals granted by the Chair of the Audit Committee; and (ii) may not exceed C$50,000, in the case of pre-approvals granted by any other member of the Audit Committee.

 

35


Table of Contents

All proposed services, or the fees payable in connection with such services, that have not already been pre-approved must be pre-approved by either the Audit Committee or pursuant to Delegated Authority. Prohibited services may not be pre-approved by the Audit Committee or pursuant to Delegated Authority.

Other Information

One or more representatives of PwC will be present at the Meeting. The representatives will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

Vote Required for Approval

The appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors requires an affirmative majority of the votes duly cast at the Meeting.

 

The Board Recommends You Vote “FOR” for the Appointment of PricewaterhouseCoopers LLP as Independent Auditors of the Company until the Close of the Next Annual Meeting of Shareholders

 

 

Special Business of the Meeting

 

 

 

 

Item 3. Amend and Reconfirm the Company’s Shareholder Rights Plan

 

Encana adopted a shareholder rights plan (the “Rights Plan”) effective July 30, 2001, which has been amended and restated several times. The Rights Plan was last reconfirmed and approved at Encana’s annual meeting of shareholders held May 3, 2016.

At the Meeting, shareholders will be asked to consider and, if deemed appropriate, approve an ordinary resolution to amend and reconfirm the Rights Plan (the “Rights Plan Resolution”). The text of the Rights Plan Resolution and summary of proposed amendments are described below. To be amended and continue in effect after the Meeting, the Rights Plan Resolution must be approved by a simple majority of votes (50 percent plus one) cast by shareholders at the Meeting. If the Rights Plan Resolution is not passed, the Rights Plan will terminate on April 30, 2019. If the Rights Plan Resolution is passed, the Rights Plan will require reconfirmation by Encana’s shareholders at the 2022 annual meeting of shareholders.

Proposed Amendments

Proposed amendments to the Rights Plan are intended to conform to reflect certain governance practices and recommendations provided by shareholder proxy advisory firms, and other amendments of a general housekeeping nature. The proposed amendments update the Rights Plan by:

 

   

amending the definition of “Acting Jointly or in Concert” to remove the reference in such definition to a similar definition found in Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (“MI 62-104”);

 

   

replacing all remaining references to MI 62-104 with references to National Instrument 62-104Take-Over Bids and Issuer Bids (“NI 62-104”), which replaced MI 62-104 upon the adoption of a harmonized take-over bid regime for all Canadian jurisdictions in 2016;

 

   

amending the definition of “Competing Permitted Bid” to clarify that Common Shares tendered pursuant to such a bid cannot be taken up until the close of business on the later of (i) the earliest date on which Common Shares may be taken up under any other Permitted Bid (as defined in the Rights Plan) or Competing Permitted Bid then in existence; and (ii) the last day of the minimum initial deposit period prescribed for such a bid by NI 62-104; and

 

   

making certain additional conforming, technical and administrative amendments to correct typographical errors and ensure consistency and clarity among provisions.

 

36


Table of Contents

The amendments to the Rights Plan are not proposed in response to or in anticipation of any acquisition or take-over bid that is known to the management of the Company, nor is the Rights Plan, as it is proposed to be amended, intended to prevent a take-over of the Company, to secure the continuance of current management and directors of the Company in office, or to deter fair offers for the Common Shares.

The purpose and principal terms of the Rights Plan, including the proposed amendments, are set forth in Schedule B to this Proxy Statement. A copy of the Rights Plan, as proposed to be amended, may be obtained by contacting the Corporate Secretary at (403) 645-2000 or by fax at (403) 645-4617, and will be available on Encana’s website at www.encana.com.

Approval

 

The Board Recommends You Vote “FOR” for the Rights Plan

The Board has determined that the proposed continuation and amendment and restatement of the Rights Plan is in the best interests of Encana and its shareholders. Unless otherwise instructed, the persons designated in the proxy form and the voting information form intend to vote FOR the Rights Plan Resolution below. The text of the Rights Plan Resolution, subject to such amendments, variations or additions as may be approved at the Meeting, is set forth below:

“RESOLVED AS AN ORDINARY RESOLUTION OF THE HOLDERS OF COMMON SHARES that:

 

  1.

The shareholder rights plan (“Rights Plan”) of Encana Corporation (the “Corporation”), including the amendments thereto, be confirmed, and the Amended and Restated Shareholder Rights Plan Agreement to be dated as of April 30, 2019 between the Corporation and AST Trust Company (Canada) (successor to CIBC Mellon Trust Company), which amends and restates the Amended and Restated Shareholder Rights Plan Agreement dated May 3, 2016, and continues the rights issued thereunder, be and is hereby ratified, confirmed and approved.

 

  2.

Any director or officer of the Corporation is authorized and directed for and on behalf of the Corporation (whether under its corporate seal or otherwise) to enter into, to execute and deliver all such instruments, agreements, corollary agreements and documents, including all notices, consents, applications, acknowledgements, certificates and other instruments (herein the “Instruments”) and do, or cause to be done, all such other acts and things (herein “Acts”) as may be necessary for the purpose of giving effect to the foregoing resolutions or to comply with any Instrument or Act, and such Instruments and Acts authorized and approved by these resolutions shall constitute valid and binding obligations of the Corporation, and the performance by the Corporation under such Instruments and pursuant to such Acts is hereby authorized.”

 

 

Item 4. Approve the Omnibus Incentive Plan

 

On February 13, 2019, the Board adopted, subject to shareholder approval, the Omnibus Incentive Plan. The Omnibus Incentive Plan is a long-term incentive plan that permits the grant of stock options (“Stock Options”), stock appreciation rights (“SARs”), RSUs, PSUs, restricted stock (“Restricted Stock”) and other share-based awards (“Other Share-Based Awards”) to directors, officers and employees of the Company and its affiliates, as well as prospective directors, officers and employees who have accepted offers of employment or directorship from the Company or its affiliates (collectively, the “Eligible Individuals”).

The Omnibus Incentive Plan is designed to, among other things, promote a proprietary interest in the Company among Eligible Individuals and to align the interests of such individuals with the interests of shareholders. The Omnibus Incentive Plan, if approved, will also help to streamline the administration of long-term incentive awards, as all new awards granted by the Company will be governed by a single plan.

 

37


Table of Contents

A complete copy of the Omnibus Incentive Plan is attached to this Proxy Statement as Schedule A, and a summary of the principal terms of the Omnibus Incentive Plan is set forth below. A summary of certain U.S. and Canadian federal income tax consequences to Eligible Individuals and to the Company of Awards (as defined below) granted under the Omnibus Incentive Plan is provided in Schedule E to this Proxy Statement.

At the Meeting, shareholders will be asked to consider and, if deemed appropriate, approve an ordinary resolution approving the Omnibus Incentive Plan (the “Omnibus Incentive Plan Resolution”). If the Omnibus Incentive Plan Resolution is passed the Omnibus Incentive Plan will replace the Encana Corporation Employee Stock Appreciation Rights Plan, the Performance Share Unit Plan for Employees of Encana Corporation, the Restricted Share Unit Plan for Employees of Encana Corporation, the Restricted Share Unit Plan for Directors of Encana Corporation and the Encana Corporation Employee Stock Option Plan (the “ESOP”, and together with the foregoing plans, the “Prior Plans”) in respect of future awards, and no new awards will be granted under such Prior Plans. Outstanding awards granted under the Prior Plans will continue to be governed by the terms of such plans until such awards are exercised, expire, or are otherwise terminated or cancelled, with the exception of 1,623,491 RSUs and 2,016,468 PSUs at target (corresponding to 4,032,936 PSUs at maximum) granted in 2018 to certain employees and directors of the Company, which are proposed to be amended to become subject to and settled pursuant to the terms of the Omnibus Incentive Plan, pending shareholder approval at the Meeting.

In addition, subsequent to the Board’s adoption of the Omnibus Incentive Plan, the Company granted an aggregate of 918,633 Stock Options (together with tandem SARs), 1,518,690 SARs, 10,613,059 RSUs and 3,908,182 PSUs at target (corresponding to 7,816,364 at maximum) to Eligible Individuals in March 2019. Further details about these prior grants are provided in the table included below under the heading “New Plan Benefits”. Each of the above-described 2018 RSU and PSU grants and the March 2019 grants are intended to be governed by and subject to the Omnibus Incentive Plan, but if the Company’s shareholders do not approve the Omnibus Incentive Plan and the grant of these awards under that plan at the Meeting, these awards will remain outstanding and instead be amended to become subject to and governed by the applicable Prior Plan. These awards cannot be exercised or settled under the terms of the proposed Omnibus Incentive Plan (i.e., settled with Common Shares in the case of RSUs and PSUs) until such time that shareholders of the Company have approved and ratified the Omnibus Incentive Plan and these grants.

The 2018 RSU and PSU grants that are subject to shareholder ratification at the Meeting consist of: (i) 1,623,491 RSUs (including 156,575 Director RSUs); and (ii) 2,016,468 PSUs at target (corresponding to 4,032,936 PSUs at maximum). The March 2019 grants that are subject to shareholder ratification at the Meeting consist of: (i) 918,633 Stock Options; (ii) 1,518,690 SARs; (iii) 10,613,059 RSUs (including 283,350 Director RSUs); and (iv) 3,908,182 PSUs at target (corresponding to 7,816,364 PSUs at maximum). The RSU and PSU grants that are proposed to be ratified at the Meeting contemplate a cliff vesting date three years from the grant date, except Director RSU grants contemplate immediate vesting followed by settlement on the third anniversary of the grant date or upon the applicable director’s retirement from the Board (whichever occurs first). The Stock Option grants that are proposed to be ratified at the Meeting contemplate vesting over a period of three years, with 30 percent of each such grant vesting on the first anniversary of the grant date, an additional 30 percent vesting on the second anniversary of the grant date, and the final 40 percent vesting on the third anniversary of the grant date. The exercise price applicable to such Stock Option grants, being C$9.54, was determined on the grant date based on the volume-weighted average price of a Common Share on the TSX for the five trading days immediately prior to the grant date.

In connection with the proposed Omnibus Incentive Plan, the Board is seeking approval for 30,000,000 Common Shares to be made available for issuance pursuant to awards granted under the Omnibus Incentive Plan, which number includes all Common Shares which may be issued on the settlement of the 2018 RSU and PSU awards described above and on the exercise or settlement of Stock Options (together with tandem SARs), SARs, RSUs and PSUs granted in March 2019, all of which are proposed to be governed by the terms of the Omnibus Incentive Plan. Common Shares issued pursuant to awards granted under the Omnibus Incentive Plan that expire, or are terminated, forfeited or cancelled, will again be available for issuance pursuant to awards subsequently granted under the Omnibus Incentive Plan. The number of Common Shares available for issuance pursuant to awards granted under the Omnibus Incentive Plan will be subject to adjustment in the event of a share split, share dividend,

 

38


Table of Contents

reverse share split, reorganization, share combination, recapitalization or similar event affecting the capital structure of the Company.

New Plan Benefits1

The awards that have been granted as of the date of this Proxy Statement that are governed, or proposed to be governed, by the Omnibus Incentive Plan are included in the table below. The additional benefits or amounts that will be received by or allocated to each of the individuals and groups listed in the table below in the future are not presently determinable.

 

Name and Position Dollar value ($)2 Number of  units3

  Doug Suttles

  President and Chief Executive Officer

$16,128,126 2,320,6764
     

  Sherri Brillon

  Executive Vice President & Chief Financial Officer

$3,328,227 483,9875
     

  Michael McAllister

  Executive Vice President & Chief Operating Officer

$4,341,165 631,2866
     

  David Hill

  Executive Vice President, Exploration & Business Development

$2,850,000 409,6707
     

  Renee Zemljak

  Executive Vice President, Midstream, Marketing & Fundamentals

$2,850,000
409,6708
     

  Executive Officer Group9

$32,898,097 4,749,79910
     

  Non-Executive Director Group11

$3,720,000 438,944
     

  Non-Executive Officer Employee Group12

$114,650,441 15,399,43213

Notes:

(1)

This table includes (i) RSUs and PSUs granted in 2018 to certain employees and directors of the Company, which are proposed to be amended to become subject to and settled pursuant to the terms of the Omnibus Incentive Plan, pending shareholder approval at the Meeting, and (ii) Stock Options (together with tandem SARs), SARs, RSUs and PSUs granted to Eligible Individuals in March 2019 under the Omnibus Incentive Plan, pending shareholder approval at the Meeting.

