FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of: February, 2020 | Commission File Number: 1-12384 |
SUNCOR ENERGY INC.
(Name of registrant)
150 6th Avenue S.W.
P.O. Box 2844
Calgary, Alberta
Canada, T2P 3E3
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F o Form 40-F ý
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
SUNCOR ENERGY INC. | |||
Date: February 27, 2020 |
By: |
/s/ SHAWN POIRIER
|
Exhibit
|
Description of Exhibit | ||
---|---|---|---|
99.1 |
Notice of Meeting, Invitation to Shareholders and Management Proxy Circular, dated February 26, 2020 | ||
99.2 |
Form of Proxy |
||
99.3 |
Notice of Annual General Meeting and Notice of Availability of Proxy Materials |
Notice of Meeting, Invitation to Shareholders and Management Proxy Circular, dated February 26, 2020
CONTENTS |
1 | Invitation to Shareholders | |
|
||
2 | About this Management Proxy Circular | |
|
||
3 | Voting and Proxies: Questions and Answers | |
|
||
6 | Business of the Meeting | |
6 | Financial Statements | |
6 | Election of Directors | |
13 | Appointment of Auditor | |
14 | Advisory Vote on Approach to Executive Compensation | |
|
||
15 | Board of Directors Compensation | |
|
||
20 | Executive Compensation | |
20 | Letter to Shareholders | |
22 | Compensation Discussion and Analysis | |
46 | Compensation Disclosure of Named Executive Officers | |
52 | Termination Agreements and Change of Control Arrangements | |
|
||
54 | Indebtedness of Directors, Executive Officers and Senior Officers | |
|
||
54 | Summary of Incentive Plans | |
|
||
58 | Claw Back Policy | |
|
||
58 | Directors' and Officers' Insurance | |
|
||
58 | Advance Notice By-Law | |
|
||
59 | Corporate Governance | |
|
||
59 | Additional Information | |
|
||
59 | Advisories | |
|
||
A-1 | Schedule A: Named Executive Officers' Outstanding Option-Based Awards and Grant Date Fair Values for Share-Based Awards | |
|
||
B-1 | Schedule B: Corporate Governance Summary | |
|
||
C-1 | Schedule C: Position Description for Independent Board Chair | |
|
||
D-1 | Schedule D: Director Independence Policy and Criteria | |
|
||
E-1 | Schedule E: Board Terms of Reference | |
|
NOTICE OF ANNUAL GENERAL MEETING OF
SHAREHOLDERS OF SUNCOR ENERGY INC.
The annual general meeting (the meeting) of shareholders of Suncor Energy Inc. (the Corporation) will be held on May 6, 2020, in the Metropolitan Ballroom at The Metropolitan Centre, 333 Fourth Avenue S.W., Calgary, Alberta, at 10:30 a.m. Mountain Daylight Time (MDT).
The meeting will have the following purposes:
The accompanying management proxy circular provides detailed information relating to the matters to be dealt with at the meeting and forms part of this notice.
Shareholders are encouraged to express their vote in advance by completing the form of proxy or voting instruction form provided to them. Detailed instructions on how to complete and return proxies are provided on pages 3 to 5 of the accompanying management proxy circular. To be effective, the completed form of proxy must be received by our transfer agent and registrar, Computershare Trust Company of Canada, Proxy Department, 135 West Beaver Creek, P.O. Box 300, Richmond Hill, Ontario, L4B 4R5, at any time prior to 10:30 a.m. MDT on May 4, 2020 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.
Shareholders may also vote their shares by telephone or through the internet using the procedures described in the form of proxy or voting instruction form.
Shareholders registered at the close of business on March 9, 2020 will be entitled to receive notice of and vote at the meeting.
By order of the Board of Directors of Suncor Energy Inc.
Arlene Strom
Chief Legal Officer and Corporate Secretary
February 26, 2020
Calgary, Alberta
INVITATION TO SHAREHOLDERS
Dear Shareholder:
On behalf of the board of directors (the Board), management and employees of Suncor Energy Inc. (the Corporation), we invite you to attend our annual general meeting (the meeting) of shareholders on May 6, 2020, to be held in the Metropolitan Ballroom at The Metropolitan Centre, 333 Fourth Avenue S.W., Calgary, Alberta, at 10:30 a.m. Mountain Daylight Time.
The items of business to be considered at this meeting are described in the Notice of Annual General Meeting of shareholders of the Corporation and the accompanying management proxy circular. The contents and sending of the management proxy circular have been approved by the Board.
Your participation at this meeting is very important to us. We encourage you to vote by following the instructions in the form of proxy or voting instruction form provided to you. Following the formal portion of the meeting, management will review the Corporation's operational and financial performance for 2019 and provide an outlook on priorities for 2020 and beyond. You will also have an opportunity to ask questions and to meet the directors and executives of the Corporation.
Many of our public documents, including our 2019 Annual Report, are available in the Investor Centre on our website located at www.suncor.com. We encourage you to visit our website during the year for information about the Corporation, including news releases and investor presentations. To ensure you receive all the latest news relating to the Corporation, including the speeches of senior executives, you can use the 'Email Alerts' subscribe feature on the Corporation's website. Additional information relating to the Corporation is also available under the Corporation's profile on SEDAR at www.sedar.com or EDGAR at www.sec.gov.
We look forward to seeing you at the meeting.
Yours sincerely,
Michael M. Wilson
Chair of the Board |
Mark S. Little
President and Chief Executive Officer |
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 1
ABOUT THIS MANAGEMENT PROXY CIRCULAR
You are invited to attend the annual general meeting (the meeting) of holders (shareholders) of common shares (common shares or shares) of Suncor Energy Inc. to be held in the Metropolitan Ballroom at The Metropolitan Centre, 333 Fourth Avenue S.W., Calgary, Alberta, on May 6, 2020, at 10:30 a.m. Mountain Daylight Time (MDT) for the purposes indicated in the Notice of Annual General Meeting.
Suncor's management proxy circular includes important information regarding the matters to be acted upon at the meeting, and our compensation practices for and compensation of the board of directors of Suncor (the Board
or Board of Directors) and Suncor's Named Executive Officers (as defined on page 22) for the year ended December 31, 2019.
This management proxy circular is dated February 26, 2020, and all information contained in this management proxy circular is given as of such date, unless stated otherwise.
In this management proxy circular, references to "Suncor", the "corporation", the "company", "our" or "we" mean Suncor Energy Inc., its subsidiaries, partnerships and joint arrangements, unless the context otherwise requires.
2 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
VOTING AND PROXIES: QUESTIONS AND ANSWERS
This management proxy circular is furnished in connection with the solicitation by or on behalf of management of Suncor of proxies to be used at the annual general meeting of shareholders of Suncor. It is expected that solicitation will be primarily by mail, but proxies may also be solicited personally, by telephone or other similar means by Suncor employees or agents. Custodians and fiduciaries will be supplied with proxy materials to forward to beneficial owners of Suncor common shares and normal handling charges will be paid by Suncor for such forwarding services.
Your vote is very important to us. We encourage you to exercise your vote to ensure your shares are represented at the meeting.
To be valid, proxy forms must be dated, completed, signed and deposited with our transfer agent and registrar, Computershare Trust Company of Canada (Computershare): (i) by mail using the enclosed return envelope or one addressed to Computershare Trust Company of Canada, Proxy Department, 135 West Beaver Creek, P.O. Box 300, Richmond Hill, Ontario, L4B 4R5; or (ii) by hand delivery to Computershare, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1. Additionally, you may vote by using the internet at www.investorvote.com or by calling 1-866-732-VOTE (8683). Your proxy instructions must be received in each case no later than 10:30 a.m. MDT on May 4, 2020 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 deposit of proxies may be waived or extended by the chair of the meeting at his or her discretion, without notice. Please read the following for commonly asked questions and answers regarding voting and proxies.
Q. Am I entitled to vote?
A. You are entitled to vote if you are a holder of common shares as of the close of business on March 9, 2020, the record date for the meeting. Subject to certain restrictions required by the Petro-Canada Public Participation Act (as described in the AIF under the heading "Description of Capital Structure Petro-Canada Public Participation Act") which section is incorporated by reference herein, each Suncor common share is entitled to one vote. A simple majority of votes (50% plus one vote) cast at the meeting in person or by proxy is required to approve all matters to be considered at the meeting. The list of registered shareholders maintained by Suncor will be available for inspection after March 9, 2020, during usual business hours at the offices of
Computershare, 600, 5308th Avenue S.W., Calgary, Alberta, T2P 3S8 and will be available at the meeting.
Q. What am I voting on?
A. You will be voting on:
Q. What if amendments are made to these matters or if other matters are brought before the meeting?
A. If you attend the meeting in person and are eligible to vote, you may vote on such matters as you choose. If you have completed and returned a proxy, the common shares represented by proxy will be voted or withheld from voting in accordance with your instructions on any ballot that may be called for and, if you specify a choice with respect to any matter to be acted upon, the common shares will be voted accordingly. The persons named in the proxy form will have discretionary authority with respect to amendments or variations to matters identified in the Notice of Annual General Meeting and to other matters that may properly come before the meeting. As of the date of this management proxy circular, our management knows of no such amendment, variation or other matter expected to come before the meeting. If any other matters properly come before the meeting, the management nominees named in the proxy form will vote on them in accordance with their best judgment.
Q. Who is soliciting my proxy?
A. The management of Suncor is soliciting your proxy. Solicitation of proxies will be done primarily by mail, supplemented by telephone or other contact, by our employees or our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors who we have retained at a cost of $66,150 for their advisory services and will reimburse them for any related expenses. Any other costs related to the solicitation are paid by Suncor.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 3
Q. How can I vote?
A. If you are eligible to vote and your shares are registered in your name, you can vote your shares in person at the meeting or by completing your proxy form through any of the methods described above.
If your shares are not registered in your name but are held by a nominee, please see below.
Q. How can a non-registered shareholder vote?
A. If your shares are not registered in your name, but are held in the name of a nominee (usually a bank, trust company, securities broker or other financial institution), your nominee is required to seek your instructions as to how to vote your shares. Your nominee should have provided you with a package of information respecting the meeting, including either a proxy or a voting form. Carefully follow the instructions accompanying the proxy or voting form.
Q. How can a non-registered shareholder vote in person at the meeting?
A. Suncor does not have access to all the names of its non-registered shareholders. Therefore, if you are a non-registered shareholder and attend the meeting, we will have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as a proxyholder. If you wish to vote in person at the meeting, insert your name in the space provided on the proxy or voting form sent to you by your nominee. In doing so you are instructing your nominee to appoint you as a proxyholder. Complete the form by following the return instructions provided by your nominee. You should report to a representative of Computershare upon arrival at the meeting.
Q. Who votes my shares and how will they be voted if I return a proxy?
A. By properly completing and returning a proxy, you are authorizing the person named in the proxy to attend the meeting and vote your shares. You can use the proxy form provided to you, or any other proper form of proxy, to appoint your proxyholder.
The shares represented by your proxy must be voted or withheld from voting according to your instructions in the proxy. If you properly complete and return your proxy but do not specify how you wish the votes cast, your shares will be voted or withheld from voting as your proxyholder sees fit. Unless contrary instructions are provided, shares represented by proxies received by management will be voted:
Q. Can I appoint someone other than the individuals named in the proxy form to vote my shares?
A. Yes you have the right to appoint the person or company of your choice, who does not need to be a shareholder, to attend and act on your behalf at the meeting. If you wish to appoint a person other than the names that appear, then strike out those printed names appearing on the proxy form or voting instruction form and insert the name of your chosen proxyholder in the space provided.
NOTE: It is important to ensure that any other person you appoint is attending the meeting and is aware that his or her appointment to vote your shares has been made. Proxyholders should, upon arrival at the meeting, present themselves to a representative of Computershare.
Q. What if my shares are registered in more than one name or in the name of my corporation?
A. If the shares are registered in more than one name, all those registered must sign the form of proxy. If the shares are registered in the name of your corporation or any name other than yours, you may be required to provide documentation that proves you are authorized to sign the proxy form.
Q. Can I revoke a proxy or voting instruction?
A. If you are a registered shareholder and have returned a proxy, you may revoke it by:
If you are a non-registered shareholder, contact your nominee for information on how to revoke your proxy or voting instruction.
4 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Q. Is my vote confidential?
A. Your proxy vote is confidential. Proxies are received, counted and tabulated by our transfer agent, Computershare. Computershare does not disclose the results of individual shareholder votes unless: they contain a written comment clearly intended for management; in the event of a proxy contest or proxy validation issue; or if necessary to meet legal requirements.
Q. How many shares are outstanding?
A. As of February 21, 2020, there were 1,526,810,321 common shares outstanding. We have no other class or series of voting shares outstanding.
As of February 21, 2020, there was no person or company who, to the knowledge of our directors and executive officers, beneficially owned, or controlled or directed, directly or indirectly, common shares carrying 10% or more of the voting rights attached to all outstanding common shares.
Q. How will meeting materials be delivered?
A. We are using notice and access to deliver this management proxy circular to both our registered and non-registered shareholders. This means that Suncor will post the management proxy circular online for our shareholders to access electronically. You will receive a package in the mail with a notice (the Notice) outlining the matters to be addressed at the meeting and explaining how to access and review the management proxy circular electronically, and how to request a paper copy at no charge. You will also receive a form of proxy or a voting instruction form in the mail so you can vote your shares. All applicable meeting related materials will be indirectly forwarded to non-registered shareholders at Suncor's expense.
Notice and access is an environmentally friendly and cost effective way to distribute the management proxy circular because it reduces printing, paper and postage.
Q. How can I request a paper copy of the management proxy circular?
A. Both registered and non-registered shareholders can request a paper copy of the management proxy circular for up to one year from the date it is filed on SEDAR (www.sedar.com). The management proxy circular will be sent to you at no charge. If you would like to receive a paper copy of the management proxy circular, please follow the instructions provided in the Notice. If you request a paper copy of the management proxy circular, you will not receive a new form of proxy or voting instruction form, so you should keep the original form sent to you in order to vote.
Suncor will provide paper copies of the management proxy circular to shareholders who have standing instructions to
receive, or for whom Suncor has otherwise received a request to provide, paper copies of materials.
If you have any questions about notice and access you can call our Investor Relations line at 1-800-558-9071.
Q. What is electronic delivery?
A. Electronic delivery is voluntary e-mail notification sent to shareholders when documents such as our annual report, quarterly reports and this management proxy circular are available on our website. If you wish, you may elect to be notified by e-mail when documentation is posted on our website. Electronic delivery saves paper, reduces our impact on the environment and reduces costs.
Q. How can I ask for electronic delivery?
A. If you are a registered shareholder, go to the Investor Communication website at www.InvestorDelivery.com and follow the instructions on the screen.
You will need your Control Number and your PIN number (you will find them on the proxy form provided in your package).
Non-registered shareholders can sign up for mailings (not proxy materials) through www.computershare.com/mailinglist.
Q. What if I have other questions?
A. If you have a question regarding the meeting please contact Computershare at 1-877-982-8760 or visit www.computershare.com.
Webcast of Meeting
The meeting may also be viewed via webcast on www.suncor.com starting at 10:30 a.m. MDT on May 6, 2020. Shareholders may view the meeting and ask questions online, but will not be able to vote via the webcast.
Shareholder Proposals
Eligible shareholders should direct any proposals they plan to present at the 2021 annual meeting of shareholders to our Corporate Secretary. To be included in our 2021 management proxy circular, the proposal must be received at Suncor Energy Inc. at P.O. Box 2844, 150 6th Avenue S.W., Calgary, Alberta, Canada T2P 3E3 by November 30, 2020.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 5
Financial Statements
The audited consolidated financial statements for the year ended December 31, 2019, together with the notes thereto and the report of the auditors thereon will be placed before the meeting. These audited consolidated financial statements form part of our 2019 Annual Report. Copies of the 2019 Annual Report may be obtained from the Corporate Secretary upon request and will be available at the meeting. The full text of the 2019 Annual Report is available on Suncor's website at www.suncor.com and has been filed with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission (SEC).
Election of Directors
Number of Directors. Suncor's articles stipulate there shall be not more than fifteen nor fewer than eight directors. The Board is currently composed of ten directors, with nine non-employee directors, including Michael M. Wilson, our Board chair, and one member of management, Mark S. Little, our President and Chief Executive Officer (CEO).
In accordance with our by-laws, the Board has determined that ten directors will be elected at the meeting. Following the meeting, and assuming that all proposed nominees for director are elected as contemplated in this management proxy circular, the Board will be composed of nine non-employee directors and Mark S. Little, Suncor's President and CEO. The term of office of each director is from the date of the meeting at which he or she is elected or appointed until the next annual meeting of shareholders or until a successor is elected or appointed.
Unless authority to do so is withheld, the persons named in the form of proxy intend to vote FOR the election of the nominees whose names appear on pages 7 to 11. Management does not expect that any of the nominees will be unable to serve as a director but, if that should occur for any reason prior to the meeting, the persons named in the form of proxy reserve the right to vote for another nominee at their discretion unless the proxy specifies the common shares are to be withheld from voting in the election of directors.
Majority Voting for Directors. The Board has adopted a policy (the Majority Voting Policy) that requires that any nominee for director who receives a greater number of votes "withheld" than votes "for" his or her election as a director shall submit his or her resignation to the Governance Committee of the Board for consideration promptly following the meeting. The Majority Voting Policy applies only to uncontested elections, meaning elections where the number of nominees for directors is equal to the number of directors to be elected. The Governance Committee shall consider the resignation and shall provide a recommendation to the Board. The Board will consider the recommendation of the Governance Committee and determine whether to accept it within 90 days of the applicable meeting. Absent exceptional circumstances, the Board shall accept the resignation which will be effective upon such acceptance. A news release will be issued promptly by Suncor announcing the Board's determination, including, if applicable, the reasons for rejecting the resignation. A director who tenders his or her resignation will not participate in any meetings to consider whether the resignation shall be accepted.
Shareholders should note that, as a result of the Majority Voting Policy, a "withhold" vote is effectively the same as a vote against a director nominee in an uncontested election. A copy of the Majority Voting Policy is available on Suncor's website at www.suncor.com.
6 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
The Persons Nominated for Election as Directors Are:
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 7 of 7 | 100% | Year | Votes in Favour | Alaska Air Group, Inc. | ||||||
|
|||||||||||
Audit (Chair) | 7 of 7 | 100% | 2019 | 99.27% | Park Hotels & Resorts Inc. | ||||||
|
|||||||||||
Environment, Health, Safety and Sustainable Development | 4 of 4 | 100% | 2018 | 99.58% | |||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
Share Ownership
Target(5) |
|||||||
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
Nil | 38 794 | 38 794 | 1 651 073 | Yes | 2.1x | |||||||
|
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 6 of 7 | 86% | Year | Votes in Favour | Tectonic Metals Inc. | ||||||
|
|||||||||||
Environment, Health, Safety and Sustainable Development | 4 of 4 | 100% | 2019 | 96.93% | |||||||
|
|||||||||||
Human Resources and Compensation | 4 of 5 | 80% | 2018 | 97.89% | |||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
||||||||
|
|
|
|
|
Share Ownership
Target(5) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
17 548 | 114 493 | 132 041 | 5 619 665 | Yes | 7.0x | |||||||
|
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 7 of 7 | 100% | Year | Votes in Favour | Southwestern Energy Company | ||||||
|
|||||||||||
Governance | 5 of 5 | 100% | 2019 | 98.59% | |||||||
|
|||||||||||
Human Resources and Compensation (Chair) | 5 of 5 | 100% | 2018 | 99.41% | |||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
Share Ownership
Target(5) |
|||||||
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
6 698 | 51 049 | 57 747 | 2 457 712 | Yes | 3.1x | |||||||
|
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 7 of 7 | 100% | Year | Votes in Favour | GasLog Ltd. | ||||||
|
|||||||||||
Environment, Health, Safety and Sustainable Development | 4 of 4 | 100% | 2019 | 99.31% | |||||||
|
|||||||||||
Human Resources and Compensation | 5 of 5 | 100% | 2018 | 99.93% | |||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
||||||||
|
|
|
|
|
Share Ownership
Target(5) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
15 600 | 18 707 | 34 307 | 1 460 106 | Yes | 1.8x | |||||||
|
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 7 of 7 | 100% | Year | Votes in Favour | None | ||||||
|
|||||||||||
2019 | 99.09% | ||||||||||
|
|
|
|
|
|
2018 |
|
N/A |
|
|
|
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
||||||||
|
|
|
|
|
Share Ownership
Target(5) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4)(7) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
70 852 | 91 951 | 162 803 | 6 928 896 | Yes | 5.8x | |||||||
|
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 6 of 7 | 86% | Year | Votes in Favour | None | ||||||
|
|||||||||||
Audit | 7 of 7 | 100% | 2019 | 99.80% | |||||||
|
|||||||||||
Governance | 5 of 5 | 100% | 2018 | N/A | |||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
Share Ownership
Target(5) |
|||||||
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
13 000 | 16 189 | 29 189 | 1 242 284 | Yes | 1.6x | |||||||
|
Suncor Board and Board Committees(9) |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 7 of 7 | 100% | Year | Votes in Favour | None | ||||||
|
|||||||||||
Audit | 7 of 7 | 100% | 2019 | 97.11% | |||||||
|
|||||||||||
Environment, Health, Safety and Sustainable Development (Chair) | 2 of 2 | 100% | 2018 | 97.76% | |||||||
|
|||||||||||
Governance | 3 of 3 | 100% | |||||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
||||||||
|
|
|
|
|
Share Ownership
Target(5) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
6 330 | 101 479 | 107 809 | 4 588 351 | Yes | 5.7x | |||||||
|
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 1 of 1 | 100% | Year | Votes in Favour | Bank of Montreal | ||||||
|
|||||||||||
Audit | 1 of 1 | 100% | 2019 | N/A | |||||||
|
|||||||||||
Environment, Health, Safety and Sustainable Development | 1 of 1 | 100% | 2018 | N/A | |||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
||||||||
|
|
|
|
|
Share Ownership
Target(5) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
585 | 6 284 | 6 869 | 292 345 | No | 0.4x | |||||||
|
Suncor Board and Board Committees(9) |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors | 7 of 7 | 100% | Year | Votes in Favour | Lucara Diamond Corp. | ||||||
|
|||||||||||
Environment, Health, Safety and Sustainable Development | 2 of 2 | 100% | 2019 | 96.78% | |||||||
|
|||||||||||
Human Resources and Compensation | 5 of 5 | 100% | 2018 | 98.45% | |||||||
|
|||||||||||
Governance (Chair) | 2 of 2 | 100% | |||||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
||||||||
|
|
|
|
|
Share Ownership
Target(5) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
4 000 | 102 551 | 106 551 | 4 534 811 | Yes | 5.7x | |||||||
|
Suncor Board and Board Committees |
Meeting
Attendance |
Annual General Meeting
Voting Results |
Other Public
Company Boards |
||||||||
|
|||||||||||
Board of Directors (Chair) | 7 of 7 | 100% | Year | Votes in Favour | Air Canada | ||||||
|
|||||||||||
2019 | 99.68% | Celestica Inc. | |||||||||
2018 | 99.71% | ||||||||||
|
Common Shares and Share Units Held as at December 31, 2019 | Common | DSUs(3) |
Total
Common |
Total Value
of Common |
||||||||
|
|
|
|
|
Share Ownership
Target(5) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares(2) |
Shares
and DSUs |
Shares and
DSUs ($)(4) |
Meets
Target |
Current
Status |
||||||||
|
||||||||||||
10 000 | 72 035 | 82 035 | 3 491 410 | Yes | 2.5x | |||||||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 7
8 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Cease Trade Orders, Bankruptcies, Penalties or Sanctions. No proposed director is, as at the date hereof, or has been in the last ten years, a director, chief executive officer or chief financial officer of any company (including Suncor) that (a) was the subject of a cease trade order or similar order or an order that denied the company access to any exemption under securities legislation, for a period of more than 30 consecutive days, that was issued while the proposed director was acting in that capacity, or (b) was subject to a cease trade order or similar order or an order that denied the company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in that capacity.
No proposed director is, as at the date hereof, or has been in the last ten years, a director or executive officer of any company (including Suncor) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, other than (a) Mr. Benson, a current and proposed director of Suncor, who was a director of Winalta Inc. (Winalta) when it obtained an order on April 26, 2010 from the Alberta Court of Queen's Bench providing for creditor protection under the Companies' Creditors Arrangement Act (Canada). A plan of arrangement for Winalta received court confirmation later that year, and Mr. Benson ceased to be a director of Winalta in May of 2013; and (b) Mr. Gass, a current and proposed director of Suncor, who was a director of Weatherford International plc (Weatherford) when it underwent a financial restructuring under Chapter 11 of the U.S. Bankruptcy Code which was initiated on July 1, 2019. Mr. Gass ceased to be a director of Weatherford on December 13, 2019.
No proposed director has, within the last ten years, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his or her assets.
No proposed director has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director
Appointment of Auditor
Management and the Board propose that KPMG LLP be appointed as Suncor's auditor until the close of the next annual meeting. KPMG LLP have been Suncor's auditors since March 1, 2019. Unless authority to do so is withheld, the persons named in the form of proxy intend to vote FOR the appointment of KPMG LLP.
Fees paid and payable to PricewaterhouseCoopers LLP, the corporation's former auditor, and the fees paid and payable to KPMG LLP, the corporation's current auditor, for the year ended December 31, 2018 and 2019 are detailed below.
($ thousands) | 2019 | 2018 | |||
|
|||||
Audit Fees | 4 350 | 5 016 | |||
|
|||||
Tax Fees | | | |||
|
|||||
Audit-Related Fees | 410 | 449 | |||
|
|||||
All Other Fees | | 15 | |||
|
|||||
Total | 4 760 | 5 480 | |||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 13
The nature of each category of fees is as follows:
Audit Fees. Audit Fees were for professional services rendered by the auditor for the audit of Suncor's annual financial statements, or services provided in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Audit-Related Fees were for professional services rendered by the auditor for the review of quarterly financial statements and for the preparation of reports on specified procedures as they relate to audits of joint arrangements and attestation services not required by statute or regulation.
All Other Fees. All Other Fees were subscriptions to auditor-provided and supported tools.
All services described beside the captions "Audit Fees", "Audit-Related Fees" and "All Other Fees" were approved by the Audit Committee in compliance with paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X under the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act). None of the fees described above were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Regulation S-X under the Exchange Act. Further details respecting our auditor is provided in our AIF under the heading "Audit Committee Information".
