1 Governance PROPOSAL 1 - ELECTION OF DIRECTORS 9 Recommendation of the Board 10 DIRECTORS AND NOMINEES 11 Director Biographies and Qualifications 11 Director Nominee and Board Membership Criteria and Qualifications 14 Director Independence 15 BOARD GOVERNANCE AND STRUCTURE 17 The Role of the Board 17 Board Structure 19 Board Governance 23 Communications with the Board 25 CORPORATE GOVERNANCE 26 Foundation for Certain Governing Document Provisions 26 Code of Conduct and Corporate Policies 26

* * * * *

 

PROPOSAL 1—ELECTION OF DIRECTORS

 

Proposal 1—Election of Directors

 

		* * * * * Our Board has nominated two directors for election as Class II directors at this Annual Meeting to hold office for a three-year term:
		John Kennedy		Michael Roemer
		Both Mr. Kennedy and Mr. Roemer are currently directors and the Board believes that each possesses the qualities and experience that director nominees should possess.   Each of Messrs. Kennedy and Roemer has agreed to be named in this Proxy Statement and to serve if elected.   * * * * *

Pursuant to our certificate of incorporation and bylaws, the Board is classified into three classes of directors, designated Class I, Class II and Class III, with each class having a three-year term. With the exception of Messrs. Gawick and Roemer, each of our current directors was appointed to the Board upon C&J’s emergence from a Chapter 11 financial restructuring effective January 6, 2017; Messrs. Gawick and Roemer were re-appointed to the Board at that time. The Class II directors’ terms expire at this 2019 Annual Meeting; Class III directors’ terms expire at the 2020 annual meeting; and Class I directors’ terms expire at the 2021 annual meeting.

Based on the recommendations from our Nominating and Governance Committee, our Board has nominated Messrs. John Kennedy and Michael Roemer for re-election as Class II directors to serve for a three-year term until the 2022 annual meeting of stockholders and until their successors have been elected, or until their earlier death, resignation or removal. Each of Messrs. Kennedy and Roemer has agreed to be named in this Proxy Statement and to serve if elected. We have no reason to believe that the director nominees will be unable or unwilling to serve on our Board if elected.

The following table provides summary information about our current directors, including the Class II nominees, as of April 8, 2019, and the subsequent pages include more detailed information about their individual experience, qualifications, attributes and skills that led our Nominating and Governance Committee and Board to conclude that they should serve as directors.

 

Name

Age

C&J / Board Position

Director Since

Independent

Tenure (years)

Other Current Public Boards

Donald Gawick

61

President, Chief Executive Officer and Director, Class III

July 2016

3

0

Patrick Murray

76

Board Chair, Director, Class III

January 2017

✓

2

0

Stuart Brightman

62

Director, Class I

January 2017

✓

2

2

*

John Kennedy

66

Director Nominee

January 2017

✓

2

0

Steven Mueller

66

Director, Class III

January 2017

✓

2

0

Michael Roemer

60

Director Nominee

December 2010

✓

8

0

Michael Zawadzki

38

Director, Class I

January 2017

✓

2

0

 

*

Mr. Brightman, an active CEO, currently serves on his company’ board as well as on the board of a subsidiary company. Particularly given the overlap of issues between the two related companies, we do not believe that Mr. Brightman’s ability to devote sufficient time to our Board is impacted. Mr. Brightman has announced his intent to retire from his role as chief executive officer immediately following his company’s annual meeting of stockholders on May 3, 2019. He has also announced his intent to retire from the board of CSI Compressco GP Inc. after that meeting.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      9

PROPOSAL 1—ELECTION OF DIRECTORS

 

The Board seeks out, and the Board is comprised of, individuals whose knowledge, skills, and breadth and depth of experience complement those of other Board members. The Board believes that each director nominee is highly qualified to serve as a member of our Board and that, through their respective backgrounds and track records of success in what we believe are highly relevant positions, these individuals contribute a wealth of talent and experience to the Board. Each director nominee also contributes intangible qualities such as critical thinking and analysis, which, taken together, provide us with the variety and depth of knowledge, viewpoints and ideas necessary for effective oversight, direction and vision for the Company.

There are no family relationships among any of our directors (specifically including the director nominees) and executive officers.

Please see “Share Ownership Information—Security Ownership of Management” for information regarding our current directors’ and director nominees’ holdings of equity securities of the Company.