(2)

Represents grant date fair value, based on the volume-weighted average price of a Common Share on the NYSE or TSX, as specified in the applicable grant agreement, during the five trading days prior to the March 8, 2019 grant date (C$9.54 or US$7.16) and February 26, 2018 grant date (C$13.76 or US$10.87) as applicable. Amounts awarded in Canadian dollars have been converted to U.S. dollars using the Bank of Canada exchange rate on the applicable grant date.

(3)

Represents number of Common Shares underlying the applicable award. Number of Common Shares underlying PSUs are included at the target level; actual number of Common Shares deliverable based on actual performance may equal up to 200% of the target number.

(4)

Includes 711,054 SARs with an exercise price of US$7.16.

(5)

Includes 150,682 Stock Options with an exercise price of C$9.54.

(6)

Includes 196,541 Stock Options with an exercise price of C$9.54.

(7)

Includes 125,481 SARs with an exercise price of US$7.16.

(8)

Includes 125,481 SARs with an exercise price of US$7.16.

(9)

Includes all seven executive officers, including the NEOs listed individually in the table above.

(10)

Includes 501,181 Stock Options with an exercise price of C$9.54 and 962,016 SARs with an exercise price of US$7.16.

(11)

Includes all eleven directors who are not executive officers, each of whom is a Nominee for election as a director.

(12)

Includes approximately 1,879 Eligible Individuals.

(13)

Includes 457,547 Stock Options with an exercise price of C$9.54 and 595,156 SARs with an exercise price of US$7.16.

Description of the Omnibus Incentive Plan

The purpose and principal terms of the Omnibus Incentive Plan are summarized below. This summary does not purport to be a complete description of the Omnibus Incentive Plan and is qualified in its entirety by reference to the full text of the Omnibus Incentive Plan, a copy of which is included at Schedule A to this Proxy Statement.

Purpose

The Omnibus Incentive Plan is designed to, among other things, promote a proprietary interest in the Company among Eligible Individuals and to align the interests of such individuals with the interests of shareholders through the issuance of long-term incentive awards, including Stock Options, SARs, PSUs, RSUs, Restricted Stock and Other Share-Based Awards (each, an “Award” and collectively the “Awards”).

 

39


Table of Contents

Eligibility

Awards may be granted under the Omnibus Incentive Plan to Eligible Individuals. A Stock Option designated as an “incentive stock option” under the applicable grant agreement may be granted only to employees of the Company and its subsidiaries (within the meaning of Section 424(f) of the United States Internal Revenue Code of 1986 (the “Code”)).

Administration

The Omnibus Incentive Plan will be administered by the HRC Committee or another committee of the Board consisting of at least two directors (such administering body to be referred to in this section as the “Committee”). The Committee has absolute authority to determine the Eligible Individuals to whom Awards may be granted, and to establish the terms, conditions and limitations of each Award (subject to the terms of the Omnibus Incentive Plan and the applicable provisions of the Code), including without limitation, the type and amount of an Award, the number of Common Shares subject to an Award, the exercise price, any vesting conditions, restrictions or limitations attaching to an Award (including any performance criteria to be achieved during any performance period and the length of such performance period) and any vesting acceleration or forfeiture waiver (including on termination of service) regarding any Award and Common Shares relating thereto. The Committee also has full power and authority to interpret the terms and provisions of the Omnibus Incentive Plan as well as any Award issued under the Omnibus Incentive Plan (and any grant agreement relating thereto).

Number of Authorized Shares

The maximum number of Common Shares that may be issued pursuant to Awards under the Omnibus Incentive Plan will be 30,000,000, representing 2 percent of the issued and outstanding Common Shares as at the date of this Proxy Statement. Common Shares issued pursuant to Awards granted under the Omnibus Incentive Plan may, subject to the terms of the grant agreement in respect of an Award, be issued from treasury or purchased in the open market or otherwise, at the sole discretion of the Committee.

All Awards outstanding under the Prior Plans (“Prior Plan Awards”) on the date on which the Omnibus Incentive Plan becomes effective will remain subject to and be settled in accordance with the terms of the applicable Prior Plan, with the exception of 1,623,491 RSUs and 2,016,468 PSUs at target (corresponding to 4,032,936 PSUs at maximum) granted in 2018 to certain employees and directors of the Company, which are proposed to be amended to become subject to and settled pursuant to the terms of the Omnibus Incentive Plan, pending shareholder approval at the Meeting. There are 8,129,492 Common Shares relating to currently outstanding Stock Option grants listed and reserved for issuance upon the exercise of outstanding awards under the ESOP.

If any Award is forfeited, terminates, expires or lapses instead of being exercised, or any Award is settled for cash, the Common Shares subject to such Awards will not be counted as Common Shares issued pursuant to Awards granted under the Omnibus Incentive Plan. Common Shares subject to an Award intended to qualify for the employment inducement award exception under Section 303A.08 of the New York Stock Exchange Company Manual or Section 613(c) of the TSX Company Manual shall not reduce the number of Common Shares available for issuance under the Omnibus Incentive Plan.

If the exercise price of any Stock Option or SAR and/or the tax withholding obligations relating to any Stock Option or SAR are satisfied by delivering Common Shares or the Company withholding Common Shares relating to such Award, the gross number of Common Shares subject to the Award shall be deemed to have been issued under the Omnibus Incentive Plan. If the tax withholding obligation relating to any Award other than a Stock Option or SAR is satisfied by delivering Common Shares or the Company withholding Common Shares relating to such Award, the net number of Common Shares subject to the Award after payment of the tax withholding obligation shall be deemed to have been issued under the Omnibus Incentive Plan.

Limits on Awards to Insiders, Non-Employee Directors and Any One Person

No Awards shall be granted to any Eligible Individual if, at the time of such grant, such grant could result in the number of Common Shares (a) issued to Company “insiders” (as defined by the TSX Company Manual) in any one

 

40


Table of Contents

year period, or (b) issuable to Company “insiders” (as defined in the TSX Company Manual) at any time, in each case, pursuant to the exercise or settlement of Awards issued under the Omnibus Incentive Plan, or when combined with all other securities-based compensation arrangements, exceeding 10 percent of the outstanding Common Shares.

A non-employee director of the Company shall not be granted Awards covering Common Shares with an aggregate grant date Fair Market Value (as defined below) in excess of US$800,000 during any one-year period, and no more than US$100,000 of such allocated grant date Fair Market Value may be comprised of Stock Options or SARs. In addition, a non-employee director shall not be granted any Awards under the Omnibus Incentive Plan if, at the time of such grant, such grant could result in the aggregate number of Common Shares issued to all non-employee directors exceeding 1 percent of the Company’s then issued and outstanding Common Shares.

No Stock Option that is intended to qualify as an “incentive stock option” may be granted to any Eligible Individual who, at the time of such grant, owns Common Shares possessing more than 10 percent of the total combined voting power of all Common Shares, unless at the time such Stock Option is granted, the exercise price is at least 110 percent of the Fair Market Value of a Common Share and such Stock Option expires before the fifth anniversary of the date on which it was granted.

Subject to the terms of the Omnibus Incentive Plan, “Fair Market Value” means, with respect to any particular date, the volume weighted average trading price per Common Share on the stock exchange designated in the applicable grant agreement during the five trading days immediately preceding such date.

Adjustments

In the event of a merger, arrangement, consolidation, acquisition of property or shares, share rights offering, liquidation, disposition of an affiliate (including by reason of a disaffiliation) or similar transaction affecting the Company or any of its affiliates, the Committee may make such adjustments as it deems equitable and appropriate to (a) the aggregate number and kind of securities reserved for issuance and delivery under the Omnibus Incentive Plan, (b) the number and kind of securities subject to Awards then outstanding, and (c) the exercise price of outstanding Awards.

In the event of a share split, reverse share split, share dividend, share combination, reorganization, recapitalization or similar event affecting the capital structure of the Company, or a disaffiliation, separation or spinoff, in each case without consideration, or other extraordinary dividend of cash or other property to the Company’s shareholders, the Committee may make adjustments as it deems equitable and appropriate to (a) the aggregate number and kind of securities reserved for issuance and delivery under the Omnibus Incentive Plan, (b) the number and kind of securities subject to Awards then outstanding, and (c) the exercise price of outstanding Awards.

Types of Awards

Stock Options and SARs

Each Stock Option granted under the Omnibus Incentive Plan will entitle an Eligible Individual to purchase one or more Common Shares upon payment of an exercise price, subject to the terms and conditions of the Omnibus Incentive Plan and the applicable grant agreement. SARs may be granted as a separate Award or in conjunction with a Stock Option. Upon the exercise of a SAR, the Eligible Individual will be entitled to receive an amount equal to the product of (a) the excess of the closing price of one Common Share on the last trading day preceding the date of exercise of the SAR, over the exercise price of the applicable SAR, multiplied by (b) the number of Common Shares in respect of which the SAR has been exercised. Stock Options granted with a tandem SAR will allow the Eligible Individual to surrender the Stock Option and exercise the related SAR or to exercise the Stock Option, in which case the related SAR will immediately terminate, and no payment will be made, or Common Shares issued in respect thereof. The applicable grant agreement for SARs grants not in conjunction with a Stock Option will specify whether such payment is to be made in cash or Common Shares or will reserve to the Committee or the Eligible Individual the right to make that determination prior to or upon the exercise of the SAR.

 

41


Table of Contents

The exercise price per Common Share subject to a Stock Option or SAR will be determined by the Committee and set forth in the applicable grant agreement and will not be less than the Fair Market Value of a Common Share on the applicable grant date.

The term of each Stock Option and each SAR will be fixed by the Committee, however in no event will any Stock Option or SAR be exercisable more than 10 years following the grant date of such Award, subject to the terms of the Omnibus Incentive Plan. Notwithstanding the foregoing, if the date on which a Stock Option or SAR is meant to terminate, expire or lapse (the “Termination Date”) occurs during a trading blackout period imposed by the Company and applicable to the relevant participant, or within 10 business days of the expiry thereof, then the Termination Date will be extended to the date that is 10 business days following the expiry date of such trading blackout period.

Stock Options and SARs currently outstanding under the Prior Plans and Stock Options granted under the Omnibus Incentive Plan in March 2019 will expire no more than seven years from the grant date of such Award.

RSUs

RSUs are Awards denominated in Common Shares that will be settled in a specified number of Common Shares or a cash amount equal to the Fair Market Value of a specified number of Common Shares, as determined in the sole discretion of the Committee.

The vesting of RSUs is conditioned upon the continued service of the applicable Eligible Individual. RSUs will vest in accordance with the terms and conditions of the Omnibus Incentive Plan and the applicable grant agreement.

An Eligible Individual to whom RSUs are awarded will have no rights as a shareholder with respect to the Common Shares represented by the RSUs until Common Shares are actually delivered to the Eligible Individual in settlement thereof.

The effect of an Eligible Individual’s period of absence or termination of service on such Eligible Individual’s RSUs will be as set forth in the applicable grant agreement.

PSUs

PSUs are Awards denominated in Common Shares that will be settled in Common Shares or a cash amount equal to the Fair Market Value of Common Shares, as determined in the sole discretion of the Committee. The number of PSUs settled will vary depending on the Company’s achievement over a designated performance period of performance criteria determined by the Committee and set forth in the applicable grant agreement.

The vesting of PSUs is conditioned upon the continued service of the applicable Eligible Individual. PSUs will vest in accordance with the terms and conditions of the Omnibus Incentive Plan and the applicable grant agreement.

An Eligible Individual to whom PSUs are awarded will have no rights as a shareholder with respect to the Common Shares represented by the PSUs until Common Shares are actually delivered to the Eligible Individual in settlement thereof.

The effect of an Eligible Individual’s period of absence or termination of service on such Eligible Individual’s PSUs will be as set forth in the applicable grant agreement.