Advisory Vote on Approach to Executive Compensation
The Board believes that shareholders should have the opportunity to fully understand the objectives, philosophy and principles that the Board has used to make executive compensation decisions.
We hope you will carefully review the "Letter to Shareholders" beginning on page 20 and our "Compensation Discussion and Analysis" beginning on page 22 before voting on this matter. We encourage any shareholder who has comments on our approach to executive compensation to forward these comments to the chair of the Human Resources and Compensation Committee (HR&CC) c/o the Corporate Secretary, Suncor Energy Inc., P.O. Box 2844, 150 6th Avenue S.W., Calgary, Alberta, T2P 3E3. The "Compensation Discussion and Analysis" section discusses our compensation philosophy and approach to executive compensation, what our Named Executive Officers are paid and how their level of compensation is determined. This disclosure has been approved by the Board on the recommendation of the HR&CC.
At the meeting, shareholders will have an opportunity to vote on our approach to executive compensation through consideration of the following advisory resolution:
"RESOLVED, on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the management proxy circular of Suncor Energy Inc. delivered in advance of its 2020 annual meeting of shareholders."
As this is an advisory vote, the results will not be binding upon the Board. However, in considering its approach to compensation in the future, the Board will take into account the results of the vote, together with feedback received from shareholders in the course of our engagement activities. Since instituting a vote on an advisory resolution on our approach to executive compensation in 2011, Suncor has received strong support from shareholders with an average of 93.55% of votes "for", including 94.05% of the votes cast in favour in 2019.
14 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
BOARD OF DIRECTORS COMPENSATION
Philosophy and Approach
Philosophy. Compensation of non-employee directors is intended to:
Approach. The Governance Committee reviews Board compensation levels periodically to ensure Suncor's approach to Board compensation is competitive at the median of the Suncor Compensation Peers (as defined below) and takes into account governance and best practice trends.
As part of this review, the Governance Committee engages Willis Towers Watson to benchmark compensation for non-employee directors and the Board chair and provide information on Board compensation governance and best practice trends. This information is used by the Governance Committee in determining the compensation components, mix and pay level for non-employee directors, including the Board chair, that is then recommended to the full Board for approval.
The total compensation structure for non-employee directors for 2019 consisted of annual retainers and an annual equity award provided in the form of DSUs. DSUs are notional units that have the same value as our common shares, and therefore have the same upside potential and downside risk. Directors are required to meet robust share ownership guidelines. DSUs, along with Suncor common shares, count towards meeting these guidelines.
Structure
Suncor's North American energy peers, identified on page 30 (the Suncor Compensation Peers), used for benchmarking Suncor's non-employee director and Board chair compensation structure are the same companies used for benchmarking senior executive compensation. Suncor's rank, as compared to the Suncor Compensation Peers, in relation to revenue, assets and enterprise value, is also provided on page 30. The following tables display the compensation structure for 2019 for all non-employee directors.
Compensation Structure Components for Non-Employee Directors (excluding Board chair) | ($) | |||
|
||||
Retainer |
|
|
|
|
|
||||
Annual Retainer(1) | 72 500 | |||
|
||||
Annual Committee Chair Retainer: | ||||
|
||||
Audit Committee | 25 000 | |||
|
||||
HR&CC | 15 000 | |||
|
||||
EHS&SD Committee and Governance Committee | 10 000 | |||
|
||||
Annual Committee Member Retainer: | ||||
|
||||
Audit Committee | 7 500 | |||
|
||||
EHS&SD Committee, Governance Committee and HR&CC | 5 000 | |||
|
||||
Travel within continental North America (Per Round Trip)(2) | 1 500 | |||
|
||||
Travel originating from outside continental North America (Per Round Trip)(3) | 3 000 | |||
|
||||
Annual Equity |
|
|
|
|
|
||||
Annual DSU target value(4) | 217 500 | |||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 15
Compensation Structure for Board chair(5) | ($) | ||
|
|||
Retainer |
|
|
|
|
|||
Annual Retainer(1) | 250 000 | ||
|
|||
Travel within continental North America (Per Round Trip)(2) | 1 500 | ||
|
|||
Travel originating from outside continental North America (Per Round Trip)(3) | 3 000 | ||
|
|||
Annual Equity |
|
|
|
|
|||
Annual DSU target value(4) | 280 000 | ||
|
Looking Ahead to 2020:
At its meeting in November 2019, the Governance Committee recommended that the Board maintain the 2019 target total compensation for non-employee directors and the Board chair for 2020. The Board approved the recommendation.
Committee Membership. The following table sets forth the current committee members, all of whom are non-employee and independent directors.
Committee Members
|
Audit
Committee |
EHS&SD
Committee |
Governance
Committee |
HR&CC
|
|
||||
---|---|---|---|---|---|---|---|---|---|
|
|||||||||
Patricia M. Bedient(1) | Chair | ü | |||||||
|
|||||||||
Mel E. Benson | ü | ü | |||||||
|
|||||||||
John D. Gass | ü | Chair | |||||||
|
|||||||||
Dennis M. Houston | ü | ü | |||||||
|
|||||||||
Brian MacDonald | ü | ü | |||||||
|
|||||||||
Maureen McCaw(2) | ü | Chair | |||||||
|
|||||||||
Lorraine Mitchelmore(3) | ü | ü | |||||||
|
|||||||||
Eira M. Thomas(2) | Chair | ü | |||||||
|
Building Equity Ownership. Share ownership guidelines are one way non-employee directors demonstrate their commitment to Suncor's long-term success and alignment with shareholders. For 2019, share ownership guidelines were $1,400,000 for the Board chair and $800,000 for all other non-employee directors. The level of ownership must be attained by each director within five years of when he or she is first elected or appointed or from the date an increase in the share ownership guidelines is approved. Suncor common shares and DSUs count toward the share ownership guideline.
As at December 31, 2019, all non-employee directors, including the Board chair, have met or are on track to meet the share ownership guidelines. Mr. Little is subject to separate share ownership guidelines; see "Compensation Discussions and Analysis Our Approach to Executive Ownership Guidelines" for further information.
Suncor periodically benchmarks its share ownership guideline levels to ensure they are in line with its peers.
16 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Total Compensation
Total Compensation Summary. The following table provides information on the total compensation paid to the non-employee directors for the year ended December 31, 2019.
($) | |||||||
|
|||||||
Name(1) |
Total
Fees Paid |
Share-Based
Awards(2) |
Total
Compensation(3) |
||||
|
|||||||
Patricia M. Bedient | 107 000 | 215 683 | 322 683 | ||||
|
|||||||
Mel E. Benson | 84 000 | 215 683 | 299 683 | ||||
|
|||||||
Dominic D'Alessandro(4) | 48 000 | 108 537 | 156 537 | ||||
|
|||||||
John D. Gass | 97 000 | 215 683 | 312 683 | ||||
|
|||||||
Dennis M. Houston | 87 000 | 215 683 | 302 683 | ||||
|
|||||||
Brian MacDonald | 91 000 | 215 683 | 306 683 | ||||
|
|||||||
Maureen McCaw | 93 500 | 215 683 | 309 183 | ||||
|
|||||||
Lorraine Mitchelmore(5) | 14 167 | 249 213 | 263 380 | ||||
|
|||||||
Eira M. Thomas | 95 000 | 215 683 | 310 683 | ||||
|
|||||||
Michael M. Wilson | 251 500 | 277 915 | 529 415 | ||||
|
|||||||
Total | 968 167 | 2 145 446 | 3 113 613 | ||||
|
Fees Paid. The following table provides a detailed breakdown of the fees paid to our non-employee directors for the year ended December 31, 2019. Fees are paid quarterly.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 17
Equity Based Compensation
Annual DSU Grant. Non-employee directors participate in Suncor's DSU Plan. When redeemed after leaving the Board, each DSU pays the holder the then current cash equivalent of the market price per share, as calculated in accordance with the DSU Plan.
DSUs are an important component of non-employee director compensation. They provide a stake in Suncor, promote greater alignment between directors and shareholders and are considered to be a preferred form of non-employee director equity compensation under governance best practices.
Under the DSU Plan, each non-employee director receives an annual DSU grant as part of his or her total compensation. The annual grant of DSUs is generally awarded in equal quarterly installments.
For each new non-employee director, the DSU Plan provides for a joining grant of DSUs equal to the annual grant for the year in which he or she is appointed to the Board. New non-employee directors who join the Board and any director who becomes Board chair during the year will receive a pro-rated annual DSU grant based on the date they join the Board or became Board chair, as applicable.
Each non-employee director, other than Mr. Wilson, the Board chair, Mr. D'Alessandro, who retired from the Board on May 2, 2019 and Ms. Mitchelmore, who was appointed to the Board on November 6, 2019, received 5,060 DSUs in 2019. Mr. Wilson received 6,520 DSUs, Mr. D'Alessandro received 2,530 DSUs and Ms. Mitchelmore received 5,903 DSUs, comprised of a pro-rated annual grant of 843 DSUs and a joining grant of 5,060 DSUs. In 2019, non-employee directors, including the Board chair, received an aggregate of 50,373 DSUs.
Fees Paid in DSUs. Until share ownership guidelines for non-employee directors are met (see page 16 for details), non-employee directors receive one-half or, if they choose, all of their fees (excluding expense reimbursements) in the form of DSUs. The number of DSUs to be credited to the non-employee director's account on each payment date is equal to the number of common shares that could have been purchased based on the market value on the quarterly payment date based on the fees allocated to the director. On each dividend payment date for common shares, an additional number of DSUs, equivalent to the number of common shares that could have been acquired on that date by notional dividend reinvestment based on the market value, are credited to the non-employee directors' DSU accounts.
Redemption of DSUs. DSUs may be redeemed when a non-employee director ceases to hold office, on a date elected by that director prior to November 30 of the calendar year following such cessation. For directors subject to payment of U.S. federal tax, the redemption period to elect payout of the DSUs they hold commences on the first day of the calendar year following the year in which the non-employee director ceases to be a member of the Board, and ends on November 30 of that same year. However, no redemption will be permitted within the first six months following separation from service by a U.S. taxpayer who is considered a "specified employee". The cash payment at redemption is calculated by multiplying the number of DSUs by the then-current market value of a common share, as per the terms of the DSU Plan.
Stock Options. In line with governance best practices, stock option grants to non-employee directors were discontinued effective January 1, 2009. There are no remaining stock options awarded prior to 2009.
Director Equity Compensation Hedging. Pursuant to Suncor's policies, directors are not permitted to engage in short selling in Suncor common shares or to purchase financial instruments (including, for greater certainty, puts, options, calls, prepaid variable forward contracts, equity swaps, collars or units of exchange funds) that are designed to hedge or offset a change in the market value of Suncor common shares or other securities of Suncor held by the director.
18 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Share-Based Awards. The following table provides information about share-based awards outstanding for our non-employee directors as at December 31, 2019 and provides the value vested in relation to share-based awards held by our non-employee directors during the year ended December 31, 2019.
Name |
Value vested during the year(1)
($) |
Aggregate market or payout value of vested
share-based awards not paid out or distributed(2) ($) |
|||
|
|||||
Patricia M. Bedient | 215 683 | 1 651 073 | |||
|
|||||
Mel E. Benson | 215 683 | 4 872 822 | |||
|
|||||
Dominic D'Alessandro(3) | 108 537 | 4 150 536 | |||
|
|||||
John D. Gass | 215 683 | 2 172 645 | |||
|
|||||
Dennis M. Houston | 215 683 | 796 170 | |||
|
|||||
Brian MacDonald | 215 683 | 689 004 | |||
|
|||||
Maureen McCaw | 215 683 | 4 318 946 | |||
|
|||||
Lorraine Mitchelmore(4) | 249 213 | 267 447 | |||
|
|||||
Eira M. Thomas | 215 683 | 4 364 571 | |||
|
|||||
Michael M. Wilson | 277 915 | 3 065 810 | |||
|
|||||
Total | 2 145 446 | 26 349 024 | |||
|
Director Value at Risk. The following table provides the aggregate equity holdings of current non-employee directors for the years ended December 31, 2018 and 2019 as well as the net change during 2019 and the total value at risk as at December 31, 2019.
December 31, 2018 |
December 31, 2019 |
Net Change During 2019 |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
Name | Shares |
Share-
based awards(1) |
Options(2) | Shares |
Share-
based awards(1) |
Options | Shares |
Share-
based awards(3) |
Options |
Total value
at risk(4) ($) |
|||||||||||
|
|||||||||||||||||||||
Patricia M. Bedient | | 29 924 | | | 38 794 | | | 8 870 | | 1 651 073 | |||||||||||
|
|||||||||||||||||||||
Mel E. Benson | 17 548 | 105 192 | | 17 548 | 114 493 | | | 9 301 | | 5 619 665 | |||||||||||
|
|||||||||||||||||||||
John D. Gass | 6 698 | 43 054 | | 6 698 | 51 049 | | | 7 995 | | 2 457 712 | |||||||||||
|
|||||||||||||||||||||
Dennis M. Houston | 15 600 | 11 060 | | 15 600 | 18 707 | | | 7 647 | | 1 460 106 | |||||||||||
|
|||||||||||||||||||||
Brian P. MacDonald | 5 000 | 8 546 | | 13 000 | 16 189 | | 8 000 | 7 643 | | 1 242 284 | |||||||||||
|
|||||||||||||||||||||
Maureen McCaw | 6 108 | 91 601 | | 6 330 | 101 479 | | 222 | 9 878 | | 4 588 351 | |||||||||||
|
|||||||||||||||||||||
Lorraine Mitchelmore | | | | 585 | 6 284 | | 585 | 6 284 | | 292 345 | |||||||||||
|
|||||||||||||||||||||
Eira M. Thomas | 4 000 | 93 705 | | 4 000 | 102 551 | | | 8 846 | | 4 534 811 | |||||||||||
|
|||||||||||||||||||||
Michael M. Wilson | 10 000 | 57 163 | | 10 000 | 72 035 | | | 14 872 | | 3 491 410 | |||||||||||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 19
Letter to Shareholders
To Our Fellow Shareholders:
On behalf of the Human Resources and Compensation Committee (HR&CC) and the Board of Directors (Board) of Suncor Energy Inc. (Suncor), we are pleased to share the company's approach to senior executive compensation and how it aligns with company performance.
In the Compensation Discussion and Analysis section that follows, we share detailed information on our pay-for-performance philosophy, compensation programs, governance practices and compensation for Named Executive Officers (NEOs).
Suncor Leadership Transition. Mark Little became President and Chief Executive Officer through a successful leadership transition following the retirement of Steve Williams. Our transition plan allowed Suncor to maintain its leading position in Canada's energy industry and remain focused on operational excellence, capital discipline, sustainability and profitable growth while returning value to shareholders.
Suncor's New Purpose. Suncor's ongoing stability at the senior leadership level enabled Mr. Little and the senior leadership team to undertake a thorough review of the company's vision, mission and values, which resulted in the formulation of Suncor's new purpose: To provide trusted energy that enhances people's lives, while caring for each other and the earth.
Suncor's new purpose is closely aligned with "Suncor 4.0", which we see as our latest evolution as a company and one where we aim to apply digital technologies to improve business performance through the acceleration of operational excellence. This initiative is expected to enable us to achieve world-class performance, generate value, drive and enhance our competitive advantage and create the workplace of the future.
One of the many initiatives that support Suncor 4.0, guided by our new purpose, is the planned replacement of our coke-fired boilers with natural gas cogeneration at Oil Sands Base Plant. This project is not only expected to reduce emissions and costs within our own operations, but it will allow us to provide lower-carbon energy to Alberta's electricity grid. By displacing coal-fired power generation in Alberta the anticipated benefit is a reduction in greenhouse gas emissions by approximately 2.5 million tons per year. We believe this project demonstrates our ongoing commitment to energy development that considers environmental, social and economic factors.
Returning Value. Suncor continued to deliver value to shareholders in 2019. Our total shareholder return has significantly outperformed the Suncor Compensation Peers (as listed on page 30) and the S&P/TSX Capped Energy Index over the past one, three, and five years and the TSX over five years.
Suncor's integrated model moderated the impact of changing oil prices as reflected in a 3% year-over-year increase in Funds From Operations (FFO) in 2019, which achieved 99% of the Annual Incentive Plan target.
Our strong financial performance results from the quality and integration of our assets and the effective execution of our business strategy, which allowed for the repurchase of nearly $2.3 billion of our common shares and $2.6 billion in dividends, representing 45% of total funds from operations.
TSR Performance (%)
Compensation Governance. Our compensation programs are designed to ensure we attract and retain top executive talent. Senior executive pay levels are benchmarked against a North American peer group of energy companies. Program design and practices are reviewed regularly with the assistance of external consultants, to enhance alignment with best practice, company and shareholder interests and competitive benchmarks.
A review in 2019 found our compensation programs and practices continue to reinforce Suncor's business strategy and align with current market and best practices. The only structural change in 2019 was to the mix of vehicles used to deliver our long-term incentives from 50% options and 50% Performance Share Units (PSUs) to 25% options, 25% Restricted Share Units (RSUs) and 50% PSUs, beginning with awards in 2020. This change aligns with our strategic focus on returning value to
20 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
shareholders as the addition of RSUs increases the portion of equity-based pay that benefits from dividends and aligns with prevailing market practice while maintaining a strong weighting on performance-oriented long-term incentives.
Chief Executive Officer (CEO) Compensation. Mr. Little's compensation was increased in 2019 on his appointment as President and CEO. These compensation changes positioned him at an appropriate level relative to the median total direct compensation of Suncor's North American energy peers.
Approximately 89% of Mr. Little's total direct compensation of $10.0 million in 2019 varied with performance and approximately 71% was provided in the form of mid-to long-term incentives, which reinforce the linkage to relative and absolute share price performance.
Aligning with Shareholder Interests. Our equity-based and performance-contingent incentive programs form the largest components of total direct compensation for our NEOs, which ensures that the value they receive is aligned with the interests of our shareholders. The assessment of realizable CEO pay relative to Suncor's peers can be found on page 24 and confirms that, over the past three years, Suncor's strong TSR performance is aligned to realizable pay. Your Board, with the support of the HR&CC, is committed to ensuring that Suncor's senior executive compensation continues to align with our shareholders' interests and supports the company's competitiveness and future success.
Further, we look forward to continuing to advance our efforts related to environmental, social and governance topics and will be working closely with key stakeholders to help ensure we further align our long term goals with our executive compensation.
Looking Ahead. Thanks to our integrated business model and a focus on capital discipline and profitable growth, Suncor continues to present a compelling investor proposition. With Mr. Little as President and CEO, a highly capable and experienced senior management team and an employee base unified in its efforts by a refreshed purpose, we remain confident in Suncor's ability to continue to deliver strong and sustainable performance going forward.
We welcome shareholder feedback on our business operations, policies and practices, including executive compensation.
Sincerely,
John D. Gass
Chair of the Human Resources and Compensation Committee |
Michael M. Wilson
Chair of the Board |
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 21
COMPENSATION DISCUSSION AND ANALYSIS
Page | |||
|
|||
2019 Named Executive Officers | 22 | ||
|
|||
Pay and Performance Overview | 22 | ||
|
|||
Compensation Governance | 26 | ||
|
|||
Our Approach to Executive Compensation | 29 | ||
|
|||
Compensation of the Named Executive Officers | 34 | ||
|
|||
2019 Performance | 37 | ||
|
|||
Executive Compensation Alignment with Shareholder Value | 43 | ||
|
2019 Named Executive Officers
The persons (the Named Executive Officers or NEOs) who are the focus of the Compensation Discussion and Analysis and who appear in the compensation tables are:
|
||||
MARK S. LITTLE | M.S. LITTLE | PRESIDENT AND CHIEF EXECUTIVE OFFICER(1) | ||
|
||||
ALISTER COWAN | A. COWAN | CHIEF FINANCIAL OFFICER(2) | ||
|
||||
MICHAEL R. MACSWEEN | M.R. MACSWEEN | EXECUTIVE VICE PRESIDENT, UPSTREAM | ||
|
||||
STEPHEN D.L. REYNISH | S.D.L. REYNISH | EXECUTIVE VICE PRESIDENT, STRATEGY & OPERATIONS SERVICES | ||
|
||||
KRISTOPHER P. SMITH | K.P. SMITH | EXECUTIVE VICE PRESIDENT, DOWNSTREAM | ||
|
||||
STEVEN W. WILLIAMS | S.W. WILLIAMS | FORMER CHIEF EXECUTIVE OFFICER(3) | ||
|
Pay and Performance Overview
Suncor's executive compensation programs are designed to align the interests of our executives with shareholders, rewarding executives for delivering annual and longer term results and building sustainable shareholder value.
Our business is linked to the commodity cycle with significant long-term capital investments. It requires
focus on profitable growth, achieved through capital discipline and reliable operations that are conducted in a safe and environmentally and socially responsible way.
The following information provides an overview of some key points regarding pay and performance at Suncor.
22 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Focusing on Performance. We look at performance from a number of perspectives with the intention of balancing short-term financial and operational metrics with long-term shareholder value creation:
Financial Results | Value Drivers | Leadership | Shareholder Value | ||||
|
|||||||
FFO(1) ROCE(1) |
|
Safety Sustainability Base Business Growth |
|
Personal performance, which includes the successful execution of operational and capital plans. |
|
Absolute total shareholder return (TSR), which includes changes in share price and reinvested dividends, plus relative TSR through our performance share unit (PSU) plan (PSU Plan). Absolute share price appreciation through stock options. Absolute TSR through our restricted share unit (RSU) plan (RSU Plan). |
|
|
How Total Direct Compensation (TDC) is Delivered.
Component | Performance Orientation | Time Frame | |||
|
|||||
Salary |
Reflects the market competitive value of the role versus peers.
Salary increases reflect performance demonstrated on the job. |
Annual review with adjustments as appropriate | |||
|
|||||
Annual Incentive |
Aligns with financial and operational performance objectives.
Reflects a combination of corporate, business unit and personal performance. |
Short-term
Annual performance |
|||
|
|||||
PSUs |
Rewards financial performance (FFO and ROCE) and relative TSR (share price performance plus dividends relative to performance peers).
Fully at-risk with a 0% to 200% of target payout. |
Mid-term
Three-year rolling performance cycles |
|||
|
|||||
RSUs | Rewards absolute TSR (share price performance plus dividends). |
Mid-term
Vest after three years |
|||
|
|||||
Stock Options |
Rewards absolute share price performance.
Only delivers value if share price appreciates over the grant price. |
Long-term
Seven-year term Vest over three years |
|||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 23
Pay Alignment to Total Shareholder Return. Suncor has a long-standing pay-for-performance philosophy that is reflected in the design of our programs. A significant portion of the NEOs' total direct compensation is contingent upon Suncor's financial results, operating results and share price performance. The alignment of our pay programs with performance over short- and mid- to long-term periods is regularly reviewed, with the aim of ensuring that our short-term actions lead to long-term increases in shareholder value.
In reviewing alignment of our pay programs with performance we look at two different perspectives: pay opportunity and realizable pay.
Pay Opportunity | Realizable Pay | ||
|
|||
Static numbers reported in the Summary Compensation Table for total direct compensation in 2017 and 2018 and estimated pay for 2019.
It does not reflect the impact of share price on the ultimate value received through equity awards. |
Dynamic numbers that capture total direct compensation reflecting the value of outstanding equity awards as at December 31, 2019.
The values ultimately received could be lower or higher than those in the Summary Compensation Table depending on future performance. |
||
|
The following charts demonstrate the alignment between Suncor's CEO(1) pay and TSR over the past three years for their pay opportunity and realizable pay relative to the chief executive officers of the Suncor Compensation Peers.
Suncor's CEO pay opportunity and realizable pay is positioned in the upper right of the charts below, within the zone of reasonable alignment, indicating that the corporation had strong relative TSR performance that is aligned to its relative pay. Suncor's TSR performance was in the third quartile of the peer group over the three year period, while three peers had a higher pay opportunity and six peers had a higher realizable pay.
Pay Opportunity(2) | Realizable Pay(3) | |
|
|
|
CEO Pay Multiple of Median Peer Group Pay. We also look at the pay opportunity for the CEO as a multiple of the median pay opportunity of the Suncor Compensation Peers. The 2019 pay for the CEO compared to the pay opportunity for the Suncor Compensation Peers based on current data is at a multiple of 0.9 times the median. The HR&CC believes there is no excessive pay disparity between Suncor's CEO and market pay, given Suncor's relative size and performance versus peers. The pay multiple is well within the acceptable range based on best practices recommended by institutional investors and recognized governance organizations.
24 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
CEO Pay at a Glance. As displayed in the corresponding chart, Mr. Little's actual 2019 total direct compensation, as indicated in the Summary Compensation Table, is approximately 1% lower than Suncor's total direct compensation structure for the CEO role, which is targeted at the median of the Suncor Compensation Peers. The 2019 actual compensation level reflects Mr. Little's ongoing leadership and personal performance in the two roles that he held during 2019. For more information on Mr. Little's performance and compensation in 2019, see pages 37 to 38.
Pay Programs Are Supported By Key Governance Practices. Suncor has implemented and maintains a number of key executive compensation governance practices that we believe are consistent with best practices, support our business objectives and align with shareholder interests.
Key Practices
|
||
ü | Our HR&CC is comprised entirely of independent directors | |
|
||
ü | The HR&CC engages an independent executive compensation advisor that does not provide other services to Suncor | |
|
||
ü | Maintain minimum share ownership guidelines including 6 times salary for the President and CEO and 3 times salary for the Chief Financial Officer and Executive Vice Presidents | |
|
||
ü | Have a claw back policy | |
|
||
ü | Conduct a compensation program risk assessment annually | |
|
||
ü | Benchmark senior executive target pay against a relevant North American industry peer group | |
|
||
ü | Have a post-retirement share ownership hold period for the CEO | |
|
||
ü | Provide at least 50% of mid- to long-term incentive compensation through PSUs | |
|
||
ü | Have no termination payments in excess of 2 times cash pay | |
|
||
ü | Have double trigger change of control provisions for equity awards | |
|
||
ü | Have vesting requirements and service and earnings caps on the Suncor Energy Supplemental Executive Retirement Plan (SERP) | |
|
||
ü | Have significant performance contingent pay for the CEO with over 85% of pay at risk | |
|
||
ü | Have a robust target setting process | |
|
||
ü | Annual incentive plan (AIP) and PSU Plan include threshold performance levels and payout caps | |
|
||
ü | Have an AIP deferral program that allows executives to take a portion or all of their annual incentive payment in DSUs | |
|
||
ü | No option re-pricing | |
|
||
ü | No loans are provided to executives | |
|
||
ü | Have a no hedging policy for common shares and other Suncor securities held by an executive | |
|
||
ü | No excessive perquisites are provided | |
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 25
Compensation Governance
Board of Directors. The Board oversees development of the overall strategic direction and policy framework for Suncor. This responsibility, in part, is discharged with the assistance of Board committees, including the HR&CC. Further details relating to Board committees can be found in Schedule B.