Shares represented by properly executed proxies will be voted, if authority to do so is not withheld, for the election of each of Messrs. Kennedy and Roemer. However, if a nominee should become unable or unwilling to serve for any reason, proxies may be voted for another person nominated as a substitute by our Board. The Board may also reduce the number of directors. The proxies being solicited will be voted for no more than two nominees at the Annual Meeting. If you hold your shares in street name, please be aware that brokers, banks and other holders of record do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker, bank or other holder of record how to vote on this proposal, they will deliver a non-vote on this proposal. Directors are elected a majority vote standard for uncontested director elections and a plurality vote standard for contested director elections. Stockholders may not cumulate their votes in the election of directors.

 

✓		OUR BOARD RECOMMENDS A VOTE “ FOR ” THE CLASS II DIRECTOR NOMINEES LISTED ABOVE.

 

10      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

DIRECTORS AND NOMINEES

 

Director Biographies and Qualifications

Described below are the principal occupations and directorships for at least the past five years of our current directors, including the director nominees, as well as certain additional information regarding their individual experience, qualifications, attributes and skills that led our Nominating and Governance Committee and Board to conclude that each should serve on the Board.

 

Donald Gawick (Director, Class  III)		Director Since: July 2016 Chief Executive Officer
Mr. Gawick, 61, joined our Board of Directors in July 2016. He also currently serves as our President and Chief Executive Officer, a position he was appointed to in June 2016, having previously served as our Chief Operating Officer.   Mr. Gawick was President and Chief Executive Officer of C&J’s wireline business, Casedhole Solutions, Inc. (“Casedhole Solutions”), from March 2010 through June 2012, when C&J acquired Casedhole Solutions. Mr. Gawick continued in his role of President of Casedhole Solutions until his promotion to Chief Operating Officer in October 2012. Mr. Gawick started his oilfield career in 1979 with Schlumberger and from then until March 2010, he held numerous management positions with Schlumberger, focusing on operations and marketing, including oversight of all of Schlumberger’s oilfield business segments. In addition, he has held senior leadership positions in oilfield services in sales, business and new technology development, service delivery and health-safety-environmental management, with assignments throughout the United States, as well as in Canada, Europe, the Far East and Latin America.   Mr. Gawick holds a Bachelor of Science degree in Electrical Engineering from the University of Manitoba.   The Board believes that Mr. Gawick’s significant role in the growth and management of our Company and his extensive leadership, operations and business experience, including his current position as the President and Chief Executive Officer of the Company, support the conclusion that he should continue to serve as a member of our Board.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      11

DIRECTORS AND NOMINEES

 

 

Patrick Murray  (Director, Class  III)		Director Since: January 2017 Chair of the Board
Mr. Murray, 76, joined our Board of Directors in January 2017 and currently serves as Chair of the Board. In 2007, Mr. Murray retired from Dresser, Inc. (including its successors in interest, “Dresser”), a manufacturer and marketer of highly engineered equipment for the energy industry, where he had been the chairman of the board since 2004 and Chief Executive Officer since 2001.   Mr. Murray has over 35 years of domestic and international experience in both operational management and financial/business development leadership roles. Mr. Murray served in a variety of senior leadership roles with Dresser, including President and Chief Executive Officer of Dresser; President of Halliburton Company’s Dresser Equipment Group, Inc.; Vice President, Strategic Initiatives of Dresser Industries, Inc.; and Vice President, Operations of Dresser, Inc. from 1996 to 2000. Mr. Murray was Chief Executive Officer of the management team that led the leveraged buyout of Dresser Equipment Group by Dresser senior management and investment firms.   Mr. Murray served as the President of Sperry-Sun Drilling Services from 1988 through 1996.   Mr. Murray joined NL Industries in 1973 as a Systems Application Consultant and served in a variety of increasingly senior management positions.   Mr. Murray also serves on the board of the World Affairs Council of Dallas Fort Worth, on the board of advisors for the Maguire Energy Institute at the Edwin L. Cox School of Business, Southern Methodist University, and as Chairman of the Board of Regents of Seton Hall University. Mr. Murray holds a Bachelor of Science degree in Accounting and a Master of Business Administration from Seton Hall University. He also served for two years in the U.S. Army as a commissioned officer.   The Board believes that Mr. Murray’s extensive executive-level management experience, public board experience and comprehensive knowledge and understanding of the oil and gas industry support the conclusion that he should continue to serve as a member of our Board.