Restricted Stock

Shares of Restricted Stock are actual Common Shares issued to an Eligible Individual, subject to certain restrictions on the ability to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock during the restriction period determined by the Committee. Subject to the foregoing and the terms of the applicable grant agreement, the applicable Eligible Individual will have, in respect of his or her shares of Restricted Stock, all the rights of a shareholder of the Company holding the class or series of Common Shares that is the subject of the Restricted Stock, including the right to receive dividends and, subject to TSX approval, the right to vote the Common Shares.

Vesting of Restricted Stock (i) shall be conditional upon the continued service of the applicable Eligible Individual, and (ii) may be subject to the achievement of performance criteria as determined by the Committee.

 

42


Table of Contents

The effect of an Eligible Individual’s period of absence or termination of service on such Eligible Individual’s shares of Restricted Stock will be as set forth in the applicable grant agreement.

Other Share-Based Awards

Subject to the terms of the Omnibus Incentive Plan, the Committee may grant equity-based or equity-related awards not otherwise described in the Omnibus Incentive Plan in such amounts and subject to such terms and conditions consistent with the terms of the Omnibus Incentive Plan as the Committee may determine, which may: (a) involve the transfer of actual Common Shares to Eligible Individuals, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of Common Shares, (b) be subject to performance-based and/or service-based conditions, (c) be in the form of phantom stock, deferred share units or other awards denominated in, or with a value determined by reference to, a number of Common Shares that is specified at the time of the grant of such award, and (d) be designed to comply with applicable laws of jurisdictions other than the United States or Canada.

No Repricing

Without shareholder approval and except as described above under the heading “Adjustments”, the Committee is not authorized to reduce the exercise price of an outstanding Stock Option or SAR, including by way of a cancellation in exchange for cash or other Awards or in conjunction with the grant of any new Stock Option or SAR with a lower exercise price.

Transferability

Except as set forth below, Awards under the Omnibus Incentive Plan are not transferable except by will or by laws of descent and distribution (or otherwise for estate settlement purposes). A Stock Option that is not designated as an “incentive stock option” under the applicable grant agreement or a SAR may be transferred by a participant, for no value or consideration, to such participant’s family members, whether directly or indirectly or by means of a trust or partnership or otherwise, if such transfer is expressly permitted by the Committee.

Change in Control

Under the Omnibus Incentive Plan, in the event of a Change in Control (as hereinafter defined) in which outstanding Awards are not assumed or replaced by the resulting entity, then immediately prior to the time of such Change in Control all outstanding Awards will vest in full and the Company will generally be required to settle such Awards, together with any previously vested but unexercised Awards, in cash, property or a combination thereof, as applicable, as soon as practicable (and in any event within 30 days of the Change in Control), and for every performance-based Award that vests in connection with a Change in Control, the level of achievement of the performance criteria in respect of the applicable performance period shall be deemed to be the greater of (a) the median performance criteria and (b) the level of achievement of the performance criteria applicable to a performance period as determined by the Committee no later than the date of the Change in Control, taking into account performance through the latest date preceding the Change in Control as to which performance can, as a practical matter, be determined (but no later than the end of the performance period).

In the event of a Change in Control in which outstanding Awards are assumed or replaced by the resulting entity, then any outstanding and unvested Awards held by a participant will immediately vest in full and will generally be paid or, become exercisable (if applicable), and all vesting and exercisability restrictions on such Awards will immediately lapse, if within a specified period after the Change in Control the participant’s employment or service is terminated by the Company other than for CIC Cause (as defined in the Omnibus Incentive Plan) or by the participant for Good Reason (as defined in the Omnibus Incentive Plan).

For the purposes of the Omnibus Incentive Plan, a “Change in Control” has the definition set forth in the Omnibus Incentive Plan and generally means the occurrence of any of the following events:

 

  i.

an acquisition by any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any persons acting jointly or in concert with the foregoing, of beneficial

 

43


Table of Contents
 

ownership of 30 percent or more of either (a) the then outstanding Common Shares, or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (generally excluding any acquisition directly from the Company, any acquisition by the Company, any acquisition by any employee benefit plan of the Company or any of its subsidiaries, or any acquisition pursuant to certain transactions described in paragraph (ii) below);

 

  ii.

the consummation of a reorganization, merger, arrangement, statutory share exchange, consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or disposition of all or substantially all of the assets of the Company, or the acquisition of assets or securities of another entity by the Company or any of its subsidiaries, unless immediately after such transaction (a) the beneficial owners of common shares and voting securities of the Company immediately prior to the transaction retain, in substantially the same proportions, at least 50 percent of such common shares and voting securities of the company resulting from such transaction, (b) no person (excluding any employee benefit plan of the Company or any entity resulting from the transaction) beneficially owns 30 percent or more of the then outstanding common shares or voting securities of the company resulting from such transaction except to the extent such ownership existed prior to the transaction, and (c) at least a majority of the members of the board of directors of the company resulting from such transaction were incumbent directors of the Company at the time of action of the Board providing for such transaction;

 

  iii.

a change in the composition of the Board such that the incumbent members of the Board cease to constitute at least a majority of the Board (provided that directors whose election, or nomination for election by shareholders, was approved by at least a majority of the incumbent Board shall be considered incumbent members, excluding any such directors whose initial assumption of office occurs as a result of an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board); or

 

  iv.

the approval by the shareholders of a complete liquidation or dissolution of the Company.

Term and Amendments

Unless earlier terminated by the Board, the Omnibus Incentive Plan will terminate, and no further Awards will be granted thereunder, on the tenth anniversary of the date on which the Omnibus Incentive Plan becomes effective. Awards outstanding as of such date shall not be affected or impaired by the termination of this Plan.

The Committee may amend, alter or discontinue the Omnibus Incentive Plan or amend the terms of any Award granted thereunder from time to time without shareholder approval; provided however that:

 

  (a)

approval of the holders of a majority of Common Shares present in person or by proxy at a meeting of shareholders is necessary for any:

 

  i.

increase in the maximum number of Common Shares issuable pursuant to Awards granted under the Plan;

 

  ii.

amendment that would reduce the exercise price of an outstanding stock option or SAR;

 

  iii.

amendment to extend the maximum term of any Award;

 

  iv.

amendment to permit the transfer or assignment of Awards beyond what is contemplated by the Omnibus Incentive Plan;

 

  v.

amendment to increase the limits on non-employee director participation contained in the Omnibus Incentive Plan;

 

  vi.

amendment that removes or exceeds the insider participation limit contained in the Omnibus Incentive Plan;

 

  vii.

amendment to the Omnibus Incentive Plan’s amendment provisions; or

 

  viii.

amendment for which shareholder approval is otherwise required under the rules or policies of the TSX or the NYSE, as applicable, or any applicable law, and

 

44


Table of Contents
  (b)

the consent of the Award holder is obtained for any amendment, alteration or discontinuation which adversely alters or impairs the rights of the holder in respect of a previously granted Award.

Approval

 

 

The Board Recommends You Vote “FOR” the Omnibus Incentive Plan Resolution

 

The Board has determined that the approval of the Omnibus Incentive Plan is in the best interests of Encana and its shareholders. The Board recommends that shareholders vote FOR the Omnibus Incentive Plan Resolution. Unless otherwise instructed, the persons designated in the proxy form and the voting information form intend to vote FOR the Omnibus Incentive Plan Resolution. The text of the Omnibus Incentive Plan Resolution, subject to such amendments, variations or additions as may be approved at the Meeting, is set forth below:

“RESOLVED AS AN ORDINARY RESOLUTION OF THE HOLDERS OF COMMON SHARES that:

 

  1.

The omnibus long-term incentive plan of the Corporation (the “Omnibus Incentive Plan”), in substantially the form as set forth in Schedule A of the Corporation’s Proxy Statement dated March 14, 2019, be and is hereby ratified, confirmed and approved.

 

  2.

The Corporation be and is hereby authorized to reserve and allot for issuance up to 30,000,000 common shares in the capital of the Corporation pursuant to Awards (as such term is defined in the Omnibus Incentive Plan) granted under the Omnibus Incentive Plan from time to time in accordance with the terms of the Omnibus Incentive Plan.

 

  3.

The issuance of common shares in the capital of the Corporation, which shall be deducted from the 30,000,000 common shares authorized pursuant to Item 2 above, pursuant to an aggregate of 918,633 stock options (together with tandem stock appreciation rights), 1,518,690 stock appreciation rights, 10,613,059 restricted share units and 3,908,182 performance share units at target (corresponding to 7,816,364 at maximum) granted under the Omnibus Incentive Plan on March 8, 2019, and an aggregate of 1,466,916 restricted share units granted under the Restricted Share Unit Plan for Employees of Encana Corporation, 156,575 restricted share units granted under the Restricted Share Unit Plan for Directors of Encana Corporation, and 2,016,468 performance share units at target (corresponding to 4,032,936 performance share units at maximum) granted under the Performance Share Unit Plan for Employees of Encana Corporation following the amendment of such awards so that they are governed by and settled in accordance with the terms of the Omnibus Incentive Plan, as described in the Corporation’s Proxy Statement dated March 14, 2019, be and is hereby approved, authorized and ratified.

 

  4.

Any director or officer of the Corporation is authorized and directed for and on behalf of the Corporation (whether under its corporate seal or otherwise) to enter into, execute and deliver all such instruments, agreements, corollary agreements and documents, including all notices, consents, applications, acknowledgements, certificates and other instruments (herein the “Instruments”) and do, or cause to be done, all such other acts and things (herein “Acts”) as may be necessary for the purpose of giving effect to the foregoing resolutions or to comply with any Instrument or Act, and such Instruments and Acts authorized and approved by these resolutions shall constitute valid and binding obligations of the Corporation, and the performance by the Corporation under such Instruments and pursuant to such Acts is hereby authorized.”

 

 

Item 5. Advisory Vote to Approve Compensation of Named Executive Officers

 

Encana is committed to providing shareholders with clear, comprehensive and transparent executive compensation disclosure. For information on Encana’s approach to executive compensation, see our “Compensation Discussion and Analysis” beginning on page 47.

As required by Section 14A of the Exchange Act and related SEC rules, Encana is providing shareholders with an opportunity to vote to approve, on a non-binding advisory basis, compensation of our NEOs as disclosed in this Proxy Statement, commonly known as “Say-on-Pay”.

 

45


Table of Contents

As a result of the advisory vote on frequency of Say-on-Pay votes at our 2018 annual meeting of shareholders, Encana has determined that it will hold, on a non-binding advisory basis, an annual Say-on-Pay vote. The Corporation’s decision regarding the frequency of future Say-on-Pay votes will remain in effect until the next required vote on such frequency.

The Board recognizes a thoughtful executive compensation framework is critical to managing risk and appropriately incentivizing executive leadership relative to both actual performance and demonstrated behaviours. The HRC Committee has worked diligently to develop an executive compensation program that attracts and retains top talent, while motivating and rewarding performance that drives sustainable, long-term shareholder value. In this regard, the Board believes Encana’s approach to executive compensation is balanced and effectively aligns the performance of our executive officers with the long-term interests of our shareholders.

As this is an advisory vote, the results will not be binding upon the Board. However, when considering the Company’s approach to compensation for the NEOs, the Board will take results of this vote into account, together with other shareholder feedback and best practices in compensation governance. During 2018, the Company engaged with shareholders to solicit their feedback on its approach to compensation. This feedback and the corresponding actions undertaken by the Board in response are discussed at “Shareholder Outreach” on page 50.

The Board recommends that shareholders vote FOR the resolution set out below and, unless otherwise instructed, the persons designated in the form of proxy or the voting instruction form intend to vote FOR the following resolution:

RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers of the Company as disclosed in the Company’s Proxy Statement for the 2019 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure”.

Vote Required for Approval

To be approved, the advisory resolution on the compensation of the NEOs requires an affirmative majority of the votes duly cast at the Meeting.