Human Resources & Compensation Committee. Central to the role of the HR&CC is aligning executive compensation with the delivery of shareholder value. The role and operation of the HR&CC under its mandate include assisting the Board annually in the areas of executive compensation, succession planning, incentive compensation plans and compensation governance. Key objectives in these areas include:
The HR&CC fulfilled its mandate, as summarized in this section, in 2019.
All HR&CC members are independent directors. The HR&CC is currently comprised of the following members: John D. Gass (chair), Mel E. Benson, Dennis M. Houston and Eira M. Thomas.
The HR&CC members have experience in leadership roles involving EHS and social responsibility, strong knowledge of the energy industry (three of four with an energy industry background), a mix of functional experience and competency, and tenure as directors of various public companies. This background provides the HR&CC with the collective experience, skills and qualities to effectively support the Board in carrying out its mandate. Further information on HR&CC member experience and skills is provided in the inventory of Board member capabilities and competencies on page B-3 of Schedule B.
Executive Compensation Consultants. Willis Towers Watson provides advice to the HR&CC, supports management in the area of executive compensation and provides services in other human resources areas, including pensions. Willis Towers Watson has protocols in place to ensure that they are in a position to provide independent advice. Willis Towers Watson was originally retained in February 2006.
Meridian Compensation Partners (Meridian) is directly retained by the HR&CC as its independent advisor. Meridian was originally retained by the HR&CC in February 2010.
Willis Towers Watson provides the HR&CC consulting support and information in the following areas:
Meridian's role is to review and provide advice to the HR&CC on analysis and recommendations put forward by management and Willis Towers Watson. As the HR&CC's independent advisor, Meridian:
The decisions made by the HR&CC may reflect factors and considerations other than as provided or recommended by our executive compensation consultants. During 2019, Willis Towers Watson and Meridian met with the HR&CC chair and attended relevant sections of HR&CC meetings, as necessary.
26 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Executive Compensation-Related Fees
Executive compensation-related fees paid by Suncor in 2019 and 2018 to Willis Towers Watson and Meridian are displayed in the table below.
Executive Compensation Consultant |
Fees Paid
related to 2019 ($) |
Fees Paid
related to 2018 ($) |
|||
|
|||||
Willis Towers Watson | 225 160 | 234 080 | |||
|
|||||
Meridian | 36 421 | 53 268 | |||
|
All Other Fees
Willis Towers Watson's Human Capital and Benefits practice also assisted in certain matters related to pension and benefits, including, but not limited to, actuarial and accounting services. Total fees payable to Willis Towers Watson for the foregoing services were $1,972,077 in 2019 and $1,540,478 in 2018. In addition, Willis Towers Watson provides broking and corporate risk services, as well as other general management consulting services, which are separate and distinct from the Willis Towers Watson Human Capital and Benefits consulting. Total fees payable to Willis Towers Watson for these services were $1,030,440 in 2019 and $825,000 in 2018. As the HR&CC's independent advisor, Meridian does not act on other matters for Suncor. As such, other than the fees disclosed above, no other fees were paid by Suncor to Meridian in 2019 and 2018.
The HR&CC pre-approves all material executive compensation-related fees paid to Willis Towers Watson and Meridian. The HR&CC does not pre-approve services provided by Willis Towers Watson that do not relate to executive compensation-related services.
Managing Compensation Risk. Suncor's executive compensation policies and programs are designed to create appropriate incentives to increase long-term shareholder value. While the energy business by its nature requires some level of risk taking to achieve returns in line with shareholder expectations, Suncor structures compensation plans and programs and maintains guidelines and policies which it believes limit excessive risk. Key oversight procedures and risk mitigating features to support managing compensation risk are outlined below.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 27
Oversight Procedures
|
|||
Suncor's strategic plan, as reviewed by the Board, balances investment risk and reward, and assesses company and industry risks in advance to support planning, risk
management and decision making.
Suncor uses tools including an Enterprise Risk Management System, Operational Excellence Management System and Trading Risk Management Policy to identify and manage risk. In the normal course of business, Suncor has financial controls that provide limits and authorities in areas such as capital and operating expenditures, divestiture decisions and marketing and trading transactions. These financial controls mitigate inappropriate risk taking. |
The HR&CC uses a compensation program risk assessment framework in assessing Suncor's compensation policies and programs to determine whether any components could
encourage unacceptable or excessive risk taking.
The elements of the compensation risk assessment framework are categorized in four areas: pay philosophy and compensation structure, plan designs, performance metrics and governance. The HR&CC reviews the results of the compensation program risk assessment annually to take into account and consider any significant shifts in Suncor's business strategies or compensation policies and programs. From its review in 2019 the HR&CC concluded that Suncor's compensation policies and programs do not encourage excessive risk taking that could be expected to have a material adverse impact on Suncor. |
||
|
Key Risk Mitigating Features
Plan and Program Design | |||
|
|||
Total direct compensation for executives provides a balance between base salary and variable performance contingent compensation. For our NEOs, emphasis is not focused
on one compensation component, but is spread across annual, mid- and long-term programs to support and balance sustained short-term performance and long-term profitability.
For our NEOs, typically 80% or more of their target total direct compensation is variable based on company, business unit and personal performance and the remaining 20% or less is base salary. Of the 80% or more of variable compensation, approximately 80% or more is mid- and long-term focused and approximately 20% or less is short-term focused. The strong weighting towards mid- to long-term compensation mitigates the risk of undue emphasis on short-term goals at the expense of long-term sustainable performance. Annual grants of stock options vest over three years and have a seven-year term, reinforcing the goal of building and sustaining long-term value in line with shareholder interests. Our mid-term PSU Plan rewards relative TSR performance over three years versus our PSU peer group of companies, as described on page 55. The PSU plan also measures ROCE performance beginning with 2019 awards. Annual awards and overlapping three year performance periods deter short-term focused decision making and require sustained performance to achieve a payout. For PSU grants, there is no payout if relative TSR performance is in the bottom grouping of companies, a payout cap of 200% of target when relative TSR performance is in the top company grouping of the peer group and a sliding scale of payout levels based on each company grouping in between. ROCE similarly has pre-determined performance levels associated with the same range of no payout up to a maximum of 200%. |
The AIP for all salaried employees is inherently designed to limit risk. Short-term incentive pay is earned based on achievement against a balanced and diversified mix
of performance measures. The measures include both financial and operating performance targets. This balanced approach discourages focus on a single measure at the expense of other key factors (e.g., profitable growth at the expense of safety).
This design is intended to diversify the risk under any one performance area.
AIP targets, results and payouts are stress tested and reviewed by the HR&CC. The funds to provide for annual cash payouts under the AIP are determined based on key corporate measures and a scorecard for each business unit with consistent measurement across areas critical to Suncor's success. A performance threshold for payouts under the AIP is established each year. For 2019, the threshold was based on achievement of a minimum FFO level requirement. Under the DSU Plan, executives may elect annually to allocate 25% to 100% of their AIP payment to DSUs. This feature in the DSU Plan is used by executives to assist in meeting share ownership requirements and defers annual incentive compensation, further encouraging a focus on long-term performance. Matching funds are not provided by Suncor. For the 2019 performance period, three of the NEOs elected to take a portion of their AIP payment in DSUs. |
||
|
Policies and Guidelines |
|||
|
|||
Suncor's total compensation for executives is regularly benchmarked against a peer group of companies of similar size and business scope approved by the HR&CC. This
ensures that compensation is competitive with peers and aligned with Suncor's philosophy.
Suncor executives must achieve and maintain specific share ownership levels based on a multiple of their annual salary. A substantial share ownership level assists in aligning executive interests with those of shareholders. The share ownership guidelines for NEOs are found on page 31. The CEO must maintain his share ownership requirement level through the first year following retirement. |
The HR&CC and the Board provide strong oversight of the management of Suncor's compensation programs. The HR&CC has discretion in assessing performance under
executive compensation programs to adjust metrics or the payouts based on results and events and has used this discretion to reduce or increase payouts under certain programs in the past.
Claw back policy allows the Board to seek reimbursement of incentive compensation under certain situations involving a material restatement of all or a portion of the corporation's financial statements and for misconduct. Executives are not permitted to engage in short selling in Suncor shares or to purchase financial instruments (including, for greater certainty, puts, options, calls, prepaid variable forward contracts, equity swaps, collars or units of exchange funds) that are designed to hedge or offset a change in the market value of Suncor's common shares or other Suncor securities held by an executive. |
||
|
28 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Conclusion
Given the oversight procedures and the key risk mitigation features of Suncor's compensation policies and programs described above, the HR&CC does not believe that there are any identified risks arising from the corporation's compensation policies and practices that are reasonably likely to have a material adverse impact on the corporation.
Our Approach to Executive Compensation
Pay-for-Performance Philosophy. Suncor maintains a strong pay-for-performance philosophy that is demonstrated in the mix of compensation provided to executives and the way we measure success. Compensation plans and practices are tied closely to our strategy, performance, talent and risk management business objectives.
A significant portion of the total direct compensation of our senior executives is provided in variable performance contingent pay designed to reward superior business performance and increasing shareholder returns. This approach reinforces our pay philosophy and ensures alignment with shareholder interests. Incentive-based pay is designed to reward successful short-, medium and long-term performance in key areas. These areas include safety, sustainability, base business, growth, FFO, ROCE, relative share price performance, absolute share price performance and leveraging our integrated strategy, all of which enable results that are important to our shareholders.
Achieving the Right Balance. To deliver sustained and profitable long-term performance, it is essential that Suncor attracts, engages and retains talented, capable executives who can execute on current priorities and help position Suncor over the long-term for sustained success. To do this, programs are designed to provide an attractive and competitive total compensation opportunity. Suncor believes it provides the right balance in its overall rewards program to achieve this through "total direct compensation", consisting of salary, annual incentive, mid- and long-term equity-based incentives, and "indirect compensation", consisting of benefits and retirement-related programs. These programs are complemented with excellent career development opportunities and careful succession planning.
Defining Our Marketplace. Our senior executives are responsible for managing a large, global enterprise with multiple operating units and significant capital expenditures.
As the largest integrated energy company in Canada and fourth largest in North America by enterprise value at December 31, 2019, size and business scope are key criteria in defining the marketplace and peer companies used to establish competitive compensation levels for our senior executives. This means we must look beyond Canadian energy companies and include U.S. energy companies in our peer group in order to capture a sufficient number of companies of comparable size and complexity to comprise a meaningful peer group.
The peer group used to benchmark compensation levels for Suncor's senior executives in 2019, including the NEOs identified on page 22, is approved by the HR&CC. The peer group and selection criteria are regularly reviewed by the HR&CC and include energy sector specific companies, financial and operational comparability, nature and scope of operations and represent a primary market for executive talent.
Our peer group for 2019 is comprised of the 16 North American based energy companies listed below and provides a robust sample to ensure that compensation changes made by a single company do not unduly influence benchmark data. In Canada, we include pipeline companies, since there are fewer comparable large upstream and integrated energy companies and because pipeline companies form part of our competitive labour market. In the U.S., where there are many more large upstream and integrated companies, we limit the peer companies to comparable upstream and integrated energy companies.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 29
For our NEOs and other senior executives, Suncor's 2019 total direct compensation structure is targeted at the median of the Suncor Compensation Peers, which are identified below. The same peer group is used to benchmark director compensation.
Canada | U.S. | |
Canadian Natural Resources Limited (CNQ) |
|
Anadarko Petroleum Corporation (APC)(1) |
Cenovus Energy Inc. (CVE) | Apache Corporation (APA) | |
Enbridge Inc. (ENB) | Chevron Corporation (CVX) | |
Encana Corporation (ECA)(2) | ConocoPhillips (COP) | |
Husky Energy Inc. (HSE) | Devon Energy Corporation (DVN) | |
Imperial Oil Limited (IMO) | EOG Resources Inc. (EOG) | |
TC Energy Corporation (TRP) | Hess Corporation (HES) | |
Marathon Oil Corporation (MRO) | ||
Occidental Petroleum Corporation (OXY) |
Similar peer groups of companies are used in determining the relative TSR performance for our PSU grants as described on page 55. Differences from the Suncor Compensation Peers reflect the specific purpose of each group (i.e., benchmarking of executive pay versus comparing company shareholder return performance).
Suncor ranks as one of the larger companies, as compared to the Suncor Compensation Peers, in relation to revenues, assets and enterprise value.
The chart below shows Suncor's ranking as compared to the Suncor Compensation Peers(1).
30 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Executive Share Ownership Guidelines. Suncor strongly believes that executives' interests should be aligned with the interests of Suncor's shareholders. One of the key ways we reinforce this is by requiring executives to have personal holdings in Suncor common shares or share equivalents equal to a multiple of their annual base salary.
The share ownership guidelines for our executives are reviewed periodically to ensure they continue to be market competitive and consistent with good governance practice. These guidelines visibly demonstrate alignment of executives' interests with those of Suncor's shareholders and are supported by market data.
2019 and 2020 Guidelines. The share ownership guideline level must be achieved by the end of the fifth year after appointment to an executive position or promotion
to a more senior executive position. On promotion to a more senior executive position, the prior guideline level must be maintained at the new base salary level.
Only Suncor common shares and DSUs count toward fulfillment of the guidelines; PSUs, RSUs and stock options do not. Where share ownership guidelines have not been met within the prescribed period, executives must use the cash payout from their annual incentive award, a current vested PSU grant payout, or other cash resources to immediately satisfy any shortfall to the current share ownership guideline for their level.
The share ownership guidelines for 2019 remained competitive with the Suncor Compensation Peers and no changes have been made for 2020.
The following table sets forth the compliance of each NEO with the share ownership guidelines as a multiple of annual salary as at December 31, 2019. All NEOs are in compliance with their current share ownership guideline.
Holdings(2) |
|||||||||||||||
NEO |
Executive Share
Ownership Guideline Level |
Compliance Date
for achieving Guideline Level |
Current
Requirement at December 31, 2019(1) |
Shares | DSUs |
Holding
Value ($) |
Multiple of
Annual Salary held in Shares and DSUs |
||||||||
|
|||||||||||||||
M.S. LITTLE(3) | 6 × | December 31, 2024 | 3 × | 70 852 | 91 951 | 6 928 896 | 5.8 x | ||||||||
|
|||||||||||||||
A. COWAN | 3 × | December 31, 2019 | 3 × | 57 973 | 49 420 | 4 570 642 | 7.0 x | ||||||||
|
|||||||||||||||
M.R. MACSWEEN | 3 × | December 31, 2017 | 3 × | 45 003 | 74 449 | 5 083 877 | 8.3 x | ||||||||
|
|||||||||||||||
S.D.L. REYNISH | 3 × | December 31, 2017 | 3 × | 19 654 | 74 974 | 4 027 368 | 6.5 x | ||||||||
|
|||||||||||||||
K.P. SMITH | 3 × | December 31, 2018 | 3 × | 33 462 | 21 558 | 2 341 651 | 3.8 x | ||||||||
|
CEO Hold Requirement. The CEO must maintain his share ownership level for one year following his retirement, which aligns with current good governance practices and shareholder interests.
Total Direct Compensation Components. Total direct compensation, made up of base salary, an annual incentive and mid- to long-term incentives, is designed to reward short-term results and achievement of sustained longer-term performance in key business areas that enable the operational and financial results important to our shareholders.
Incentive or variable performance contingent compensation represents a significant portion of total direct compensation for senior executives. The percentage of variable performance contingent total direct compensation increases with greater levels of responsibility. The elements of total direct compensation, as well as other compensation and benefit related elements, are outlined below.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 31
32 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Key LTI Plan Terms. Suncor's business involves strategic investments over long periods of time. With stock options and PSUs as key elements of long-term incentive (LTI) compensation, NEOs are fully aligned with the economic interests of our shareholders over a medium- and long-term horizon, are significantly leveraged to Suncor's share price performance from an ultimate compensation standpoint and are rewarded based on a balance between relative TSR performance (PSUs) and absolute share price performance (RSUs and stock options). The following table provides the key LTI plan features for equity awards provided to the NEOs and other executives as part of their competitive compensation in 2019.
Performance Share Units (PSUs) | Stock Options | |||
|
||||
Term | Three years | Seven years | ||
|
||||
Description | Share units with a value that mirrors common shares and a performance condition that determines the vesting level (between 0% and 200% of grant) | Options to acquire common shares | ||
|
||||
Frequency | Granted annually | Granted annually | ||
|
||||
Performance Condition |
TSR performance relative to peers, weighted 70% for the 2019 award and 100% for 2017 and 2018 awards
ROCE performance against budget, weighted 30% for the 2019 award |
Value is only realized when the common share price exceeds the exercise price | ||
|
||||
Vesting |
After a three year performance period
Vesting level is subject to performance condition achievement and HR&CC approval |
1/3 vest each year starting on January 1 of the year following the annual grant and are based on the share price determined at the time of grant | ||
|
||||
Payout | Paid out in cash following the end of the three year performance period based on units held, vesting level and market value of a common share | On exercise, acquire common shares at the price determined at the time of grant | ||
|
||||
Employment Termination(1) |
|
Resignation share units are cancelled Involuntary Termination share units are cancelled Retirement share units are held to end of the performance period and paid out based on vesting level |
|
Resignation unvested options are cancelled; vested options may be exercised for up to the earlier of three months or expiry Involuntary Termination unvested options are cancelled; vested options may be exercised for up to the earlier of three months or expiry Retirement unvested options vest immediately and all options held may be exercised up to the earlier of three years or expiry |
|
Looking Ahead to 2020:
Beginning with 2020 awards, restricted share units (RSUs) will be introduced to our LTI Plan for executives under the following mix: 50% in PSUs, 25% in stock options, and 25% in RSUs. This change increases the emphasis on dividends, which directly contribute to TSR and the realizable pay from PSUs and RSUs. Reducing the weight on stock options, which reward only absolute share price appreciation, also aligns our mix more closely with our peers.
Executive Equity Compensation Hedging. Pursuant to Suncor's policies, executives are not permitted to engage in short selling in shares or to purchase financial instruments (including, for greater certainty, puts, options, calls, prepaid variable forward contracts, equity swaps, collars or units of exchange funds) that are designed to hedge or offset a change in the market value of Suncor's common shares or other Suncor securities held by an executive.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 33
Compensation of the Named Executive Officers
Compensation Decision-Making. The compensation of the CEO and the other NEOs is determined through a structured annual process followed by the HR&CC to ensure it aligns with shareholder interests, rewards executives for performance achieved and enables Suncor to attract and retain talented executives.
The steps below illustrate the performance and compensation planning process which also includes consideration of market information, governance practices, trends and advice from our executive compensation consultants.
Step 1: Review pay philosophy, peer group and program design. Benchmark compensation levels and assess trends. Determine pay mix, pay at risk and establish the compensation structure for the upcoming year.
Step 2: Review and approve corporate and business unit goals and metrics and CEO personal goals. Review and approve annual and longer term compensation program results. Review disclosure of prior year compensation decisions and program results.
Step 3: Monitor company progress and evaluate in-year performance under compensation programs.
Step 4: Evaluate company and CEO performance and determine compensation that will be recommended to the Board. Review compensation for other senior executives.
2019 Total Direct Compensation. The 2019 base salary, annual incentive and long-term incentive awards for each NEO are covered in the tables that follow in this section. Information on Suncor's AIP and performance in 2019 is provided on pages 34 to 36. Details on each NEO's performance, and their total direct compensation for 2017 to 2019 are provided on pages 37 to 42.
Base Salary. During 2019, NEO base salaries were increased by the percentages displayed in the following table. The increases reflect their demonstrated capabilities and ensure that their base salaries are competitive with the market for their positions. Mr. Little's increase in 2019 was associated with his appointment to President and CEO on May 2, 2019. This increase aligns his salary with market levels based on the Suncor Compensation Peers.
Base Salary 2019
($) |
Increase from 2018
(%) |
Base Salary 2018
($) |
|||||
|
|||||||
M.S. LITTLE | 1 200 000 | 14.3 | 1 050 000 | ||||
|
|||||||
A. COWAN | 650 000 | 2.4 | 635 000 | ||||
|
|||||||
M.R. MACSWEEN | 615 000 | 2.5 | 600 000 | ||||
|
|||||||
S.D.L. REYNISH | 615 000 | 2.5 | 600 000 | ||||
|
|||||||
K. P. SMITH | 615 000 | 2.5 | 600 000 | ||||
|
|||||||
S.W. WILLIAMS | 1 475 000 | 0 | 1 475 000 | ||||
|
Annual Incentive Plan (AIP). Suncor's AIP rewards our NEOs and other AIP participants based on performance achieved versus the measures and targets approved for the corporate and business unit components and the annual goals approved for the individual components. The chart to the right displays the weight for each of the AIP performance components and provides a further breakdown of the business unit component of AIP showing the weight for each value driver. Awards under the AIP are determined based on the weighted performance of the components. In addition to performance measures for Safety and Sustainability, many of the initiatives within the Growth component are expected to improve Suncor's safety, environmental, and social performance. Collectively, these measures and initiatives represent approximately 40% of the business unit component of AIP. |
|
|
34 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
The AIP calculation and targets for the 2019 performance period are as follows:
Corporate component: The 30% corporate component measures FFO, which Suncor believes is a key indicator of the corporation's financial strength and profitability.
Target performance for the corporate component of the AIP represents a level of FFO that is determined based on key influencers such as production guidance, capital and operating costs, and the budgeted price for Brent crude, among others. For 2019, a threshold for determining if any payment is made under the AIP was based on a minimum FFO requirement.
In 2019, performance on FFO was slightly below target. The achieved FFO(1) of $10.8 billion, which was reduced to $10.5 billion for the purposes of AIP calculations(2), was 1% below the AIP target of $10.6 billion resulting in a payout of 96% on this component of the AIP. The HR&CC has discretion to increase or decrease awards under the AIP based on its assessment of the impact of events that may have had an effect on performance. In 2019, the HR&CC did not exercise its discretion.
Business unit component: The 50% business unit component consists of five business unit scorecards, each following standard performance measures across the four value driver areas base business, safety, growth and sustainability. Five objective measures are common to all business unit scorecards: recordable injury frequency, loss of primary containment, environmental regulatory incidents, controllable costs and production or utilization. The overall score for the weighted average business unit component of the AIP for NEOs is determined on the combination of performance of each business unit and the weighting assigned to each.
The business unit results reflect overall 2019 performance that is above target, as summarized below.
Governance of the AIP is comprehensive. Reviews of performance measures, weightings, targets and results are carried out at the business unit, corporate and HR&CC level.
Individual component: Information on the performance of the NEOs under the 20% individual component can be found beginning on page 37 and information on the calculation of their 2019 AIP awards can be found below.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 35
2019 AIP Awards. The table below displays the calculation of the AIP award for each NEO based on the three AIP components and the final award amounts approved for 2019 performance. The AIP awards for Messrs. Little and Williams were determined by the HR&CC and approved by the Board. The AIP awards for the other NEOs were determined by Mr. Little with review by the HR&CC.
The calculations to determine the awards displayed in the tables below are comprised of two steps: first determine the Overall Performance Factor based on the AIP components, and second determine the AIP Award Payout.
2019 AIP Awards Performance Factor | ||||||||||||||||||||
|
||||||||||||||||||||
Corporate Performance [A] | Business Unit Performance [B] | Individual Performance [C] |
Overall
Performance Factor [F] |
|||||||||||||||||
|
||||||||||||||||||||
Name |
Weight × Corporate
Factor |
Total
Factor [A] |
Weight × Business
Unit Factor(1) |
Total
Factor [B] |
Weight × Individual
Factor |
Total
Factor [C] |
[A+B+C] | |||||||||||||
|
||||||||||||||||||||
M.S. LITTLE | 0.96 | 0.29 | 1.12 | 0.56 | 1.58 | 0.32 | 1.16 | |||||||||||||
|
|
|
|
|||||||||||||||||
A. COWAN | 0.96 | 0.29 | 1.12 | 0.56 | 1.50 | 0.30 | 1.15 | |||||||||||||
|
|
|
|
|||||||||||||||||
M.R. MACSWEEN | 30% | 0.96 | 0.29 | 50% | 1.12 | 0.56 | 20% | 1.29 | 0.26 | 1.11 | ||||||||||
|
|
|
|
|||||||||||||||||
S.D.L. REYNISH | 0.96 | 0.29 | 1.12 | 0.56 | 1.51 | 0.30 | 1.15 | |||||||||||||
|
|
|
|
|||||||||||||||||
K.P. SMITH | 0.96 | 0.29 | 1.11 | 0.56 | 1.63 | 0.33 | 1.17 | |||||||||||||
|
|
|
|
|||||||||||||||||
S.W. WILLIAMS | 0.96 | 0.29 | 1.12 | 0.56 | 1.18 | 0.24 | 1.08 | |||||||||||||
|
2019 AIP Awards Payout | Payout % vs Target Opportunity | |||||||||||||||
|
||||||||||||||||
Name |
Annualized
Base Salary December 31, 2019 [D] |
AIP
Target [E] |
Overall
Performance Factor [F] |
Calculated
AIP Award [D × E x F](2) |
Approved AIP
Award Payout |
Target
(100%) |
Maximum
(220%) |
Approved AIP
Award as a % of Target |
||||||||
|
||||||||||||||||
M.S. LITTLE | $1 200 000 | 122%(3) | 1.16 | $1 700 000 | $1 700 000 | $1 460 000 | $3 212 000 | 116% | ||||||||
|
||||||||||||||||
A. COWAN | $650 000 | 75% | 1.15 | $560 000 | $560 000 | $487 500 | $1 072 500 | 115% | ||||||||
|
||||||||||||||||
M.R. MACSWEEN | $615 000 | 75% | 1.11 | $510 000 | $510 000 | $461 250 | $1 014 750 | 111% | ||||||||
|
||||||||||||||||
S.D.L. REYNISH | $615 000 | 75% | 1.15 | $530 000 | $530 000 | $461 250 | $1 014 750 | 115% | ||||||||
|
||||||||||||||||
K.P. SMITH | $615 000 | 75% | 1.17 | $540 000 | $540 000 | $461 250 | $1 014 750 | 117% | ||||||||
|
||||||||||||||||
S.W. WILLIAMS | $1 475 000 | 63%(4) | 1.08 | $1 000 000 | $1 000 000 | $921 875 | $2 028 125 | 108% | ||||||||
|
Long-Term Incentive (LTI) Awards. The table below displays the 2019 equity award of stock options and PSUs and the value at grant in February 2019 for each of the NEOs. Mr. Little did not receive an additional LTI award in connection with his appointment to Chief Executive Officer in May 2019. The equity awards considered: the market target value for the equity awards at the median of the Suncor Compensation Peers; individual performance as determined by the Board in the case of Messrs. Little and Williams; individual performance as determined by Mr. Williams in the case of the other NEOs; and the previous year's equity award received by each NEO under the stock option plan (SOP) and the PSU Plan.