 

Stuart Brightman (Director, Class  I)		Director Since: January 2017 Other Public Company Directorships: TETRA Technologies, Inc.; CSI Compressco GP Inc., a subsidiary of TETRA*
Mr. Brightman, 62, joined our Board of Directors in January 2017. Mr. Brightman has served as Chief Executive Officer of TETRA Technologies, Inc. (“TETRA”), a diversified oilfield services company, since May 2009. He also served as President of TETRA from May 2009 until February 2018, and as Executive Vice President and Chief Operating Officer of TETRA from April 2005 to May 2009.   During his tenure in executive roles at TETRA, Mr. Brightman has successfully positioned TETRA as a leading player in several of its markets. He has also led TETRA through multiple key acquisitions and divestitures.   Prior to TETRA, Mr. Brightman spent 11 years at Dresser in a variety of leadership roles, during which he was involved in multiple M&A transactions, internal restructurings and product/market repositionings. He has experience in integration of acquisitions and oversight of operations, engineering, sales and marketing, finance, human resources and information technology. He was also part of the management team that led the leveraged buyout of Dresser Equipment Group by Dresser senior management and investment firms.   Mr. Brightman received his B.S degree from the University of Pennsylvania and his Master of Business Administration degree from the Wharton School of Business.   The Board believes that Mr. Brightman’s broad oil field services and executive management experience, and his knowledge of current developments and best practices in the industry along with his proven leadership and business capabilities support the conclusion that he should continue to serve as a member of our Board.   * Mr. Brightman has announced his intent to retire from his role as Chief Executive Officer of TETRA immediately following the annual meeting of TETRA stockholders on May 3, 2019. He has also announced his intent to retire from the board of CSI Compressco GP Inc. after the 2019 Annual Meeting of the TETRA stockholders on May 3, 2019.

 

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DIRECTORS AND NOMINEES

 

 

John Kennedy (Director Nominee, Class  II)		Director Since: January 2017
Mr. Kennedy, 66, joined our Board of Directors in January 2017. Mr. Kennedy was president and chief executive officer of Wilson International, a wholly-owned business unit of Smith International from 1999 to 2010 and of Schlumberger from August 2010 to May 2012. During his tenure, the company developed and executed growth strategies building a global infrastructure and implementing leading supply chain information technologies.   Prior to this, he served in multiple senior financial roles including Chief Financial Officer, at Smith International Inc., where he held responsibility for, among other things, accounting, strategic planning, investor relations, SEC reporting, board reporting, tax planning, exposure management, acquisition integration and corporate finance.   He currently serves as chairman of the board of directors of MicroSeismic Inc., where he has also served as chairman of the audit committee since January 2015. He was appointed to MicroSeismic’s board of directors in September 2013. Mr. Kennedy also currently serves as an advisor to Sumitomo Corporation of the Americas, a position he has held since 2015. Mr. Kennedy previously served on the board of directors for Edgen Group from January to November 2013 and CE Franklin Inc. from 1999 to May 2012. Mr. Kennedy is a member of the Industry Advisory Board to the Industrial Distribution Program at Texas A&M university, a position he has held since 2005. His career has spanned over 35 years in both executive finance and operating positions providing a broad range of expertise in strategic planning, organization structure, acquisitions, divestitures, recapitalizations and reorganizations in companies with global operations.   Mr. Kennedy is a member of the Chartered Association of Corporate Treasurers (FCT). Mr. Kennedy graduated from Farnborough College of Technology in 1973.   The Board believes Mr. Kennedy’s vast experience in global finance and accounting, and his extensive knowledge of corporate finance, financial accounting, tax, operations and mergers and acquisitions support the conclusion that he should continue to serve as a member of our Board.