 

    The Board Recommends You Vote “FOR” the Approval of the Compensation of the Company’s Named Executive Officers as Disclosed in the Proxy Statement

 

 

46


Table of Contents

 

Compensation Discussion and Analysis

 

 

This Compensation Discussion and Analysis (“CD&A”) outlines Encana’s executive compensation philosophy and design, and alignment of our compensation with the interests of our shareholders. We have also highlighted our 2018 Company achievements relative to our long-term strategy, and 2018 executive compensation decisions for our CEO and four other top executive officers. These five named executive officers, known as our “NEOs” are listed below:

 

LOGO    LOGO    LOGO    LOGO    LOGO

DOUG SUTTLES

President &
Chief Executive Officer

  

SHERRI BRILLON

Executive Vice-President & Chief Financial Officer

  

MIKE MCALLISTER

Executive Vice-President &
Chief Operating Officer

  

DAVID HILL

Executive Vice-President, Exploration & Business Development

  

RENEE ZEMLJAK

Executive Vice-President, Midstream, Marketing & Fundamentals

 

      

Table of Contents:    

   Page

I.  Executive Summary

     47

II.  Executive Compensation Philosophy

     51

III.  2018 Compensation Program and Metrics

     53

IV.  2018 Compensation Decisions

     56

V.  Compensation Governance – Administering Compensation to the Highest Standards

     62

VI.  2018 Detailed Compensation Disclosure

 

     66

 

      

 

 

  I. EXECUTIVE SUMMARY

 

Our Strategy – Disciplined Focus on Profitable Growth

Encana is a leading North American energy producer focused on developing our multi-basin portfolio of oil, natural gas liquids and natural gas producing plays. Encana is committed to growing long-term shareholder value through a disciplined focus on generating profitable growth. In the pursuit of growing shareholder value, the Company has undertaken a rigorous portfolio optimization process that resulted in the divestiture of approximately $12 billion in assets over the past five years. This portfolio optimization has meaningfully increased the quality of Encana’s assets and significantly enhanced our financial health (as referenced by the chart below).

 

 

LOGO

 

47


Table of Contents

For 2018, our objective was the delivery of quality returns and sustainable value growth, with a focus on the following key objectives:

 

   

Cash flow growth, with the goal of self-funding production growth

   

Corporate level returns

   

Capital efficiency

   

Strong balance sheet

   

Industry leading environmental, health, and safety performance

2018 Incentive Programs Designed to Support Key Business Objectives

Both our annual and long-term incentive plans are designed to keep our executives focused on the execution of key business objectives for 2018, as referenced by the table below

 

     

2018 Objectives

 

  

Relevant Incentive Metrics

 

 

How We Performed

 

 

Cash flow growth, with goal of

self-funding production growth

  

 

Bonus Metrics

•  Growth within cash flow

•  Total production

 

PSU Metric

•  Cash flow per share

 

 

 

•  Generated $140 million of free cash flow with cash flow growth of 57% year over year

•  Liquids production growth of over 30% year over year with liquids averaging 48% in Q4 2018

     

Corporate level returns

  

Bonus Metrics

•  Corporate margin

•  Total costs

 

 

•  Cash flow margin up 37% year over year and 15% above budget

•  Operating expense per BOE down 18% year over year

•  Administrative costs per BOE down 47% year over year

 

     

Capital efficiency

  

Bonus Metrics

•  Capital efficiency

 

•  Capital efficiency improved 30% from 2017

     

Strong balance sheet

  

PSU Metric

•  Net Debt to Adjusted EBITDA

 

 

•  Debt leverage down by 1.0x from 2.3x in 2017 to 1.3x in 2018

     
Environmental, health, and safety performance   

Bonus Metrics

•  Safety modifier

 

•  For the fifth consecutive year, we improved our safety performance, making 2018 the safest year ever in the history of the Company

 

In addition to the execution of the above key objectives, we also grew long-term shareholder value in the following ways:

 

   

We announced our strategic combination with Newfield Exploration, which closed February 13, 2019. This transaction will create a leading multi-basin company with large, premium positions in three of North America’s highest-quality, oil and liquids weighted plays; Permian, Anadarko and Montney. The combination of Encana and Newfield will help create scale and sustainability which, coupled with transaction-related synergies, will allow us to enhance return of cash to our shareholders

   

We executed $250 million share buyback in 2018

   

We announced $1.25 billion share buyback and a 25 percent increase to our dividend in 2019

Direct Compensation Components

Executive compensation at Encana is designed with two key elements in mind:

 

   

Compete in the Market – determining base pay against a carefully selected group of industry peers

   

Pay for Performance – ensuring short and long-term incentives are calculated based on company and individual performance

 

48


Table of Contents

To underpin these elements, we have developed a competitive, performance-based compensation program, outlined in the following table:

 

    

Element

 

Form of Award

 

Period

 

Program Components

FIXED

 

 

Base Salary

 

 

Cash

 

 

One year

 

 

Determined by multiple factors including:

•  scope of responsibilities;

•  experience;

•  performance;

•  market data from our Compensation Peer Group; and

•  internal equity considerations.

 

AT RISK

 

 

Annual Bonus

 

 

Cash, with an election to defer 25% or 50% into DSUs

 

 

One year

 

 

•  Performance-based

•  Award based 75 percent on Company Scorecard results; 25 percent on individual performance results

•  Company Scorecard measures performance relative to Board-approved metrics

 

 

 

Long-Term Incentives 

 

 

RSUs

 

 

Three years

(cliff vested)

 

 

•  Retention-focused

•  Realized value based on our share-price performance.

•  Currently settled in cash with intent to settle certain 2018 and 2019 grants in shares, subject to approval of the Omnibus Incentive Plan

 

   

 

SARs

 

 

Three-year vesting on  each anniversary period  as follows:

(30%, 30%, 40%)

Expires after seven years

 

 

•  Performance-based

•  Realized value based on appreciation in share price relative to original grant price.

•  Cash or share settled at participant’s discretion

 

     

 

PSUs

 

 

Three years

(cliff vested)

 

 

•  Performance-based

•  Realized value determined by our Total Shareholder Return (“TSR”) performance relative to our PSU Performance Peer Group (described on page 64), as well as achievement of key strategic milestones

•  Currently settled in cash, with intent to settle certain 2018 and 2019 grants in shares subject to approval of the Omnibus Incentive Plan

 

2018 Pay Outcomes Demonstrate Pay and Performance Alignment

Since launching our strategy in 2013, we have established a powerful track record of efficiency, discipline, as well as meeting and beating our performance targets. We believe our realized compensation and 2018 compensation decisions reflect these strong results.

 

   

2018 Annual Bonus

The Company’s performance against our annual scorecard met or exceeded each of our goals. In addition, the Board’s reward of the safety modifier, gave us a total Company Score of 162 percent. For further details on the Company Score, see page 56.

 

49


Table of Contents
   

2019 Long Term Incentive Payout (PSUs)

Our consistent performance delivered TSR that exceeded the median of our PSU Performance Peer Group over the three-year performance period. We also met or exceeded each of our strategic milestones over that same period, giving us a PSU multiplier of 168 percent. For further details on the strategic milestones see page 60.

 

 

LOGO

Shareholder Outreach

 

 

LOGO

We reach out to targeted investors to engage in discussions regarding issues that are important to them and to seek their input in executive compensation and corporate governance matters. Our outreach team includes Investor Relations and Corporate Governance representatives from the Company's management team, including the Corporate Secretary, the independent Chair of the HRC Committee and the Chairman of the Board. As we prepare for the proxy season, we consider investor feedback and perspectives in evaluating and structuring our executive compensation program and preparing proxy statement disclosures. Following the annual meeting, we engage with our largest investors on issues of importance to them. As outlined on page 77 of this Proxy Statement, there are also a number of established channels that any investor may use to communicate with the Company.

Regular and meaningful engagement with our shareholders is a key priority for our Board. Feedback is sought through ongoing comprehensive outreach by a team which includes our Chairman of the Board and HRC Chairperson as well as representatives of management and our investor relations team. In 2018, these discussions addressed topics including executive compensation, corporate governance and ESG issues. A snapshot of our ongoing approach to shareholder engagement is provided below.

 

Shareholder Engagement

 

 

•  Throughout the year, we reach out to and engage with shareholders on issues of importance to them. These discussions, conducted by representatives of management and our investor relations team, seek shareholder perspective on topics ranging from compensation approach and design, corporate governance, ESG and strategy. Feedback is provided directly to our Board for review and consideration at each regularly scheduled Board meeting

 

 

 

•  Our Chairman of the Board and HRC Committee Chairperson meet directly with shareholders and other key stakeholders throughout the year on the same topics noted above. Feedback from these sessions is collected by the Chairman of the Board and provided to the HRC Committee and/or Board (as applicable) at its next scheduled meeting

 

 

 

•  Both prior to and after we file our annual proxy materials, we invite our shareholders and other stakeholders to provide feedback directly to Board or management, either in writing or through direct discussions. Feedback received from these efforts is provided directly to the Board

 

 

50


Table of Contents

Feedback received from our engagement efforts is carefully considered by the Board throughout the year. The perspectives of governance institutions and proxy advisors are also considered in Board discussion and decision-making on compensation and governance-related topics.

In 2017-2018, we engaged in a comprehensive outreach program to over 45 percent of our total share ownership. Details regarding these engagement efforts and the corresponding changes made to our program are discussed on pages 34 to 35 of our 2018 Proxy Statement. For 2018, these changes included introduction of double trigger change in control vesting provisions in our LTI plans and increased share ownership requirements for our directors.

Encana shareholders indicated strong support of our program in 2018 with an 89 percent “FOR” or favorable “Say-on-Pay” vote at our annual meeting of shareholders. We believe this result reflects our shareholders perspective that our program is structured to encourage strategic performance and aligned with their long-term interests.

In 2018, the Board carefully considered this feedback and continued to seek the perspective of those with whom we did not have opportunity to engage prior to our 2018 vote. To this end, the Chairman of the Board, HRC Chairperson and management representatives continued to engage with key shareholders, pension funds and key governance institutions, including the Canadian Coalition of Good Governance, to seek additional feedback on our program and Board governance. Results were shared with all directors at regular Board meetings throughout the year.

These conversations were constructive and confirmed our program is aligned with our strategy and shareholder focused. Our efforts also reinforced our commitment to regular and ongoing shareholder feedback as a key element of compensation governance.

 

 

  II. EXECUTIVE COMPENSATION PHILOSOPHY

 

Our Compensation Philosophy is designed to attract, retain, and reward the talent required to deliver shareholder value. The philosophy contains four key principles:

 

   

Key Principle

 

 

How Principle Applied to Executive Compensation

 

   

Alignment with shareholders

 

 Annual pay largely consists of at-risk, performance-based LTI awards aligned with the absolute and relative performance of our share price.

 

  CEO and other NEOs realized pay in-line with value realized by shareholders over the same period.

 

   

Pay-for-performance

 

 90 percent of total direct compensation for our CEO and over 80 percent of other NEOs’ compensation is directly tied to the Company’s financial, operational, and/or TSR results.

 

  Annual bonus determined by execution of key operational, financial and strategic measures approved by the Board, contained in our annual Company Scorecard.

 

 HRC Committee establishes rigorous targets for the Annual Bonus and strategic portion of our PSU program that align with the delivery of our strategy and five-year plan.

 

   

Paying competitively

 

 Compensation design built around median compensation for target performance measured against our Compensation Peer Group.

 

  Executive pay aligned to relevant executive role and competitive geographic market (U.S. and Canada).

 

   

Sound risk management

 

 Annual risk assessments of our executive compensation programs.

 

  HRC Committee comprised of independent directors and retains an independent compensation advisor

 

 Our program reflects governance best practices and avoids governance pitfalls (outlined below)

 

Alignment with Shareholders through Realized Compensation

Over the past five years since the launch of our new strategy, we have outperformed our median peer company. However, over this same time-period, our absolute share price has reduced, largely as a result of the significant

 

51


Table of Contents

decline in commodity prices over that period. Our pay programs have recognized these overall market conditions, as demonstrated by the CEO’s realized compensation over this period. Over the past five years, the CEO’s realized compensation is 56 percent below his target compensation.

Our three-year performance through 2018 was in the upper end of the 2nd quartile of our PSU Performance Peer Group (described on page 64).

The following graph shows CEO target and realized compensation from December 31, 2014 to December 31, 2018 and compares our TSR performance to that of the median of our peer companies over this same period.