For more information on Suncor's equity plans, see "Summary of Incentive Plans". For further details on each NEO's 2019 equity award and total compensation for 2019, see the "Summary Compensation Table".
Name | Options | PSUs | RSUs(1) |
Option
Value ($) |
PSU
Value ($) |
RSU
Value ($) |
Total
($) |
||||||||
|
|||||||||||||||
M.S. LITTLE | 538 700 | 83 120 | | 3 560 807 | 3 574 991 | | 7 135 798 | ||||||||
|
|||||||||||||||
A. COWAN | 217 800 | 33 590 | | 1 439 658 | 1 444 706 | | 2 884 364 | ||||||||
|
|||||||||||||||
M.R. MACSWEEN | 212 600 | 32 790 | | 1 405 286 | 1 410 298 | | 2 815 584 | ||||||||
|
|||||||||||||||
S.D.L. REYNISH | 212 600 | 32 790 | | 1 405 286 | 1 410 298 | | 2 815 584 | ||||||||
|
|||||||||||||||
K.P. SMITH | 212 600 | 32 790 | | 1 405 286 | 1 410 298 | | 2 815 584 | ||||||||
|
|||||||||||||||
S.W. WILLIAMS | 753 500 | 116 250 | | 3 179 770 | 4 999 913 | | 8 179 683 | ||||||||
|
36 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
2019 Performance
Mark S. Little, President and Chief Executive Officer
Mr. Little was appointed President and Chief Executive Officer on May 2, 2019, having previously been President and Chief Operating Officer. His efforts have helped ensured a seamless leadership transition, effectively guiding Suncor as it optimized funds flow and profitability, resulting in continued value creation for shareholders. Key accomplishments include the establishment of a transformation strategy to drive long term value and the creation of a Transformation Management Office to execute this strategy, continued progress on Syncrude performance improvement, including the interconnecting pipelines, autonomous haulage system (AHS) roll out, refinery optimization and integration enhancements, sanctioning the coke-fired boiler replacement project at the Oil Sands Base Plant and entering into a strategic digital partnership with Microsoft.
2019 Key Performance Results
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 37
2019 Total Direct Compensation
Mr. Little received a 14.3% base salary increase effective May 2, 2019 on his appointment to President and Chief Executive Officer, increasing his salary to $1,200,000. This increase positioned his pay at an appropriate level relative to the median level of total direct compensation for Suncor's North American energy peers
The AIP award of $1,700,000 represents 116% of his target opportunity and is based on Suncor's and Mr. Little's performance. Mr. Little's long term incentive grant value was $7,135,798, in the form of stock options and PSUs, as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2017-2019) | |
|
|
|
38 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Alister Cowan, Chief Financial Officer
Mr. Cowan was appointed Chief Financial Officer in July 2014. He is responsible for directing Suncor's financial operations, including controllers, investor relations, treasury, tax, internal audit and enterprise risk management. His efforts are focused on the integrity and reporting of all financial, management and risk information, ensuring that Suncor has the financial strength necessary to execute the company's strategic plans as well as engaging with shareholders and the broader investment community.
2019 Key Performance Results
2019 Total Direct Compensation
Mr. Cowan received a base salary increase of 2.4% effective March 1, 2019, increasing his annual salary to $650,000. The AIP award of $560,000 represents 115% of his target opportunity and is based on Suncor's and Mr. Cowan's performance. Mr. Cowan's long term incentive grant value was $2,884,364, in the form of stock options and PSUs, as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2017-2019) | |
|
|
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 39
Michael R. MacSween, Executive Vice President, Upstream
Mr. MacSween was appointed Suncor's Executive Vice President, Upstream in December 2017. In this role, he leads all of Suncor's operated and non-operated oil sands, in situ, and exploration and production assets. Mr. MacSween most recently served as Executive Vice President, Major Projects where he was accountable for the safe and cost-effective engineering, procurement and construction activities for Suncor's growth projects in the upstream, downstream and renewable energy portfolios. Mr. MacSween serves on the board of directors of the Canadian Welding Bureau, Syncrude and United Way of Calgary and area.
2019 Key Performance Results
2019 Total Direct Compensation
Mr. MacSween received a base salary increase of 2.5% effective March 1, 2019, increasing his annual salary to $615,000. The AIP award of $510,000 represents 111% of his target opportunity and is based on Suncor's and Mr. MacSween's performance. Mr. MacSween's long term incentive grant value was $2,815,584, in the form of stock options and PSUs as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2017-2019) | |
|
|
|
40 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Stephen D.L. Reynish, Executive Vice President, Strategy & Operations Services
Mr. Reynish was appointed Executive Vice-President, Strategy & Operations Services in December 2017. In this role, he leads commercial and business development, which includes the creation and execution of long-range business plans, acquisitions and divestment initiatives, as well as the oversight of other large-scale commercial activities. He continues to guide Suncor's portfolio optimization and represent Suncor's interests in its joint venture oil sands projects. He also is responsible for Suncor's operations services, which include Environment, Health and Safety; Enterprise and Digital Technology; Enterprise Technical; Projects; and Supply Chain and Field Logistics. Mr. Reynish previously served as Suncor's Executive Vice-President, Strategy & Corporate Development. Mr. Reynish serves on the board of Energy Safety Canada.
2019 Key Performance Results
2019 Total Direct Compensation
Mr. Reynish received a base salary increase of 2.5% effective March 1, 2019, increasing his annual salary to $615,000. The AIP award of $530,000 represents 115% of his target opportunity and is based on Suncor's and Mr. Reynish's performance. Mr. Reynish's long term incentive grant value was $2,815,584, in the form of stock options and PSUs as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
Total Direct Compensation ($) | Value of Long Term Incentives (2017-2019) | |
|
|
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 41
Kristopher P. Smith, Executive Vice President, Downstream
Mr. Smith was appointed Suncor's Executive Vice President, Downstream in October 2015. In this role, he is responsible for the operation of Suncor's refining network in North America, including the distribution and marketing of refined products under the Petro-Canada brand, as well as Suncor's renewable energy business. He is also accountable for the establishment and achievement of all Downstream business objectives of Suncor. Mr. Smith previously served as Senior Vice President of Supply, Trading and Corporate Development. He is a board member (and past chair) of the Canadian Fuels Association and board member of Actua, a leading science, technology, engineering and mathematics education outreach organization.
2019 Key Performance Results
2019 Total Direct Compensation
Mr. Smith received a base salary increase of 2.5% effective March 1, 2019, increasing his annual salary to $615,000. The AIP award of $540,000 represents 117% of his target opportunity and is based on Suncor's and Mr. Smith's performance. Mr. Smith's long term incentive grant value was $2,815,584, in the form of stock options and PSUs as indicated in the chart below. The actual value of the award will vary depending on Suncor's future share price and TSR performance relative to Suncor's peers.
|
|
|
Total Direct Compensation ($) | Value of Long Term Incentives (2017-2019) | |
|
|
|
42 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Looking Ahead to 2020:
Target AIP was increased from 75% to 80% of base salary for the executive vice president level, which includes the CFO position, as a result of the annual review of our executive compensation structure in 2019.
A 2.5% base salary increase budget was approved for executives in 2020 based on competitive benchmarking.
On February 5, 2020, the Board approved a grant of options, PSUs and RSUs to the NEOs effective February 18, 2020, as displayed in the table below, under the terms of the SOP, the PSU Plan and the RSU Plan. The exercise price of these options is $39.08 and the grant price of the PSUs and RSUs is $39.08.
Name | Options | PSUs | RSUs | ||||
|
|||||||
M.S. LITTLE | 414 231 | 108 752 | 54 376 | ||||
|
|||||||
A. COWAN | 138 889 | 36 464 | 18 232 | ||||
|
|||||||
M.R. MACSWEEN | 136 453 | 35 824 | 17 912 | ||||
|
|||||||
S.D.L. REYNISH | 136 453 | 35 824 | 17 912 | ||||
|
|||||||
K.P. SMITH | 138 889 | 36 464 | 18 232 | ||||
|
Executive Compensation Alignment with Shareholder Value
In an industry subject to commodity price cycles, Suncor continues to focus on long-term value growth and returns for shareholders. The following performance graph shows Suncor's cumulative TSR for the past five years against equity market benchmarks. For the measurement period, the aggregate realizable total direct compensation of our NEOs, as seen in the Realizable Pay graph on page 45, has been generally consistent with TSR. A substantial portion of NEO total direct compensation is linked to Suncor's share price and therefore is aligned with the interests of shareholders.
Performance Graph(1)(2)
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 43
CEO Realizable Pay. The aggregate five-year realizable pay chart shows the CEO's realizable total direct compensation compared to his pay opportunity at December 31, 2019 for the five-year period from 2015 to 2019. The realizable pay value is approximately 3% lower than the pay opportunity level. In contrast, Suncor's TSR over the same five-year period has outperformed nearly all of our peers.
The table below compares the grant date value of total direct compensation (pay opportunity), as reflected in the Summary Compensation Table, to the CEO's realizable total direct compensation for the period from 2015 to 2019. Over the same period, the current value of $100 invested in Suncor's common shares is $136, which exceeds the actual value earned and outstanding to Mr. Little for $100 awarded in total direct compensation of $97.
Year |
Total Direct
Compensation (Pay Opportunity)(1) ($000s) |
Realizable
Total Direct Compensation as at Dec. 31, 2019(2) ($000s) |
Performance Period From | To | |||||
|
|||||||||
2015 | 4 486 600 | 6 295 898 | Dec 31, 2014 | ||||||
|
|||||||||
2016 | 3 848 925 | 7 558 619 | Dec 31, 2015 | ||||||
|
|||||||||
2017 | 5 867 703 | 5 308 488 | Dec 31, 2016 | Dec 31, 2019 | |||||
|
|||||||||
2018 | 7 456 463 | 5 105 899 | Dec 31, 2017 | ||||||
|
|||||||||
2019 | 9 981 568 | 6 523 959 | Dec 31, 2018 | ||||||
|
|||||||||
2015-2019 | 31 641 259 | 30 792 863 | Dec 31, 2014 | ||||||
|
CEO Look Back. The HR&CC annually reviews a broader analysis of the total compensation earned and accruing to the CEO since his appointment and comparing it to the TSR during the same period. With the appointment of Mr. Little as President and CEO on May 2, 2019 there is minimal history to review.
In the most recent review of the former CEO, the HR&CC compared the total accrued compensation earned by Mr. Williams from his appointment in 2012 up to December 31, 2018 to both the absolute increase in market capitalization, and the relative increase in market capitalization versus the S&P/TSX Composite and the S&P/TSX Capped Energy indices over the same period, and found it to be reasonable.
NEO Realizable Pay. The pay opportunity and realizable total direct compensation for the NEOs over the period from 2015 to 2019 is shown in the chart below. For this five year period, the realizable pay value, which is a snapshot at December 31, 2019, for total direct compensation for the NEOs was approximately 5% higher than the pay opportunity, as determined in accordance with the methodology described in the footnotes for the Realizable Pay Total Direct Compensation chart below. The higher realizable pay value of total direct compensation for the NEOs for the measurement period is generally consistent with the trend of total return on investment indicated for Suncor in the TSR performance graph provided on page 43.
Suncor's strong operational performance during the five year period resulted in above target payouts under the AIP component of total direct compensation. The realizable value of total direct compensation demonstrates the
44 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
pay-for-performance design of Suncor's programs that reward TSR performance achieved relative to peer companies under the PSU Plan and Suncor's absolute share price performance over the applicable five year period.
Realizable Pay Total Direct Compensation in millions ($)(1)(2)(3)
Cost of Management. The following table includes the aggregate total direct compensation for the NEOs compared to Suncor's FFO for the years ended, and market capitalization as at, December 31, 2019 and 2018.
2019(1) | 2018 | ||||
|
|||||
Total direct compensation of all NEOs(2) | $25.9 | $34.2 | |||
|
|||||
Total direct compensation as a percentage (%) of FFO(3) for the year ended December 31 | 0.24% | 0.34% | |||
|
|||||
Total direct compensation as a percentage (%) of Suncor's market capitalization as at December 31 | 0.04% | 0.06% | |||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 45
COMPENSATION DISCLOSURE OF NAMED EXECUTIVE OFFICERS
Aggregate Equity Holdings. The following table provides the aggregate equity holdings of the NEOs for the years ended December 31, 2018 and 2019, indicating the net change during 2019 and the total value at risk as at December 31, 2019.
December 31, 2018 |
December 31, 2019 |
||||||||||||||||||||
|
|
||||||||||||||||||||
Name | Shares | DSUs(1)(2) | PSUs(1)(3) | Options | RSUs(1) | Shares | DSUs(1)(2) | PSUs(1)(3) | Options | RSUs(1) | |||||||||||
|
|||||||||||||||||||||
M.S. LITTLE | 55 744 | 56 285 | 112 945 | 1 345 600 | 0 | 70 852 | 91 951 | 150 824 | 1 884 300 | | |||||||||||
|
|||||||||||||||||||||
A. COWAN | 57 973 | 47 538 | 72 163 | 1 022 800 | 0 | 57 973 | 49 420 | 70 989 | 1 240 600 | | |||||||||||
|
|||||||||||||||||||||
M.R. MACSWEEN | 39 378 | 64 349 | 70 485 | 1 045 000 | 7 226 | 45 003 | 74 449 | 69 299 | 1 202 600 | 7 513 | |||||||||||
|
|||||||||||||||||||||
S.D.L. REYNISH | 16 707 | 57 700 | 70 485 | 501 666 | 7 226 | 19 654 | 74 974 | 69 299 | 714 266 | 7 513 | |||||||||||
|
|||||||||||||||||||||
K.P. SMITH | 30 546 | 20 737 | 71 336 | 1 100 000 | | 33 462 | 21 558 | 69 299 | 1 262 600 | | |||||||||||
|
Net change during 2019 |
|||||||||||
|
|||||||||||
Name | Shares | DSUs(1)(2) | PSUs(1) | Options | RSUs(1) | ||||||
|
|||||||||||
M.S. LITTLE | 15 108 | 35 666 | 37 879 | 538 700 | | ||||||
|
|||||||||||
A. COWAN | | 1 882 | (1 174 | ) | 217 800 | | |||||
|
|||||||||||
M.R. MACSWEEN | 5 625 | 10 100 | (1 186 | ) | 157 600 | 287 | |||||
|
|||||||||||
S.D.L. REYNISH | 2 947 | 17 274 | (1 186 | ) | 212 600 | 287 | |||||
|
|||||||||||
K.P. SMITH | 2 916 | 821 | (2 037 | ) | 162 600 | | |||||
|
Value at Risk |
|||||||||||||||
|
|||||||||||||||
Name |
Value of
Shares(4) ($) |
Value of
DSUs(4) ($) |
Value of
PSUs(4) ($) |
Value of
Options(5) ($) |
Value of
RSUs(4) ($) |
Total Value
at Risk ($) |
Multiple
of Salary (#) |
||||||||
|
|||||||||||||||
M.S. LITTLE | 3 015 461 | 3 913 468 | 6 419 089 | 5 365 750 | 0 | 18 713 768 | 15.6 | ||||||||
|
|||||||||||||||
A. COWAN | 2 467 330 | 2 103 317 | 3 021 313 | 3 725 700 | 0 | 11 317 660 | 17.4 | ||||||||
|
|||||||||||||||
M.R. MACSWEEN | 1 915 328 | 3 168 562 | 2 949 366 | 4 350 750 | 319 771 | 12 703 776 | 20.7 | ||||||||
|
|||||||||||||||
S.D.L. REYNISH | 836 474 | 3 190 898 | 2 949 366 | 1 969 629 | 319 771 | 9 266 138 | 15.1 | ||||||||
|
|||||||||||||||
K.P. SMITH | 1 424 142 | 917 534 | 2 949 366 | 5 045 600 | 0 | 10 336 642 | 16.8 | ||||||||
|
46 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Summary Compensation Table. The following table provides information concerning compensation paid to the NEOs for the years ended December 31, 2019, 2018 and 2017.
Name and Principal | Salary |
Share-
Based Awards(1) |
Option-
Based Awards(2) |
Non-equity incentive
plan compensation ($) |
Pension
Value(4) |
All Other
Compensation(5) |
Total
Compensation |
||||||||||||
Position | Year | ($) | ($) | ($) | Annual(3) | Long-Term | ($) | ($) | ($) | ||||||||||
|
|||||||||||||||||||
M.S. LITTLE | 2019 | 1 145 769 | 3 574 991 | 3 560 807 | 1 700 000 | | 1 651 100 | 86 017 | 11 718 684 | ||||||||||
|
|||||||||||||||||||
President and Chief | 2018 | 915 000 | 2 579 400 | 2 512 063 | 1 450 000 | | 2 996 300 | 68 700 | 10 521 463 | ||||||||||
|
|||||||||||||||||||
Executive Officer(6) | 2017 | 687 404 | 2 031 935 | 1 948 364 | 1 200 000 | | 4 837 500 | 51 682 | 10 756 885 | ||||||||||
|
|||||||||||||||||||
A. COWAN | 2019 | 647 115 | 1 444 706 | 1 439 658 | 560 000 | | 782 000 | 45 528 | 4 919 007 | ||||||||||
|
|||||||||||||||||||
Chief Financial Officer | 2018 | 633 115 | 1 444 464 | 1 406 755 | 675 000 | | 772 500 | 44 336 | 4 976 170 | ||||||||||
|
|||||||||||||||||||
2017 | 625 000 | 1 479 456 | 1 412 400 | 720 000 | | 627 800 | 46 875 | 4 911 531 | |||||||||||
|
|||||||||||||||||||
M.R. MACSWEEN | 2019 | 612 115 | 1 410 298 | 1 405 286 | 510 000 | | (36 600 | ) | 37 063 | 3 938 162 | |||||||||
|
|||||||||||||||||||
Executive Vice President, | 2018 | 592 461 | 1 410 072 | 1 373 261 | 655 000 | | 417 500 | 33 335 | 4 481 629 | ||||||||||
|
|||||||||||||||||||
Upstream | 2017 | 556 308 | 1 753 762 | 1 380 300 | 690 000 | | 695 800 | 32 757 | 5 108 927 | ||||||||||
|
|||||||||||||||||||
S.D.L. REYNISH | 2019 | 612 115 | 1 410 298 | 1 405 286 | 530 000 | | 702 700 | 45 024 | 4 705 423 | ||||||||||
|
|||||||||||||||||||
Executive Vice President, | 2018 | 594 364 | 1 410 072 | 1 373 261 | 650 000 | | 885 900 | 41 152 | 4 954 749 | ||||||||||
|
|||||||||||||||||||
Strategy & Operations | 2017 | 566 308 | 1 753 762 | 1 380 300 | 675 000 | | 728 500 | 34 418 | 5 138 288 | ||||||||||
Services | |||||||||||||||||||
|
|||||||||||||||||||
K.P. SMITH | 2019 | 612 115 | 1 410 298 | 1 405 286 | 540 000 | | 507 700 | 29 178 | 4 504 577 | ||||||||||
|
|||||||||||||||||||
Executive Vice President, | 2018 | 592 461 | 1 410 072 | 1 373 261 | 650 000 | | 1 021 400 | 30 169 | 5 077 363 | ||||||||||
|
|||||||||||||||||||
Downstream | 2017 | 554 462 | 1 479 456 | 1 412 400 | 675 000 | | 759 200 | 25 508 | 4 906 026 | ||||||||||
|
|||||||||||||||||||
S.W. WILLIAMS | 2019 | 771 538 | 4 999 913 | 3 179 770 | 1 000 000 | | (387 100 | ) | 51 144 | 9 615 265 | |||||||||
|
|||||||||||||||||||
Former Chief Executive | 2018 | 1 465 577 | 5 065 942 | 4 933 692 | 3 061 000 | | 100 800 | 162 396 | 14 789 407 | ||||||||||
|
|||||||||||||||||||
Officer(6) | 2017 | 1 415 769 | 5 077 224 | 4 847 100 | 3 189 000 | | 117 600 | 173 309 | 14 820 002 | ||||||||||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 47
Share-Based Awards and Option-Based Awards. The following table provides certain information about option-based awards and share-based awards outstanding for the NEOs as at December 31, 2019. For further details, including the exercise price and expiration date, of each option-based award held by the NEOs as at December 31, 2019, see Schedule A.
Option-Based Awards |
Share-Based Awards |
||||||||||
|
|
||||||||||
Name |
Aggregate
number of securities underlying unexercised options |
Aggregate
value of unexercised "in-the-money" options(1) ($) |
Aggregate
number of shares or units of shares that have not vested(2) |
Aggregate
market or payout value of share- based awards that have not vested(2)(3) ($) |
Aggregate
market or payout value of vested share-based awards not paid out or distributed(4) ($) |
||||||
|
|||||||||||
M.S. LITTLE | 1 884 300 | 5 365 750 | 150 824 | 6 419 089 | 7 194 102 | ||||||
|
|||||||||||
A. COWAN | 1 240 600 | 3 725 700 | 70 990 | 3 021 313 | 4 513 768 | ||||||
|
|||||||||||
M.R. MACSWEEN | 1 202 600 | 4 350 750 | 76 812 | 3 269 138 | 5 524 231 | ||||||
|
|||||||||||
S.D.L. REYNISH | 714 266 | 1 969 629 | 76 812 | 3 269 138 | 5 546 567 | ||||||
|
|||||||||||
K.P. SMITH | 1 262 600 | 5 045 600 | 69 299 | 2 949 367 | 3 327 985 | ||||||
|
|||||||||||
S.W. WILLIAMS | 4 190 000 | 16 000 400 | 247 354 | 10 527 369 | 10 342 487 | ||||||
|
48 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Incentive Plan Awards Value Vested or Earned During the Year. The following table provides the value of option-based awards on the vesting date, the value of share-based awards that vested during the year ended December 31, 2019, and the value of non-equity incentive plan compensation earned during the year ended December 31, 2019, for the NEOs.
Name |
Option-Based
awards Value vested during the year (as at vesting date)(1) ($) |
Share-Based
awards Value vested during the year(2)(3) ($) |
Non-equity incentive
plan compensation Value earned during the year(4) ($) |
||||
|
|||||||
M.S. LITTLE | 659 997 | 4 730 634 | 1 700 000 | ||||
|
|||||||
A. COWAN | 607 203 | 2 410 451 | 560 000 | ||||
|
|||||||
M.R. MACSWEEN | 633 600 | 2 683 168 | 510 000 | ||||
|
|||||||
S.D.L. REYNISH | 607 203 | 3 005 668 | 530 000 | ||||
|
|||||||
K.P. SMITH | 607 203 | 2 410 451 | 540 000 | ||||
|
|||||||
S.W. WILLIAMS | 2 098 800 | 8 272 228 | 1 000 000 | ||||
|
Option Exercises Value Realized During the Year. The following table provides the number of Suncor common shares acquired upon the exercise of options as well as the aggregate value realized upon the exercise of these options during the year ended December 31, 2019 for the NEOs.
Name |
Common Shares Acquired
on Option Exercise |
Aggregate Value
Realized(1) ($) |
|||
|
|||||
M.S. LITTLE | | | |||
|
|||||
A. COWAN | | | |||
|
|||||
M.R. MACSWEEN | 55 000 | 503 429 | |||
|
|||||
S.D.L. REYNISH | | | |||
|
|||||
K.P. SMITH | 50 000 | 415 668 | |||
|
|||||
S.W. WILLIAMS | 813 000 | 7 971 973 | |||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 49
Suncor Retirement Arrangements. The Suncor Energy Pension Plan is a registered pension plan that provides retirement income to Suncor employees and former employees, including Messrs. Little, Williams, Cowan, MacSween, Reynish and Smith. Retirement income is based on a defined contribution account balance, or depending upon the employees' eligibility, based on a combination of a defined benefit pension payment, including an employee-paid benefit feature, and a defined contribution account balance. All of the NEOs participate in the combination provision of the plan.
In addition to the pension provided under the Suncor Energy Pension Plan, certain executive officers may receive supplemental retirement payments under the terms of the SERP. Under the terms of the SERP, any new participants must be approved by the HR&CC. Nine persons who are currently members of Suncor senior executive management were participants in the SERP as at December 31, 2019.
The SERP is a non-registered supplemental retirement arrangement designed to attract mid-career executives with a competitive career based pension that features an up-front accrual. This attraction element is balanced by features that limit the executive pension by: (i) requiring that an executive provide five years of service to be entitled to SERP benefits, which is five years more than the service required under the Suncor Energy Pension Plan; (ii) limiting service to Suncor related experience only, both for vesting and benefit accrual purposes; (iii) limiting the executive's total pension to 50%, unless there is total service greater than 25 years, in which case the maximum is 70% of executive remuneration; and (iv) limiting executive remuneration to a maximum of two times base salary (base salary plus annual incentive target bonus of up to 100% of base salary). All of the NEOs are members of the SERP. Additional details of the SERP follow.
50 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Defined Benefit Plans. The following table summarizes the retirement income of each of the NEOs under the defined benefit provisions of Suncor's pension arrangements.