 

Steven Mueller (Director, Class  III)		Director Since: January 2017
Mr. Mueller, 66, joined our Board of Directors in January 2017. He is also currently a Senior Advisor for First Reserve Corporation (a private equity investment firm exclusively focused on energy and specializing in buyouts, growth capital, and industry consolidations in middle market companies), having joined the First Reserve Senior Advisor Program in September 2016.   Mr. Mueller served in key leadership roles, including Chairman of the Board, Chief Executive Officer, Chief Operating Officer and President at Southwestern Energy Company (“Southwestern”) (an energy company engaged in exploration, development, production, gathering and marketing) during his tenure from 2008 until his retirement in 2016. While with Southwestern, he repositioned the company from Arkansas centric to a significant Appalachian exploration and production player and oversaw numerous acquisitions and divestitures. He was also instrumental in Southwestern’s environmental and sustainability efforts, including developing a leading approach to water use, methane emissions and fracture stimulation issues.   Mr. Mueller received a Bachelor of Science degree in Geologic Engineering from the Colorado School of Mines. His 40 plus years of experience in the oil and gas industry evolved from his first position as a Geological Engineer with Tenneco Oil and Gas Company to roles of increasing responsibility in engineering, operations and management with both large and micro exploration and production companies. He has also participated in transformations in all but one of those companies.   He continues to exhibit his leadership in the industry through his involvement with the Gas Technology Institute.   The Board believes that Mr. Mueller’s extensive operational, executive management and public board experience, as well as his knowledge of current developments and best practices in the oil and gas industry along with his proven leadership and business capabilities support the conclusion that he should continue to serve as a member of our Board.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      13

DIRECTORS AND NOMINEES

 

 

Michael Roemer (Director Nominee, Class  II)		Director Since: December 2010
Mr. Roemer, 60, joined our Board of Directors in December 2010. Mr. Roemer also operates his business, Roemer Financial Consulting, a financial advisory services company that he founded in 2012. He advises closely held businesses with financial advice, focusing on potential merger and acquisitions and exit transactions.   Prior to his current role, Mr. Roemer served as a Partner and Chief Financial Officer of Hammond, Kennedy, Whitney & Company (“HKW”), a private equity firm. In this role, his responsibilities included, among other things, financial and tax reporting, coordinating financial due diligence of acquisition targets, and working with the HKW team to assess a target’s financial results and the financial management team’s capabilities.   Mr. Roemer received his Bachelor of Science in Accounting from the University of Rhode Island. Mr. Roemer began his career with the Flackman, Goodman & Potter accounting firm, where he rose to the level of Partner. He is a licensed CPA with over 35 years’ experience.   The Board believes Mr. Roemer’s extensive background in public accounting and knowledge of generally accepted accounting principles, combined with his additional experience as the chief financial officer of a private equity firm and his vast experience in financial and accounting matters support the conclusion that he should continue to serve as a member of our Board.

 

Michael Zawadzki  (Director, Class   I)		Director Since: January 2017
Mr. Zawadzki, 38, joined our Board of Directors in January 2017. Mr. Zawadzki is also a Senior Managing Director of The Blackstone Group and Co-Head of GSO Capital Partners’ energy platform. Mr. Zawadzki oversees GSO’s activities in the energy sector and sits on the investment committee for GSO’s various energy funds.   Prior to joining GSO in 2006, Mr. Zawadzki was with Citigroup Private Equity, where he completed numerous private equity and subordinated debt investments. He also worked in the investment banking division of Salomon Smith Barney, focused on the media and telecommunications industries.   Mr. Zawadzki currently serves on the Board of Directors of Twin Eagle Resource Management, where he has served since March 2017, Sequel Energy Group since November 2016, 3Bear Energy since September 2016, Elevation Midstream since July 2018, and Community Development Capital Group since November 2013. During the past five years, Mr. Zawadzki has also served on the Board of Directors of Titan Energy, LLC.   Mr. Zawadzki received a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania, where he graduated magna cum laude.   The Board believes that Mr. Zawadzki’s extensive knowledge and expertise of the energy industry, including public and private company board experience, as well as his capabilities with respect to corporate finance, financial accounting and mergers and acquisitions, as well as planning and analysis, support the conclusion that he should continue to serve as a member of our Board.

Director Nominations and Board Membership Criteria and Qualifications

We believe that, at a minimum, our directors should be persons of integrity, be able to exercise sound, mature and independent business judgment in the best interests of our stockholders as a whole, be recognized leaders in business or professional communities, have the knowledge, skills, experience, perspectives and personal attributes that complement those of other Board members and, as a whole, align with the Company’s needs, be able to actively participate in Board and committee meetings and related activities, be able to work professionally and effectively with other Board members and our management, be available to remain on the Board long enough to make an effective contribution, and have no material relationships with competitors, customers or other third parties that could present realistic possibilities of conflict of interest or legal issues.

