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Schlumberger Limited
5599 San Felipe, 17th
Floor
Houston, Texas 77056
42, rue Saint-Dominique
75007 Paris, France
Parkstraat 83
2514 JG The Hague
The Netherlands
NOTICE OF ANNUAL GENERAL MEETING OF STOCKHOLDERS To Be Held April 11, 2007
March 1, 2007
The Annual General Meeting of Stockholders of Schlumberger Limited (Schlumberger N.V.) will be held at the Avila Beach Hotel, Penstraat 130, Willemstad, Curaao, Netherlands Antilles, on Wednesday, April 11, 2007 at 10:30 in the morning (Curaao time), for the following purposes:
1.To elect 13 directors.2.To report on the course of business during the year ended December 31, 2006, to approve the Companys Consolidated Balance Sheet as at December 31, 2006, its Consolidated Statement of Income for the year ended December 31, 2006, and the declaration of dividends by the Board of Directors as reflected in the Companys 2006 Annual Report to Stockholders.
3.To approve the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the accounts of the Company for 2007.Action will also be taken upon such other matters as may come properly before the meeting.
The close of business on February 21, 2007 has been fixed as the record date for the meeting. All holders of common stock of record at the close of business on that date are entitled to vote at the meeting.
| By order of the Board of Directors, |
| Ellen Summer |
| Secretary |
Please sign, date and promptly return the enclosed proxy card in the enclosed envelope, or grant a
proxy and give voting instructions by telephone or internet, so that you may be represented at the
meeting. Instructions are on your proxy card or on the voting instruction card included by your broker.
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SEC Filing Excerpt
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Program
Philosophy
Schlumbergers compensation philosophy is driven by the need to recruit, develop, motivate and retain top talent both in the short-term and long-term and to support the Companys values in the areas of people, technology and profitability. Promotion from within is a key principle at Schlumberger, and a significant majority of executive officers have reached their current positions through career development in the Company. Diversity is a very important part of Schlumbergers cultural philosophy, and Schlumberger believes its use of similar compensation packages at all levels is a strong factor in Schlumbergers success with diversity. The same compensation philosophy is applied to all levels of exempt employees, including executive officers. While the amounts may be different, each of the components of the compensation package is the same and is applied using the same methodology. Exceptions to this principle are generally due to local requirements.
Employees globally are included in an annual objectives-setting process and review, and their performance against these objectives determines the compensation they receive. Other factors affecting compensation are:
annual Company performance;
the jobs impact on Company results;
the Companys objective to be competitive with selected companies in the oil services, exploration and production, refining and pipeline industries and with selected other companies of comparable size and scope, known as the comparator or peer groups; andinternal equity.
Executive officers receive the same benefits as other employees. As is the case with compensation, any differences are generally due to local requirements. In line with this philosophy, executive officers receive minimal perquisites and have no employment agreements or golden parachutes. In the event of a change in control, the only compensation and benefits changes for all employees, including executive officers, are full vesting in any unexercised stock options and full vesting in any account balance under the supplemental retirement savings plan.
In establishing executive compensation, Schlumberger believes that:
base salaries should be at levels competitive with peer companies that compete with the Company for business opportunities and executive talent;annual cash incentive and stock option awards should reflect progress toward Company-wide financial and personal objectives and should balance rewards for short-term and long-term performance; and
the Companys policies should encourage appropriate executive stock ownership through stock option awards and stock ownership guidelines in order to align the interests of its executive officers with those of its stockholders.Purpose
The executive compensation program has been designed to accomplish the following long-term objectives:
provide market-competitive compensation and benefits that will enable Schlumberger to attract, motivate and retain talented executive officers;produce long-term positive results for the Companys stockholders and employees; and
provide balanced incentives for achieving short-term goals and long-term growth.Administration
The Schlumberger executive compensation program is administered by the Compensation Committee of the Board of Directors. The specific duties and responsibilities of the Compensation Committee are described in this proxy statement under Corporate Governance - Compensation Committee. The Compensation Committee has retained an independent consulting firm with respect to executive compensation matters. The
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consultants working on Schlumbergers executive compensation matters report to and act at the direction of the Compensation Committee. Schlumberger management does not direct or oversee the activities of the consulting firm with respect to the Companys executive compensation program and has not engaged the consulting firm for any other matter, except producing communication materials relating to the establishment of a pension plan in France.
Elements of Compensation
General
The primary elements of the executive compensation program during an individuals tenure consist of:
base salary;annual cash incentive; and
long-term incentives (stock option awards).Restricted stock units have recently been added to the range of compensation tools, although currently they are used for a limited population that does not include executive officers.
The selection of the three main elements allows the Company to remain competitive in attracting and retaining executive talent, and to motivate executives with current and potential financial rewards. At the same time, this relatively simple compensation plan design enables it to be applied and communicated to exempt employees of over 140 nationalities working in approximately 80 countries globally. Schlumberger sees diversity of its work force as a business imperative enabling the Company to provide services to clients anywhere in the world.
In years of average performance the Committee deems it appropriate to position executive officer jobs at or around the median of the market for a comparable position. This means that the package remains competitive enough to attract and retain top talent but does not over reward average performance. Compensation is set between the 50th and 75th percentiles or higher for exceptional business performance, for key skills in critical demand, and for positions that are of high internal value. The Company is prepared to pay above the 75th percentile for performance that significantly exceeds the Companys and the individuals goals for purposes of motivation, reward and retention.
Relative Size of Major Compensation Elements
The combination of base salary, annual cash incentive and stock options comprise total direct compensation. In setting executive compensation, the Compensation Committee considers the aggregate compensation payable to an executive officer and the form of the compensation. The Committee seeks to achieve the appropriate balance between immediate cash rewards and long-term financial incentives for the achievement of both annual and long-term financial and non-financial objectives.
The Committee reviews the mix of the compensation elements for executive officers against companies in the comparator groups as part of the external consultants executive compensation analysis. The size and mix of each element in a compensation package is based on job impact on the Company, market practice and overall Company and individual performance. The level of incentive compensation typically increases in relation to an executive officers responsibilities. The Compensation Committee believes that making a significant portion of an executive officers compensation contingent on annual results and stock price performance more closely aligns the executive officers interests with those of the shareholder.
The Committee may decide, as appropriate, to modify the mix of base, annual and long-term incentives to best fit an executive officers specific circumstances. For example, the Committee may make the decision to award more cash and not award a stock grant. This provides more flexibility to the Committee to reward executive officers appropriately as they near retirement, when they may only be able to partially fulfill the five-year vesting required for stock options. The Compensation Committee may also increase the size of stock option grants to an executive officer if the total number of career stock option grants does not adequately reflect the executives current position with the Company.
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Selection of Comparator Companies
The Compensation Committee approves annually the companies used in the executive compensation analysis based on surveys by the executive compensation consulting firm. The Companys human resources function works with the executive compensation consultants to match Company positions against survey positions and to compile the annual compensation data for each executive officer.
Two peer groups are used for the Companys compensation analysis. The first peer group includes 33 companies in the oil services, exploration and production, refining and pipeline industries, including 11 direct competitors in the oilfield services industry, which are part of Value Lines Oilfield Services Industry Group. Several international energy and energy-related companies that also meet the established criteria are included in this peer group, reflecting the Companys international operations. The second peer group includes 49 companies with revenues from $10-$30 billion and a median revenue of $14.5 billion. The revenue range was extended to $10-$30 billion in 2006 from $5-$25 billion (median revenue of $10 billion) to better reflect the size of the Company. Excluded from this peer group are companies from industry sectors that are least comparable to Schlumbergers areas of focus and that do not have a global presence. The peer group data provides guidance but does not dictate the setting of executive officers compensation.
In addition to this peer-based market analysis, an internal equity analysis is carried out to ensure that both the total compensation and individual compensation components for each executive officer position are sized appropriately in relation to each other.