Annual Benefits
Payable(2) |
|||||||||||||||
|
|||||||||||||||
Name |
Number of
years credited service(1) |
As at
December 31, 2019 ($) |
At age 65
($) |
Defined
Benefit Obligation as at January 1, 2019(3) ($) |
Compensatory
change(4) ($) |
Non-
compensatory change(5) ($) |
Defined
Benefit Obligation as at December 31, 2019(3) ($) |
||||||||
|
|||||||||||||||
M.S. LITTLE | 11 | 897 861 | 896 967 | 15 528 264 | 1 649 181 | 3 585 473 | 20 762 917 | ||||||||
|
|||||||||||||||
A. COWAN | 5 | 300 497 | 552 359 | 3 704 597 | 780 081 | 949 443 | 5 434 121 | ||||||||
|
|||||||||||||||
M.R. MACSWEEN | 24 | 504 155 | 686 800 | 7 470 162 | (38 519 | ) | 1 760 499 | 9 192 142 | |||||||
|
|||||||||||||||
S.D.L. REYNISH | 8 | 410 668 | 513 946 | 5 584 805 | 700 781 | 1 001 934 | 7 287 519 | ||||||||
|
|||||||||||||||
K.P. SMITH | 19 | 504 699 | 651 679 | 6 480 108 | 502 902 | 1 812 599 | 8 795 609 | ||||||||
|
|||||||||||||||
S.W. WILLIAMS | 17 | 1 406 512 | (6) | | 22 315 657 | (389 019 | ) | 4 976 219 | 26 902 856 | ||||||
|
Defined Contribution Plans. Under the combination provision of the Suncor Energy Pension Plan, applicable to all of the NEOs, Suncor makes contributions to the defined contribution accounts for all employees of 1% of basic earnings, plus up to an additional 1.5% of basic earnings on a 50% matching basis. All contributions to the defined contribution accounts are subject to maximum levels.
Under the Suncor Energy Pension Plan, employees may invest the balance of their accounts in a broad range of investment funds made available by the plan; an employee's investment return is based upon the market returns earned by each fund in which the employee has chosen to invest his or her contributions. At retirement, employees may transfer the balance of their accounts to a pension account as prescribed by law or the corporation may purchase an annuity on behalf of the employee.
The following table summarizes the defined contributions accounts of each of the NEOs.
Name |
Accumulated value
as at January 1, 2019 ($) |
Compensatory
($) |
Accumulated value
as at December 31, 2019 ($) |
||||
|
|||||||
M.S. LITTLE | 42 602 | 1 919 | 50 726 | ||||
|
|||||||
A. COWAN | 28 032 | 1 919 | 35 827 | ||||
|
|||||||
M.R. MACSWEEN | 229 647 | 1 919 | 278 015 | ||||
|
|||||||
S.D.L. REYNISH | 48 247 | 1 919 | 56 228 | ||||
|
|||||||
K.P. SMITH | 203 112 | 4 798 | 253 382 | ||||
|
|||||||
S.W. WILLIAMS | 37 873 | 1 919 | (1) | ||||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 51
TERMINATION AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Termination Agreements
Suncor has employment termination agreements with each of the NEOs.
If NEOs are terminated by Suncor, other than for just cause, or resign within 120 days following a constructive dismissal event (each a Termination Event), NEOs are compensated based on their remuneration.
Notice Period Provisions. For the NEOs, should a Termination Event occur, the termination agreements provide a 24-month notice period. Cash payments are provided (i) for base salary and annual incentive during the notice period, (ii) for SOP options which, but for the Termination Event, would have become exercisable during the notice period unless the NEO is eligible for retirement, in which case, under the terms of the SOP, unvested options would vest immediately and the option term would be reduced to the earlier of three years or expiry, and (iii) for PSUs and RSUs (based on a performance factor calculated as at the date of termination, in the case of PSUs) unless the NEO is eligible for retirement, in which case the PSUs and RSUs would be held until the end of the performance or maturity period (in the case of RSUs) and paid per the terms of the PSU and RSU plans, and for an executive not eligible for retirement, the PSUs and RSUs are pro-rated for the period of employment during the performance or maturity period. The NEOs receive credited service under the SERP for the notice period.
Double Trigger Provisions and Change of Control. Suncor's termination agreements with the NEOs are "double trigger", and as such provide for payments based only upon involuntary termination or constructive dismissal following a change of control.
Under the SOP, the PSU Plan and the RSU Plan, a change of control generally includes a transaction or series of transactions whereby any person or combination of persons, acting jointly or in concert, beneficially owns, directly or indirectly, or exercises control or direction over, 35% or more of the outstanding voting securities of Suncor or its successor.
NEOs with less than five years of executive service may become eligible to receive supplemental retirement payments under the SERP in the event of a change of control of Suncor, after the occurrence of certain specified corporate changes, or for certain executives, after a substantial decrease in such executive's responsibilities. In addition, Suncor has entered into certain trust arrangements for non-U.S. taxpayers to secure its obligations under the SERP upon a change in control of Suncor.
Governance. The HR&CC annually reviews the status of termination agreements and change of control arrangements for Suncor's senior executives and periodically reviews current governance trends and market practices. Based on the HR&CC's review of governance trends and market practices, amendments may be made to agreement terms for new participants.
Looking Ahead to 2020:
Beginning with 2020 awards, the treatment of LTI upon retirement changed. Retirement before age 60 will result in awards granted during the year of retirement being pro-rated based on the portion of the year worked.
52 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Termination and Change of Control Benefits
The table below shows the incremental amounts to which the NEOs would be entitled under the circumstance of a termination and/or change of control on December 31, 2019.
Type of Termination(1) |
Base
Salary ($) |
Short-Term
Incentive(2) ($) |
Long-Term
Incentive(3)(4) ($) |
Pension(5)
($) |
Total Payout
($) |
||||||
|
|||||||||||
M.S. LITTLE | |||||||||||
|
|||||||||||
Resignation(6) | | | 46 816 | | 46 816 | ||||||
|
|||||||||||
Retirement | | | 46 816 | | 46 816 | ||||||
|
|||||||||||
Termination (Without Cause)(7) | 2 400 000 | 3 000 000 | 46 816 | 4 818 660 | 10 265 476 | ||||||
|
|||||||||||
Change of Control(8) | 2 400 000 | 3 000 000 | 46 816 | 4 818 660 | 10 265 476 | ||||||
|
|||||||||||
Change of Control(9) | | | 46 816 | | 46 816 | ||||||
|
|||||||||||
A. COWAN | |||||||||||
|
|||||||||||
Resignation(6) | | | 38 866 | | 38 866 | ||||||
|
|||||||||||
Retirement | | | 38 866 | | 38 866 | ||||||
|
|||||||||||
Termination (Without Cause)(7) | 1 300 000 | 975 000 | 38 866 | 1 918 982 | 4 232 848 | ||||||
|
|||||||||||
Change of Control(8) | 1 300 000 | 975 000 | 38 866 | 1 918 982 | 4 232 848 | ||||||
|
|||||||||||
Change of Control(9) | | | 38 866 | | 38 866 | ||||||
|
|||||||||||
M.R. MACSWEEN | |||||||||||
|
|||||||||||
Resignation | | | | | | ||||||
|
|||||||||||
Retirement(10) | | | | | | ||||||
|
|||||||||||
Termination (Without Cause)(7) | 1 230 000 | 922 500 | 4 391 607 | 795 671 | 7 339 778 | ||||||
|
|||||||||||
Change of Control(8) | 1 230 000 | 922 500 | 4 391 607 | 795 671 | 7 339 778 | ||||||
|
|||||||||||
Change of Control(9) | | | | | |||||||
|
|||||||||||
S.D.L. REYNISH | |||||||||||
|
|||||||||||
Resignation(6) | | | 37 984 | | 37 984 | ||||||
|
|||||||||||
Retirement | | | 37 984 | | 37 984 | ||||||
|
|||||||||||
Termination (Without Cause)(7) | 1 230 000 | 922 500 | 37 984 | 2 339 325 | 4 529 809 | ||||||
|
|||||||||||
Change of Control(8) | 1 230 000 | 922 500 | 37 984 | 2 339 325 | 4 529 809 | ||||||
|
|||||||||||
Change of Control(9) | | | 37 984 | | 37 984 | ||||||
|
|||||||||||
K.P. SMITH | |||||||||||
|
|||||||||||
Resignation | | | | | | ||||||
|
|||||||||||
Retirement(10) | | | | | | ||||||
|
|||||||||||
Termination (Without Cause)(7) | 1 230 000 | 922 500 | 38 866 | 619 830 | 2 811 196 | ||||||
|
|||||||||||
Change of Control(8) | 1 230 000 | 922 500 | 2 216 017 | 619 830 | 4 988 347 | ||||||
|
|||||||||||
Change of Control(9) | | | | | | ||||||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 53
noted above, and the incremental value of PSUs and RSUs held, pro-rated for active period of time in plan, that vest at termination, calculated as per the applicable Plan. PSUs are based on the performance level at December 31, 2019.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
No current or proposed director, executive officer or employee of Suncor, or any former director, executive officer or employee of Suncor, or any associate of any of the foregoing, is, or has been at any time during 2019, excluding routine indebtedness, indebted to Suncor or its subsidiaries, either in connection with the purchase of Suncor securities or otherwise.
SUMMARY OF INCENTIVE PLANS
The following table sets forth information in respect of securities authorized for issuance under our equity compensation plans as at December 31, 2019.
Plan Category |
Number of securities to
be issued upon exercise of outstanding options (a) |
Percentage
of issued and outstanding |
Weighted-average
exercise price of outstanding options ($) (b) |
Number of securities remaining
available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
Percentage
of issued and outstanding |
|||||
|
||||||||||
Equity compensation plans approved by security holders | 33 881 748 | 2.21% | 39.70 | 14 294 593 | 0.93% | |||||
|
||||||||||
Total | 33 881 748 | 2.21% | 39.70 | 14 294 593 | 0.93% | |||||
|
The numbers shown beside "Equity compensation plans approved by security holders" refer to options granted under the SOP. In 2019, there were 2,687,885 options exercised pursuant to Suncor's incentive plans.
Suncor Energy Stock Option Plan. The SOP provides for the grant of stock options to purchase common shares, as well as the grant of stock appreciation rights (SARs) to eligible employees of Suncor. Eligible employees are persons who provide services to Suncor or any of its subsidiaries or partnerships and for whom we are required by law to make income source withholdings. The maximum number of common shares issuable pursuant to the SOP is 48,176,341 common shares (or 3.1% of the total issued and outstanding common shares on December 31, 2019).
Options entitle the holder to purchase common shares at a price not less than the Market Value (as defined below) of the shares on the date of grant. Where SARs are granted on a stand-alone basis, each SAR entitles the holder to receive, upon exercise, payment equal to the difference between the Market Value of a common share on exercise and the Market Value of a common share on the date of grant. The options and SARs generally have a term of seven years with a vesting schedule of one third per year over three years. "Market Value" means the simple average of the daily high and low prices at which common shares were traded in one or more board lots on the TSX over the five trading days immediately preceding the date of grant or exercise date, as the case may be. The exercise price of each option granted cannot be less than the fair market value of a common share at the time of grant.
Due to legislative changes in 2010 under the Income Tax Act (Canada), Suncor no longer grants SARs or tandem SARs to Canadian employees.
54 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Performance Share Unit Plan. PSUs form a minimum of 50% of the equity component of total direct compensation for executives. A PSU award may pay out based on a vesting level between 0% and 200% contingent upon Suncor's performance over a three-year period. PSUs provide for notional dividend re-investment.
The selection of peer group companies for a PSU grant is based on a number of criteria including size (revenue and market capitalization or enterprise value), industry and business scope (integrated and exploration and production companies), oil weighting, peers of peers (the companies most often used as peer companies) and stock behavior and volatility. The selection criteria are reviewed periodically and approved by the HR&CC. The PSU peer group is reviewed annually for new grants, adjusted as appropriate and approved by the HR&CC.
2017 and 2018 PSU peer group:
2019 PSU peer group:
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 55
Vesting of PSU awards is determined based on Suncor's TSR relative to peer companies and its resulting company grouping rank as displayed in the table below. 70% of the vesting level for 2019 PSUs will be determined based on Suncor's relative TSR performance and the remaining 30% of the vesting level will be based on Suncor's ROCE performance relative to targets.
Performance Factor
(% of PSUs vesting) |
Company TSR Rank vs.
2017-2018 Peers |
Company TSR Rank vs.
2019 Peers |
|||
|
|||||
200% | 1-3 | 1-3 | |||
|
|||||
175% | 4-5 | 4-5 | |||
|
|||||
150% | 6-7 | 6-7 | |||
|
|||||
100% | 8-9 | 8 | |||
|
|||||
75% | 10-11 | 9-10 | |||
|
|||||
50% | 12-13 | 11-12 | |||
|
|||||
0% | 14 and below | 13 and below | |||
|
Following a robust process, at the end of the three-year PSU grant performance period, TSR is measured, company grouping rank and performance factor are determined (including ROCE performance beginning with 2019 awards) and, if applicable, a payout is made to participants in cash. The final payout value is based on the number of vested PSUs (including dividend equivalents) multiplied by the market price of a common share, as calculated under the PSU Plan provisions.
Since inception in 2004, 29% of PSU grant vesting levels have been below target, including three which were at 0%, 14% were at target and 57% have been above target based on relative TSR performance compared to the peer group. The last five PSU grant vesting levels have been above target, reflecting Suncor's consistently strong TSR relative to peer companies.
PSUs do not count towards the assessment of executive share ownership levels for purposes of the share ownership guidelines. Upon payout, executives must use the cash payout, or other cash resources, to purchase common shares on the open market toward satisfying any unmet share ownership guidelines at the compliance date.
Restricted Share Unit Plan. The RSU Plan was established in January 2009 by the HR&CC. Under the plan, RSUs are granted to middle management and above as part of their competitive compensation and may be granted on a targeted basis and to support attraction and retention of individuals with key skills at the professional, middle management and executive levels. As RSU value is tied directly to Suncor's share price and dividends, RSUs serve to further align participants with shareholder interests.
Each RSU is a right to a cash payment, equivalent in value to one common share based on the value of Suncor's average common share price for the last 20 trading days of the restricted period (60 trading days beginning with 2020 RSU grants). Grants under the RSU Plan are administered by the HR&CC or its delegate. RSUs do not count towards the assessment of executive share ownership levels for purposes of the share ownership guidelines. The RSU Plan provides for notional dividend reinvestment.
Closed Plans. The following table provides the key terms of the Suncor equity-based plans that are closed to new grants.
Year
Approved |
Plan Name(1) |
Award
Type |
Number Outstanding
at December 31, 2019 |
Vesting
Schedule |
Expiry(2) |
Performance
Conditions |
|||||||
|
|||||||||||||
2000 | Petro-Canada Deferred Stock Unit Plans (Eligible Employees of Petro-Canada)(3) | DSU | 21 | | | No | |||||||
|
|||||||||||||
2004 | Petro-Canada Deferred Stock Unit Plan (Non-Employee Directors of Petro-Canada)(4) | DSU | 18 035 | | | No | |||||||
|
Aggregate Potential Dilution. The aggregate potential dilution of all issued, outstanding and authorized options under the SOP was 3.14% at December 31, 2019. Suncor has no other equity compensation plans involving newly issued securities.
56 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Burn Rate. In 2019 there were 7,756,000 stock options granted under the SOP which resulted in a burn rate of 0.50%. In 2018 there were 7,231,080 stock options granted under the SOP which resulted in a burn rate of 0.45%, and in 2017 there were 7,400,900 stock options granted under the SOP which resulted in a burn rate of 0.45%.
Additional Terms of Equity Compensation Plans.
Issuance of Shares under Plans
Amendment
Impact of Change of Control, Reorganization or Other Events Affecting the Corporation
Termination of Employment
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 57
The Board approved the adoption of a claw back policy for Suncor in 2012. Under the claw back policy, in situations where: (i) the amount of incentive compensation received by an executive officer or former executive officer to whom the policy applies was calculated based or contingent upon the achievement of certain financial results that were subsequently the subject of, or affected by, a material restatement of all or a portion of the corporation's financial statements; (ii) the executive officer or former executive officer engaged in intentional misconduct or fraud that caused, or potentially caused, the need for the restatement, as admitted by the executive officer or, in the absence of such admission, as determined by a court of competent jurisdiction in a final judgment that cannot be appealed; and (iii) the incentive compensation payment received would have been lower had the financial results been properly reported, then the Board may, to the extent permitted by applicable laws and to the extent it determines that it is in the corporation's best interest to do so, require reimbursement of the amount by which the after-tax incentive compensation received by such executive officer under the corporation's annual and long-term incentive plans exceeded that which the executive officer would have received had the financial statements not been materially restated.
DIRECTORS' AND OFFICERS' INSURANCE
Policies purchased by Suncor provide insurance for the directors and officers of Suncor against liability for any actual or alleged error, misstatement, misleading statement, act, omission, neglect or breach of duty in discharging their duties, individually or collectively. If Suncor is unable by law to indemnify individual directors and officers, including in an event of insolvency, there is no deductible and a US$200 million limit applies. In 2019, Suncor paid premiums of approximately US$1.0 million for directors and officers insurance for the 12-month period ending July 1, 2020.
ADVANCE NOTICE BY-LAW
In 2015, shareholders confirmed Amended and Restated By-Law No. 2, A By-Law Relating to Advance Notice of Nominations of Directors of the corporation (By-Law No. 2), which establishes a framework for advance notice of nominations of persons for election to the Board. By-Law No. 2 sets deadlines for a certain number of days before a shareholders' meeting for a shareholder to notify the corporation of his, her or its intention to nominate one or more directors, and explains the information that must be included with the notice for it to be valid. By-Law No. 2 applies at an annual meeting of shareholders or a special meeting of shareholders that was called to elect directors (whether or not also called for other purposes), and may be waived by the Board. It does not affect the ability of shareholders to requisition a meeting or make a proposal under the Canada Business Corporations Act.
In the case of an annual meeting of shareholders, notice must be given to the corporation not less than 30 days prior to the date of the meeting; provided, however, that if the meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the meeting was made, notice shall be made not later than the close of business on the tenth day following such public announcement. In the case of a special meeting (which is not also an annual meeting) of shareholders, notice must be given not later than the close of business on the fifteenth day following the date on which the first public announcement of the date of the meeting was made. In the case of an annual meeting of shareholders or a special meeting of shareholders called for the purpose of electing directors (whether or not also called for other purposes) where notice and access is used for delivery of proxy related materials, notice must be given not less than 40 days prior to the date of the meeting (but in any event, not prior to the date on which the first public announcement of the date of the meeting was made); provided, however, that if the meeting is to be held on a date that is less than 50 days after the date of such public announcement, notice shall be made, in the case of an annual meeting of shareholders, not later than the close of business on the tenth day following the date on which the first public announcement of the date of the meeting was made and, in the case of a special meeting of shareholders, not later than the close of business on the fifteenth day following the date of such public announcement. Shareholders should consult the full text of By-Law No. 2, which is available on Suncor's website at www.suncor.com and has been filed under the corporation's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
As at the date of this management proxy circular, the corporation had not received any additional director nominations.
58 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
The Board is committed to maintaining high standards of corporate governance, and regularly reviews and updates its corporate governance systems in light of changing practices, expectations and legal requirements.
Suncor is a Canadian reporting issuer. Our common shares are listed on both the TSX and the New York Stock Exchange (NYSE). Accordingly, our corporate governance practices reflect applicable rules and guidelines adopted by the Canadian Securities Administrators (the Canadian Requirements) and the SEC, including applicable rules adopted by the SEC to give effect to the provisions of the Sarbanes-Oxley Act of 2002 (collectively, the SEC Requirements). NYSE corporate governance requirements are generally not applicable to non-U.S. companies; however, Suncor has reviewed its practices against the requirements of
the NYSE applicable to U.S. domestic companies (NYSE Standards). Based on that review, Suncor's corporate governance practices in 2018 and 2019 did not differ from the NYSE Standards in any significant respect, with the exceptions described in Schedule B under the heading, "Compliance with NYSE Standards".
Suncor's Statement of Corporate Governance Practices (Statement) this year is based on the Canadian Requirements, as set out in National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices. This Statement has been approved by the Board, on the recommendation of its Governance Committee. Suncor's Statement can be found in Schedule B.
ADDITIONAL INFORMATION
Additional information relating to Suncor, including financial information, is provided in Suncor's audited consolidated financial statements for the year ended December 31, 2019 and in its MD&A, which are included in our 2019 Annual Report. Copies of these documents are available without
charge from Suncor at 150 6th Avenue S.W., Calgary, Alberta T2P 3E3, by calling 1-800-558-9071, or by e-mail request to info@suncor.com, or by referring to the company's profile on SEDAR at www.sedar.com or EDGAR at www.sec.gov.
ADVISORIES
This management proxy circular and the schedules hereto contain certain forward-looking statements and forward-looking information (collectively, forward-looking statements) within the meaning of applicable Canadian and U.S. securities laws and other information based on Suncor's current expectations, estimates, projections and assumptions that were made by the corporation in light of information available at the time the statement was made and consider Suncor's experience and its perception of historical trends, including expectations and assumptions concerning: the accuracy of reserves and resources estimates; commodity prices and interest and foreign exchange rates; the performance of assets and equipment; capital efficiencies and cost savings; applicable laws and government policies; future production rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour, services and infrastructure; the satisfaction by third parties of their obligations to Suncor; the development and execution of projects; and the receipt, in a timely manner, of regulatory and third-party approvals. All statements and information that address expectations or projections about the future, and statements and information about Suncor's strategy for growth, expected and future expenditures or investment decisions, commodity prices, costs, schedules, production volumes, operating and financial results, future financing and capital activities, and
the expected impact of future commitments are forward-looking statements. Some of the forward-looking statements and information may be identified by words like "expects", "anticipates", "will", "estimates", "plans", "scheduled", "intends", "believes", "projects", "indicates", "could", "focus", "vision", "goal", "outlook", "proposed", "target", "objective", "continue", "should", "may", "potential", "future", "opportunity", "would", "priority" and similar expressions.
Forward-looking statements in this management proxy circular and the schedules hereto include references to: the business of and procedure for the meeting; the composition of the Board following the meeting; the expectation that the application of digital technologies to improve business performance through the acceleration of operational excellence will help Suncor achieve world-class performance, generate value, drive and enhance its competitive advantage, and create the workplace of the future; the belief that Suncor's initiatives will contribute to the success of Suncor 4.0 and the corporation's purpose; expectations about Suncor's coke-fired boiler replacement program, including the expectation that it will reduce emissions and costs within Suncor's operations, allow the corporation to export lower-carbon energy to Alberta's electricity grid, reduce greenhouse gas emissions by approximately 2.5 million tons per year and that the project demonstrates Suncor's ongoing commitment to energy development that
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 59
considers environmental, social and economic factors; the belief that Suncor's integrated model helps minimize the impact of changing oil prices; Suncor's commitment to ensuring that its executive compensation continues to align with its shareholders' interests and supports the corporation's competitiveness and future success; the belief that Suncor will continue to advance its efforts related to ES&G topics and will work closely with key shareholders to help ensure it continues to advance the alignment of its executive compensation; the belief that Suncor will continue to deliver strong and sustainable performance going forward; the belief that identifying future opportunities will help achieve Suncor's annual $2 billion free funds flow target by 2023; the expectation that continued implementation of AHS at the Fort Hills mine, solvent injection pilots for in situ developments and continued implementation of PASS technology will help enable Suncor's regional tailings plans; the expectation that driving safety improvements throughout the business will continue in 2020; management's expectation that none of the nominees for director will be unable to serve as director; the intended aims of compensation for directors and NEOs; commitment of the HR&CC to ensuring that senior executive compensation is aligned with shareholders' interests and supports Suncor's competitiveness and future success; the HR&CC's belief that there is no excessive pay disparity between Suncor's CEO and market pay, given Suncor's relative size and performance versus peers; Suncor's belief that the key executive compensation governance practices are consistent with best practices, support Suncor's business objectives and align with shareholder interests; estimated values of compensation components and those of the Suncor Compensation Peers; that Suncor's compensation policies and programs do not encourage excessive risk that could have a material adverse effect on Suncor; the HR&CC's conclusion that it does not believe that there are any identified risks arising from the corporation's compensation policies and practices that are reasonably likely to have a material adverse impact on the corporation; Suncor's belief that it provides the right balance in its overall rewards program to attract, engage and retain talented, capable executives; Suncor's belief that FFO and ROCE is an important indicator of the corporation's financial strength and profitability; the expectation that approximately 40% of the business unit component of AIP is driven by, or is expected to contribute to improvement in Suncor's safety, environmental, and/or social performance; statements surrounding Suncor's $2 billion free funds flow target, including the steps Suncor will take to achieve it; statements about the proposed interconnecting pipelines between Syncrude's Mildred Lake site and Suncor's Oil Sands Base Plant; Suncor's belief that a diversity of backgrounds, opinions and perspectives and a culture of inclusion helps to create a healthy and dynamic workplace which improves overall business performance; the belief that the most effective way to achieve Suncor's goal of
increasing the representation of women in leadership roles at all levels of the organization is to identify high-potential women within the corporation and work with them to ensure they develop the skills, acquire the experience and have the opportunities necessary to become effective leaders; the belief that the most effective way to achieve a goal of increasing diversity at all levels of leadership is to work to achieve an inclusive and respectful workplace for all; references to Suncor's social goal and the strategies to achieve such goal; the anticipated effects of Suncor's corporate governance practices and those of the Board of Directors; the anticipated timing of the retirement of directors from the Board; and Suncor's belief in diversity amongst Board members and its workforce and plans with respect to diversity.
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Suncor. Suncor's actual results may differ materially from those expressed or implied by its forward-looking statements, so readers are cautioned not to place undue reliance on them.