CEO Target and Actual Pay vs. Indexed TSR

 

LOGO

Pay-for-Performance

Executive compensation is predominantly in the form of variable, at-risk pay. The following charts show that 90 percent of the CEO’s compensation and 82 percent of the NEOs average compensation is in the form of performance-based compensation:

 

CEO Pay Mix    NEOs (Average) Pay Mix

 

 

LOGO

  

 

 

LOGO

Paying Competitively

To remain competitive, we set annual target compensation for our executives around the median (or 50th percentile) of comparable roles within our Compensation Peer Group, which is listed on page 63. Target compensation may be set above or below the median based on various factors, including time in role, sustained performance over time, readiness for promotion, skill set and experience relative to external market counterparts. Actual compensation varies above or below the target based on company and individual performance, and absolute and relative changes in our share price over time.

 

52


Table of Contents

Sound Risk Management

The following table outlines the executive compensation governance best practices that we incorporate and the governance pitfalls that we avoid:

 

WHAT WE DO

 

  

WHAT WE DON’T DO

 

 

  Maintain an independent HRC Committee with the necessary skills, knowledge and experience and formalized decision-making process

 

  Retain an independent compensation advisor to our HRC Committee that provides no services on behalf of management

 

  Independent Board members assess Company performance relative to pre-approved key operational, financial and strategic performance objectives for purposes of determining Annual Bonus awards

 

  Grant LTIs with payouts being either directly driven by share price performance, or driven by share performance relative to a group of industry peers and performance against key multi-year objectives

 

  Impose maximum payouts (or “caps”) to executive Annual Bonus awards and PSU payouts

 

  Maintain “double trigger” vesting provisions for cash severance payable to our executives and CEO upon a change-in-control (“CIC”), requiring both a CIC and termination of employment for payout to occur

 

  Maintain “double trigger” accelerated vesting provisions for all new LTI grants to participants into our LTI plans

 

  Impose executive compensation clawback and no hedging/short-selling policies, as well as share ownership guidelines

 

  Strong governance oversight to encourage the right behaviors, and discourage imprudent risks that could have a material adverse impact on Encana

  

 

×  No executive employment contracts with multi-year guaranteed pay increases, bonus awards or LTI grants.

 

×  No CIC or termination payments greater than two-times cash pay multiple for our executives, including our CEO.

 

×  No re-pricing, option exchanges, or cancellations of LTI grants

 

×  No gross-up of executive compensation, including perquisites or incentive awards, to account for taxes

 

×  No excessive contracts, severance packages or guaranteed compensation for our executives, including our CEO

 

 

 

 

  III. 2018 COMPENSATION PROGRAM AND METRICS

 

 

 

LOGO

Annual Bonus

All employees participate in our Annual Bonus program, which provides opportunity to earn a cash award based on a combination of performance against Company metrics, and performance against individual objectives for the year.

 

53


Table of Contents

An important principle of the Annual Bonus is to ensure that all employees are aligned around the same key Company metrics. To achieve this, we create a Company Scorecard, which is then used to communicate the metrics and to track our performance against them throughout the year, resulting in an overall Company Score for the year.

Each year the HRC Committee establishes rigorous targets that balance the desire for stretch performance with the need to motivate our employees and executives.

Within the Company Scorecard, the Board has two modifying mechanisms to assist in determining the appropriate final Company Score:

 

   

Safety Modifier (-20% to +20%)

Safety is a foundational value of Encana. This modifier serves to both reinforce our commitment to achieving our Company metrics safely, and to enable the Board to adjust our overall score to reflect the strength or weakness of our performance in this area.

 

   

Board Discretion Modifier (-25% to +25%)

This modifier enables the Board to adjust payments upwards or downwards, based on unforeseen or unusual circumstances that may arise during the year.

These modifiers are used judiciously by our HRC Committee to ensure that bonuses are truly reflective of company performance.

The split of Annual Bonus between Company performance and individual performance varies by job level. For the CEO and other NEOs, this split is 75 percent based on the Company Scorecard and 25 percent based on individual performance.

The Annual Bonus target is expressed as a percentage of base salary, having a range from zero to a maximum of two times bonus target.

Company Scorecard Metrics Focused on Returns

The following quantitative metrics were selected in 2018 as our Company Scorecard, both to align with the key components of our strategic plan, and as the building blocks of delivering strong financial returns to shareholders.

 

 

2018 Bonus Metrics

 

 

 

Rationale for Metric and Role in Delivering Shareholder Returns

 

Cash Flow Margin

 

Highlights and reinforces our focus on value creation.

   

Capital Efficiency

 

Keeps us focused on strengthening our track record of delivering better wells at lower cost.

   

Total Costs

 

Strict financial discipline to retain and enhance the efficiencies we have captured over the past four years.

   

Total Production

 

Focus on high margin oil and condensate opportunities; delivering year over year growth in total production.

   

Growth Within Cash Flow

 

This metric underpins the fundamental deliverable from our strategy – return of cash to shareholders. Our 2018 goal represents a milestone towards achieving that  strategy.

 

LTI Awards

LTI awards are the largest portion of the target compensation of our executives. They are primarily performance-based, are designed to focus executive management on strategy, delivery and long-term value creation and are highly correlated with the Company’s share price performance.

LTI awards are issued annually, following approval at the February HRC Committee meeting. In setting the target value of LTI awards, the HRC Committee reviews individual performance, retention risk, internal equity and overall market competitiveness.

 

54


Table of Contents

There are three LTI vehicles currently used by the Company – RSUs, Stock Options/SARs, and PSUs.

RSUs

The number of shares underlying each RSU award is determined by dividing the target grant value by the volume-weighted average price (“VWAP”) of a Common Share of the Company on the TSX (for Canadian employees) or NYSE (for U.S. employees) for the five trading days immediately prior to the award date. RSU awards “cliff vest” after three years, generally subject to continued employment, and are then settled in cash or for certain grants subsequent to February 2018 and subject to approval of the Omnibus Incentive Plan at the Meeting, in Common Shares. The cash settlement value is determined by multiplying the five-trading day VWAP immediately prior to the vesting date by the total number of Common Shares of the Company underlying the award, subject to any blackout period. Therefore, the realized value from RSUs exactly mirrors the shareholder experience over the same period. When cash dividends are paid by the Company on outstanding Common Shares, the Company credits additional dividend equivalent RSUs to the participant’s account. Dividend equivalent RSUs are subject to the same terms and conditions as the RSUs and vest and are settled at the same time and in the same form as the RSUs to which such dividend equivalent RSUs relate.

Stock Options and SARs

Our Canadian-based employees receive stock option grants, whereas our U.S. based employees receive SARs. Stock options and SARs have a strike price per Common Share equal to the VWAP of a Common Share on the TSX or NYSE, as applicable, for the five trading days immediately prior to the award date, and the number of our Common Shares subject to each award is determined by dividing the target grant value by a Black-Scholes value. Stock option and SAR awards vest over three years, 30 percent on each of the first and second anniversaries of grant and 40 percent on the third anniversary of grant, generally subject to continued employment through the applicable date, expiring 7 years from the grant date. As any value realized requires an increase in our share price relative to the strike price, we consider these grants to be performance-based, or “at-risk” compensation. Any value lost from the strike price results in a zero payment to the participant. Any value realized above the strike price also mirrors the experience of a shareholder over the same period.

PSUs

The target number of shares underlying each PSU award, and the settlement value of each PSU award, is determined in the same manner as described above for RSU awards. PSUs awards “cliff vest” after three years, generally subject to continued employment and are then settled in cash or, for certain grants subsequent to February 2018 and subject to approval of the Omnibus Incentive Plan at the Meeting, in Common Shares. The number of PSUs settled, however, can range from 0 to 200 percent, determined solely by Encana’s performance relative to metrics chosen by the HRC Committee at the time of grant. These metrics are tied to multi-year strategy delivery, and relative total shareholder return. When cash dividends are paid by the Company on outstanding Common Shares, the Company credits additional dividend equivalent PSUs to the participant’s account. Dividend equivalent PSUs are subject to the same terms and conditions as PSUs and vest and are settled at the same time and in the same form as the PSUs to which such dividend equivalent PSUs relate.

 

55


Table of Contents

2018 PSU Design

In recommending performance metrics for the 2018 PSU awards to the Board, the HRC Committee wanted to continue to ensure our NEOs were incentivized to achieve a combination of total shareholder return relative to our peers (“Relative TSR”) and absolute performance of the Company against key components of our strategic plan (“Strategic Milestones”).

 

         

 

2018 PSU Metrics

 

  

 

Weighting    

 

  

 

Measurement

 

      

 

Rationale for Goal

 

 

Relative TSR

  

 

50%    

  

 

Three-year
TSR relative
to our PSU
Performance
Peer Group

     

 

Investors expect outperformance versus peers

 

We measure the success of our Company not only against our own goals but also against performance relative to peers. Relative TSR allows us to measure our performance in relation to our peers, reducing the impact of price changes on the performance measure.

Margin Growth

   25%        Cash Flow
per Share
(CFPS)
Growth
      We believe that a key component of long-term value creation is a combination of rebalancing the product mix to be more liquids rich, investing in premium locations with the highest returns, and achieving sustained cost reductions over multiple years.

Balance Sheet Strength

   25%        Net Debt to
adjusted
EBITDA
      To deliver quality returns through the commodity cycle, we believe that we need a balance sheet that provides us with the flexibility to succeed through all stages of the commodity cycle. Improving our balance sheet capacity, optimizing our leverage, and managing our long-term commitments effectively are key contributors to this goal.

This combination of metrics is strongly linked to delivering quality corporate returns.

 

  IV. 2018 COMPENSATION DECISIONS

2018 Base Salary

Base salaries for the CEO and other NEOs were reviewed in February 2018. Based on total compensation positioning within the market, the HRC Committee recommended no increases to CEO or other NEO salaries for 2018.

2018 Annual Bonus

Similar to base salaries, the HRC Committee recommended no changes to target bonuses in 2018.

Target Bonus Ranges for 2018

 

     
          

 

Percentage of Base Salary (%)

 

           

 

Target

 

  

 

Maximum

 

Doug Suttles

   CEO    125    250

Sherri Brillon

   EVP & Chief Financial Officer      75    150

Mike McAllister

   EVP & Chief Operating Officer      90    180

David Hill

   EVP, Exploration & Business Development      70    140

Renee Zemljak

   EVP, Midstream, Marketing & Fundamentals      70    140

2018 Performance Results

The table below is our Company Scorecard, with our results against the Company’s 2018 bonus performance goals.

 

Metric

  

Weighting     

  

Target     

  

Actual

  

Score

 

1)  Cash Flow Margin(1) ($/BOE)

   20%         $14.49         $16.47      40  

2)  Capital Efficiency ($/BOE/d)

   20%         $14,300         $14,100      23  

3)  Total Costs(2) ($Millions)

   20%         $1,768         $1,721      32  

4)  Total Production (MBOE/d)

   20%         366         361      20  

5)  Growth within Cash Flow

   20%         CF = Capex           CF > Capex        20  
    

Calculated Company Score

     135  

Notes:

(1)

Cash Flow Margin is defined as Non-GAAP Cash Flow Margin excluding long-term incentive costs.

(2)

Total Costs is defined as transportation and processing expense, operating expense, excluding long-term incentive costs, administrative expense, excluding restructuring and long-term incentive costs, and capitalized indirect costs, excluding long-term incentive costs.

 

56


Table of Contents

The calculated Company Score above was then modified based on safety and Board discretion as follows:

 

   

A safety modifier of 20 percent was awarded. The Board determined that achieving the company’s safest year ever for the fifth consecutive year justified adjusting the company score by the maximum amount allowed within the plan.

   

No Board discretion modifier was applied.

As a result of these modifications, the final Company Score for 2018 was 162 percent. For the CEO and other NEOs, this score was applied to 75 percent of their Annual Bonus payment.

Individual Goals Focus on Key Initiatives for Delivering Shareholder Value

The CEO and other NEOs are rewarded for achievement against individual goals. A summary of each NEO’s performance against those goals is as follows:

 

 

Doug Suttles – President & Chief Executive Officer

 

 

Goal

 

 

 

Performance

 

   

1) Continue to drive safety performance

 

•  Delivered Company’s safest year ever for the fifth consecutive year

 

   

2) Deliver growth within cash flow

 

•  Exceeded goal and delivered $140 million free cash flow from operations. Including A&D activity, free cash flow of $616 million was achieved.

 

•  Returned > $300 million of capital to shareholders.

