On June 12, 2017, our Compensation Committee approved a redesign of the Company’s executive compensation program that was intended to align the program more closely with the Company’s business strategy while at the same time addressing current best market practices and specific concerns raised by stockholders. As part of our outreach efforts, the Chairman of the Compensation Committee and management met with our largest shareholders to discuss concerns that included share dilution, financial metric selection and certain performance cash measurement and payment practices. Following is a description, including rationale, for the changes to the executive compensation program:
Annual Incentive Compensation:
Replaced our prior bespoke Bristow Value Added (“BVA”) performance metric with Return on Invested Capital (“ROIC”), a more widely recognized financial return measure, in response to stockholder concerns about the use of BVA; and
Increased weighting on individual STRIVE performance component to 50% to enhance focus on our STRIVE strategy (as more specifically described beginning on page 26 of this proxy statement) and to align awards with achievement against key strategic business objectives that are crucial to our long-term success.
Long Term Incentive (LTI) Compensation:
Increased performance cash to 50% of total LTI compensation mix to emphasize performance-based compensation and reduce stockholder dilution from equity-based awards granted at lower stock prices;
Added an absolute TSR cap and floor to our performance cash awards to enhance alignment of performance cash payouts with absolute returns experienced by our stockholders; and
Added a multi-year earnings per share (EPS) performance goal to our performance cash awards in response to stockholder concerns about using relative TSR as our sole long-term performance measure and to enhance alignment of performance cash payouts with long-term financial performance over which management has more direct control.
Adopted a clawback policy that applies to all cash and equity compensation for our officers to better align with generally accepted best practices for executive compensation governance.
Post-Termination Benefits: In order to better align with our peer group and broader market trends, we:
Added double-trigger vesting to our long-term incentive awards in the context of a change-in-control,
Reduced cash severance for termination not in connection with a change-in-control, and
Eliminated accelerated vesting of long-term incentive awards for termination not in connection with a change-in-control.
Continuing Challenges in the Offshore Oil and Gas Sector
The oil and gas business environment experienced a significant downturn beginning during fiscal year 2015 and ongoing volatility related to commodity prices. Brent Crude oil prices declined from approximately $106 per barrel at July 1, 2014 to a low of approximately $26 per barrel in February 2016, with an increase to approximately $65 per barrel as of March 31, 2018. The decrease in oil prices negatively impacted the cash flow of our clients and resulted in their implementation of measures to reduce their operating and capital costs. These cost cutting efforts continued into fiscal year 2018 and have impacted both the offshore production and the offshore exploration activity levels of our clients, resulting in reduced demand for oil and gas transportation services. Over this period we have also seen several of our peers in the offshore oil and gas transportation sector file for bankruptcy.
A recent recovery in commodity prices has contributed to improved stock price performance among onshore North American oil and gas companies while the offshore oil and gas sector continues to lag. Despite our successful efforts through the continued downturn to preserve our cash and manage revenue and margin declines through (1) cost reductions and capital efficiencies and
BRISTOW GROUP INC. – 2018 Proxy Statement – 24