Risks, uncertainties and other factors that could influence the financial and operating performance of all of Suncor's operating segments and activities include, but are not limited to, changes in general economic, market and business conditions, such as commodity prices, interest rates and currency exchange rates; fluctuations in supply and demand for Suncor's products; the successful and timely implementation of capital projects, including growth projects and regulatory projects; risks associated with the development and execution of Suncor's projects and the commissioning and integration of new facilities; the possibility that completed maintenance activities may not improve operational performance or the output of related facilities; the risk that projects and initiatives intended to achieve cash flow growth and/or reductions in operating costs may not achieve the expected results in the time anticipated or at all; competitive actions of other companies, including increased competition from other oil and gas companies or from companies that provide alternative sources of energy; labour and material shortages; actions by government authorities, including the imposition or reassessment of, or changes to, taxes, fees, royalties, duties, tariffs, quotas and other government-imposed compliance costs and mandatory production curtailment orders and changes thereto; changes to laws and government policies that could impact the corporation's business, including environmental (including climate change), royalty and tax laws and policies; the ability and willingness of parties with whom Suncor has material relationships to perform their obligations to us; the unavailability of, or outages to, third-party infrastructure that could cause disruptions to production or prevent the corporation from being able to
60 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
transport its products; the occurrence of a protracted operational outage, a major safety or environmental incident, or unexpected events such as fires (including forest fires), equipment failures and other similar events affecting Suncor or other parties whose operations or assets directly or indirectly affect Suncor; the potential for security breaches of Suncor's information technology and infrastructure by malicious persons or entities, and the unavailability or failure of such systems to perform as anticipated as a result of such breaches; security threats and terrorist or activist activities; the risk that competing business objectives may exceed Suncor's capacity to adopt and implement change; risks and uncertainties associated with obtaining regulatory, third-party and stakeholder approvals outside of Suncor's control for the corporation's operations, projects, initiatives and exploration and development activities and the satisfaction of any conditions to approvals; the potential for disruptions to operations and construction projects as a result of Suncor's relationships with labour unions that represent employees at the corporation's facilities; our ability to find new oil and gas reserves that can be developed economically; the accuracy of Suncor's reserves, resources and future production estimates; market instability affecting Suncor's ability to borrow in the capital debt markets at acceptable rates or to issue other securities at acceptable prices; maintaining an optimal debt to cash flow ratio; the success of the corporation's risk management activities using derivatives and other financial instruments; the cost of compliance with current and future environmental laws, including climate change laws; risks relating to increased activism and public opposition to fossil fuels and oil sands; risks and uncertainties associated with closing a transaction for the purchase or sale of a business, asset or oil and gas property, including estimates of the final consideration to be paid or received; the ability of counterparties to comply with their obligations in a timely manner; risks associated with joint arrangements in which the corporation has an interest; risks associated with land claims and Aboriginal consultation requirements; the risk that the corporation may be subject to litigation; the impact of technology and risks associated with developing and implementing new technologies; and the accuracy of cost estimates, some of which are provided at the conceptual or other preliminary stage of projects and prior to commencement or conception of the detailed engineering that is needed to reduce the margin of error and increase the level of accuracy. The foregoing important factors are not exhaustive.
Many of these risk factors and other assumptions related to Suncor's forward-looking statements are discussed in further detail in Suncor's AIF, its MD&A, Form 40-F and other documents it files from time to time with securities regulatory authorities. Copies of these documents and Suncor's audited consolidated financial statements for the year ended December 31, 2019 are available without charge from Suncor at 150 6th Avenue S.W., Calgary, Alberta T2P 3E3, by calling 1-800-558-9071, or by email request to info@suncor.com or by referring to the corporation's profile on SEDAR at www.sedar.com or EDGAR at www.sec.gov. The forward-looking statements contained in this management proxy circular and the schedules hereto are made as of the date hereof. Except as required by applicable securities laws, we assume no obligation to update publicly or otherwise revise any forward-looking statements or the foregoing risks and assumptions affecting such forward-looking statements, whether as a result of new information, future events or otherwise.
Financial information in this management proxy circular is reported in Canadian dollars, unless otherwise noted, and is provided in Suncor's audited consolidated financial statements for the year ended December 31, 2019 and the MD&A, which are included in our 2019 Annual Report. Production volumes are presented on a working-interest basis, before royalties, unless otherwise noted. Certain financial measures in this management proxy circular namely operating earnings, ROCE, free funds flow and FFO are not prescribed by Canadian GAAP. Operating earnings is defined in the Advisories Non-GAAP Financial Measures section of the MD&A and reconciled to the most directly comparable GAAP measure in the Financial Information section of the MD&A. ROCE, free funds flow and FFO are defined and reconciled, as applicable, to the most directly comparable GAAP measures in the Advisories Non-GAAP Financial Measures section of the MD&A. These non-GAAP financial measures are included because management uses this information to analyze business performance, leverage and liquidity. These non-GAAP financial measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. 61
SCHEDULE A: NAMED EXECUTIVE OFFICERS' OUTSTANDING OPTION-BASED AWARDS
AND GRANT DATE FAIR VALUES FOR SHARE-BASED AWARDS
The following table provides details of options held by the NEOs as at December 31, 2019. Details of options granted to NEOs subsequent to December 31, 2019 are included in the "Compensation Discussion and Analysis" section of the management proxy circular.
Option-Based Awards | |||||||||||
|
|||||||||||
Name | Grant Date |
Number of
securities underlying unexercised options(1) |
Option
exercise price ($) |
Option
expiration date(2) |
Value of
unexercised "in-the- money" options(3) ($) |
||||||
|
|||||||||||
M.S. LITTLE | Feb. 13, 2014 | 210 000 | 36.04 | Feb. 13, 2021 | 1 369 200 | ||||||
|
|||||||||||
President and Chief Executive | Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | 768 600 | ||||||
|
|||||||||||
Officer(4) | Feb. 15, 2016 | 250 000 | 30.21 | Feb. 15, 2023 | 3 087 500 | ||||||
|
|||||||||||
Feb. 20, 2017 | 265 000 | 42.03 | Feb. 20, 2024 | 140 450 | |||||||
|
|||||||||||
Dec. 11, 2017 | 35 600 | 43.99 | Dec. 11, 2024 | | |||||||
|
|||||||||||
Feb. 22, 2018 | 375 000 | 42.99 | Feb. 22, 2025 | | |||||||
|
|||||||||||
Feb. 15, 2019 | 538 700 | 43.01 | Feb. 15, 2026 | | |||||||
|
|||||||||||
A. COWAN | Aug. 12, 2014 | 152 800 | 43.00 | Aug. 12, 2021 | | ||||||
|
|||||||||||
Chief Financial Officer | Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | 768 600 | ||||||
|
|||||||||||
Feb. 15, 2016 | 230 000 | 30.21 | Feb. 15, 2023 | 2 840 500 | |||||||
|
|||||||||||
Feb. 20, 2017 | 220 000 | 42.03 | Feb. 20, 2024 | 116 600 | |||||||
|
|||||||||||
Feb. 22, 2018 | 210 000 | 42.99 | Feb. 22, 2025 | | |||||||
|
|||||||||||
Feb. 15, 2019 | 217 800 | 43.01 | Feb. 15, 2026 | | |||||||
|
|||||||||||
M.R. MACSWEEN | Feb. 15, 2013 | 20 000 | 32.46 | Feb. 15, 2020 | 202 000 | ||||||
|
|||||||||||
Executive Vice President, | Feb. 13, 2014 | 160 000 | 36.04 | Feb. 13, 2021 | 1 043 200 | ||||||
|
|||||||||||
Upstream | Feb. 16, 2015 | 210 000 | 38.90 | Feb. 16, 2022 | 768 600 | ||||||
|
|||||||||||
Feb. 15, 2016 | 180 000 | 30.21 | Feb. 15, 2023 | 2 223 000 | |||||||
|
|||||||||||
Feb. 20, 2017 | 215 000 | 42.03 | Feb. 20, 2024 | 113 950 | |||||||
|
|||||||||||
Feb. 22, 2018 | 205 000 | 42.99 | Feb. 22, 2025 | | |||||||
|
|||||||||||
Feb. 15, 2019 | 212 600 | 43.01 | Feb. 15, 2026 | | |||||||
|
|||||||||||
S.D.L. REYNISH | Feb. 15, 2016 | 153 333 | 30.21 | Feb. 15, 2023 | 1 893 663 | ||||||
|
|||||||||||
Executive Vice President, Strategy & | Feb. 20, 2017 | 143 333 | 42.03 | Feb. 20, 2024 | 75 966 | ||||||
|
|||||||||||
Operations Services | Feb. 22, 2018 | 205 000 | 42.99 | Feb. 22, 2025 | | ||||||
|
|||||||||||
Feb. 15, 2019 | 212 600 | 43.01 | Feb. 15, 2026 | | |||||||
|
|||||||||||
K.P. SMITH | Feb. 15, 2013 | 20 000 | 32.46 | Feb. 15, 2020 | 202 000 | ||||||
|
|||||||||||
Executive Vice President, | Sep. 9, 2013 | 20 000 | 36.08 | Sep. 09, 2020 | 129 600 | ||||||
|
|||||||||||
Downstream | Feb. 13, 2014 | 160 000 | 36.04 | Feb. 13, 2021 | 1 043 200 | ||||||
|
|||||||||||
Feb. 16, 2015 | 195 000 | 38.90 | Feb. 16, 2022 | 713 700 | |||||||
|
|||||||||||
Feb. 15, 2016 | 230 000 | 30.21 | Feb. 15, 2023 | 2 840 500 | |||||||
|
|||||||||||
Feb. 20, 2017 | 220 000 | 42.03 | Feb. 20, 2024 | 116 600 | |||||||
|
|||||||||||
Feb. 22, 2018 | 205 000 | 42.99 | Feb. 22, 2025 | | |||||||
|
|||||||||||
Feb. 15, 2019 | 212 600 | 43.01 | Feb. 15, 2026 | | |||||||
|
|||||||||||
S.W. WILLIAMS | Feb. 13, 2014 | 550 000 | 36.04 | Feb. 13, 2021 | 3 586 000 | ||||||
|
|||||||||||
Former Chief Executive Officer(4) | Feb. 16, 2015 | 600 000 | 38.90 | Feb. 16, 2022 | 2 196 000 | ||||||
|
|||||||||||
Feb. 15, 2016 | 795 000 | 30.21 | Feb. 15, 2023 | 9 818 250 | |||||||
|
|||||||||||
Feb. 20, 2017 | 755 000 | 42.03 | Feb. 20, 2024 | 400 150 | |||||||
|
|||||||||||
Feb. 22, 2018 | 736 500 | 42.99 | Feb. 22, 2025 | | |||||||
|
|||||||||||
Feb. 15, 2019 | 753 500 | 43.01 | Feb. 15, 2026 | | |||||||
|
A-1 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Grant Date Fair Values for Share-Based Awards
The following table provides the grant date fair values for share-based awards granted to NEOs in 2017, 2018 and 2019.
Name | Year |
PSUs
($) |
RSUs
($) |
DSUs
($) |
|||||
|
|||||||||
M.S. LITTLE | 2019 | 43.01 | | | |||||
|
|||||||||
President and Chief Executive Officer(2) | 2018 | 42.99 | | | |||||
|
|||||||||
2017 | 42.26 | (1) | | | |||||
|
|||||||||
A. COWAN | 2019 | 43.01 | | | |||||
|
|||||||||
Chief Financial Officer | 2018 | 42.99 | | | |||||
|
|||||||||
2017 | 42.03 | | | ||||||
|
|||||||||
M.R. MACSWEEN | 2019 | 43.01 | | | |||||
|
|||||||||
Executive Vice President, Upstream | 2018 | 42.99 | | | |||||
|
|||||||||
2017 | 42.03 | | | ||||||
|
|||||||||
S.D.L. REYNISH | 2019 | 43.01 | | | |||||
|
|||||||||
Executive Vice President, Strategy & | 2018 | 42.99 | | | |||||
|
|||||||||
Operations Services | 2017 | 42.03 | 43.99 | | |||||
|
|||||||||
K.P. SMITH | 2019 | 43.01 | | | |||||
|
|||||||||
Executive Vice President, Downstream | 2018 | 42.99 | | | |||||
|
|||||||||
2017 | 42.03 | 43.99 | | ||||||
|
|||||||||
S.W. WILLIAMS | 2019 | 43.01 | | | |||||
|
|||||||||
Former Chief Executive Officer(2) | 2018 | 42.99 | | | |||||
|
|||||||||
2017 | 42.03 | | | ||||||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. A-2
SCHEDULE B: CORPORATE GOVERNANCE SUMMARY
Throughout this summary, there are references to information available on the Suncor Energy Inc. (Suncor or the Corporation) website. All such information is available at www.suncor.com under the "About Us Governance" tab. In addition, shareholders may request printed copies of these materials by contacting Suncor at the address on the back of the management proxy circular which this schedule is attached to (the Circular), by calling 1-800-558-9071 or by email request to invest@suncor.com.
Suncor's board of directors (Board) and management are committed to best practices in corporate governance. Suncor has a comprehensive corporate governance program which follows best practices and is in compliance with all applicable rules and regulations.
Board of Directors Composition and Independence
The cornerstone of Suncor's governance system is its board of directors (Board), whose duty is to supervise the management of Suncor's business and affairs. The composition of the Board and its independence are important elements of this system. Mark S. Little, Suncor's President and Chief Executive Officer (CEO), is the only member of the Board who is not independent. Following the 2020 annual general meeting (2020 AGM) and assuming that all nominees for director are elected as contemplated in the Circular, 9 of 10 members (90%) of the Board will be independent directors. A short biography of each individual standing for election to the Board can be found starting on page 7 of the Circular.
Suncor's independent directors meet in-camera at each Board and committee meeting without Mr. Little or any other member of management present. The Board sessions are presided over by Michael M. Wilson, Suncor's independent Board chair. The committee sessions are presided over by the independent chairs of the respective committees. The applicable chair then communicates to management any issues or matters discussed at the in-camera meetings requiring management attention.
The Board has approved position descriptions for the Board chair and Board committee chairs, which are available on Suncor's website. The position description for the Board chair is also set out in Schedule C. These position descriptions supplement the Terms of Reference, as described below. The position descriptions are reviewed annually by the Governance Committee. Any changes to the position descriptions are recommended by that committee to the full Board.
On an annual basis, the Board reviews and assesses the independence of its members in accordance with criteria it has adopted for this purpose. The Board's independence policy and criteria include a description of certain relationships that operate as a complete bar to independence as well as additional requirements applicable to members of the Audit Committee. Suncor's independence criteria, which are set out in Schedule D, are consistent with the Canadian Requirements and the SEC Requirements (each defined on page 59 of the Circular).
In applying the independence criteria, the Board reviews and analyzes the existence, materiality and effect of any relationships between Suncor and each of its directors, either directly, through a family member, or as a partner, shareholder or officer of another organization that has a relationship with Suncor. The Board determines in each case
B-1 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
whether the relationships could be reasonably expected to interfere with the exercise of the director's independent judgement.
Some members of the Board are involved with companies with which Suncor has business relationships. The Board has reviewed each of these relationships against the independence criteria and has determined that none of these relationships impair the independence of the individual directors: (i) as the directors do not serve as employees or executives of these other companies, their respective remuneration from these directorships is not personally material to them nor is it dependent on or variable with the nature or extent of the business relationship with Suncor; (ii) any business relationship with Suncor is not material to Suncor or the other company; and (iii) they are not personally involved in negotiating, managing, administering or approving contracts between Suncor and the other entities on whose boards they serve.
The Board's conflict of interest policy precludes these directors from voting with respect to any contract or transaction where a potential conflict of interest could exist, should they be considered by the Board (see "Conflicts of Interest").
Other Public Company Board Memberships. While Suncor does not limit the number of public company boards on which a director may serve, the Terms of Reference provide that each director should ensure that he or she is able to devote sufficient time and energy to carry out their duties effectively. Suncor's CEO can only join the board of another public company with the consent of the Board.
Some of Suncor's directors sit on the boards of other public companies, the particulars of which are set out on pages 7 to 11 of the Circular. None of Suncor's directors are considered to be "over-boarded" as currently defined by the guidelines established by either Institutional Shareholder Services, Inc. or Glass, Lewis & Co.
A board "interlock" occurs when two or more Suncor directors are on the board of another public company. Suncor does not restrict board interlocks but recognizes that it is important for directors to remain impartial and independent even if they have a common board membership. None of Suncor's directors currently have a board interlock.
Nomination of Directors and Selection Process
The Governance Committee conducts the selection process for new nominees to the Board pursuant to its policy on the selection process for new Board members (the Selection Process Policy). Directors are chosen for their integrity, character, sound and independent judgment, breadth of experience, insight and knowledge and business acumen. The Governance Committee has emphasized the Board's commitment to having a diverse Board comprised of individuals having a diversity of backgrounds, experience and skills sets. The inclusion of an appropriate number of female directors and the identification of female candidates is also a key search criterion in the director selection and nomination process as per the terms of the Board Diversity Policy (the Diversity Policy). See "Inclusion and Diversity" for a discussion of the Diversity Policy and how the Board incorporates diversity into the Board selection process.
Pursuant to the policies of the Board, the assessment and selection process is undertaken by the Governance Committee as needed and consists of several steps, including: (i) maintaining and updating an inventory of capabilities, competencies, skills and qualities of current Board members and of the Board as a whole; and (ii) identifying capabilities, competencies, skills and qualities desired to be added to the Board, taking pending retirements and the Board's current needs and priorities into account. The role of the CEO in that process is limited and appropriate. The Board has determined that the industry background and functional experience of the Board currently maps well to Suncor's business strategy.
The following table lists the capabilities, competencies, skills and qualities of the non-executive directors standing for re-election at the 2020 AGM, together with their retirement dates in accordance with Suncor's Retirement and Change of Circumstance Policy (the Retirement Policy), assuming an annual meeting in late April of their retirement year, based on their ages.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-2
The above inventory is assessed as required to identify any capabilities, competencies, skills and qualities desired to be added to the Board in light of the Board's current needs and priorities. The Governance Committee uses this assessment as a basis for identifying selection criteria describing the skills, experiences, qualifications, diversity (gender, members of visible minorities, Aboriginal status, age, persons with disabilities, business experience, professional expertise, personal skills, stakeholder perspectives, geographic background and other diversity attributes) and personal qualities desired in potential new Board members. The Governance Committee identifies candidates from a number of sources, including executive search firms and referrals from existing directors. When a vacancy occurs or is pending, the Governance Committee, with the assistance of an executive search firm, identifies a short list of potential candidates to pursue further. In addition to the factors listed above, the Governance Committee considers whether each candidate can devote sufficient time and resources to his or her duties as a Board member. The identification of diverse candidates is also a key search criterion in the director selection and nomination process. The Governance Committee engages an executive search firm or other third party expert to assist in carrying out its duties and must retain such parties to complete reference and background checks on Board candidates. Pursuant to Board policies, the Governance Committee is required to maintain an evergreen list, updated as needed, of potential Board candidates for planned and unplanned vacancies.
Throughout the process, the Governance Committee provides updates to the Board and solicits input on candidates. Candidates are interviewed by members of the Governance Committee and other directors as deemed appropriate. The Governance Committee ultimately provides its recommendation on Board candidates to the full Board. Candidates may be appointed by the Board to hold office for a term expiring not later than the close of the next annual meeting of shareholders.
Inclusion and Diversity
Board of Directors. A fundamental belief of Suncor's Board is that a board comprised of women and men representing diverse points of view can add greater value than a board comprised solely of directors with similar backgrounds. The Board aims to be comprised of directors who have a range of perspectives, insights and views in relation to the issues affecting Suncor. This belief in diversity has been confirmed in the Diversity Policy adopted by the Board. The Diversity Policy provides that the Board should include individuals from diverse backgrounds, having regard to gender, members of visible minorities, Aboriginal status, age, persons with disabilities, business experience, professional expertise, personal skills, stakeholder perspectives, geographic background and other diverse attributes. In particular, the Board believes there should be an appropriate number of female directors and aspires to maintain a Board in which each gender represents at least 30% of the members of the Board. Accordingly, consideration of whether the diverse attributes highlighted in the Diversity Policy are sufficiently
B-3 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
represented on the Board is an important component of the selection process for new members of Suncor's Board.
The Board has ensured that the Diversity Policy will be effectively implemented by embedding it into its Selection Process Policy. The Selection Process Policy requires the Governance Committee to conduct periodic assessments to consider the level of representation on the Board of the various attributes enumerated in the Diversity Policy, including the number of women on the Board. The Governance Committee has emphasized the Board's commitment to the recruitment of women in recent years by making the identification of female candidates a key search criterion in the director selection and nomination processes it has undertaken. The Diversity Policy requires that it is reviewed annually to assess its effectiveness in promoting a diverse Board. The Board members also have the opportunity to evaluate, on an annual basis, the effectiveness of the director selection and nomination process through the Evaluation Process (as defined herein); see "Annual Evaluation Process" under the heading "Board Tenure and Renewal".
Through the Diversity Policy, the Board has established a measurable gender diversity target of 30% for each of the male and female gender. In addition, Suncor is a proud supporter of the 30% Club Canada, a not-for-profit organization that is focused on the continued drive towards achieving greater gender balance at all levels, including an aspirational objective of 30% women on boards by 2022. The Board is proud that, with 40% women on the Board, it currently exceeds the target in the Diversity Policy as well as the aspirational objective of the 30% Club Canada. Further, following the 2020 AGM and assuming that all nominees for director are elected as contemplated in the Circular, four of ten directors (40%) on the Board will be women. One of the ten director nominees (10%) is Aboriginal. There are no director nominees that are a member of a visible minority or have a disability. The Board has not, however, established a target regarding the number of visible minorities, persons with disabilities, or persons with Aboriginal status on the Board. The Board has determined that, at this time, additional targets would not be the most effective way of ensuring the Board is comprised of individuals with diverse attributes and backgrounds and believes its current make up reflects the principles of diversity set out in the Diversity Policy.
The graphs below show the breakdown of the 2020 director nominees by gender and age.
Suncor Management. Suncor's people focus and its commitment to creating an inclusive and diverse workplace reflects a strongly-held belief that business performance will be enhanced and social responsibilities met through an inclusive culture, including people with a diversity of backgrounds, experiences, and perspectives.
In recognizing the value of inclusion and diversity, Suncor's aim is to be a great place to work for everyone. Our commitment is to build and sustain an inclusive work environment that enables everyone, including women, people with disabilities, Indigenous people, visible minorities and LGBTQ+ persons, to fully contribute to business performance. Enhancements to the Corporation's diversity self-identification process in 2019 will enable Suncor to better understand representation and direct our future efforts to promote an inclusive and respectful workplace.
Currently, Suncor's inclusion and diversity strategy and execution plans have a particular focus on increasing the overall representation of women and of Indigenous people in the workforce. Plan objectives seek to ensure there will be highly qualified women to fill vacancies, including vacancies in leadership roles, and increasing the representation of
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-4
women, specifically, in operations and maintenance roles, areas that are traditionally underrepresented in the industry. Suncor's social goal of building mutual trust and respect with the Indigenous people of Canada enables improvements to Indigenous workforce development and their participation in energy development.
In appointing individuals to its senior leadership team, comprised of executive officers and senior leaders reporting directly to executive officers, Suncor weighs a number of factors: the skills and experience required in roles, the skills, experience and attributes of prospective candidates, and the representation of women, Indigenous people, visible minorities, persons with disabilities and LGBTQ+ persons in senior leadership roles.
Currently, two out of nine members (22%) of Suncor's executive leadership team, which is comprised of Suncor's executive officers, are women and nineteen out of forty-nine (39%) of Suncor senior leaders are women. There is one (2%) senior leader who identifies as Indigenous, two (4%) senior leaders who identify as a visible minority, and one (2%) senior leader identified as a person with a disability.(1) There are no members of Suncor's executive leadership team that have identified as being Indigenous, a member of a visible minority or identify as having a disability.
Suncor does not set representation targets in executive officer or senior leadership positions. Rather, it believes the most effective way to achieve a goal of increasing diversity at all levels of leadership is to work to achieve an inclusive and respectful workplace for all. Furthermore, we identify high potential candidates, enable the development of their skills, and make available opportunities to become effective leaders. To this end, Suncor regularly evaluates its selection and development processes to identify and remove systemic barriers to advancement of minority persons.
Suncor has formed an Inclusion and Diversity Council comprised of senior leaders from across Suncor's business. The Council leads the development and execution of the Corporation's overarching inclusion and diversity strategy and, further, supports the successful implementation of business unit specific inclusion and diversity initiatives. The strategy is characterized by five strategic pillars or areas of focus: leadership, understanding and skill development, employee involvement, processes, and industry and community. In 2019, Suncor realized progress in each of these focus areas.
Key 2019 accomplishments include providing education, training, and tools to employees and leaders to address unconscious bias and enhance their contribution to building an inclusive workplace, continuing to improve processes to reduce systemic bias, improving support for any employee taking parental leave, and expanding employee-led inclusion networks, both broad-based and those that focus on women and Indigenous people.
Finally, the introduction of Suncor's Equal Opportunity and Inclusion Policy in early 2020 affirms the Corporation's continued commitment to and the standards around which it will build an inclusive workplace and diverse workforce.
Board Tenure and Renewal
The Board's goal is to be made up of members who have a range of perspectives, insights and views in relation to issues affecting Suncor. In furtherance of that goal, the Board has implemented two primary mechanisms of board renewal: the Retirement Policy; and an annual evaluation process, each of which is described in detail below. The Board has not adopted term limits for directors as it believes the Retirement Policy and the annual board evaluation process are effective in achieving the appropriate level of renewal of the Board's membership.
The tenure of directors standing for election at the 2020 meeting can be summarized as follows, with the average director tenure being 6.7 years:
Retirement Policy. The Board has adopted the Retirement Policy, which provides that all directors, other than management directors, must retire from the Board upon completion of their term of office at the annual meeting of shareholders following their 72nd birthday. The Governance Committee, in consultation with the Board chair, has the authority under exceptional circumstances to recommend extension of the term of a Board member if the retirement of such director would not be in the best interests of Board continuity and effectiveness. Any such extension shall be subject to approval of the Board. The CEO and other management directors are required to leave the Board when they cease to be employees of Suncor.
Annual Evaluation Process. Suncor's Board Effectiveness Policy establishes an annual process (the Evaluation Process) whereby directors are provided with an opportunity to evaluate the effectiveness of the Board, its committees, the
B-5 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Board chair, committee chairs and individual directors and to identify areas where effectiveness may be enhanced. The results of the Evaluation Process carried out in 2019 confirmed that all directors and committees, and the Board as a whole, effectively fulfilled their responsibilities.
The Evaluation Process involves the solicitation of input from individual directors through an annual on-line survey presented in two parts: (i) an evaluation form that explores the directors' views and solicits feedback on how well they believe the Board and its committees, including their chairs, are performing (the Board Effectiveness Survey); and (ii) a peer feedback survey (the Peer Survey) that explores the directors' views and solicits feedback on their assessment of other directors' performance, including their contributions and participation in Board discussions and debate, accountability, knowledge, experience, demonstration of high ethical standards and communication and persuasion skills.
The Evaluation Process includes open-ended questions to allow directors to elaborate on their responses and to suggest improvements. The Board Effectiveness Survey asks each director whether he or she believes the Board and each of its committees are functioning as they should in accordance with their mandates. Consideration of the appropriateness of the Board's size is also addressed and the size of the Board was confirmed to be appropriate by the directors in 2019. Information obtained from the answers to these questions assists the Board in determining whether any of the Board or committee mandates or Board processes or policies should be revised.