Timing of Compensation Decisions
All elements of executive officer compensation are reviewed each January, after a review of financial, operating and personal objectives with respect to the prior years results. Early in the calendar year, financial, operating and personal objectives are determined for the current year. The Compensation Committee may, however, review salaries or grant stock options at other times as the result of new appointments or promotions during the year.
The following table summarizes the approximate timing of the more significant compensation events:
|
Event |
Timing |
|
| Set Board and Committee dates | At least 1 year prior to meeting dates. Board meetings have historically been held on the third Thursday of January, April, July and October, and committee meetings have been held the day before each Board meeting. In 2006, the Board also began meeting on the first Thursday of June without any associated committee meetings. | |
| Establish executive officer financial objective(s) | January of each fiscal year for current year | |
| Establish executive officer personal objectives | Early in the first quarter of the fiscal year for current year | |
| External consultants provide analysis for Compensation Committee to evaluate executive compensation | October of each year for compensation in the following fiscal year | |
| Evaluate executive performance (achievement of objectives established in previous fiscal year) and recommend compensation based on those results | Results approved in January of each fiscal year for annual cash incentive with respect to prior year. Earned incentive paid in February. | |
| Review and recommend base salary and determine stock option grants | January of each fiscal year for base salary for that year and for stock options to be granted in that year |
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Cash Compensation
Base Salary
Base salaries for each executive officer position are compared with similar jobs in both peer groups. A base salary change for an executive officer position, except the CEO, is recommended by the CEO and approved by the Compensation Committee according to:
market movement of salaries in the peer groups;comparison to internal peer positions;
the Companys relative performance during the year; andoverall performance against objectives.
A base salary for a position at the executive level is generally fixed for several years, which means that increases are usually more significant when they occur. This less frequent change of base salary is also consistent with the emphasis on the at-risk, or variable, portion of compensation, namely annual cash incentive and stock options. While the comparator market data provide guidance in making decisions on executive compensation, the Committee considers the value of an executive officers position to the Company and the market competitiveness for the positions requisite skills. If business or individual performance is below average, it is possible that no base salary increase will be awarded.
There are occasions when a base salary can be reduced such as when an executive officer moves to a position of lesser responsibility in the organization. Alternatively, the base salary can be frozen for a number of years until it falls in line with comparable positions. This depends on individual situations.
Base salary of the CEO is reviewed and recommended by the Committee for approval by the independent members of the Board based on the same criteria as above.
In 2006, Mr. Gould was awarded a base salary increase from $1,500,000 to $2,500,000 based on his achievements since he became CEO in March 2003. This was the first base salary increase for Mr. Gould since becoming CEO. The Committee took into consideration the overall Company performance, the refocus of the Company on oilfield services and Mr. Goulds position in the comparator market, bearing in mind that the Committee sets executive officer compensation for a number of years. The Board approved the Committees recommended base salary increase.
In 2006, Mr. Sbiti, Executive Vice President of Oilfield Services, was recommended by the CEO for a base salary increase from 500,000 to 600,000 EUR, based on his performance and the performance of the Oilfield Services Group. Oilfield Services continues to grow in size, geography, competition and new product development. Mr. Sbiti had not received a base salary increase since he assumed the Executive Vice President position in January 2003. In recognition of Mr. Sbitis leadership role with the Oilfield Services Group and its continued growth and outstanding performance, Mr. Sbiti received a base salary increase from 600,000 EUR to 700,000 EUR in 2007.
As part of his phased retirement, Mr. Perraud will cease to be Chief Financial Officer effective March 1, 2007 and will be replaced by Simon Ayat. Mr. Perraud received no base salary increase in 2006.
In 2007, Mr. Boutte received a base salary increase to $650,000 in recognition of his strong performance and WesternGecos results. Mr. Bouttes last base salary increase was in July 2003.
Mr. Corrigan was promoted to the position of Vice President of Operations of Oilfield Services in April 2006 with a base salary of 425,000 EUR.
Mr. Pai was an executive officer for part of 2006. His total compensation requires that we include him in the list of named executive officers. Mr. Pais compensation was set in October 2004, when he received a significant promotion to Vice President of Technologies. Mr. Pai was named Area President Europe and Africa in 2006, which is not an executive officer position. His base salary remained basically unchanged.
The base salaries for Messrs. Gould and Boutte place them in the top quartile of the comparator groups. The base salaries for Messrs. Perraud, Corrigan and Pai place them between the 50th and 75th percentiles of the comparator groups. Mr. Sbitis base salary places him at the 75th percentile of the comparator groups.
Annual Cash Incentive
Under SEC rules, the annual cash incentive for 2006 is presented in the Summary Compensation Table under Non-Equity Incentive Plan Compensation.
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The annual cash incentive potential for executive officers ranges from 0% to 60% to 0% to 100% of base salary depending on the position. Half of the potential range is based on the satisfactory completion of personal objectives and the other half of the potential range is based on the satisfaction of financial objectives. The incentive is performance-based and is paid out in February according to the achievement of both personal and financial objectives during the previous fiscal year. The financial half of the incentive has an incremental financial element, which can double the payout on achievement of superior financial results. This enhanced incentive is only applied to operations and staff positions reporting to the CEO, to jobs reporting to executive officers and to certain operations and staff jobs that have a significant impact on the Companys success. The Committee reviews and recommends to the full Board the financial objectives for both the executive officers and the CEO. The Compensation Committee approves the personal objectives for the CEO and assesses the CEOs performance against those objectives in determining the level of the annual incentive award, which is approved by the Board. The CEO approves the personal objectives for the other executive officers and the Committee reviews and approves the results.
2006 Annual Incentive
In 2006, the financial half of the incentive for all executive officers was based on earnings per share goals.
Earnings per share before charges and credits (herein referred to as EPS) was selected as the most appropriate measure upon which to base the annual incentive because it is currently the metric that Schlumberger believes is most widely used to evaluate the performance of Schlumberger by investors and analysts. A minimum performance level was set, below which no financial incentive would be paid. Schlumberger has paid zero financial incentive in years when performance does not reach expected results.
Due to the potential for exceptional growth that began in 2006, a series of stretch targets was set based on EPS, which provided the opportunity to increase the financial half of the incentive from 100% to 300% of the incentive potential for those eligible. No incentive would have been paid if the minimum EPS target had not been met. In order for 100% of the financial incentive to pay out in 2007 for goals set in 2006, the EPS achieved had to be a minimum of 41% higher than the EPS achieved in 2005. An increase in EPS of over 47% was needed to achieve 200% of the financial incentive, and an increase in EPS of at least 53% was needed to achieve the maximum 300% level. For 2006, EPS was 82% above 2005, resulting in incentive payments at the 300% level.
As Mr. Pai is no longer an executive officer, his financial objectives included financial targets specific to his business as well as the EPS goals of the other named executive officers. Mr. Pais incentive award was paid on a pro-rata basis taking into account the first four months of the year in his executive officer position and the rest of the year in his new position.
The second half of the incentive is related to personal objectives that are specific to each executive officer position and may relate to:
technology or geographical profitability or revenue growth;new technology introduction and market penetration;
acquisitions or divestitures;non-financial goals that are important to the Companys success, including:
people-related objectives such as retention and diversity; andsafety objectives; and
any other business priority.In 2006, the CEO, each of the executive officers and Mr. Pai had an objective to reduce attrition in professional groups. This was particularly difficult given the high level of competition for technical talent in the energy sector. In addition, the CEO, business heads and Mr. Pai had growth goals relating to their business area and an objective on strategic alliances or acquisitions. Each business head had Quality, Health, Safety and Environment objectives to maintain excellent performance or improve in a particular area.
The CEO had an objective to reorganize the service/product line segments in the second quarter of 2006. This new organization was achieved in the third quarter of 2006. The CEO also had an objective on social responsibility and corporate governance.
The award for the personal half of the objectives was based on the results each executive achieved.