The Nominating and Governance Committee is responsible for recommending to the Board nominees for election as director, and the Board is responsible for selecting nominees for election (or re-election, as the case may be). On an annual basis, the Nominating and Governance Committee reviews each incumbent director’s continued service on the Board, including the qualifications and other characteristics required of directors in the context of the current composition of the Board and our long-term strategy and future needs as well as the current business environment with the goal of creating a complementary balance of expertise, backgrounds and perspectives aligned with the long-term interest of stockholders.

 

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DIRECTORS AND NOMINEES

 

The Nominating and Governance Committee is also responsible for, as needed, identifying, evaluating and recommending individuals qualified to serve as directors to the Board. In identifying prospective director candidates for the Board, the Nominating and Governance Committee may seek referrals from other members of the Board, management, stockholders and other sources. The Nominating and Governance Committee also may, but need not, retain a professional search firm in order to assist in these efforts. The Nominating and Governance Committee and the Board utilizes the same criteria for evaluating candidates regardless of the source of the referral.

The Nominating and Governance Committee and Board believe that a diverse mix of backgrounds, experiences, perspectives and personal attributes and other characteristics enhances the quality of our Board’s deliberations, decision-making and overall effectiveness, and best positions the Company for long-term success. In evaluating potential Board candidates, our Board considers diversity in its broadest sense, including, among other things, diversity of skills, background, perspective, personal and professional experiences, geography, age, gender, race, ethnicity, and other demographics. The Nominating and Governance Committee and the Board seek individuals with qualities and characteristics that, when combined with those of our incumbent directors, enhance the effectiveness of the Board and support long-term value creation. In doing so, the Nominating and Governance Committee and the Board will consider the immediate and future needs of our Company.

The Nominating and Governance Committee considers the effectiveness of its approach to Board composition, diversity and criteria for Board service, and refreshment in connection with the annual performance evaluation of our Board, committees and individual directors. Part of this review focuses on whether and to what extent our Board includes an optimal mix of characteristics that reflect an effective Board for C&J’s needs, strategy and business environment. We believe that the evaluation program has been designed such that any gaps or skill-related deficiencies would be identified and addressed as part of the process.

 

Director Independence

As a publicly traded company listed on the NYSE, we are required to comply with the rules and regulations of the NYSE as well as that of the SEC. The NYSE requires listed companies to have a board of directors with at least a majority of independent directors, as that term is defined by the applicable rules and regulations of the NYSE and SEC. Additionally, each of the Audit Committee, Compensation Committee and Nominating and Governance Committee is required to be comprised solely of independent directors, with heightened standards applicable to Audit Committee and Compensation Committee members.

As discussed below, all of our directors, including the Board Chair, are independent of the Company and management, except for Mr. Gawick who serves as our President and Chief Executive Officer (“CEO”). This is substantially above the NYSE requirement that a majority of the directors be independent. In accordance with the rules of the NYSE, only independent directors serve on the Board’s standing committees.

Each year, our Nominating and Governance Committee evaluates the relationships between the Company and each director and reports the results of its review to the Board. To be considered “independent,” a director must be affirmatively determined by the Board, at the recommendation of the Nominating and Governance Committee and after due deliberation, to have no material relationship with the Company other than as a director. Rather than adopting categorical standards, the Nominating and Governance Committee and the Board assess the relationships and other facts and circumstances relevant to director independence on a case-by-case basis, in each case consistent with the applicable rules and regulations of the NYSE and SEC.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      15

DIRECTORS AND NOMINEES

 

After reviewing all relationships each director has with the Company, including the nature and extent of any business relationships between the Company and such person, and based on the review and recommendation of the Nominating and Governance Committee, the Board has affirmatively determined that each of Messrs. Murray, Brightman, Kennedy, Mueller, Roemer and Zawadzki has no material relationships with the Company and, is “independent” under the applicable rules and regulations of the SEC, the NYSE and in accordance with our Corporate Governance Guidelines. In addition to the Board-level standards for director independence, each member of the Audit Committee meets the heightened independence standards required for audit committee members under the NYSE and SEC rules, and each member of the Compensation Committee meets the heightened independence standards for compensation committee members under the NYSE rules.