Board Effectiveness Review
Confidential responses are tabulated and analyzed by the Corporate Secretary and presented in a report which is circulated to the chair of the Governance Committee and Board chair, who then work with the Corporate Secretary to summarize key items and recommendations for enhancing or strengthening effectiveness (including any recommendations arising from the one-on-one meetings described under "Peer Review" below). The recommendations are tabled, discussed and finalized at the first Governance Committee meeting in each calendar year and timelines and action items are assigned at the meeting to track any follow-up to effect the recommendations. The chair of the Governance Committee reports to the full Board on the survey results and action items at the first meeting of the Board in each calendar year and reports on the progress made on the recommendations throughout the year. All materials distributed to the Governance Committee are made available for review by all directors.
Peer Review
The results of the Peer Survey are tabulated and consolidated by the Corporate Secretary and a summary report is circulated to the chair of the Board and the Governance Committee. Individual directors receive their personal results.
The Board chair conducts one-on-one meetings with each director to discuss his or her peer review results and to receive input on governance, risk and strategy. The Board chair discusses his own peer review results with the chair of the Governance Committee. The one-on-one meetings are completed prior to the first Board and committee meetings held in each calendar year. This allows any input provided on governance, risk and strategy to be incorporated in the action plans arising from the Evaluation Process. Once the peer review meetings are completed, the Board chair prepares a summary of key items arising from these discussions which are discussed in-camera at the Governance Committee and at the meeting of the full Board.
Terms of Reference
The Board has adopted terms of reference (the Terms of Reference), which serve as the charter of the Board. The Terms of Reference are reviewed by the Board at least annually. They include a general overview of the Board's role in Suncor's governance, a statement of key guidelines and policies applicable to the Board and its committees, and a mandate that describes its major responsibilities, goals and duties. Matters included in the mandate range from specific matters, including those that by law must be exercised by the Board, such as the declaration of dividends, to its general role to determine, in broad terms, the purposes, goals, activities and general characteristics of Suncor and its business. The Terms of Reference provide that the Board is responsible for the selection, monitoring and evaluation of executive management and for overseeing the ways in which Suncor's business and affairs are managed, thereby assuming responsibility for the stewardship of Suncor. The full text of the Terms of Reference is set out in Schedule E.
The Board discharges certain of its responsibilities through its four standing committees: the Audit Committee, the Environment, Health, Safety and Sustainable Development (EHS&SD) Committee, the Governance Committee and the Human Resources and Compensation Committee (HR&CC). Each committee has a mandate, which it reviews annually and updates as appropriate. Any proposal to amend the mandates is reviewed by the Governance Committee for recommendation to the Board. There were no material amendments to any committee mandate in 2019.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-6
The Governance Committee, with input from the Board chair, makes recommendations to the Board regarding committee appointments. In considering the appointment of members to Board committees, the Governance Committee and the Board endeavor to include directors of diverse backgrounds and at least one director with expertise and experience relevant to the committee's key roles.
Except where otherwise specified in the Terms of Reference, Suncor's by-laws or the relevant committee mandate, each committee has the power to determine its own rules of procedure. Subject to limited exceptions, the committees generally do not have decision making authority; rather, they convey their findings and recommendations on matters falling within their mandates to the full Board.
The committees also have the authority to conduct independent investigations into matters that fall within the scope of their responsibilities and may engage external advisors (as may the full Board or an individual director), at Suncor's expense, to assist them in fulfilling their mandate.
The Board delegates day-to-day management of Suncor's business to the CEO and other members of senior management. A management control process policy, adopted by the Board, defines and sets limits on the authority delegated by the Board.
The Board has developed and approved a position description for the CEO, which includes a general description of the role as well as specific accountabilities in the areas of strategic planning, financial results, leadership, safety, government, environment and social relations and management's relationship with the Board. A copy of the CEO position description is available on Suncor's website.
The following is a description of some key duties of the Board as set out in the Terms of Reference. For more information, please refer to "Board Committees", the Terms of Reference and the mandates of the Board committees available on Suncor's website.
Ethics. The Terms of Reference require the Board, through the CEO, to establish Suncor's standards of conduct, including the Corporation's general moral and ethical tone and compliance with applicable laws. The CEO in turn is accountable for setting a high ethical tone and fostering a culture of integrity throughout the organization. The Board plays an active role in ensuring a high standard of corporate ethics and integrity through its oversight of Suncor's written standards of business conduct (the Code) and compliance program (see Ethical Business Conduct), and through its assessment and evaluation of the performance of the CEO.
Strategic Planning. One of the Board's major duties is to review, with management, Suncor's purpose, objectives and goals and the strategies and plans for achieving them. The Board also monitors Suncor's progress toward its strategic goals and plans, and revises Suncor's direction where warranted.
The Board is continually updated on the human, technological and capital resources required to implement Suncor's strategies and any regulatory, environmental, social, cultural or governmental constraints that may impact Suncor in carrying out its business objectives. Where instructive, this includes a competitive analysis of Suncor against its peers in different facets of its business. The Governance Committee acts as a sounding board for management on key strategic initiatives, and ensures that timely Board reviews of these initiatives occur throughout the year.
In addition to the Board's ongoing stewardship over Suncor's strategy, each year the Board holds a meeting devoted solely to corporate strategy. The Governance Committee works with management to design this annual strategy meeting, and following the meeting, assesses its effectiveness. The annual strategy meeting generally includes internal and external speakers to provide updates and perspectives on topical issues that could impact Suncor's corporate strategy. Discussions also occur at regularly scheduled Board meetings throughout the year to update the corporate strategy and to discuss developments, opportunities and issues that arise during the year on an 'as needed' basis.
The Board is also responsible for ensuring Suncor has an effective strategic planning process, and on an annual basis reviews Suncor's annual business plan (including Suncor's annual capital budget) and in doing so endorses the strategies reflected in Suncor's long range plan. The Governance Committee provides assistance to the Board by annually assessing Suncor's planning and budgeting processes.
Stakeholder Communications. Suncor has a disclosure policy that establishes guidelines for Suncor's communications with shareholders, investment analysts, other stakeholders and the public generally. This policy includes measures to avoid selective disclosure of material information, identifies designated Suncor spokespersons and establishes internal review processes for key public communications. The Code addresses Suncor's obligations for continuous and timely disclosure of material information and sets standards requiring directors, officers, employees and contract workers trading in Suncor shares and other securities to comply with applicable law.
Suncor has disclosure controls and procedures designed to ensure that material information relating to Suncor is made known to our CEO and Chief Financial Officer (CFO). Suncor has a Disclosure Committee, chaired by the Vice President and Controller, and has designed and implemented due diligence procedures to support the financial reporting process and the certification of financial reports by the CEO and CFO.
B-7 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Suncor interprets its operations for its shareholders and other stakeholders through a variety of channels, including its periodic financial reports, securities filings, news releases, Report on Sustainability, Climate Risk and Resilience Report, webcasts, external website, social media posts, briefing sessions and group meetings. Suncor encourages and seeks stakeholder feedback through various channels including corporate communications and investor relations programs, which incorporate surveys of shareholders and analysts, and through participation in the regulatory process. The Board, either directly or through the activities of a designated Board committee, reviews and approves all quarterly and annual financial statements and related management's discussion and analysis (MD&A), the management proxy circular, the annual information form/Form 40-F and press releases containing significant new financial information, among other items.
Shareholder Engagement. Suncor recognizes the importance of strong and consistent engagement with its shareholders. The Board is specifically mandated to ensure systems are in place for communication with Suncor's shareholders and other stakeholders and that these systems are appropriately resourced. Suncor maintains a toll-free phone number as well as email and regular mail addresses for stakeholder feedback and questions. In addition, Suncor encourages shareholders to attend Suncor's annual meeting and interested parties may attend in person or via webcast. The annual meeting provides a valuable opportunity to hear directly from Suncor's management about the results of Suncor's business and operations, as well as its strategic plans. Members of the Board are in attendance at annual meetings and the Board chair and the chair of each Board committee are available to answer questions as appropriate. In addition, senior management hold quarterly conference calls and webcasts with the investment community to review Suncor's most recently released financial and operating results.
The Board recognizes that it is also important for the Board to communicate with shareholders, including organizations that represent or advise shareholders (collectively, Interested Parties) on matters of governance, and to that end, has adopted a Shareholder Communication and Engagement Policy (the Engagement Policy). In accordance with the Engagement Policy, Interested Parties may communicate to the Board in writing to express their views on matters that are important to them, by addressing their correspondence to the Board in care of the Corporate Secretary at the address on the back page of the Circular, or via email at: invest@suncor.com, subject line: Attention: Chair of the Board / Chair of [Insert Board Committee Name] c/o Corporate Secretary. The Board has determined that questions or concerns related to the Board and senior management succession processes, executive and Board compensation, Board level corporate governance and other matters that are within the scope of the Board's supervisory and oversight duties, as set out in its Terms of Reference, may appropriately be addressed to, and by, the Board. In addition, the Engagement Policy recognizes that in certain circumstances it may be appropriate for Board members, generally through the Board chair or the chair of a committee, to meet with an Interested Party, and sets out criteria to be considered if the Board receives a meeting request and terms applicable to the conduct of any such meeting.
During 2019, the Board chair, certain directors and several members of the executive team communicated with various corporate governance stakeholders to listen to their opinions. These meetings involved a dialogue on a number of topics, including: corporate governance (Board composition/diversity, governance structures/processes, compensation, risk oversight), climate risk management, water and tailings management, technology, sustainability strategy, sustainability disclosure, community, Indigenous relations and operating results.
Risk Oversight. Suncor is committed to a proactive program of enterprise risk management intended to enable decision-making through consistent identification and assessment of risks inherent to its assets, activities and operations. Some of these risks are common to operations in the oil and gas industry as a whole, while some are unique to Suncor. The Board oversees Suncor's Enterprise Risk Management Program (the ERM Program). In accordance with the ERM Program, senior management, including the CEO, undertakes an entity-wide process to identify, assess and report on the significant risks to Suncor's business and management's strategies to address risk.
The Board ensures there are systems in place to effectively identify, manage and monitor the principal risks of Suncor's business, and to mitigate their impact. A principal risk is generally considered to be an exposure that has the potential to materially impact Suncor's ability to meet or support its strategic objectives.
Each year the Board reviews Suncor's principal risks. The Audit Committee annually reviews the governance of the ERM Program and ensures each principal risk has an executive sponsor and is mapped to a Board committee or the full Board as appropriate for oversight. The Audit Committee also reviews and approves the appointment of the vice president responsible for Suncor's enterprise risk and internal audit function, who reports directly to the Audit Committee regarding enterprise risk management matters.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-8
The following table sets forth Suncor's principal risks and the Board committee and/or full Board to which each principal risk is mapped for oversight, as well as highlighting the role of the Board and the Audit Committee in reviewing the principal risks.
Risk Category |
Board of
Directors |
Audit
Committee |
Governance
Committee |
EHS&SD
Committee |
HR&CC | ||||||
|
|||||||||||
Principal Risk Review | ü | ü | |||||||||
|
|||||||||||
Commodity Price | ü | ||||||||||
|
|||||||||||
Major Operational Incident (Safety, Environmental and Reliability) | ü | ü | |||||||||
|
|||||||||||
Government/Regulatory and Policy Effectiveness | ü | ||||||||||
|
|||||||||||
Carbon Risk | ü | ü | |||||||||
|
|||||||||||
Market Access | ü | ||||||||||
|
|||||||||||
Information Security | ü | ü | |||||||||
|
|||||||||||
Project Development and Execution | ü | ||||||||||
|
|||||||||||
Cumulative Impact and Pace of Change | ü | ||||||||||
|
|||||||||||
Tailings Management, Dam Integrity and Mine Closure | ü | ||||||||||
|
Members of the Board question management at Board and committee meetings, as well as throughout the year, to ensure that risks are appropriately identified, assessed, mitigated and monitored. The high level of engagement of Board members, as well as their extensive experience, contributes to the effectiveness of the Board's risk oversight, and contributes to the Board's understanding of the interrelationship of risks and any pre-existing conditions or vulnerabilities that could have a compounding impact on Suncor.
Sustainability is embedded in Suncor's purpose, as well as being a key strategic priority and focus area, which is reflected by the establishment in 2017 of a Chief Sustainability Officer. Environmental and social concerns are integrated into our existing principal risks and ERM Program.
For a detailed explanation of the significant risks applicable to Suncor and its businesses, see "Risk Factors" in Suncor's Annual Information Form dated February 26, 2020, filed under Suncor's profile at www.sedar.com.
Succession Planning and Monitoring/Evaluating Senior Management. The Board ensures the continuity of executive management by appointing a CEO and overseeing succession planning. While the Board remains active in this area, the HR&CC is specifically mandated to assist the Board by ensuring that appropriate executive succession planning and performance evaluation programs and processes (including development and career planning) are in place and operating effectively for executives. The HR&CC also reviews significant changes to the organization's structure as they arise and the impact these changes have on executive roles.
The HR&CC annually reviews the succession planning process and results for executive leadership, and reports to the Board on these matters. As part of this process, the CEO, supported by the Chief People Officer reviews candidates for the CEO and other executive leadership positions, with the HR&CC. In its July meeting, the HR&CC reviewed and confirmed its support for Suncor's succession and development plans for its senior executive positions. The HR&CC also met in camera to discuss the CEO succession plan and has an emergency CEO succession plan in place, should it be required. In May, 2019, an important step in CEO transition occurred when Mark Little assumed the role of CEO from Steve Williams, following Mr. Williams' retirement.
The Board also reviews Suncor's processes for identifying successors for its vice presidents, employees who directly report to its vice presidents, and managers. Successors are identified using a formal process that rigorously assesses leadership potential across Suncor using specific criteria, including employees' performance, aspirations, engagement, agility, experience and capabilities. For a discussion of how Suncor considers diversity in this process, see "Inclusion and Diversity".
B-9 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
The Board encourages the CEO to expose the Board to Suncor's executives and high potential employees, both for succession planning and career development and to provide the Board with a broader perspective on issues relevant to Suncor. Directors are provided with opportunities to meet with Suncor employees through attendance at events hosted by Suncor, such as Suncor's President's Operational Excellence Awards, or when they visit Suncor's facilities.
The HR&CC assists the Board in monitoring the CEO's performance by conducting an annual performance review against predetermined goals and criteria (including the goal of succession planning). The HR&CC also reviews with the CEO the performance of his direct reports.
Expectations and Responsibilities of Directors. The Terms of Reference, supplemented by a Board approved accountability statement for directors (the Accountability Statement), which is available on Suncor's website, identifies the key expectations placed on Board members. Board meeting dates are established well in advance and directors are expected to be prepared for and attend all meetings absent extenuating circumstances. Directors' attendance records for meetings held in 2019 are set out on page B-13.
Directors are required to devote sufficient time, effort and energy to their role as a Suncor director to effectively discharge their duties to Suncor and the Board. Pursuant to the Terms of Reference, Audit Committee members must not be members of the audit committees of more than two other public companies, unless the Board determines that simultaneous service on a greater number of audit committees would not impair the member's ability to effectively serve on Suncor's Audit Committee.
Internal Controls. The Board is specifically mandated to ensure processes are in place to monitor and maintain the integrity of Suncor's internal controls and management information systems. The Audit Committee assists the Board in this regard and monitors the effectiveness and integrity of Suncor's financial reporting, management information, internal controls of business processes and Internal Audit function (excluding operations integrity audit matters, which are specifically within the mandate of the EHS&SD Committee(1)).
The Audit Committee exercises general oversight over the Internal Audit function by reviewing the plans, activities and performance of the Internal Auditors. The appointment or termination of the vice president responsible for Internal Audit is approved by the Audit Committee. This individual has a direct reporting relationship with the committee and meets with it, in the absence of other members of management, at least quarterly. The Audit Committee also reviews and recommends appointees to the office of the CFO.
Board Committees
In addition to the responsibilities described elsewhere in this Schedule, the following provides a brief summary of the key functions, roles and responsibilities of Suncor's Board committees. The complete text of the mandate of each Board committee is available on Suncor's website.
Governance Committee. The Governance Committee assists the Board in two main areas: corporate governance; and corporate strategy.
In its governance role, the Governance Committee is mandated to determine Suncor's overall approach to governance issues and key corporate governance principles. In doing so, it closely monitors emerging best practices in governance. In addition, the Corporate Secretary, or her delegate, attends conferences and meetings on governance and updates the committee on developing trends and practices. Suncor also reviews recommendations of governance and shareholder advisory organizations and participates in benchmarking studies undertaken by such organizations to assess its governance practices in relation to those of other issuers in a wide range of geographies and industries. The Corporation's legal function monitors changes in law, administrative policy and stock exchange requirements relating to governance, and provides updates to the Governance Committee.
The Governance Committee also reviews matters pertaining to Suncor's values, beliefs and standards of ethical conduct and any principal risks that have been delegated to the committee for oversight, and assists the Board in its strategy role (see "Ethics" and "Strategic Planning", under the heading "Terms of Reference").
The Governance Committee reviews and reports to the Board on directors' compensation. In consultation with the HR&CC and outside advisors, the Governance Committee has developed guidelines for director compensation based on, among other factors, directors' roles and responsibilities and an analysis of the competitive position of Suncor's director compensation program. The Governance Committee annually reviews the competitiveness and form of Board compensation and makes recommendations to the full Board on Board compensation and share ownership guidelines for directors. The Board sets director compensation based upon these recommendations.
Audit Committee. The Audit Committee assists the Board in matters relating to Suncor's external auditors and the external audit process, oil and natural gas reserves reporting, financial reporting and public communication, risk management, security and certain other key financial
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-10
matters. The Audit Committee also assists the Board in matters relating to internal controls of Suncor's business processes and the Internal Audit function (see "Internal Controls", under the heading "Terms of Reference").
The Audit Committee plays a key role in relation to Suncor's external auditors. It initiates and approves their engagement (including fees) or termination, subject to shareholder approval, and monitors and reviews their independence, effectiveness, performance and quality control processes and procedures.
The Audit Committee reviews with management and external auditors, and as appropriate approves, significant financial reporting matters, the conduct and results of the annual audit and significant finance and accounting policies and other financial matters. The Audit Committee also reviews Suncor's annual and quarterly financial statements, annual and quarterly MD&A and annual information form/Form 40-F. The Audit Committee approves quarterly financial statements and quarterly MD&A through authority delegated by the Board and makes recommendations to the Board with respect to approval of the annual disclosure documents.
The Audit Committee plays a key oversight role in the evaluation and reporting of Suncor's oil and natural gas reserves. This includes review of Suncor's procedures relating to reporting and disclosure, as well as those for providing information to Suncor's independent reserves evaluators. The Audit Committee reviews and approves the appointment and terms of engagement (including fees) of the reserves evaluators, including their qualifications and independence and any changes in their appointment. Suncor's reserves data and report of the reserves evaluators are annually reviewed by the Audit Committee prior to approval by the full Board.
The Audit Committee reviews Suncor's policies and practices with respect to cash management, financial derivatives, financing, credit, insurance, taxation, commodities trading and related matters. It also reviews the assets, financial performance, and funding and investment strategies of Suncor's registered pension plan. The Audit Committee oversees generally the Board's risk management governance model (see "Risk Oversight", under the heading "Terms of Reference") and also reviews audits conducted of Suncor's standards of business conduct compliance program (see "Ethical Business Conduct").
Members of the Audit Committee are required to be financially literate. All of Suncor's directors, including all members of the Audit Committee, are considered financially literate. In addition, at least one member of the Audit Committee must be determined by the Board to be an "audit committee financial expert". The Board has determined Ms. Bedient and Mr. MacDonald to be such experts. The criteria for assessing the financial literacy of directors, and whether they qualify as an "audit committee financial expert", are set out in the Terms of Reference.
For additional information about Suncor's Audit Committee, including the Audit Committee Mandate and Pre-approval Policies and Procedures, see "Audit Committee Information" in Suncor's Annual Information Form dated February 26, 2020, filed at www.sedar.com.
Environment, Health, Safety and Sustainable Development Committee. The EHS&SD Committee reviews the effectiveness with which Suncor meets its obligations and achieves its objectives pertaining to the environment, health, safety and sustainable development. This includes the effectiveness of management's establishment and maintenance of appropriate EHS&SD policies, and monitoring the adequacy and effectiveness of Suncor's Operational Excellence Management System (an overarching framework to manage operational risk), and related business processes. The EHS&SD Committee also monitors management's performance and emerging trends and issues in these areas. In fulfilling its role, the EHS&SD Committee reviews management stewardship reports as well as the findings of significant external and internal environmental, health and safety investigations, assessments, reviews and audits. Suncor's annual Report on Sustainability, a detailed public disclosure document that includes Suncor's Climate Risk and Resilience Report, reporting on Suncor's EHS&SD progress, plans and performance objectives as well as disclosure on lobbying activities, is also reviewed by the EHS&SD Committee.
The EHS&SD Committee assists the Board in matters pertaining to the integrity of Suncor's physical assets, by monitoring the adequacy of Suncor's internal controls as they relate to operational risks of its physical assets and matters of environment, health, safety and sustainable development.
Human Resources and Compensation Committee. The HR&CC assists the Board by annually reviewing the performance of the CEO and recommending his total compensation to the full Board. The corporate objectives for which the CEO is responsible include a combination of corporate goals and personal goals, set annually by the Board in consultation with the HR&CC and the Board chair. The HR&CC annually reviews the CEO's performance against these objectives and against the key accountabilities of his position, as set out in the CEO's position description. The HR&CC reports its assessment to the full Board which ultimately approves CEO compensation.
The HR&CC also reviews annually the CEO's evaluation of the other senior executives within the organization and his recommendation for their total compensation. For more information about the HR&CC and the process and criteria for determining the CEO's total compensation, see "Compensation Discussion and Analysis" in the Circular. See
B-11 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
also "Succession Planning and Monitoring/Evaluating Senior Management", under the heading "Terms of Reference".
Board and Committee Meetings
The Board chair, in consultation with the Corporate Secretary, has the responsibility of establishing a schedule for meetings of the Board and its committees each year, which is approved by the Board. Board and committee meeting dates are established sufficiently in advance where possible (at least one year and longer if practical) to minimize conflict with other commitments on directors' schedules. The Board holds at least six meetings per year, one of which is dedicated to strategy. If during the course of the year circumstances require Board or committee action or consideration, additional meetings are called.
The Board chair works with the CEO to establish the agenda for each Board meeting. The chair of each committee, in consultation with the committee secretary, determines the agenda for each committee meeting. Each Board member is free to suggest inclusion of items on any Board or committee agenda. Whenever feasible, important issues for decision are dealt with over the course of two meetings. The first meeting allows for a thorough briefing and the second allows for the final discussion and decision.
The following provides details about Board and committee meetings held during 2019 and the attendance of the directors at these meetings.
Board and Committees |
Number of Meetings
Held in 2019 |
||
|
|||
Board | 7 | ||
|
|||
Audit Committee | 7 | ||
|
|||
EHS&SD Committee | 4 | ||
|
|||
Governance Committee | 5 | ||
|
|||
HR&CC | 5 | ||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-12
Number of Meetings and Number of Meetings Attended in 2019
Director | Board(1) |
Audit
Committee |
EHS&SD
Committee |
Governance
Committee |
HR&CC |
Committees
(total) |
Overall
Attendance |
||||||||
|
|||||||||||||||
Patricia M. Bedient | 7/7 | 7/7 | 4/4 | | | 11/11 | 18/18 | ||||||||
(100%) | (Chair) | (100%) | (100%) | ||||||||||||
|
|||||||||||||||
Mel E. Benson | 6/7 | | 4/4 | | 4/5 | 8/9 | 14/16 | ||||||||
(86%) | (89%) | (88%) | |||||||||||||
|
|||||||||||||||
John D. Gass | 7/7 | | | 5/5 | 5/5 | 10/10 | 17/17 | ||||||||
(100%) | (Chair) | (100%) | (100%) | ||||||||||||
|
|||||||||||||||
Dennis M. Houston | 7/7 | | 4/4 | | 5/5 | 9/9 | 16/16 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
|
|||||||||||||||
Mark Little(2) | 7/7 | | | | | | 7/7 | ||||||||
(100%) | (100%) | ||||||||||||||
|
|||||||||||||||
Brian MacDonald | 6/7 | 7/7 | | 5/5 | | 11/11 | 17/18 | ||||||||
(86%) | (100%) | (94%) | |||||||||||||
|
|||||||||||||||
Maureen McCaw(3) | 7/7 | 7/7 | 2/2 | 3/3 | | 12/12 | 19/19 | ||||||||
(100%) | (Chair) | (100%) | (100%) | ||||||||||||
|
|||||||||||||||
Lorraine Mitchelmore(4) | 1/1 | 1/1 | 1/1 | | | 2/2 | 3/3 | ||||||||
(100%) | (100%) | (100%) | |||||||||||||
|
|||||||||||||||
Eira M. Thomas(3) | 7/7 | | 2/2 | 2/2 | 5/5 | 9/9 | 16/16 | ||||||||
(100%) | (Chair) | (100%) | (100%) | ||||||||||||
|
|||||||||||||||
Michael M. Wilson(2) | 7/7 | | | | | | 7/7 | ||||||||
(100%) | (100%) | ||||||||||||||
|
Orientation and Continuing Education
Each new member of the Board participates in a formal orientation program. The orientation program includes in-person meetings with senior management on key legal, environmental, business, financial and operational topics central to Suncor's business and operations and a tour at the sites of some of Suncor's principal operations. The orientation program also focuses on the role of the Board, its committees and its directors and the nature and operation of Suncor's business.
A directors' handbook, containing information about the Board and Suncor, including Suncor's core governance documents, is made available to each director upon joining the Board. The handbook is continuously updated and is available for viewing by directors through a secure directors' portal.
Presentations and tours at the sites of Suncor's principal operations are provided to directors on a periodic basis, often in conjunction with Board meetings, for the purpose of directly acquainting directors with Suncor's operations and the communities in which they are located.
The Governance Committee oversees the Board's strategic education program. In conjunction with Board meetings, management presents focused information to directors on topics pertinent to Suncor's business, including the impact of significant new laws or changes to existing laws and opportunities presented by new technologies. In an annual survey, directors are asked to suggest topics of interest for future information sessions and topics are chosen annually for presentations from internal or external sources.
The Board's Director Continuing Education Policy also encourages directors to enroll in courses and programs that enhance and supplement their knowledge and skills in areas relevant to their role on the Board with the approval of the Board chair or chair of the Governance Committee. Suncor also purchases memberships for directors in either the
B-13 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Institute of Corporate Directors or the National Association of Corporate Directors to allow them to access additional educational opportunities such as conferences, presentations and seminars.