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Total Cash Compensation
Cash compensation is comprised of base salary and annual cash incentive. Typically the higher the job is in the management hierarchy, the smaller the base salary as a percentage of total compensation. In other words, the higher the job impact on Company results, the larger the variable portion of compensation as a percentage of total compensation.
| 2006 Annual Incentive as a Percentage of Base Salary | ||||||||||||
| Total | ||||||||||||
|
Name |
Total Incentive Range Eligibility |
Financial Half Incentive Eligibility |
Financial Half Incentive Achieved* |
Personal Half Incentive Eligibility |
Personal
Half |
Incentive as a % of Base Salary |
||||||
|
A. Gould |
0-100 | 50 | 150 | 50 | 45 | 195 | ||||||
|
J.-M. Perraud |
0-100 | 50 | 150 | 50 | 43 | 193 | ||||||
|
C. Sbiti |
0-100 | 50 | 150 | 50 | 42 | 192 | ||||||
|
D. Boutte |
0-75 | 37.5 | 112.5 | 37.5 | 30 | 142.5 | ||||||
|
M. Corrigan** |
0-75 | 37.5 | 112.5 | 37.5 | 25.5 | 138 | ||||||
|
S. Pai |
0-75 | 37.5 | 112.5 | 37.5 | 34 | 146.5 | ||||||
*Enhanced pay-out (300% of incentive eligibility) based on achievement of superior financial goals.
**The information presented for Mr. Corrigan reflects his total annual incentive as a percentage of his base salary following his promotion in April 2006. Prior to his promotion, Mr. Corrigan had a lower incentive range.
Long-Term Incentives
Stock Options
Stock options are a vital piece of the Companys total compensation package and are designed to give high value employees and executive officers a longer-term stake in the Company, act as a long-term retention tool and align employee and shareholder interests.
Stock Option Granting Process
The Compensation Committee is responsible for option grants under Schlumbergers stock option and incentive plans. The Committee approves the total number of shares that will be available for grants the following year at the October Compensation Committee meeting. Management determines the allocation by group and function and individual recommendations are made by the heads of the operations and the functions and approved by the CEO. The Compensation Committee approves and grants all stock option awards, paying particular attention to executive officer awards, which are recommended by the CEO. Awards for the executive officers and CEO are granted by the Committee and discussed with the Board.
The regular Board and Committee meeting schedule is set at least a year in advance with Board meetings held quarterly, on the third Thursday of January, April, July and October, and the Committee meetings held the day before each Board meeting. The timing of these meetings is not determined by executive officers and is usually two days in advance of the announcement of earnings. The Company does not time the release of material non-public information for the purpose of affecting the values of executive compensation. At the time of making stock option decisions, the Compensation Committee is aware of the earnings results and takes them into account, but it does not adjust the size of grants to reflect possible market reaction. Generally, annual stock option grants are made at the January meeting of the Compensation Committee, although specific grants may be made at other regular meetings to recognize the promotion of an employee, a change in responsibility or a specific achievement. It is Schlumbergers policy to make awards to executive officers and other employees at the same time. Exceptionally in May 2005, the Compensation Committee acted at a special meeting to make stock option grants for retention purposes to certain technical employees who were not executive officers.
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The exercise price for all stock options granted to executive officers and other employees is the average of the high and low trading price of the Schlumberger common stock on the New York Stock Exchange on the date of grant. The potential gain with any increase in stock price is the same as the shareholders gain.
The last four-year ratable grant (vesting in equal parts over four years) was in January 2006. Since then, stock options have five-year ratable vesting, except that stock options granted to most employees in France have four-year cliff vesting. At the same time that the four-year ratable vesting was introduced in July 2003, the amount of earnings from stock options was capped at 125% of the exercise price. Both of these decisions were taken to limit stock option expense following the introduction of new accounting rules on expensing stock options. The decisions in April 2006 to eliminate the earnings cap for newly granted stock options and to return to five-year vesting were intended to enhance the retention of key employees in todays highly competitive market. As a result of these decisions, stock option expense increased due to the higher opportunity for gain during the life of the option and the longer vesting period. The Company believes, however, that the expense is justified.
Stock options are awarded to exempt employees (usually defined as employees in professional-level jobs), but each general grant typically includes fewer than 10% of the exempt population. The selection process for employees recommended for a grant is the same for all employees and is based on managements decision regarding the performance and potential of each individual, the individuals success in achieving both operating and non-financial objectives and the desire to retain key employees while motivating future exceptional performance. The list of recommendations to the Compensation Committee is reviewed through the Executive Vice President of each operating group and is approved by the Vice President of Personnel and the CEO.
Important Factors in Understanding Schlumbergers Use of Stock Options
The plans do not permit the following:
granting of stock options at a price below the fair market value on the grant date;repricing, or reducing the exercise price of a stock option;
substituting a new option grant with an exercise price lower than the exercise price of an outstanding option grant;providing grants with a reload vehicle; or
acceleration of vesting upon retirement.Executive Stock Ownership Guidelines
The Committee and management believe strongly in linking executive long-term rewards with shareholder value. As a result, the Compensation Committee has established the following stock ownership guidelines applicable to executive officers and other key position holders.
|
Title |
Stock Ownership Guidelines |
|||
|
CEO |
5 times base salary | |||
|
Executive Vice President |
3 times base salary | |||
|
Other Officers |
1.5 times base salary | |||
|
Key Staff Positions |
1 times base salary | |||
Each executive covered by the guidelines must hold in shares at least 30% of their gain on the stock option exercise for a period of six months. Those who do not meet the guidelines after the six-month period must continue to hold the shares until the guidelines are met. There is no specified timeline to achieve the guidelines, as many of the executives hold their options for the life of the grant.
The stock ownership guidelines also specify that any individual covered by this policy may not purchase, sell or enter into any market transactions with respect to Schlumberger stock during any blackout period. A blackout period usually applies from the beginning of the first day following the last month of each fiscal quarter (January, April, July and October 1 of each year) up to and including two full trading days after the
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public release of Schlumbergers quarterly or annual financial results. In addition to the regularly scheduled blackout periods, Schlumberger may impose additional blackout periods during which there exists material non-public information about Schlumberger, such as major acquisitions and divestitures.
Prohibition on Speculation in Schlumberger Stock
The stock ownership guidelines prohibit executives from speculating in the Companys stock, which includes, but is not limited to, short selling (profiting if the market price of the securities decreases); buying or selling publicly traded options, including writing covered calls; and hedging or any other type of derivative arrangement that has a similar economic effect.
Stock Options Granted to Executive Officers with Respect to 2006 Performance
The Compensation Committee makes grants of stock options primarily to reward prior performance but also to retain executive officers and provide incentives for future exceptional performance. The size of the stock option grant increases with the level of position, and for the CEO is typically the largest element of the total compensation package. In determining the amount, if any, of stock options granted to executive officers, the Compensation Committee considers numerous factors, including:
the Companys financial and operating performance during the relevant period;achievement of non-financial goals;
the executive officers contribution to the Companys success;the level of competition for executives with comparable skills and experience;
a review of compensation for comparable positions with the comparator groups;the total number of stock options granted to an executive over the course of his or her career, together with the retentive effect of additional stock option grants; and
a review of the internal equity of peer position career grants.The following table sets forth stock option grants on January 17, 2007 with respect to each named executive officers performance in 2006:
| Stock Option Grants | ||||
|
Name |
Number of Shares Granted* |
|||
|
A. Gould |
400,000 | |||
|
J.-M. Perraud |
0 | |||
|
C. Sbiti |
130,000 | |||
|
D. Boutte |
70,000 | |||
|
M. Corrigan |
0 | |||
|
S. Pai |
0 | |||
*No stock options were granted to Mr. Perraud due to his pending change in responsibilities. Messrs. Corrigan and Pai received two grants in 2006, so they received no grant in January 2007.