 

   

3) Deliver profitable growth

 

•  >40% cash flow

 

•  >30% Q4 to Q4 growth in core assets

 

•  >20% expansion to cash flow margin

 

•  Significantly exceeded goal -

 

•  57% cash flow year over year growth

 

•  33% year over year production growth in core assets, liquids growth of 30%

 

•  Cash flow margin increased by 37% over 2017

 

•  Operating costs/BOE decreased by 18% year over year

 

•  Administrative costs/BOE reduced by 47% year over year

 

•  Capital efficiency improved by 30% over 2017

 

•  Debt leverage was reduced from 2.3x to 1.3x in 2018

 

   

4) Enhance 2020+ Portfolio

 

•  Announced strategic combination with Newfield, furthering the Company’s multi-basin strategy, introducing a third core growth asset in the Anadarko Basin

 

   

5) Advance succession plans and leadership development

 

•  Robust programs built and operating effectively across Company

   

6) Continue to develop Encana’s culture

 

•  Company culture continues to positively evolve; best illustrated through speed of action, execution capability and embrace of innovation

 

Individual Score        

 

 

 

180

 

 

 

Sherri Brillon – Executive Vice-President & Chief Financial Officer

 

Goal

 

 

 

Performance

 

   

1)  Ongoing analysis of Encana’s strategy and performance to maximize value

 

•  Developed and facilitated discussion through the year of our strategy and financial analysis of multiple scenarios and options, including return of capital strategy, culminating in announcement to acquire Newfield. Financial due diligence, pro forma preparation for filings, and focused post announcement investor engagement program

   

2)  Develop and deliver on a budget where capital will not exceed cash flow

 

•  Disciplined 2018 capital allocation combined with proactive assessment and adjustments delivered free cash flow and returned over $300 million of capital to shareholders through dividends and share repurchases

   

 

3)  Maintain a strong balance sheet

 

•  Credit facility of $4 billion extended to 2022 and negotiated cost savings of $4 million per year securing strong access to liquidity. Undrawn at year-end. Debt leverage ratio down 1.0 times to 1.3 times year over year

 

•  Retained investment grade credit rating with stable outlook

   

 

4)  Deliver cost and process improvements from Finance

 

•  Tax and related interest recoveries; accounts payable process and automation; lower insurance premiums, audit recoveries, 3% fewer staff and other initiatives delivered over $100 million in 2018

 

•  Completed lease standard financial reporting process for 2019, clean quarterly reporting with increased automation and managed our financial risk exposure related to changing regulation

 

Individual Score        

 

 

  160

 

57


Table of Contents

 

Mike McAllister – Executive Vice-President & Chief Operating Officer

 

 

Goal

 

 

 

Performance

 

 

1)  Continue to drive safety performance

 

 

 

•  Achieved safest year ever for 5th consecutive year

 

   

2)  Deliver full year production budget > 367 Mboe/d with 46% liquids

 

•  Equivalent production of 361 Mboe/d with liquid content of 47%

 

•  Full year equivalent production 30% higher than 2017 adjusted for dispositions

 

•  Full year liquids production of 168 Mbbls/d, 30% higher than 2017

 

•  Core assets full year total production of 346 Mboe/d, 33% higher than 2017

 

   

 

3)  Grow Core asset production Q417’ to Q418’ > 35%.

 

•  Q4 core asset production grew by 25% with shortfall due to Montney gas

 

•  Permian Q4 2018 production 99 Mboe/d, 19% higher than Q4 2017

 

•  Montney Q4 2018 liquids production of 56 Mbbls/d, 93% higher than Q4 2017

 

•  Eagle Ford meeting full year production target

 

•  Duvernay exceeded full year production target by 3%

 

   

 

4)  Base Production Decline < 40 %.

 

 

•  Base decline improved to 39%

   

 

5)  Deliver 2018 production efficiency < $14,300/boe/d

 

 

•  Production efficiency goal achieved

   

 

6)  Deliver 2018 improved capital efficiency

 

 

•  Spent $1.975 billion against an approved capital budget of $2 billion, drilling 309 wells and bringing 326 wells on production.

 

•  Drilled 10% more wells for 5% more capital.

 

•  Full year production costs came in 2% or $38 million less than plan

   

 

7)  Hold Operations staff level flat year over year

 

 

•  Operations staff reduced by 2% year over year

 

Individual Score        

 

 

 

  165

 

 

David Hill – Executive Vice-President, Exploration & Business Development

 

 

Goal

 

 

 

Performance

 

   

1)  Manage Encana’s 2018 A&D program

 

•  Divestment proceeds of $493 million achieved in 2018

 

•  Announced strategic combination with Newfield

 

   

2)  Active optimization of Encana’s land position within each asset

 

•  Completed 12 cashless land trades and swaps

 

•  Almost $400 million net present value uplift

 

•  Over 140 additional premium locations added

 

   

3)  Improve optionality within Encana’s joint ventures

 

•  Successful renegotiation of joint venture agreements and terms with 6 joint venture partners, resulting in a significant increase in operational and commercial flexibility

   

4)  Drive innovation

 

•  Work carried out on Enhanced Oil Recovery application, including fluid and rock work, and cyclic gas injection on Eagle Ford and Duvernay volatile oil reservoirs

   

5)  Manage Encana’s depletion and reserves planning processes

 

•  Improved business integration, communication and ownership for both programs in 2018

 

Individual Score        

 

 

 

 

 

145

 

58


Table of Contents

 

Renee Zemljak – Executive Vice-President, Midstream, Marketing & Fundamentals

 

 

Goal

 

 

 

Performance

 

 

1)  Optimize revenue opportunities through sales portfolio diversification strategy and marketing services

 

 

 

•  Uplifted realized revenues by $338 million

 

2)  Manage Encana’s commodity price risk

 

 

•  Secured commodity hedge program aligned with strategy execution

 

•  Protected $310 million sales revenues through the regional basis hedge programs

 

 

3)  Optimize Encana’s transportation and processing costs

 

 

•  Mitigated almost $100 million of transportation costs

 

•  Reduced future commitments $58 million with NGL transportation renegotiation

 

 

4)  Deliver midstream solutions

 

 

•  Secured firm midstream service agreement for Pipestone development enhancing capital efficiently with a focus on minimizing commitments

 

•  Renegotiated Permian midstream agreements

 

 

5)  Deliver market access solutions

 

 

•  Secured long term firm NGL and gas transportation agreements for Pipestone development providing competitive access to markets while minimizing long term commitments

 

 

Individual Score        

 

 

 

 

180

 

 

The individual scores for the CEO and other NEOs were applied to the remaining 25 percent of their Annual Bonus payment.

2018 Annual Bonus Payments

The resulting 2018 Annual Bonus payments were as follows:

 

            Earned Bonus
  Target Bonus     Company  
Performance (75%)  
  Individual  
Performance (25%)  
  Total Bonus     Total Bonus  
as % of Target  

Doug Suttles

  $ 1,375,000     $1,670,625   $618,750   $2,289,375   167%

Sherri Brillon

  $ 338,715     $411,539   $135,486   $547,025   162%

Mike McAllister

  $ 482,886     $586,707   $199,190   $785,897   163%

David Hill

  $ 315,000     $382,725   $114,188   $496,913   158%

Renee Zemljak

  $ 343,000     $416,745   $154,350   $571,095   167%

 

59


Table of Contents

2018 LTI Awards

For 2018, our CEO and other NEOs received LTI awards consisting of 25 percent RSUs, 25 percent options/SARs and 50 percent PSUs. The realized value of these LTI awards will be determined at the time of vesting and based on our Company and share-price performance. Details of awards are as follows:

 

     RSUs (25%)     Options / SARs (25%)     PSUs (50%)  
     # of Units       Target Value     # of Units     Target Value     # of Units     Target Value  

 

Doug Suttles

 

 

 

 

 

 

195,235  

 

 

 

 

 

 

$2,073,927  

 

 

 

372,585  

 

 

 

$2,073,922  

 

 

 

390,469  

 

 

 

$4,147,843  

 

 

Sherri Brillon

 

 

 

 

 

 

41,788  

 

 

 

 

 

 

$443,902  

 

 

 

79,748  

 

 

 

$443,902  

 

 

 

83,576  

 

 

 

$887,804  

 

 

Mike McAllister

 

 

 

 

 

 

54,506  

 

 

 

 

 

 

$579,002  

 

 

 

104,019  

 

 

 

$579,002  

 

 

 

109,012  

 

 

 

$1,158,004  

 

 

David Hill

 

 

 

 

 

 

34,499  

 

 

 

 

 

 

$375,004  

 

 

 

62,498  

 

 

 

$375,004  

 

 

 

68,998  

 

 

 

$750,008  

 

 

Renee Zemljak

 

 

 

 

 

 

34,499  

 

 

 

 

 

 

$375,004  

 

 

 

62,498  

 

 

 

$375,004  

 

 

 

68,998  

 

 

 

$750,008  

 

2016 PSUs Settlement

Vesting and payout of 2016 PSU awards was assessed by the HRC Committee at its February 2019 meeting. At that meeting, the HRC Committee reviewed Encana’s TSR performance from January 1, 2016 to December 31, 2018, relative to the 2016 PSU Performance Peer Group described on page 64.

The Company’s performance over that period resulted in a relative TSR ranking above the 50th percentile, which resulted in 50 percent of the payout at 136 percent of award.

The strategic goals applicable to the 2016 PSU awards resulted in 50 percent of the payout at 200 percent of target.

 

   

Strategic Milestones focused on Margin Growth, Balance Sheet Strength and Portfolio and the following results led to the maximum payout for this portion of the 2016 PSUs:

 

   

Met or exceeded every key strategic metric on the five-year plan launched in 2013

   

Non-GAAP cash flow margin up 147% percent from 2016

   

Delivered free cash flow in 2018, one year earlier than projected in the five-year plan

   

Balance sheet leverage declined by more than half since 2016

   

Core assets delivering 96 percent of total 2018 production, up from 72 percent overall in 2016

   

Permian production more than doubled since 2016; Montney liquids production up nearly 300 percent Q4 2016 to Q4 2018

The total payout multiplier for the 2016 PSU awards was 168 percent of target.

Other Compensation Elements

In addition to the compensation programs described above, the Company also provides the following additional compensation elements to NEOs, generally consistent with market practice within our Compensation Peer Group.

Pension and Retirement Benefits

NEOs participate in the same Company pension and retirement programs as all other employees, based on the country in which they reside. Further details of the CEO’s and other NEOs’ retirement arrangements can be found beginning on page 70.

Welfare Benefits

NEOs participate in the same Company-sponsored welfare benefit programs as our employees, based on the country in which they reside.

 

60


Table of Contents

Lump sum cash payment in lieu of perquisites

A lump sum cash payment is provided in lieu of payment for any specific perquisites that are offered by some of our Compensation Peer Group companies. The lump sum is intended for items such as, but not limited to, professional association dues, company vehicle, and financial advice.

Additional CEO Benefits

Additional benefits were provided to Mr. Suttles as part of his compensation arrangements upon his appointment as CEO in 2013. These benefits include: (i) a prescribed-value annual allowance for personal travel on Company aircraft; and (ii) two round-trip business class flights per year for personal travel. These benefits are treated as employment income and are fully taxable. Following Mr. Suttles’ relocation to Denver in 2018, he is no longer entitled to two round-trip business class flights per year for personal travel. Mr. Suttles receives no tax gross-ups or loans in respect of the travel allowance, and any unused balance at year end is forfeited and cancelled. Further details of these benefits are included under the “All Other Compensation” column for Mr. Suttles in the Summary Compensation Table on page 66.

Employee Deferred Share Unit Plan

Under the Employee Deferred Share Unit Plan (“Employee DSU Plan”), executives can elect to convert either 25 percent or 50 percent of their Annual Bonus award into DSUs. DSU holdings are intended to encourage shareholder alignment and assist executives to achieve required equity ownership levels. To defer his or her Annual Bonus award into DSUs, an executive must elect prior to December 31 of the preceding calendar year. Such elections, once made, are irrevocable. Once an election is made, the number of DSUs credited to an executive is calculated as follows:

 

 

LOGO

DSUs are payable only following an executive’s cessation of employment. DSUs are settled in cash and are credited with additional DSUs equivalent to dividends payable on our Common Shares during the deferral period. In 2017, Ms. Brillon elected to convert 25 percent of her 2018 Bonus award into DSUs.