During 2019, the Board, its committees and individual directors participated in presentations and received educational information on a variety of topics, including those set out in the table below.
Date | Topic | Presented/Hosted By | Attended By | ||||
|
|||||||
EVA: the Good, the Bad and the Complex | National Association of Corporate Directors | John Gass | |||||
|
|||||||
Q1 | World Economic Forum Annual Meeting | World Economic Forum | Mark Little | ||||
|
|||||||
Adaptive Governance Board Oversight of Disruptive Risk | National Association of Corporate Directors | Patricia Bedient | |||||
|
|||||||
A New Lens on CEO Succession Planning | National Association of Corporate Directors | John Gass | |||||
|
|||||||
The Future of Work: Redefining Work, Workforces and Workplaces | Global Director Forum | Maureen McCaw | |||||
|
|||||||
Q2 | Microsoft CEO Summit | Microsoft Corporation | Mark Little | ||||
|
|||||||
BCG New CEO Conference | Boston Consulting Group | Mark Little | |||||
|
|||||||
Environmental, Social and Governance (ESG) Risks | National Association of Corporate Directors | Patricia Bedient | |||||
|
|||||||
Committee Chair Orientation | Management | Maureen McCaw | |||||
|
|||||||
Q3 | ESG: Building Shareholder-focused Incentive Plans for a New Generation of Investors | National Association of Corporate Directors | John Gass | ||||
|
|||||||
Director Orientation | Management | Lorraine Mitchelmore | |||||
|
|||||||
Tour of the Edmonton Refinery | Management | Patricia Bedient, Mel Benson, John Gass, Mark Little, Brian MacDonald, Maureen McCaw, Lorraine Mitchelmore, Eira Thomas, Michael Wilson | |||||
|
|||||||
Q4 | Tour of the Enerkem Facility |
Enerkem Inc.
Management |
Patricia Bedient, Mel Benson, John Gass, Mark Little, Brian MacDonald, Maureen McCaw, Lorraine Mitchelmore, Eira Thomas, Michael Wilson | ||||
|
|||||||
A 2020 Vision for the Compensation Committee | National Association of Corporate Directors | John Gass | |||||
|
|||||||
Pilko Safety Forum | Pilko & Associates, LP | Maureen McCaw | |||||
Institute of Corporate Directors | |||||||
|
|||||||
Global Directors Forum The Future of Work | Institute of Corporate Directors | Maureen McCaw | |||||
Deloitte | |||||||
Baker McKenzie | |||||||
|
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-14
Ethical Business Conduct
Sound, ethical business practices are fundamental to Suncor's business. Suncor's standards for the ethical conduct of our business are set forth in the Code, which applies to Suncor's directors, officers, employees and contract workers. The Code requires strict compliance with legal requirements and Suncor's values. Topics addressed in the Code include competition, conflicts of interest and the protection and proper use of corporate assets and opportunities, confidentiality, disclosure of material information, trading in shares and securities, communications to the public, improper payments, harassment, fair dealing in trade relations and accounting, reporting and business controls. The Code is supported by detailed policy guidance and standards and a Code compliance program, under which every Suncor director, officer, employee and contract worker is required annually to complete a Code training course, read a summary of the Code, affirm that he or she understands the requirements of the Code and provide confirmation of compliance with the Code since their last affirmation, or confirmation that any instance of non-compliance has been discussed and resolved with the individual's supervisor. The summary provided includes a message from the President and CEO emphasizing Suncor's values and making it clear that all representatives of Suncor are expected to conduct business in a safe, fair, honest, respectful and ethical manner.
Suncor also has a supplier code of conduct that highlights the values that are important to Suncor and is a guide to the standard of behavior Suncor expects of all suppliers, contractors, consultants and other third parties Suncor does business with. The supplier code of conduct addresses topics such as safety, human rights, harassment, bribery and corruption and confidential information, among others. It also reinforces our commitment to sustainable development and encourages our business associates to work with us to seek ways to reduce environmental impacts, support the communities in which we work and collectively achieve economic growth. Compliance with the supplier code of conduct is a standard term of all Suncor supply chain contracts.
The Board exercises stewardship over the Code in several respects. Suncor's Internal Auditors audit the compliance program annually and the vice president responsible for Internal Audit, who has a direct reporting relationship with the Audit Committee, reports on the audit to that committee. Further, the Board has appointed a Chief Compliance Officer who reviews Suncor's Ethics and Compliance Programs and related matters with the Governance Committee on an annual basis.
Moreover, at least once annually, the Code is reviewed and if appropriate, updated. Management reports to the Governance Committee annually on this process. The Governance Committee reviews any changes and ensures the Code continues to reflect Suncor's commitment to ethics and integrity, and addresses all related legal requirements and best practices. Any waivers of Code requirements for Suncor's executive officers or members of the Board must be approved by the Board or appropriate committee thereof and disclosed. No such waivers were granted in 2019.
Suncor encourages employees to raise ethical concerns with Suncor management and Suncor's legal, corporate security, human resources and Internal Audit departments, without fear of retaliation. In addition, Suncor's "Integrity Hotline" provides a means for Suncor employees to raise issues of concern anonymously, with a third-party service provider. The Integrity Hotline is available 24 hours a day, seven days a week. Any issues of a serious nature are investigated pursuant to Suncor's internal investigations policy and protocols. The Audit Committee receives regular updates on activities relating to the Integrity Hotline. Pursuant to the Code, the vice president responsible for Internal Audit is charged with responsibility for maintaining the Integrity Hotline and ensuring that all alleged Code violations are investigated in conjunction with the Chief Compliance Officer and legal counsel.
Suncor provides additional specialized training for employees for matters governed by the Code where it is determined such training would be necessary or beneficial. For example, certain employees directly involved with Suncor's international and offshore operations are required to periodically attend focused workshops, which address, among other items, compliance with sanctions and anti-bribery and anti-corruption legislation and best practices for operating in international jurisdictions where Suncor operates.
Conflicts of Interest
The Board has a policy relating to directors' conflicts of interest. Pursuant to this policy, directors are required to maintain with the Corporate Secretary a current list of all other entities in which they have a material interest, or on which they serve as a director, trustee or in a similar capacity. This list is made available to all directors through the directors' portal. Directors must immediately advise the Corporate Secretary of any deletions, additions or other changes to any information in their declaration of interest.
If the change involves a change in the director's principal occupation or an appointment as director, officer or trustee of any for-profit or not-for-profit organization, the director must also notify the Board chair, who will determine
B-15 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
whether the change would be inconsistent with the director's duties as a member of the Board. In appropriate circumstances, the director's resignation may be required.
The policy sets out clear procedures applicable in the event conflicts arise. If a director is a party to, or has an interest in any party to, a contract or transaction before the Board (regardless of the materiality of the contract or transaction), the director must immediately advise the Board chair or the particular committee chair. The director's conflict or potential conflict is recorded in the minutes of the meeting and the director is required to absent himself or herself from the meeting for any material discussions or deliberations concerning the subject matter of the contract or transaction. The director is required to abstain from voting on any resolution in respect of such contract or transaction.
The Corporate Secretary ensures that directors do not receive Board materials in situations where the subject matter of those materials could involve an actual or potential conflict of interest.
Compliance with NYSE Standards
Suncor's corporate governance practices meet or exceed all applicable Canadian Requirements and SEC Requirements. Except as disclosed below, Suncor's corporate governance practices are in compliance with NYSE Standards in all significant respects.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. B-16
SCHEDULE C: POSITION DESCRIPTION FOR INDEPENDENT BOARD CHAIR
The following principles shape the position description and duties for the Chair of the Board of Directors of Suncor Energy Inc.:
With the foregoing in mind, the framework for Board Chair will be:
The accountabilities of the Chair include:
Shareholder Meetings
Manage the Board
Develop a More Effective Board
Work with Management
Serve as an advisor to the CEO concerning the interests of the Board and the relationship between management and the Board.
Liaise with Stakeholders
C-1 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
SCHEDULE D: DIRECTOR INDEPENDENCE POLICY AND CRITERIA
Background:
Corporate governance guidelines provide that boards of directors should have a majority of independent directors, and that the board chair should be independent.
The purpose of this independence policy and criteria is to state the criteria by which the Board of Directors (the "Board") of Suncor Energy Inc. ("Suncor") determines whether each of its directors is or is not independent.
Independence Policy:
Pursuant to the terms of reference for the Board, a majority of the Board must be independent, and in addition, the Audit, Governance, and Human Resources and Compensation Committees, shall be comprised solely of independent directors. The Governance Committee will conduct an annual review of the status of each director and director nominee in light of the following criteria for independence, and will recommend to the Board in order that the Board may affirmatively determine the status of each such individual. In making independence determinations, the Board shall consider all relevant facts and circumstances. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. The key concern when assessing independence is independence from management.
Independence Criteria:
A director of Suncor will be considered independent only if the Board has affirmatively determined that the director has no material relationship with Suncor, either directly or as a partner, shareholder or officer of an organization that has a material relationship with Suncor. A "material relationship" is one which could, in the view of the Board, be reasonably expected to interfere with the exercise of the director's independent judgment (CSA National Instrument 52-110).
Notwithstanding the foregoing, a director will NOT be considered independent if(2):
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. D-1
A director of Suncor will not be considered to have a material relationship with Suncor solely because the individual or his or her immediate family member:
D-2 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
SCHEDULE E: BOARD TERMS OF REFERENCE
Part I: Overview
The Canada Business Corporations Act (the Act), Suncor's governing statute, provides "that the directors shall manage or supervise the management of the business and affairs of a corporation...". In practice, as a Board of Directors cannot "manage" a corporation such as Suncor in the sense of directing its day-to-day operations, the overarching role and legal duty of Suncor's Board of Directors is to "supervise" the management of Suncor's business and affairs. Accordingly, the Board of Directors oversees development of the overall strategic direction and policy framework for Suncor. This responsibility is discharged through Board oversight of Suncor's management, which is responsible for the day-to-day conduct of the business. The Board, through the Chief Executive Officer (CEO), sets standards of conduct, including the Corporation's general moral and ethical tone, compliance with applicable laws, standards for financial practices and reporting, qualitative standards for operations and products and other standards that reflect the views of the Board as to the conduct of the business in the best interests of the Corporation.
In general, then, the Board is responsible for the selection, monitoring and evaluation of executive management, and for overseeing the ways in which Suncor's business and affairs are managed. In this way, the Board assumes responsibility for the stewardship of the Corporation. Specific responsibilities which facilitate the discharge of the Board's stewardship responsibilities include: the strategic planning process, risk identification and management, ensuring that effective stakeholder communication policies are in place, and ensuring the integrity of internal controls and management information systems. These responsibilities, and others, are addressed in more detail in the Board's Mandate, comprising Part IV of these Terms of Reference.
The Board of Directors discharges its responsibilities with the assistance of Board committees. The committees advise and formulate recommendations to the Board, but do not, except in limited and specifically identified circumstances, have the authority to approve matters on behalf of the Board of Directors. General guidelines relating to Board committees comprise Part III of these Terms of Reference. In addition, each committee has a written mandate, setting out the scope of its operations, and its key roles and responsibilities. Position descriptions of the Board Committee Chairs and the Board Chair set out the related principles, framework and accountabilities for those key roles in Suncor's Board governance.
The CEO of Suncor is delegated the responsibility for the day-to-day management of the Corporation and for providing the Corporation with leadership. The CEO discharges these responsibilities by formulating Corporation policies and proposed actions, and, where appropriate, presenting them to the Board for approval. The Corporation's Management Control Process Policy explicitly identifies actions which have been specifically delegated to the CEO, and those which are reserved to the Board of Directors. In addition, the Board has plenary power, and has the power to specify and modify the authority and duties of management as it sees fit with a view to Suncor's best interests and in accordance with current standards. The Act also identifies certain matters which must be considered by the Board as a whole and may not be delegated to a committee or to management. These matters include:
One of the key stewardship responsibilities of the Board is to approve the Corporation's goals, strategies and plans, and the fundamental objectives and policies within which the business is operated, and evaluate the performance of executive management. Once the Board has approved the goals, strategies and plans, it acts in a unified and cohesive manner in supporting and guiding the CEO. The CEO keeps the Board fully informed of the progress of the Corporation toward the achievement of its goals, strategies and plans, in a timely and candid manner, and the Board of Directors continually evaluates the performance of executive management toward these achievements.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. E-1
Part II: Board Guidelines
The following have been adopted by the Board as the guidelines applicable to the Board and its operations:
E-2 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
Part III: Committee Guidelines
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. E-3
Part IV: Mandate of the Board of Directors
Goals of the Board. The major goals and responsibilities of the Board are to:
Major Duties. The major duties of the Board are to:
E-4 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc. E-5
APPENDIX A TO THE TERMS OF REFERENCE FINANCIAL LITERACY AND EXPERTISE
For the purpose of making appointments to the Corporation's Audit Committee, and in addition to the independence requirements, all Directors nominated to the Audit Committee must meet the test of Financial Literacy as determined in the judgment of the Board of Directors. Also, at least one director so nominated must meet the test of Financial Expert as determined in the judgment of the Board of Directors.
Financial Literacy
Financial Literacy can be generally defined as the ability to read and understand a balance sheet, an income statement and a cash flow statement. In assessing a potential appointee's level of Financial Literacy the Board of Directors must evaluate the totality of the individual's education and experience including:
Audit Committee Financial Expert
An "Audit Committee Financial Expert" means a person who in the judgment of the Corporation's Board of Directors, has following attributes:
A person shall have acquired the attributes referred to in items (a) through (e) inclusive above through:
App A-1 2020 MANAGEMENT PROXY CIRCULAR Suncor Energy Inc.
. 8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 www.computershare.com MR SAM SAMPLE 123 SAMPLES STREET SAMPLETOWN SS X9X 9X9 Security Class COMMON SHARES Holder Account Number C1234567890 IND Fold This Form of Proxy is solicited by and on behalf of Management. Notes to proxy 1. Every holder has the right to appoint some other person or company of their choice, who need not be a holder, to attend and act on their behalf at the meeting or any adjournment or postponement thereof. If you wish to appoint a person or company other than the persons whose names are printed herein, please insert the name of your chosen proxyholder in the space provided (see reverse). 2. If the securities are registered in the name of more than one owner (for example, joint ownership, trustees, executors, etc.), then all those registered should sign this proxy. If you are voting on behalf of a corporation or another individual, you must sign this proxy with signing capacity stated, and you may be required to provide documentation evidencing your power to sign this proxy. 3. This proxy should be signed in the exact manner as the name(s) appear(s) on the proxy. 4. If this proxy is not dated, it will be deemed to bear the date on which it is mailed by Management to the holder. 5. The securities represented by this proxy will be voted as directed by the holder, however, if such a direction is not made in respect of any matter, this proxy will be voted as recommended by Management. 6. The securities represented by this proxy will be voted in favour or withheld from voting or voted against each of the matters described herein, as applicable, in accordance with the instructions of the holder, on any ballot that may be called for and, if the holder has specified a choice with respect to any matter to be acted on, the securities will be voted accordingly. 7. This proxy confers discretionary authority in respect of amendments or variations to matters identified in the Notice of Annual General Meeting or other matters that may properly come before the meeting or any adjournment or postponement thereof. 8. In order for this proxy to be effective, it must be validly signed and submitted so that it is received by Suncor Energy Inc. not less than 48 hours (excluding Saturdays, Sundays and holidays) before the Annual General Meeting or any adjournment or postponement thereof. 9. This proxy should be read in conjunction with the Notice of Annual General Meeting, the Notice of Availability of Proxy Materials and the Management Proxy Circular of Suncor Energy Inc. dated February 27, 2020. Fold Proxies submitted must be received by 10:30 am, Mountain Daylight Time, on Monday, May 4, 2020. VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK! . . . To Receive Documents Electronically You can enroll to receive future securityholder communications electronically by visiting www.investorcentre.com and clicking at the bottom of the page. To Vote by Fax Complete, sign and date the reverse hereof. Forward it by fax to 1-866-249-7775 for calls within Canada and the U.S. There is NO CHARGE for this call. Forward it by fax to 416-263-9524 for calls outside Canada and the U.S. To Vote Using the Telephone To Vote Using the Internet Call the number listed BELOW from a touch tone telephone. 1-866-732-VOTE (8683) Toll Free Go to the following web site: www.investorvote.com Smartphone? Scan the QR code to vote now. If you vote by telephone or the Internet, DO NOT mail back this proxy. Voting by mail may be the only method for securities held in the name of a corporation or securities being voted on behalf of another individual. Voting by mail or by Internet are the only methods by which a holder may appoint a person as proxyholder other than the Management nominees named on the reverse of this proxy. Instead of mailing this proxy, you may choose one of the two voting methods outlined above to vote this proxy. To vote by telephone or the Internet, you will need to provide your CONTROL NUMBER listed below. 123456789012345 CONTROL NUMBER CPUQC01.E.INT/000001/i1234 01JVVB Form of Proxy - Annual General Meeting of Suncor Energy Inc. to be held on May 6, 2020
. MR SAM SAMPLE C1234567890 XXX 123 Appointment of Proxyholder I/We, being holder(s) of Suncor Energy Inc. hereby appoint: Michael M. Wilson, or failing him, Mark S. Little Print the name of the person you are appointing if this person is someone other than the Management Nominees listed herein. OR as my/our proxyholder with full power of substitution and to attend, act and to vote for and on behalf of the shareholder in accordance with the following direction (or if no directions have been given, as the proxyholder sees fit) and all other matters that may properly come before the Annual General Meeting of shareholders of Suncor Energy Inc. to be held at The Metropolitan Centre, 333 Fourth Avenue S.W., Calgary, Alberta on May 6, 2020 at 10:30 AM (Mountain Daylight Time) and at any adjournment or postponement thereof. VOTING RECOMMENDATIONS ARE INDICATED BY OVER THE BOXES. 1. Election of Directors - The election of the following nominees as directors of Suncor Energy Inc. until the close of the next annual general meeting. Withhold Withhold Withhold 01. Patricia M. Bedient 02. Mel E. Benson 03. John D. Gass Fold 04. Dennis M. Houston 05. Mark S. Little 06. Brian P. MacDonald 07. Maureen McCaw 08. Lorraine Mitchelmore 09. Eira M. Thomas 10. Michael M. Wilson Withhold 2. Appointment of Auditors Appointment of KPMG LLP as auditor of Suncor Energy Inc. for the ensuing year. Against 3. Advisory Resolution on Executive Compensation To accept the approach to executive compensation disclosed in the Management Proxy Circular of Suncor Energy Inc. dated February 27, 2020. Fold To vote in the proxy holders discretion on any amendments or variations to the matters identified above or such other business as may properly be brought before the meeting or any continuation of the meeting after an adjournment or postponement. Authorized Signature(s) - This section must be completed for your instructions to be executed. I/We authorize you to act in accordance with my/our instructions set out above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting instructions are indicated above, this Proxy will be voted as recommended by Management. Signature(s) Date DD / MM / YY Interim Financial Statements Mark this box if you would like to receive interim financial statements and accompanying Managements Discussion and Analysis by mail. Annual Report Mark this box if you would NOT like to receive the Annual Financial Statements and accompanying Managements Discussion and Analysis by mail. If you are not mailing back your proxy, you may register online to receive the above financial report(s) by mail at www.computershare.com/mailinglist. 999999999999 S U N Q 291055 AR2 01JVWD For For For For For HIGHLIGHTED TEXT
Notice of Annual General Meeting and Notice of Availability of Proxy Materials
Have questions about this notice? Call the Toll Free Number below or scan the QR code to find out more. Toll Free 1-866 964-0492 www.computershare.com/ noticeandaccess Notice of Annual General Meeting and Notice of Availability of Proxy Materials You are receiving this notice as a shareholder of Suncor Energy Inc. (Suncor). Suncor has decided to use notice and access to deliver its Management Proxy Circular dated February 27, 2020 (the Management Proxy Circular) to you by providing you with electronic access to the document, instead of mailing paper copies. Enclosed is a form of proxy which may be used to vote your shares. Fold Notice and access is a more environmentally friendly and cost effective way to deliver the Management Proxy Circular, as it will help reduce paper use and also will reduce the cost of printing and mailing materials to shareholders. Notice is hereby given that an annual general meeting of Suncor will be held: When: May 6, 2020 10:30 am (Mountain Daylight Time) Where:The Metropolitan Centre, 333 Fourth Avenue S.W. Calgary, AB T2P 0H9 for the following purposes, as further described in the Business of the Meeting section of the Management Proxy Circular and other applicable sections listed below: i. to receive the consolidated financial statements of Suncor for the year ended December 31, 2019 together with the notes thereto and the auditors report thereon; Fold ii. to elect directors of Suncor to hold office until the close of the next annual meeting; iii. to appoint the auditor of Suncor to hold office until the close of the next annual meeting; iv. to consider and, if deemed fit, approve an advisory resolution on Suncors approach to executive compensation. See also the Executive Compensation - Compensation Discussion and Analysis section of the Management Proxy Circular; and v. to transact such other business as may properly be brought before the meeting or any continuation of the meeting after an adjournment or postponement. CPUQC01.E.INT/000001/i1234 01K0GB
How to Request a Paper Copy of the Management Proxy Circular Shareholders may request to receive a paper copy of the Management Proxy Circular by mail at no cost for up to one year from the date the Management Proxy Circular was filed on SEDAR. Requests for paper copies may be made using your Control Number as it appears on your enclosed form of proxy. If you do request a paper copy, please note that you will not receive another form of proxy; please retain your current one for voting purposes. To request a paper copy before the meeting date, please call the number below and follow the instructions. A paper copy will be sent to you within three business days of receiving your request. Toll Free, within North America: 1-866-962-0498 Outside of North America: (514) 982-8716 To request a paper copy after the meeting date, please call 1-800-558-9071. A paper copy will be sent to you within 10 calendar days of receiving your request. To ensure you receive the paper copy in advance of the voting deadline and meeting date, we estimate that your request must be received no later than 5:00 pm Eastern Daylight Time on Monday, April 20, 2020. Suncor will only provide paper copies of the Management Proxy Circular to shareholders who have standing instructions to receive, or for whom Suncor has otherwise received a request to provide, paper copies of materials. Fold Voting PLEASE NOTE YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote using the methods reflected on your enclosed form of proxy. Internet: www.investorvote.com Telephone: 1-866-732-8683 Facsimile: 1-866-249-7775 Mail: Computershare Trust Company of Canada, Proxy Department 135 West Beaver Creek, P.O. Box 300 Richmond Hill, Ontario, L4B 4R5 Fold Your form of proxy must be received by 10:30 am Mountain Daylight Time on Monday, May 4, 2020 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. PLEASE REVIEW THE MANAGEMENT PROXY CIRCULAR PRIOR TO VOTING The Management Proxy Circular and other relevant materials are available at: www.suncor.com/annual-disclosure or www.sedar.com Suncors 2019 annual report and annual financial statements will be delivered to all registered shareholders who did not opt out of receiving such documents. If you have any questions about notice and access, please call Investor Relations at 1-800-558-9071. 01K0HB
Notice of Annual General Meeting and Notice of Availability of Proxy Materials You are receiving this notice as a non-registered shareholder of Suncor Energy Inc. (Suncor). Suncor has decided to use notice and access to deliver its Management Proxy Circular dated February 27, 2020 (the Management Proxy Circular) to you by providing you with electronic access to the document, instead of mailing paper copies. Enclosed is a voting instruction form which may be used to vote your shares. Notice and access is a more environmentally friendly and cost effective way to deliver the Management Proxy Circular, as it will help reduce paper use and also will reduce the cost of printing and mailing materials to shareholders. Notice is hereby given that an annual general meeting of Suncor will be held: When: May 6, 2020 10:30 am (Mountain Daylight Time) Where: The Metropolitan Centre 333 Fourth Avenue S.W. Calgary, AB T2P 0H9 for the following purposes, as further described in the Business of the Meeting section of the Management Proxy Circular and other applicable sections listed below: i. to receive the consolidated financial statements of Suncor for the year ended December 31, 2019 together with the notes thereto and the auditors report thereon; ii. to elect directors of Suncor to hold office until the close of the next annual meeting; iii. to appoint the auditor of Suncor to hold office until the close of the next annual meeting; iv. to consider and, if deemed fit, approve an advisory resolution on Suncors approach to executive compensation. See also the Executive Compensation - Compensation Discussion and Analysis section of the Management Proxy Circular; and v. to transact such other business as may properly be brought before the meeting or any continuation of the meeting after an adjournment or postponement.
How to Request a Paper Copy of the Management Proxy Circular Non-registered shareholders may request to receive a paper copy of the Management Proxy Circular by mail at no cost for up to one year from the date the Management Proxy Circular was filed on SEDAR using the following methods and entering the control number located on the voting instruction form provided to you and following the instructions: Online at www.proxyvote.com By telephone toll free at 1-877-907-7643 If you do not have a control number, please contact your broker directly. If you do request a paper copy, please note that you will not receive another voting instruction form; please retain your current one for voting purposes. To ensure you receive the paper copy in advance of the voting deadline and meeting date, we estimate that your request must be received no later than 5:00 pm Eastern Daylight Time on Monday, April 20, 2020. Suncor will only provide paper copies of the Management Proxy Circular to shareholders who have standing instructions to receive, or for whom Suncor has otherwise received a request to provide, paper copies of materials. Voting PLEASE NOTE YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote using the methods reflected on your enclosed voting instruction form and summarized below: Internet: www.proxyvote.com Telephone: 1-800-474-7493 (English) or 1-800-474-7501 (French) Facsimile: 905-507-7793 Mail: Data Processing Centre PO Box 3700, STN INDUSTRIAL PARK Markham, ON Canada L3R 9Z9 Proxies must be received by Suncor by 10:30 am Mountain Daylight Time on Monday, May 4, 2020 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. As you are a non-registered shareholder, your voting instruction form may provide for an earlier voting deadline in order to process your votes in a timely manner. To ensure your votes are counted you should ensure your voting instruction form is submitted in the timeline provided for on such voting instruction form. PLEASE REVIEW THE MANAGEMENT PROXY CIRCULAR PRIOR TO VOTING The Management Proxy Circular and other relevant materials are available at: www.suncor.com/annual-disclosure or www.sedar.com Suncors 2019 annual report and annual financial statements will be delivered to all non-registered shareholders who requested to receive such documents. If you have any questions about notice and access, please call Investor Relations at 1-800-558-9071.