Restricted Stock and Restricted Stock Units
In 2006, the Company amended the 2005 Stock Incentive Plan to introduce restricted stock and restricted stock units. The forms of compensation were needed as a retention tool for key technical employees with significant experience due to the extreme competitiveness for such expertise in the oil and gas industry. There are no performance criteria, and vesting is based on a three-year cliff service requirement. Each grant is considered carefully to ensure the Company is targeting the right population and is approved through the Executive Vice President of the operating group and the CEO and granted by the Compensation Committee. To date, restricted stock and restricted stock units have not been granted to executive officers. The plan allows the flexibility to award restricted stock and restricted stock units to executive officers in the future as long as performance criteria are included in the vesting requirements of the grants to executive officers.
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Recoupment of Performance-based Bonuses
On the recommendation of the Compensation Committee in July 2006, the Board of Directors adopted a policy on recoupment of performance-based bonuses in the event of certain restatements of financial results. Under the policy, if financial results are significantly restated due to fraud or intentional misconduct, the Board will review any performance-based bonuses paid to executive officers who are found to be personally responsible for the fraud or intentional misconduct that caused the need for the restatement and will, to the extent permitted by applicable law, require recoupment of any amounts paid in excess of the amounts that would have been paid based on the restated financial results.
Benefits
Retirement Benefits
In line with Schlumbergers aim to provide careers and to promote retention, retirement plans are provided, where possible, for all employees, including executive officers, according to local market conditions. Schlumberger considers that both compensation and longer-term benefit plans are important elements of the compensation package. The pension plans provide for lifetime benefits upon retirement after a specified number of years of service and take into account local practice on retirement ages. They are designed to complement but not substitute for local Government plans, which may vary considerably in terms of the replacement income they provide, and other Company sponsored savings plans. Employees may participate in multiple retirement plans in the course of their career with the Company or its subsidiaries, in which case they become entitled to a benefit from each plan based upon the benefits earned during the years of service related to each plan. These plans are funded through cash contributions made by the Company and its subsidiaries based on actuarial valuations and regulatory requirements.
Some of the Schlumberger U.S. retirement plans are non-qualified plans which provide an eligible employee with additional retirement savings opportunities that cannot be achieved with tax-qualified plans due to limits on (1) annual compensation that can be taken into account under qualified plans or (2) annual benefits that can be provided under qualified plans.
Officers and other employees in the US whose compensation exceeds the qualified plan limits are eligible to participate in non-qualified excess benefit programs for 401(k), profit-sharing and pension, whereby they receive correspondingly higher benefits. Employees and executive officers assigned outside the US are entitled to participate in the applicable plans of the country where they are assigned including supplemental plans where available.
Retirement Practices
The Company has a practice of phased retirement, which is generally offered to executive officers approaching retirement, other than the CEO, at the discretion of the individual and the Company. This practice involves a transition into retirement, whereby the individual ceases being an executive officer and relinquishes primary responsibilities. He or she remains an employee and generally receives lesser salary for reduced responsibilities and reduced working time. The arrangements are typically in place for an average of two to three years as agreed at the start of the term. The purpose is to allow the outgoing executive officer to support the incoming executive officer for a period of time to ensure a smooth succession and to provide resources to the Company in particular areas of expertise. In these circumstances, the Company maintains pension contributions and other benefits such as medical and insurance and the executive officer continues to vest in previously granted stock options. The executive officer, however, is no longer eligible for additional stock options or, once his or her work time is reduced, for an annual cash incentive.
In connection with Mr. Perrauds pending change in responsibilities, Schlumberger and Mr. Perraud have entered into an employment agreement to be effective as of March 1, 2007. Under the terms of the agreement, Mr. Perraud will be employed as a Senior Financial Advisor to the Chairman until November 30, 2010, with an initial term commencing on March 1, 2007 and continuing on a full-time basis until November 30, 2007 and a secondary, reduced-time term commencing on December 1, 2007 and continuing until November 30, 2010.
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Mr. Perraud will receive compensation and benefits consisting of (1) a base salary of $50,000 per month during the initial term and $37,500 per month during the secondary term; (2) continued participation in Schlumbergers health, welfare and insurance plans on a basis comparable to that of other U.S. employees; (3) continued accrual of benefits under Schlumbergers qualified pension plans and qualified profit-sharing plans based on an annual salary of $600,000 and on any incentive payments made to him in January 2008; (4) a prorated payment (based on 11 months of service during 2007) in Schlumbergers 2007 performance incentive program; and (5) cash in an amount equal to accrued and unused vacation as of February 28, 2007. During the initial term and the secondary term, Mr. Perraud will generally continue to vest in stock options previously granted to him under Schlumbergers stock option plans. If Mr. Perraud voluntarily terminates the agreement and does not become employed by an unauthorized competitor, Mr. Perraud will be entitled to exercise any vested stock options for up to the lesser of five years or the amount of time left on the option term. If Schlumberger and Mr. Perraud mutually agree to terminate the agreement, Mr. Perraud will be entitled to the same benefits in the event of a voluntary termination and (1) if during the initial term, an amount equal to $50,000 multiplied by the number of months remaining in the initial term plus $550,000 or, (2) if during the secondary term, the sum of $37,500 multiplied by the number of months remaining in the secondary term. The agreement also contains confidentiality, return of property and noncompetition covenants.
Employment Agreements
Schlumberger does not provide employment agreements for executive officers, except in connection with phased retirement as described above. This is in line with the overall philosophy, previously discussed, that executive officers, including the CEO, be given the same elements of compensation as other employees.
Other Benefits
Schlumberger seeks to provide benefit plans, such as medical cover and life and disability insurance, on a country basis in line with market conditions. Where the local practice is considered to be less than the Schlumberger standard, Schlumberger generally offers minimum coverage. Executive officers are eligible for the same benefit plans provided to other employees, including medical coverage and life and disability insurance as well as supplemental plans chosen and paid for by employees who wish additional coverage. There are no special insurance plans for officers.
Schlumberger provides only minimum perquisites to executive officers which have been identified in the narrative notes to the compensation tables. The same perquisites are generally available to exempt employees. For example, relocation assistance is provided to employees based on a company-wide policy.
Impact of Accounting and Tax Treatment
Accounting Treatment
Schlumberger was an early adopter of the accounting rules which required companies to expense the costs of stock-based compensation in their financial statements. As such, the Company began recording stock-based compensation expense in the income statement in the third quarter of 2003 for all stock-based awards after January 1, 2003. The fair value of each award is estimated on the date of grant, using the Black-Scholes option pricing model. Once the fair value of each award is determined, it is expensed in the income statement ratably over the vesting period.
Tax Treatment
The Company grants both incentive stock options and non-qualified stock options according to US tax regulations. The Company has a qualified French sub plan for stock options, restricted stock and restricted stock units to comply with French regulatory requirements. Stock options granted under the French sub plan have four-year cliff vesting rather than the usual five-year ratable vesting, and restricted stock and restricted stock units granted under the French sub plan have two-year cliff vesting and a two-year holding period rather than the usual three-year cliff vesting schedule.
