Our Board is diverse, with five of our 10 directors being female or ethnically diverse. The members of our Board also bring a diversity of thought and experience to their roles, based on their extensive backgrounds in the energy industry and in finance, technology and international businesses.
The Board develops and enhances its knowledge of governance and sustainability topics. For example, at each quarterly meeting, the Board’s Health, Safety and Environment (HSE) Committee includes a learning module agenda item. This covers a learning topic that is typically HSE related, such as corporate crisis management, emissions reductions and science-based targets.
More information about our Board’s composition and qualifications is available in our 2020 Proxy Statement and on the Corporate Governance page of our website. For more information on our current Board, please visit the Board of Directors page of our website.
Board Committee Oversight
Our Board of Directors has direct supervision and responsibility for sustainability issues through its oversight of the enterprise risk management (ERM) process and risk register. The Board reviews sustainability topics and their impacts, risks and opportunities at its quarterly meetings. The Board’s standing committees also address those elements of sustainability that fall under the jurisdiction of their committees, and report on the implementation of strategies and pertinent issues to the full Board as part of their regular reports. The Board discusses one or more elements of sustainability at every Board meeting.
The Halliburton Board has four standing committees: Audit, Compensation, HSE, and Nominating and Corporate Governance. The membership of these four standing committees is composed entirely of independent directors.
The Audit Committee oversees the integrity of the Company’s financial statements, along with our compliance with legal and regulatory requirements. The Chief Ethics and Compliance Officer (CECO) reports to the Audit Committee on COBC audits, investigations and other related topics each quarter, and provides the Audit Committee with a comprehensive annual report that includes a review of the ERM program.
The Compensation Committee provides oversight of the Halliburton executive compensation program to ensure that it supports the Company’s long-term strategy and generates value for our shareholders while maintaining consistency and compliance with good governance practices.
The HSE Committee provides oversight of the implementation and effectiveness of our HSE and sustainable development risk management procedures, policies and programs. The committee reviews key performance indicators, personnel and process safety risk statistics and audit results each quarter, and reviews risks, mitigation strategies and third-party evaluation results at different quarterly sessions throughout the year. The HSE Committee also provides oversight to the corporate-level HSE and Sustainable Development Committee, which includes Company executives appointed by the Chief HSE Officer.
The Nominating and Corporate Governance Committee performs the annual evaluation of Halliburton director criteria, Board diversity, skills and experience profiles. This committee is responsible for identifying and proposing directors for service on the Board, and for periodically reviewing the Company’s director compensation practices and recommending changes to the Board. The full Board of Directors performs an annual succession review. In addition, the Nominating and Corporate Governance Committee oversees and reports to the Board on corporate governance issues.
Our compensation programs are integrated with our overall business strategy and management processes to incentivize performance, maximize returns and build shareholder value. We work with consultants to benchmark our compensation and benefits programs to ensure that we offer competitive remuneration packages to attract and retain high-performing executives. Our executive compensation program features market-driven compensation within a total-compensation framework, with flexibility to adjust for different business drivers and objectives throughout our operating units. The Compensation Committee has ultimate discretion on compensation decisions regarding our executive officers, and considers other business performance factors that are important to our investors, including HSE and SQ, in determining total compensation.
In response to shareholder feedback, we made meaningful modifications to the structure of our long-term incentive (LTI) program for 2020, including the introduction of performance shares and a rebalancing of our LTI mix so that more of the total award is delivered in equity. We also changed the Performance Unit Program (PUP) to issue awards that are 50 percent in stock and 50 percent in cash (instead of completely in cash). Our shareholders are strongly supportive of this shift in design as evidenced by our strong say on pay support of 91 percent. For additional information, please see the compensation section of the 2020 Proxy Statement.
Halliburton maintains regular and open communication with our shareholders to seek feedback on the Company’s corporate governance, strategy and performance, sustainability and executive compensation. We continue to hear from our shareholders that they support our overall compensation program design and are appreciative of our ongoing efforts to consider their feedback as our program evolves. Additional details on our compensation approach are available in our 2020 Proxy Statement.
Oversight of Climate-Related Risks
The Halliburton Board of Directors has direct oversight and responsibility for climate-related risks. The Audit Committee advises the Board, which has oversight of key enterprise risks, including climate-related risks and opportunities. In addition, the HSE Committee provides the Board with recommendations on climate-related management strategies and reporting on implementations of improvement activities.
Senior management is responsible for identifying climate-related risks and opportunities, assessing their potential level of impact to the business, and presenting recommendations to the full Board and relevant committees for their consideration. In 2020, these topics included energy transition and the establishment of science-based targets.
For several years, Halliburton has been reviewing climate-related risks as part of our operations development and business strategies. We are committed to regularly evaluating climate-related risks and opportunities as an ongoing business function, and our discussions with customers and our analyses of their existing and planned climate-related strategies are key to shaping our own business strategy. In 2020, we initiated a formal “2-degree scenario” analysis, as recommended by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). This analysis, which examines business resilience under different climate scenarios up to an increase of 2 degrees Celsius, will be finalized in 2021 and reported on in our 2021 Annual and Sustainability Report.