CIC Arrangements

Encana does not have general employment contracts with our NEOs. Each NEO has a CIC agreement that provides for payment of severance and other termination benefits on a qualifying termination following a CIC. The treatment of each NEO’s LTI awards upon a termination of employment following a CIC is governed by the applicable LTI plan.

 

61


Table of Contents

Following shareholder feedback, and in keeping with what has recently become the prevailing market practice among our Compensation Peer Group, we amended our LTI plans in February 2018. The amendments replaced existing “single trigger” vesting provisions in our LTI plans with “double trigger” vesting provisions (providing for CIC vesting only upon the occurrence of both (i) a CIC of Encana; and (ii) subsequent termination of the NEO’s employment by the Company, other than for “Cause”, or by the executive for “Good Reason” (each as defined within the CIC agreement) within 24 months following the CIC). The CIC agreements were also amended in February 2018 to reflect certain updates and clean-up changes intended to ensure consistency across the agreements. These changes included reducing the post-CIC protection period from 36 months to 24 months as described above in order to bring the CIC agreements into alignment with the Company’s LTI awards.

CIC Arrangement Terms

The relevant terms of our executive CIC arrangements are summarized in the table below:

 

 

 

CIC Arrangement Terms

 

   

 

APPLIES TO

 

 

 

CEO and all other Executive Leadership Team members

 

   

TRIGGER

 

CIC and subsequent termination of executive’s employment (within 24 months) either by Company, other than for Cause, or executive for Good Reason, or, in case of LTIs granted prior to 2018, solely a CIC.

   

SEVERANCE

 

Lump sum cash payment equal to two times the sum of executive’s base salary, annual allowance, professional membership fees reimbursement, matching contributions to investment plan, and annual bonus award (based on average bonus award paid over preceding three years)

   

BENEFITS

 

Continuation (or lump sum payment in lieu) of health, dental, life, disability, and accident insurance benefits for 24-month period. Career counseling, financial counseling, and executive benefits for 24-month period.

   

PENSION

 

Continued accrual or crediting of contributions (for DC pension plan participants) or, for Mr. McAllister, continued accrual of DB pension benefits for 24-month period, or cash payment equal to the value thereof

   

 

OPTIONS/ SARs

 

 

 

All unvested options/SARs vest immediately and remain exercisable until the earlier of (i) 24 months and (ii) the expiry date

 

   

PSUs

 

All outstanding PSUs immediately vest and become payable at the level specified in the plan document and at the price at which Common Shares are valued for purposes of the CIC

   

 

RSUs

 

 

 

Any unvested RSUs immediately vest and are payable based on the price at which Common Shares are valued for purposes of the CIC

 

 

 

V. COMPENSATION GOVERNANCE – ADMINISTERING COMPENSATION TO THE HIGHEST STANDARDS

 

Role of HRC Committee

The HRC Committee assists the Board in its oversight of our executive compensation program and practices, as well as ensuring that adequate succession plans are in place for all senior leadership positions within the Company.

The HRC Committee is composed entirely of independent directors and operates independently from management. For more information, please reference the section discussing the HRC Committee within the Board and Committee Governance section of our Proxy Statement.

Independent Compensation Advisor

The HRC Committee retains FW Cook as its independent compensation advisor to provide objective, specialized expertise on executive compensation matters. FW Cook reports directly to the HRC Committee Chair, Ms. Nimocks, and performs all services under the direction of the HRC Committee. Where the advisor is requested to provide services in consultation with management, such services are pre-approved by and performed under the direction of Ms. Nimocks. FW Cook provides no other services to Encana or its management. FW Cook provides independent analysis and perspective to the HRC Committee in respect of the following:

 

   

review and discussion of materials prepared by management with the HRC Committee Chair and HRC Committee prior to each meeting

   

independent analysis of annual total direct compensation recommendations for individual Executive team members, including relative to competitive market data

   

independent analysis of the competitiveness of our program relative to our Compensation Peer Group

 

62


Table of Contents
   

regular evaluation and identification of areas of potential compensation-related risk in our program

   

emerging regulatory and compensation best practices

In 2018, the HRC Committee’s independent compensation advisor received the following fees for executive compensation-related and other services provided to management:

 

   

 

FW Cook

 

  

 

2018

 

 

Executive Compensation-Related Fees

   $ 122,039.54  

All Other Fees

   $ 0  

Management Compensation Consultants

Management engages Willis Towers Watson (“Towers”) to provide pension-related services, including as actuary to our Canadian pension plans. Management also retains Towers from time to time to provide competitive market data regarding our program and employee benefit programs. In 2018, Towers received the following fees for executive compensation-related and other services provided to management:

 

   

 

Willis Towers Watson

 

  

 

2018

 

 

Executive Compensation-Related Fees

   $ 41,507.44  

All Other Fees

   $ 810,680.10  

Peer Groups and Competitive Market Data

Compensation Peer Group

As a North American energy producer, we compete for executive talent in both Canada and in the United States and our compensation must be competitive to attract and retain the executive talent we need to achieve our business objectives. For this reason, we define our competitive market as companies of similar size, industry focus, and geography as Encana, and assess our compensation against a group of North American industry peers selected by the HRC Committee (our “Compensation Peer Group”). The HRC Committee is careful to include relevant exploration and production focused companies, since their performance is similarly linked to changes in commodity prices during similar measurement periods.

In selecting our Compensation Peer Group, the HRC Committee utilizes the following criteria:

 

 

Compensation Peer Group: Evaluation Criteria

 

 

     

Financial & Operational Comparability

  

Total Assets

Production

Product Mix

  

Enterprise Value

Market Capitalization

Revenues

     

Nature & Scope of Operations

  

Primarily North American operations

Operate in similar North American plays

   Upstream exploration and production
     

Identified as Competitive Peer

  

Competitor for executive talent

Competitor for investment capital

   Identified internally or externally as a peer to Encana

The HRC Committee reviewed the Compensation Peer Group in 2018 and approved the following peer group for 2019 compensation purposes:

 

 

Canadian Peers

 

 

 

U.S. Peers

 

     

ARC Resources Ltd.

  Imperial Oil Ltd  

Antero Resources Corporation

  EQT Corporation

Canadian Natural Resources Ltd.

  Seven Generations Energy Ltd.  

Apache Corporation

  Hess Corporation

Cenovus Energy Inc.

  Suncor Energy Inc.  

Cabot Oil & Gas Corporation

  Marathon Oil Corporation

Crescent Point Energy Corporation

  TransCanada Corporation  

Chesapeake Energy Corporation

  Murphy Oil Corporation

Enbridge Inc.

     

Concho Resources Inc.

  Noble Energy Inc.

Enerplus Corporation

     

Continental Resources Inc.

  Pioneer Natural Resources Company 

Husky Energy Inc.

     

Devon Energy Corporation

  Southwestern Energy Company
       

EOG Resources Inc.

   

 

63


Table of Contents

Market competitiveness of compensation for the CEO and other members of the ELT is assessed each year by the HRC Committee using market data from the above Compensation Peer Group. For our CEO, this assessment is conducted using the U.S. peers. For the other NEOs, country-specific data from the Compensation Peer Group is used, based on the role and country in which the executive is based.

The HRC Committee uses a different peer group to assess our relative TSR performance under our PSU awards. The PSU Performance Peer Group includes companies with whom we compete for investment capital, as opposed to executive talent.

PSU Performance Peer Group

The HRC Committee selected and approved PSU peers based on the following criteria:

 

   

Similar market capitalization (between 0.5x and 2.0x of Encana)

   

North American headquartered

   

Material natural gas interests

   

Upstream exploration and production

   

Operating in similar plays in North America

   

Development of unconventional resources

The HRC Committee approved the following PSU Performance Peer Group to apply to PSU grants made in 2016 to 2018:

 

PSU Performance Peer Group (2016, 2017 and 2018 Grants)    

 

Anadarko Petroleum Corporation

Antero Resources Corporation

Apache Corporation

Baytex Energy Corporation

Cabot Oil & Gas Corporation

Canadian Natural Resources Limited

Chesapeake Energy Corporation

Concho Resources Inc.

Continental Resources Inc.

Crescent Point Energy Corporation

Devon Energy Corporation

Enerplus Corporation EOG Resources Inc.

  

EP Energy Corporation.

Hess Corporation

Marathon Oil Corporation

Murphy Oil Corporation

Newfield Exploration Company

Noble Energy Inc.

Obsidian Energy Ltd.

Pengrowth Energy Corporation

Pioneer Natural Resources Company

Range Resources Corporation

Southwestern Energy Company

Vermilion Energy Inc.

Whiting Petroleum Corporation

Compensation Risk Management

The Board is committed to the identification and mitigation of compensation-related risk. The HRC Committee has adopted a structured approach to compensation risk, designed to discourage inadvertent or undue risk taking by:

 

  i.

incorporating risk management principles directly into our program design

  ii.

active consideration of risk as a key element of compensation decision-making

  iii.

concluding regular comprehensive compensation program risk assessments of our program

Specific examples of how our program incorporates compensation risk management include:

 

   

use of balanced, operational and financial performance metrics in our Board-approved Company Scorecard;

   

use of balanced mix of vehicles in our annual LTI grants;

   

deferral of all vesting and payout of 85 percent of annual executive LTI grants for a three-year period; and

   

vesting and payout maximums (or caps) in our PSU grants.

We believe these features reduce risk by diversifying rewards, scenarios and eliminating reliance on any single or limited number of performance measures to determine executive incentive compensation. Risk is also managed through the consistent application of our program, which applies to all employees, including our executives.

 

64


Table of Contents

Compensation-related risk is also mitigated through our corporate governance practices, which include share ownership guidelines, an Incentive Compensation Clawback Policy and prohibitions regarding hedging of equity awards, all of which apply to incentive-based compensation granted to our executives.

Executive Share Ownership Guidelines

Encana has had share ownership guidelines since 2002. The share ownership guidelines require our executives and designated Vice-Presidents to achieve minimum share ownership levels within a five-year period of appointment to their position. If a participant is promoted, resulting in an increased target, the participant is given an additional two-year period to meet the new target.

Targets are calculated as a multiple of base salary, with share ownership calculated based on the aggregate value of:

 

  (i)

owned Common Shares (including beneficial ownership);

  (ii)

unvested RSUs; and

  (iii)

DSU holdings.

The HRC Committee reviews the status of executive equity ownership under the share ownership guidelines on an annual basis. The status of our NEOs’ share ownership as at December 31, 2018 is provided below.

 

    

 

Ownership Requirement (Multiple of Base Salary)

 

  

 

Current Ownership (Multiple of Base Salary)

 

Doug Suttles

  

5 times

  

11.03 times

Sherri Brillon

   3 times    9.49 times

Mike McAllister

   3 times    6.46 times

David Hill

   3 times    5.88 times

Renee Zemljak

   3 times    5.27 times

Incentive Compensation Clawback Policy

The Board adopted an Incentive Compensation Clawback Policy in 2012. Under the policy, the Board is authorized to require immediate reimbursement of all or any portion of Annual Bonus award or LTI compensation received by or payable to an executive in the event of any of the following circumstances:

 

   

Encana is required to prepare an accounting restatement due to material non-compliance with any financial reporting requirement under applicable securities laws (a “Restatement”);

   

incentive compensation received by a current or former executive in respect of years to which the Restatement pertains exceeds the amount that would have been received by the executive under the Restatement (the “Incentive Compensation”); and

   

an executive engaged in gross negligence, intentional misconduct or fraud which either caused or significantly contributed to the material non-compliance resulting in the Restatement.

Where such circumstances exist, the Board is authorized to: (i) require immediate reimbursement by the executive to Encana for all or any Incentive Compensation previously paid; (ii) immediately terminate and forfeit any right of the executive to any Incentive Compensation (in the event not previously paid); (iii) immediately withhold or cancel the value of any Incentive Compensation from any outstanding amounts owing to the executive (including any unvested or unexercised LTI awards) to compensate for (or off-set) the value against any unrecovered Incentive Compensation amount; and/or (iv) initiate such other action against the executive as the Board may deem necessary.