23
Section 162(m) of the Internal Revenue Code limits the deductibility of certain compensation expenses in excess of $1,000,000 per individual to the Companys Chief Executive Officer or any of the other four most highly compensated executives. The Companys stock option plans are in compliance with the provisions of Section 162(m) and are not subject to the $1 million limitation. The Committee continues to believe that the cash compensation payable in excess of this amount for the five named executives will not result in any material loss of tax deduction.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with the Companys management the Compensation Discussion and Analysis included in this proxy statement. Based on that review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE SCHLUMBERGER
BOARD OF DIRECTORS
|
Jamie S. Gorelick |
Nicolas Seydoux |
|
|
Adrian Lajous |
Linda G. Stuntz, Chair |
|
|
Michael E. Marks |
24
Summary Compensation Table
The following table shows the compensation paid by the Company and its subsidiaries for the fiscal year ended December 31, 2006 to the Chief Executive Officer, the Chief Financial Officer, the next three most highly compensated executive officers as of December 31, 2006 and one other person who was an executive officer during 2006 but who was not serving as an executive officer as of December 31, 2006 (collectively, the named executive officers).
|
Name and |
Year |
Salary ($) |
Bonus (4) ($) |
Stock Awards ($) |
Option Awards ($)(5) |
Non-Equity Incentive Plan Compensation ($)(4) |
Change in Pension Value & Nonqualified Deferred Compensation Earnings ($)(6) |
All Other Compensation ($)(7) |
Total ($) |
||||||||||
|
A. Gould |
2006 | 2,500,000 | N/A | N/A | 8,689,859 | 4,875,000 | 955,156 | 510,980 | (8) | 17,530,995 | |||||||||
|
|
|||||||||||||||||||
|
J.-M. Perraud |
2006 | 600,000 | N/A | N/A | 1,107,692 | 1,158,000 | 297,427 | 268,745 | (9) | 3,431,864 | |||||||||
|
|
|||||||||||||||||||
|
C. Sbiti (1) |
2006 | 748,130 | N/A | N/A | 2,376,617 | 1,436,409 | 474,079 | 157,322 | (10) | 5,192,557 | |||||||||
|
|
|||||||||||||||||||
|
D. Boutte (2) |
2006 | 520,073 | N/A | N/A | 1,631,745 | 741,058 | 18,330 | 211,555 | (11) | 3,122,761 | |||||||||
|
|
|||||||||||||||||||
|
M. Corrigan (1) |
2006 | 505,902 | N/A | N/A | 569,793 | 658,978 | 148,247 | 331,854 | (12) | 2,214,774 | |||||||||
|
|
|||||||||||||||||||
|
S. Pai (1)(3) |
2006 | 567,332 | N/A | N/A | 1,223,045 | 831,172 | 165,248 | 127,574 | (13) | 2,914,371 | |||||||||
(1) Messrs. Sbiti and Pai are paid in Euros, and a portion of Mr. Corrigans salary for 2006 was paid in Euros. For purposes of this table, the compensation for Messrs. Sbiti, Pai and Corrigan has been determined using the 2006 average exchange rate of 1 U.S. Dollar = 0.802 Euros.
(2) Mr. Boutte is paid in Pounds Sterling. For purposes of this table, the compensation for Mr. Boutte has been determined using the 2006 average exchange rate of 1 U.S. Dollar = 0.548 Pounds Sterling.
(3) Mr. Pai was an executive officer for part of 2006. Mr. Pai was named Area President Europe and Africa in 2006, which is not an executive officer position.(4) The annual cash incentive paid to Schlumbergers named executive officers is included in the column Non-Equity Incentive Plan Compensation.
(5) The amount reflected in this column is the compensation cost recognized by the Company during fiscal 2006 under Statement of Financial Accounting Standard No. 123R (Share-Based Payment) for grants made in 2006 and prior years. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for the years indicated:| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
| Dividend yield | 0.8 | %1.3 | %1.5 | %1.4 | %1.6 | %1.6 |
| Expected volatility | 33 | %31 | %24 | %36 | %34 | %33 |
| Risk free interest rates | 4.3 | 3.8 | 3.6 | 2.7 | 4.8 | 3.0 |
| Expected option life | 6.1 years | 4.5 years | 4.5 years | 4.7 years | 6.6 years | 5.5 years |
| Weighted-average fair value per share | $20.03 | $7.12 | $6.17 | $5.17 | $10.11 | 10.75 |
(11) The amount disclosed for Mr. Boutte includes the following:
|
Item |
Amount |
||
|
Unfunded credits to the Schlumberger Supplementary Benefit Plan |
$ | 75,733 | |
|
Contributions to the Schlumberger US Citizens Abroad Profit Sharing Plan |
$ | 17,600 | |
|
Contributions to the Schlumberger International Staff Pension Plan |
$ | 86,172 | |
|
Perquisites |
|||
|
Tax preparation expenses in connection with international assignment and cost of annual trip home |
$ | 32,050 | |
|
Total |
$ | 211,555 | |
(12) The amount disclosed for Mr. Corrigan includes the following:
|
Item |
Amount |
||
|
Unfunded credits to the Schlumberger Supplementary Benefit Plan |
$ | 36,057 | |
|
Unfunded matching credits to the Schlumberger Restoration Savings Plan |
$ | 18,028 | |
|
Contributions to Schlumberger Profit Sharing Plans |
$ | 13,200 | |
|
Contributions to Schlumberger 401(k) Plan |
$ | 6,600 | |
|
Perquisites |
|||
|
Relocation expenses: |
|||
|
North American relocation payment |
$ | 40,000 | |
|
Lump-sum payment |
$ | 20,741 | |
|
Temporary living expenses |
$ | 15,874 | |
|
Other expenses (moving costs, closing costs on purchase and sale of home, home sale bonus and other related costs) |
$ | 107,532 | |
|
Child education expenses |
$ | 19,967 | |
|
Payment for accrued vacation time in connection with relocation |
$ | 50,769 | |
|
Tax preparation expenses in connection with international assignment |
$ | 3,086 | |
|
Total |
$ | 331,854 | |
(13) The amount disclosed for Mr. Pai includes the following:
|
Item |
Amount |
||
|
Unfunded credits to the Schlumberger Supplementary Benefit Plan |
$ | 56,267 | |
|
Unfunded matching credits to the Schlumberger Restoration Savings Plan |
$ | 28,133 | |
|
Contributions to Schlumberger Profit Sharing Plans |
$ | 13,200 | |
|
Contributions to the Schlumberger 401(k) Plan |
$ | 6,600 | |
|
Perquisites |
|||
|
Tax preparation expenses in connection with international assignment and cost of annual trip home |
$ | 23,374 | |
|
Total |
$ | 127,574 | |
26
Grants of Plan-Based Awards for Fiscal Year 2006
The following table sets forth certain information concerning options granted to named executive officers during 2006.
|
Name(1) |
Grant Date |
All Other Option Awards: |
Exercise or Base |
Closing Market Price on Grant Date ($/Sh) |
Grant Date Fair Value of Stock and Option Awards ($) |
|||||
|
A. Gould |
1/18/2006 | 800,000 | 54.235 | 54.555 | 15,000,000 | |||||
|
J.-M. Perraud |
1/18/2006 | 80,000 | 54.235 | 54.555 | 1,500,000 | |||||
|
C. Sbiti |
1/18/2006 | 260,000 | 54.235 | 54.555 | 4,875,000 | |||||
|
D. Boutte |
1/18/2006 | 140,000 | 54.235 | 54.555 | 2,625,000 | |||||
|
M. Corrigan |
1/18/2006 7/19/2006 |
60,000 30,000 |
54.235 63.545 |
54.555 64.240 |
1,125,000 798,090 |
|||||
|
S. Pai |
1/18/2006 7/19/2006 |
80,000 30,000 |
54.235 63.545 |
54.555 64.240 |
1,500,000 798,090 |
|||||
(1) For information regarding the annual cash incentive paid to Schlumbergers named executive officers with respect to 2006, please read Compensation Discussion and AnalysisCash CompensationAnnual Cash IncentiveTotal Cash Compensation.
(2) The number of options granted on January 18, 2006 has been adjusted to reflect the 2-for-1 stock split that occurred in April 2006.
(3) The amounts disclosed in this column include option grants made pursuant to the following stock option plans:
| Schlumberger 1998 Stock Option Plan |
Schlumberger 2001 Stock Option Plan |
Schlumberger 2005 Stock Incentive Plan |
|
| Mr. Gould | 200,000 | 400,000 | 200,000 |
| Mr. Perraud | 80,000 | N/A | N/A |
| Mr. Sbiti | N/A | N/A | 260,000 |
| Mr. Boutte | 140,000 | N/A | N/A |
| Mr. Corrigan | N/A | 30,000 | 60,000 |
| Mr. Pai | 30,000 | N/A | 80,000 |
(4) The exercise price is equal to the average of the high and low per share prices of Schlumberger stock on the dates of grant and may be paid in cash or by tendering shares of common stock. Applicable tax obligations may be paid in cash or by withholding of shares of Schlumberger stock.
Stock options granted in January 2006 vest in four equal annual installments and the amount of profit is capped at 125% of the exercise price. All stock option awards after January 2006 vest in five equal annual installments and are not subject to a profit cap. The return to five-year ratable vesting and elimination of the profit cap were intended to enhance the retentive effect for stock options granted to key employees in todays highly competitive market.
27
Outstanding Equity Awards at Fiscal Year-End 2006
The following table sets forth certain information with respect to the named executive officers concerning options outstanding as of December 31, 2006.
|
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable (1) |
Number of Securities Underlying Unexercised Options (#) Unexercisable (1) |
Option Exercise Price ($) |
Option Grant Date |
Option Expiration Date |
|
A. Gould |
11,880 | 0 | 41.174 | 10/21/1997 | 10/21/2007 |
| 400,000 | 0 | 41.141 | 10/19/2000 | 10/19/2010 | |
| 200,000 | 0 | 31.188 | 4/18/2001 | 4/18/2011 | |
| 480,000 | 120,000 | 27.873 | 4/17/2002 | 4/17/2012 | |
| 360,000 | 240,000 | 20.648 | 1/15/2003 | 1/15/2013 | |
| 415,000 | 415,000 | 27.950 | 1/21/2004 | 1/21/2014 | |
| 200,000 | 600,000 | 32.455 | 1/19/2005 | 1/19/2015 | |
| 0 |
800,000 |
54.235 |
1/18/2006 |
1/18/2016 |
|
|
J.-M. Perraud |
20,000 | 0 | 32.125 | 1/18/2000 | 1/18/2010 |
| 40,000 | 0 | 41.141 | 10/19/2000 | 10/19/2010 | |
| 60,000 | 0 | 31.188 | 4/18/2001 | 4/18/2011 | |
| 80,000 | 20,000 | 27.873 | 4/17/2002 | 4/17/2012 | |
| 0 | 30,000 | 23.010 | 7/16/2003 | 7/16/2013 | |
| 50,000 | 50,000 | 32.618 | 7/21/2004 | 7/21/2014 | |
| 25,000 | 75,000 | 32.455 | 1/19/2005 | 1/19/2015 | |
| 0 |
80,000 |
54.235 |
1/18/2006 |
1/18/2016 |
|
|
C. Sbiti |
80,000 | 20,000 | 27.873 | 4/17/2002 | 4/17/2012 |
| 120,000 | 80,000 | 20.648 | 1/15/2003 | 1/15/2013 | |
| 90,000 | 90,000 | 32.618 | 7/21/2004 | 7/21/2014 | |
| 45,000 | 135,000 | 32.455 | 1/19/2005 | 1/19/2015 | |
| 0 |
260,000 |
54.235 |
1/18/2006 |
1/18/2016 |
|
|
D. Boutte |
21,978 | 0 | 41.174 | 10/21/1997 | 10/21/2007 |
| 8,792 | 0 | 35.658 | 4/15/1998 | 4/15/2008 | |
| 32,968 | 0 | 27.810 | 4/21/1999 | 4/21/2009 | |
| 40,000 | 0 | 36.516 | 4/19/2000 | 4/19/2010 | |
| 100,000 | 0 | 31.188 | 4/18/2001 | 4/18/2011 | |
| 160,000 | 40,000 | 27.873 | 4/17/2002 | 4/17/2012 | |
| 60,000 | 40,000 | 20.648 | 1/15/2003 | 1/15/2013 | |
| 50,000 | 50,000 | 32.618 | 7/21/2004 | 7/21/2014 | |
| 25,000 | 75,000 | 32.455 | 1/19/2005 | 1/19/2015 | |
| 0 |
140,000 |
54.235 |
1/18/2006 |
1/18/2016 |
|
|
M. Corrigan |
0 | 2,000 | 27.873 | 4/17/2002 | 4/17/2012 |
| 0 | 10,000 | 23.010 | 7/16/2003 | 7/16/2013 | |
| 20,000 | 20,000 | 32.618 | 7/21/2004 | 7/21/2014 | |
| 10,000 | 30,000 | 32.455 | 1/19/2005 | 1/19/2015 | |
| 0 | 60,000 | 54.235 | 1/18/2006 | 1/18/2016 | |
| 0 |
30,000 |
63.545 |
7/19/2006 |
7/19/2016 |
|
|
S. Pai |
12,000 | 0 | 36.516 | 4/19/2000 | 4/19/2010 |
| 50,000 | 0 | 38.532 | 1/17/2001 | 1/17/2011 | |
| 128,000 | 32,000 | 27.873 | 4/17/2002 | 4/17/2012 | |
| 60,000 | 20,000 | 23.010 | 7/16/2003 | 7/16/2013 | |
| 30,000 | 30,000 | 32.618 | 7/21/2004 | 7/21/2014 | |
| 15,000 | 45,000 | 32.455 | 1/19/2005 | 1/19/2015 | |
| 0 | 80,000 | 54.235 | 1/18/2006 | 1/18/2016 | |
| 0 | 30,000 | 63.545 | 7/19/2006 | 7/19/2016 |
(1) Options granted from July 2003 to January 2006 have four- year ratable vesting and stock price appreciation is capped at 125% of the exercise price on the date of grant. Grants made before and after these dates have five-year ratable vesting and no profit cap.
28
Option Exercises and Stock Vested for Fiscal Year 2006
The following table sets forth certain information with respect to stock options exercised by named executive officers during 2006.
|
Option Awards |
|||
|
|
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
|
|
A. Gould |
317,820 | 8,128,638 | |
|
J.-M. Perraud |
146,152 | 5,127,726 | |
|
C. Sbiti |
174,514 | 5,662,006 | |
|
D. Boutte |
|||
|
M. Corrigan |
82,333 | 2,962,067 | |
|
S. Pai |
9,890 | 275,330 | |
Schlumberger maintains the following pension plans for executive officers and other employees that provide for lifetime pensions upon retirement based on years of service:
Schlumberger Limited Pension Plan (SLB Pension Plan);
Schlumberger Technology Corporation Pension Plan (STC Pension Plan);
Schlumberger Limited Supplementary Benefit Plan (SLB Supplementary Plan);
Schlumberger Technology Corporation Supplementary Benefit Plan (STC Supplementary Plan); and
Schlumberger French Supplementary Pension Plan (SLB French Supplementary Plan).
The following table and narrative disclosure set forth certain information with respect to pension benefits payable to named executive officers.