No Hedging Policy

Our Securities Trading and Insider Reporting Policy expressly prohibits directors and all employees, including executives, from engaging in any form of equity monetization transactions (including the purchase of financial instruments to hedge or offset a decrease in value) involving the Encana securities that represent part of their LTI awards or, in respect of our executives, Encana securities held under our share ownership guidelines.

 

65


Table of Contents

The policy also prohibits directors and employees from engaging in the following activities involving Encana securities:

 

   

selling securities they do not own, have not fully paid for or have no right to own (engaging in a “short sale”);

   

selling a “call option” or buying a “put option”;

   

entering into equity monetization transactions involving any securities subject to our share ownership guidelines or that is the equivalent of “short selling”; and

   

entering into brokerage arrangements that might result in a sale at a time when he or she is not permitted to trade.

 

 

VI.  2018 DETAILED COMPENSATION DISCLOSURE

 

Summary Compensation Table

The table below shows the compensation paid or awarded to each of our NEOs in each of the last three years.(1)

 

Name

and Principal

Position

 

 Year 

 

 Salary ($) 

 

Stock

 Awards ($)(2) 

 

Option

 Awards ($)(3) 

 

Non-Equity
Incentive Plan
 Compensation ($)(4) 

 

Change in Pension Value
and Non-qualified Deferred
  Compensation Earnings ($)(5) 

 

All Other

 Compensation ($)(6) 

 

Total

 Compensation ($) 

 

Doug Suttles

President & Chief Executive Officer 

 

2018 
2017 
2016 

 

1,100,000
1,100,000
1,057,254

 

6,221,770
6,463,429
6,255,057

 

2,073,922
2,154,471
3,466,863

 

2,289,375
2,188,278
2,552,145

 


 

296,827
297,399
239,779

 

11,981,894
12,203,577
13,571,098

 

                 

Sherri Brillon

Executive Vice President & Chief Financial Officer

 

2018 
2017 
2016 

 

451,620
451,620
451,620

 

1,331,707
1,331,722
1,331,705

 

443,902
443,902
618,971

 

547,025
487,750
592,752

 


 

113,815
113,815
99,348

 

2,888,069
2,828,809
3,094,396

 

                 

Michael McAllister

Executive Vice-President & Chief Operating Officer

 

2018 
2017 
2016 

 

536,540
536,540
536,540

 

1,737,006
1,737,014
1,737,008

 

579,002
579,003
822,389

 

785,897
719,500
863,159

 


1,777,774
1,247,813

 

68,329
68,329
68,314

 

3,706,774
5,418,160
5,275,223

 

                 

David Hill

Executive Vice-President, Exploration & Business Development

 

2018 
2017 
2016 

 

450,000
450,000
450,000

 

1,125,012
1,125,004
1,125,006

 

375,003
375,001
390,123

 

496,913
445,725
465,750

 


 

114,446
113,681
113,597

 

2,561,374
2,509,411
2,544,476

 

                 

Renee Zemljak

Executive Vice-President, Midstream, Marketing & Fundamentals

2018 
2017 
2016 
490,000
490,000
490,000
1,125,012
1,125,004
1,125,006 
375,003
375,001
480,579
571,095
485,345
507,150

117,383
117,024
116,974
2,678,493
2,592,374
2,719,709

Notes:

(1)

All amounts are presented in U.S. dollars. Amounts paid or awarded in Canadian dollars have been converted to U.S. dollars using an exchange rate (for each year above) of C$1.00 = US$0.772 (average exchange rate for 2018) for year over year comparability.

(2)

For 2018, 2017 and 2016 RSU and PSU awards, grant date fair value is calculated by multiplying the number of granted units by the VWAP of Common Shares on the five trading days immediately prior to the February 26, 2018 grant date (C$13.76 or US$10.87), February 27, 2017 grant date (C$15.43 or US$11.75) and March 3, 2016 grant date (C$5.56 or US$4.06). PSU and RSU compensation expenses are accounted for on a fair value basis, as required by U.S. GAAP.

(3)

For 2018 Option and U.S. SAR grants, grant date fair value is determined in accordance with ASC 718 Compensation – Stock Compensation (“ASC 718”) by using a Black-Scholes model based on 52.4 percent for Canadian Option grants and 55.2 percent for U.S. SAR grants, applied using the following assumptions: Expected Term = 7 years; Volatility = 54.10 percent (Canadian Option grants), 57.87 percent (U.S. SAR grants); Dividend Yield = 0.54 percent; Risk Free Rate = 1.67. percent.

  

For 2017 Option and U.S. SAR grants, grant date fair value is determined by using a Black-Scholes-Merton Model based on 50.3 percent for Canadian Option grants and 53.3 percent for U.S. SAR grants, applied using the following assumptions:

  (i)

Expected Term = 7 years;

  (ii)

Volatility = 53.24 percent (Canadian Option grants), 57.18 percent (U.S. SAR grants);

  (iii)

Dividend Yield = 0.54 percent;

  (iv)

Risk Free Rate = 0.75 percent.

For 2016 Option and U.S. SAR grants, grant date fair value is determined in accordance with ASC 718 by using a Black-Scholes model based on 39.2 percent for Canadian Option grants and 41.5 percent for U.S. SAR grants, applied using the following assumptions:

  (i)

Expected Term = 7 years;

  (ii)

Volatility = 45.31 percent (Canadian Option grants), 48.16 percent (U.S. SAR grants);

  (iii)

Dividend Yield = 1.44 percent;

  (iv)

Risk Free Rate = 0.51 percent.

(4)

In 2017, Ms. Brillon elected to convert 25 percent of her 2018 Bonus award into DSUs. In 2016, Ms. Brillon elected to convert 50 percent of her 2017 Bonus award into DSUs. In 2015, Ms. Brillon elected to convert 25 percent of her 2016 Bonus award into DSUs. DSUs granted during 2018 in respect of such elections are discussed in the “Non-qualified Deferred Compensation Table for 2018”.

(5)

Pension Value represents the year over year compensatory change. Details are found in the “Defined Benefit Pension Table” on page 71.

(6)

See the “All Other Compensation Table” below for additional information.

 

66


Table of Contents

CEO Pay Ratio

Item 402(u) of the U.S. Securities and Exchange Commission’s Regulation S-K, adopted under the Dodd-Frank Act, required disclosure of the annual total compensation of our CEO to our median employee’s annual total compensation. The ratio disclosed below is a reasonable estimate calculated in a manner consistent with Item 402(u).

The median employee was determined based on actual 2018 total cash compensation for the period from January 1, 2018 to December 31, 2018 for the employee population as of December 31, 2018. A foreign exchange rate of C$1.00 = US$0.772 (average exchange rate during 2018) was used to convert Canadian compensation into U.S. dollars for purposes of comparison.

Mr. Suttles’ 2018 annual total compensation was $11,981,894 as reflected in the Summary Compensation Table included in this Proxy Statement. Our median employee’s annual total compensation for 2018 calculated in accordance with Item 402(c)(x) of the SEC’s Regulation S-K, which includes 2018 base salary, target grant date fair value LTI awards, annual bonus, Company contributions to retirement plan, annual allowance and other benefits, was $146,983. As a result, we estimate that Mr. Suttles’ 2018 annual total compensation was approximately 82 times that of our median employee.

All Other Compensation Table

 

Name

 Year 

Company
Contributions to
 Retirement Plans 

($)(1)

Annual
 Allowance 

($)

 Company 

Aircraft

($)(2)

Other
 Perquisites and 

Benefits

($)(3)

 Total 

($)

Doug Suttles

2018
2017
2016
169,266
148,707
86,361
36,797
36,609
34,539
49,302
37,577
47,515
41,462
74,505
71,365
296,827 
297,399 
239,779 

Sherri Brillon

2018
2017
2016
50,581
50,581
36,130
30,571
30,571
30,571

32,662
32,662
32,647
113,815 
113,815 
  99,348 

Michael McAllister

2018
2017
2016

30,571
30,571
30,571

37,758
37,758
37,743
  68,329 
  68,329 
  68,314 

David Hill

2018
2017
2016
72,900
72,900
72,900
38,000
38,000
38,000

3,546
2,781
2,697
114,446 
113,681 
113,597 

Renee Zemljak

2018
2017
2016
76,381
76,022
76,022
38,000
38,000
38,000

3,002
3,002
2,952
117,383 
117,024 
116,974 

Notes:

(1)

This column represents the matching contributions made by the Company for the benefit of the NEOs under the defined contribution plan and non-qualified deferred compensation plan. These plans are discussed in more detail in the ”2018 Non-qualified Deferred Compensation” table on page 71.

(2)

The amount reflects the value of the personal aircraft use for 2018. The aggregate incremental cost to the Company for personal use of the Company’s aircraft is calculated based on the Company’s average variable operating costs including fuel, repairs and maintenance, landing and ramp fees and other miscellaneous variable costs.

(3)

Amounts in this column include company match of respective investment plan contributions, limited personal club memberships and taxable benefit of company parking.

 

67


Table of Contents

 

Incentive Plan Awards

 

Grants of Plan-Based Awards for 2018

 

 

Name

   
Type of
award
 
 
    Grant Date      
Approval
Date
 
 
   


Estimated future

payouts under non-equity
incentive plan awards(1)

 

 
 

   


Estimated future

payouts under equity
incentive plan awards(2)

 

 
 

   


All other stock
awards: number

of shares of
stock or units(3)

(#)

 
 

 
 

 

 

 

 


 

All other option
awards: number
of securities

underlying
options(4)

(#)

 

 
 
 

 
 

 

   


Exercise or
base price of

option awards(5)
($/sh)

 
 

 
 

   


Grant date fair
value of stock

and option
awards(6)

 
 

 
 

   Threshold 
($)
   

Target

($)

   

Maximum

($)

     Threshold 
(#)
   

Target

(#)

   

Maximum

(#)

 

 

Doug Suttles

   

RSU
PSU
Option
 
 
 
   

02/26/2018
02/26/2018
02/26/2018
 
 
 
   

02/14/2018
02/14/2018
02/14/2018
 
 
 
 

 

 

 

0

 

 

 

 

$

 

1,375,000

 

 

 

 

$

 

2,750,000

 

 

 

 

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

390,469

 

 

 

 

 

 

 

 

 

 

 

 

780,938

 

 

 

 

 

   

 

 

195,235

 

 

 

 

 

 

 

 

 

 

 

 

 

372,585

 

 

 

 

 

 

 

 

 

 

 

 

C$13.76

 

 

 

 

   

$2,073,927
$4,147,843
$2,073,922
 
 
 

 

Sherri Brillon

   

RSU
PSU
Option
 
 
 
   

02/26/2018
02/26/2018
02/26/2018
 
 
 
   

02/14/2018
02/14/2018
02/14/2018
 
 
 
 

 

 

 

0

 

 

 

 

$

 

338,715

 

 

 

 

$

 

677,430

 

 

 

 

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

83,576

 

 

 

 

 

 

 

 

 

 

 

 

167,152

 

 

 

 

 

   

 

 

41,788

 

 

 

 

 

 

 

 

 

 

 

 

 

79,748

 

 

 

 

 

 

 

 

 

 

 

 

C$13.76

 

 

 

 

   

$443,902
$887,804
$443,902
 
 
 

 

Michael McAllister

   

RSU
PSU
Option
 
 
 
   

02/26/2018
02/26/2018
02/26/2018
 
 
 
   

02/14/2018
02/14/2018
02/14/2018
 
 
 
 

 

 

 

0

 

 

 

 

$

 

482,886

 

 

 

 

$

 

965,772

 

 

 

 

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

109,012

 

 

 

 

 

 

 

 

 

 

 

 

218,024

 

 

 

 

 

   

 

 

54,506

 

 

 

 

 

 

 

 

 

 

 

 

 

104,019

 

 

 

 

 

 

 

 

 

 

 

 

C$13.76

 

 

 

 

   

$579,002
$1,158,004
$579,002
 
 
 

 

David Hill

   

RSU
PSU
SAR
 
 
 
   

02/26/2018
02/26/2018
02/26/2018
 
 
 
   

02/14/2018
02/14/2018
02/14/2018
 
 
 
 

 

 

 

0

 

 

 

 

$

 

315,000

 

 

 

 

$

 

630,000

 

 

 

 

 

 

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

68,998

 

 

 

 

 

 

 

 

 

 

 

 

137,996

 

 

 

 

&nbs