|
Name |
Plan Name |
Number of Years of Credited Service (#) |
Present Value of Accumulated Benefit ($) |
Payments During Last Fiscal Year ($) |
|
A. Gould |
SLB Pension Plan |
9.5 7.0 |
482,735 3,531,447 |
N/A N/A |
|
J.-M. Perraud |
SLB Pension Plan |
11.4 8.8 |
449,875 1,112,873 |
N/A N/A |
|
C. Sbiti |
STC Pension Plan |
0.9 1.0 |
51,406 472,730 |
N/A N/A |
|
D. Boutte |
SLB Pension Plan |
3.0 12.3 3.0 2.5 |
141,248 243,223 250,166 29,613 |
N/A N/A N/A N/A |
|
M. Corrigan |
SLB Pension Plan |
0.3 8.1 0.3 5.8 |
N/A 316,583 23,171 293,224 |
N/A N/A N/A N/A |
|
S. Pai |
SLB Pension Plan |
2.3 7.2 2.3 3.8 |
65,803 148,527 268,402 211,840 |
N/A N/A N/A N/A |
29
Tax-Qualified Pension Plans
Both the Schlumberger Limited Pension Plan and the Schlumberger Technology Corporation Pension Plan are U.S. tax-qualified pension plans. These plans have substantially identical terms. Employees may participate in one or both of these plans in the course of their careers with Schlumberger, in which case they become entitled to a pension from each plan based upon the benefits accrued during the years of service related to each plan. These plans are funded through cash contributions made by the Company and its subsidiaries based on actuarial valuations and regulatory requirements. Benefits under these plans are based on an employees admissible compensation (generally base salary and cash incentive) for each year in which an employee participates in the plan and the employees length of service with Schlumberger. From January 1,1989, the benefit earned has been 1.5% of admissible compensation for service prior to the employees completion of 15 years of active service and 2% of admissible compensation for service after completion of 15 years of active service. Normal retirement under these plans is at age 65, however, early retirement with a reduced benefit is possible at age 55 or as early as age 50 with 20 years of service. Additionally, under the rule of 85, an employee or executive officer who terminates after age 55 and whose combined age and service is 85 or more, is eligible for retirement with an unreduced pension. Messrs. Gould and Perraud are each eligible for retirement with an unreduced pension under the rule of 85. The benefits are usually paid as a life-time annuity. The Company does not grant and does not expect to grant extra years of credited service under the tax-qualified pension plans to executive officers.
In 2004, the above plans were amended to generally provide that employees hired on or after October 1, 2004 would not be eligible to participate. Newly hired employees are eligible to participate in an enhanced defined contribution plan, which provides a Company contribution, depending on the employees 401(k) contribution and the profitability of the Company in any year. None of the executive officers working in the US were affected by this change.
Schlumberger Supplementary Benefit PlansNonqualified Pension
Both the Schlumberger Limited Supplementary Benefit Plan and the Schlumberger Technology Corporation Supplementary Benefit Plan contain nonqualified pension benefits. These plans have substantially identical terms and each plan provides an eligible employee with benefits equal to the benefits that the employee is unable to receive under the applicable qualified pension plan due to the U.S. Internal Revenue Code (U.S. IRC) limits on (1) annual compensation that can be taken into account under qualified plans and (2) annual benefits that can be provided under qualified plans. The retirement age under nonqualified pension plans is the same as under the tax-qualified pension plans. These benefits are subject to forfeiture if the employee is terminated for cause or has violated a confidentiality arrangement involving the Company or its affiliates. Messrs. Gould and Perraud are each eligible for retirement with an unreduced pension under the rule of 85. Currently, nonqualified plan benefits are paid to an employee (or the employees beneficiary) at the same time and in the same manner as the benefit is paid under the applicable qualified plan. These nonqualified plan benefits are payable in cash from the Companys general assets and are intended to qualify as excess benefit plans exempt from certain requirements of Title I of ERISA. The Company has not granted and does not expect to grant extra years of credited service under the nonqualified pension plans to executive officers.
French Supplementary Pension Plan
Effective January 2006, the Company adopted a French Supplementary Pension Plan for exempt employees in France. The plan complements existing national plans and provides a pension from age 60 when the employee retires from Schlumberger and is eligible for a French state pension. The benefit is equivalent to 1.5% of admissible compensation above the earnings cap for less than fifteen years service and 2% of admissible compensation for more than fifteen years service. No employee contributions are required or permitted. The benefit is paid as a life-time annuity. If an eligible employee leaves the Company before age 60 or is otherwise not entitled to a French pension, then the employee would not receive a benefit under the plan. If the eligible employee accepts early retirement before age 60, is not subsequently employed and is otherwise entitled to a French pension, then the employee would receive a benefit under the plan.
30
Nonqualified Deferred Compensation
The following table and narrative disclosure set forth certain information with respect to nonqualified deferred compensation payable to named executive officers.
|
Name |
Executive Contributions in Last FY ($) |
Company Contributions in Last FY ($)(1) |
Aggregate Earnings in Last FY ($)(2) |
Aggregate
Distributions |
Aggregate Balance at Last FYE ($)(1)(3) |
|
A. Gould |
267,300 | 400,950 | 540,871 | 5,815,141 | |
|
J.-M. Perraud |
126,200 | 113,580 | 244,970 | 2,195,635 | |
|
C. Sbiti |
157,322 | 160,791 | 2,298,906 | ||
|
D. Boutte |
53,858 | 161,905 | 450,996 | 2,004,766 | |
|
M. Corrigan |
90,142 | 54,085 | 112,732 | 1,259,843 | |
|
S. Pai |
140,667 | 84,400 | 77,447 | 1,091,279 |
(1) Company contributions and aggregate balances include amounts contributed by Schlumberger to nonqualified deferred compensation plans in 2007 with respect to fiscal 2006 compensation. For more information on the amount of company contributions, please read footnotes (8) through (13) to the Summary Compensation Table.
(2) Earnings include the increase in the present value of estimated annual benefits payable on retirement under the Schlumberger International Staff Pension Plan. For more information, please read note 3 to this table.
(3) Includes the present value of target annual benefits payable on retirement under the Schlumberger International Staff Pension Plan. The present values for Messrs. Gould, Perraud, Sbiti, Boutte, Corrigan and Pai were $1,768,644, $178,152, $1,088,359, $1,681,053, $478,298, and $209,362, respectively, as of December 31, 2006. Payment of benefits under the plan is limited to assets in the plan, and accordingly if the plan does not have sufficient assets to make target payments to participants upon retirement, benefits may be reduced or curtailed.Schlumberger maintains the following nonqualified deferred compensation plans for employees, including executive officers:
Schlumberger Limited Supplementary Benefit Plan;
Schlumberger Technology Corporation Supplementary Benefit Plan;
Schlumberger Limited Restoration Savings Plan;
Schlumberger Technology Corporation Restoration Savings Plan;
Schlumberger International Staff Pension Plan; and
Schlumberger International Staff Profit Sharing Plan.
Except for the international staff plans, all nonqualified deferred compensation plan benefits are payable in cash from the Companys general assets. All of these nonqualified plans are intended to qualify as supplementary plans or foreign plans exempt from certain requirements of Title I of ERISA.
Schlumberger Supplementary Benefit PlansNon-Qualified Profit Sharing
The Schlumberger Limited Supplementary Benefit Plan provides certain non-qualified defined contribution benefits for eligible employees, including executive officers. Schlumberger Technology Corporation maintains a plan with substantially identical terms.
The supplementary benefit plans provide an eligible employee with discretionary profit sharing contributions that are not permissible under the applicable tax-qualified plans due to U.S. IRC limits on (1) annual compensation that can be taken into account under qualified plans and (2) annual benefits that can be provided under qualified plans. These nonqualified plan benefits are credited with earnings and losses as if they were invested in the qualified plans, with the same employee investment elections as the qualified plan. An employee forfeits all rights under the nonqualified plan if the employee is terminated for cause or has violated a confidentiality arrangement involving the Company or the Companys affiliates. These nonqualified plan benefits are paid in a lump-sum payment following the end of the year in which the employee terminates active service. If the employee dies before full payment of these benefits, the unpaid benefits are paid in a lump sum to the beneficiaries designated under the applicable qualified plan.
31
Schlumberger Restoration Savings Plans
The Schlumberger Limited Restoration Savings Plan, a non-qualified deferred compensation plan, provides certain defined contribution benefits for eligible employees, including executive officers. Schlumberger Technology Corporation maintains a plan with substantially identical terms. The restoration savings plans allow an eligible employee to defer compensation (and receive an associated employer match) that the employee cannot defer under the applicable tax-qualified plans because of U.S. IRC limits on the amount of compensation that can be taken into account.
An eligible employee may elect in advance to defer a percentage (from 1% to 15%) of his or her compensation over the U.S. IRC compensation limits. The election cannot be changed during the year. The Company makes an annual matching contribution with respect to each employees deferrals for a year, if the employee is still employed by the Company or an affiliate on the last day of the year. The amount of the matching contribution is equal to one-half of the first 6% deferred by the employee in profitable years. No match is made in non-profitable years. Employees accounts are credited with interest, calculated to mirror the interest earnings of the Fixed Income Fund under the Schlumberger Master Profit Sharing Trust. Matching contributions and related interest vest based on the employees years of service, as follows:
An employees account fully vests on his death, 60th birthday, plan termination or a change in control. An employees vested account balance is paid in a single lump sum (subject to tax withholding) following the participants death, qualifying disability, retirement or other qualifying termination of employment. However, an employee forfeits all rights under the plan if a determination is made that the employee has engaged in certain dishonest acts or violated a confidentiality arrangement involving Schlumberger or its affiliates.
Schlumberger International Staff Pension Plan
Recognizing the need to maintain a high degree of mobility for certain of the Companys employees and consequently the employees inability to accumulate any meaningful pension because they are required to work in many different countries, the Company maintains the Schlumberger International Staff Pension Plan for such employees. All of the Companys named executive officers either have been in the International Staff Plan at some time during their career prior to becoming an executive officer or are in the plan because of their current assignment. This plan seeks to provide for a lifetime benefit upon retirement based on a specified number of years of service provided there are sufficient assets in the fund. The plan is funded through cash contributions made by the Company or its subsidiaries along with mandatory contributions by employees. Current contribution levels are as follows:
|
Age |
Service |
Employee |
Employer |
||
|
<50 |
<15 | 4 | % | 1 | % |
|
<50 |
15 | 5 | % | 8 | % |
|
50 |
<15 | 5 | % | 8 | % |
|
50 |
15 | 5 | % | 8 | % |
Target benefits under this plan are based on a participants admissible compensation (generally, base salary, incentive and geographical coefficient) for each year in which the employee participates in the plan and the employees length of service. Since January 1, 1993, the target benefit earned has been 2.4% of admissible compensation prior to completion of 15 years of service and 3.2% of admissible compensation for each year of service after 15 years, subject to there being sufficient assets in the fund. Those employees who remain with Schlumberger beyond 20 years of service have the first 15 years of service upgraded to 3.2%. Benefits are payable upon normal retirement age, at or after age 55, or upon early retirement, at or after age 50 with 20 years of service, as a life-time annuity.
Schlumberger International Staff Profit Sharing Plan
Schlumberger maintains an International Staff Profit Sharing Plan, which provides for an annual employer contribution based on admissible compensation. Amounts allocated to the participants accounts share in
32
investment gains and/or losses of the trust fund and are generally distributed in a lump sum upon the satisfaction of certain conditions on termination of employment. Benefits earned under the Profit Sharing Plan shall be forfeited upon a determination by the Plans Administrator that the employees separation from service was due to or in circumstances of fraud or misconduct injurious to the Company, an affiliate or any customer.
Potential Payments Upon Termination or Change in Control
Schlumbergers executive officers receive the same benefits as other employees. As is the case with compensation, any differences are generally due to local requirements. In line with this philosophy, executive officers do not have employment agreements or golden parachutes.
Phased Retirement
The Company has a practice of phased retirement, which is generally offered to executive officers approaching retirement, other than the CEO, at the discretion of the individual and the Company. Please read Compensation Discussion and AnalysisBenefitsRetirement Practices for a more detailed discussion of this practice.
Stock Options
All salaried employees who receive stock options are subject to the same terms and conditions in the event of a termination or change in control.
Termination other than due to retirement
The following table summarizes the consequences under the Companys stock option plans in the event an option holders employment is terminated other than due to retirement:
|
Event |
Consequences |
|
| Termination of employment with consent of Schlumberger and not for cause | The Compensation Committee may permit stock options to be exercised at any time within three months after termination, provided that stock options may be exercised only before their expiration and only to the extent they are exercisable on the date of termination. | |
| Death while employed by Schlumberger or after termination of employment but prior to full exercise of stock options that were exercisable on the date of such termination | Stock options may be exercised before expiration of their term by a person entitled to do so under the option holders will or the laws of descent and distribution, but only if such exercise occurs within 60 months after death (or, if earlier, the date of termination of employment) and only to the extent they are exercisable on the date of death. | |
| Termination of employment for cause or without the consent of Schlumberger (other than due to death). | The option holders rights terminate immediately. | |
Notwithstanding the above, an option holder may forfeit his or her right to exercise stock options, and may have certain prior option exercises rescinded, if such holder engages in detrimental activity within one year after termination of employment.
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Termination due to retirement
The following table summarizes the consequences under the Companys stock option plans in the event an option holders employment is terminated due to retirement:
|
Event |
Consequences |
|
| Termination of employment due to retirement | Stock options will be exercisable at any time during the 60-month period after termination by retirement or during the remainder of the option period, whichever is shorter (the post-retirement exercise period), but only to the extent they are exercisable on the date of termination. | |
| Death after retirement during post-retirement exercise period | Stock options may be exercised during a 60-month period after the date of retirement by a person entitled to do so under the option holders will or the laws of descent and distribution, provided that the stock options may be exercised only before their expiration and only to the extent they were exercisable on the date of death. |
Notwithstanding the above, an option holder may forfeit his or her right to exercise stock options, and may have certain prior option exercises rescinded, if such holder engages in detrimental activity within five years after termination of employment by retirement.
Change in Control
In the event of any reorganization, merger or consolidation where Schlumberger is not the surviving corporation, or upon the liquidation or dissolution of Schlumberger, all outstanding stock option awards will, unless alternate provisions are made by Schlumberger in connection with the reorganization, merger or consolidation for the assumption of such awards, be fully exercisable and vested and all holders will be given notice to permit exercise for 30 days prior to the cancellation of the awards as of the effective date of such event. The following table sets forth the intrinsic value of the unvested stock options held by each named executive officer as of December 29, 2006 that would become vested upon the occurrence of one of the events described in the preceding sentence:
|
Name |
Amount ($)(1) |
|
A. Gould |
54,612,470 |
|
J.-M. Perraud |
6,454,215 |
|
C. Sbiti |
13,321,155 |
|
D. Boutte |
8,191,435 |
|
M. Corrigan |
2,539,564 |
|
S. Pai |
4,944,169 |
(1) Calculated based on the difference between the closing price of Schlumberger common stock on December 29, 2006 ($63.16) and the exercise price of unvested stock options as of such date.
If Schlumberger merges or consolidates with one or more corporations and is the surviving entity, then a holder of stock options granted pursuant to Schlumbergers stock option plans will be entitled to receive, upon exercise or vesting, in lieu of the number of shares with respect to which the award is exercisable or vested, the number and class of shares of stock or other securities that the holder would have been entitled to receive pursuant to the terms of such merger or consolidation if, immediately prior to such event, such holder had been the holder of record of the number of shares of Schlumberger common stock equal to the number of shares as to which such award is then exercisable or vested.
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Retirement Plans
Schlumbergers pension plans and non-qualified deferred compensation plans include the same terms and conditions for all participating employees in the event of a termination or change in control. Other than the Schlumberger Restoration Savings Plan, none of Schlumbergers non-qualified plans provide for the accelerated payment of benefits upon a change in control. For more information on these plans, please read Executive CompensationPension Benefits and Nonqualified Deferred Compensation.
Retiree Medical
Subject to satisfying certain age, service and contribution requirements, all U.S. employees are eligible to participate in a retiree medical program. Generally, this program provides comprehensive medical, prescription drug and vision benefits for retirees and their dependents until attaining age 65, at which time Medicare becomes primary and the Schlumberger plan becomes secondary, paying eligible charges after Medicare has paid.
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Directors who are employees of Schlumberger do not receive compensation for serving on the Board or its committees. The following table provides information on Schlumbergers compensation for non-employee directors for 2006.
|
Name |
Fees ($)(1) |
Stock ($) |
Option | ||