The Board’s independence determinations included a review of the transactions that occurred since the beginning of 2018 with entities associated with our directors or members of their immediate family. In addition, in making its independence determinations, the Board considered that Mr. Zawadzki is a senior employee of GSO Capital Partners LP (together with its affiliates and related funds, “GSO”), a stockholder of the Company, and that he was initially designated for nomination to the Board by GSO pursuant to a Stockholders Agreement entered into by the Company with GSO and certain other similarly situated holders upon our emergence from a Chapter 11 financial restructuring effective January 6, 2017. The Stockholders Agreement was terminated pursuant to its terms in April 2017, however, GSO remains party to a Registration Rights Agreement with the Company.

Mr. Gawick, our President and CEO, is not considered to be “independent” due to his employment with the Company; none of our other directors have ever been employed by us.

 

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BOARD GOVERNANCE AND STRUCTURE

 

The Role of the Board

C&J’s Board of Directors and committees of the Board serve as the ultimate decision-making body for our Company, except for matters reserved for our stockholders. The primary function of the Board is independent oversight. The Board oversees the proper safeguarding of the Company’s assets, the maintenance of appropriate financial and other internal controls and the Company’s compliance with applicable laws and regulations and good governance.

The Board, on behalf of the Company and its stockholders, appoints and oversees our CEO and executive management team in conducting the business and managing the affairs of the Company. In doing so, the Board monitors and provides guidance to our executives on the strategic and business planning process to ensure ethical stewardship and focus on long-term value creation and our overall performance, business and financial strength and health.

The basic responsibility of each director is to exercise independent business judgment to act in what such director reasonably believes to be in the best interests of the Company and its stockholders as a whole. Directors discharge their responsibilities at Board and committee meetings and through ongoing communication with each other and with management throughout the year.

The Board believes that it has a strong governance structure in place to ensure independent oversight on behalf of all stockholders and effective governance in all areas of its responsibilities. We have established processes for the effective oversight of critical issues entrusted to the independent directors and to these standing committees, such as:

 

•

Strategic planning and the execution of business strategies and performance;

 

•

The integrity of our financial reporting and related internal controls;

 

•

The appointment, focus and performance of our independent auditor and internal audit function;

 

•

The effectiveness of our compliance and risk management programs, including internal processes and internal controls;

 

•

An appropriate culture of integrity and risk awareness;

 

•

Compensation philosophy and executive compensation;

 

•

Succession planning and talent management for our executive management team;

 

•

Board leadership and the appointment of the independent chair;

 

•

The structure and composition of the Board and committees;

 

•

Evaluations of Board, committee and director performance and effectiveness; and

 

•

Nominations for directors.

Strategy Oversight

Oversight of the Company’s business strategy and strategic planning is a key responsibility of the Board. The Board believes that overseeing and monitoring strategy is a continuous process. Directors discharge their duties through discussion at regular Board meetings and a dedicated meeting each year to focus on business strategy and strategic planning.

While the Board oversees the Company’s business strategy, our executive team is charged with executing the business strategy. To monitor performance against the Company’s strategic goals, the Board receives regular updates and actively engages in dialogue with our senior management team.

Risk Oversight

Enterprise risk management is a Company-wide initiative that involves the Board and management identifying, assessing and managing risks that could affect our ability to fulfill our business objectives or execute our corporate strategy. Our enterprise risk management activities involve the identification and assessment of a broad range of risks and the development of plans to mitigate their effects. It is management’s responsibility to manage the Company’s risk exposure and potential impact of the many risks that are associated with our business and a primary function of our Board is to assist and oversee management in this effort. The Board, as a whole and also at the committee level, shares this oversight responsibility. The Board’s committees assist the Board in fulfilling its oversight responsibilities with respect to risks within its areas of responsibilities, as further discussed below. We believe the Board’s role in risk oversight is consistent with the Company’s leadership structure, with our CEO and other members of senior management having direct responsibility for risk management, and the independent directors involved in providing oversight of management’s efforts to reduce, mitigate or eliminate the risks that we face.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      17

BOARD GOVERNANCE AND STRUCTURE

 

The primary means by which the Board and its designated committees oversee our risk management structure and policies is through regular communications with management, specifically including with our General Counsel, our head of internal audit, our CEO, and our Chief Financial Officer ("CFO"). In connection with our regular quarterly Board and Committee meetings, the full Board (or the appropriate committee in the case of risks that are under the purview of a particular committee) receives reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, and strategic risks. In addition, upon request, either the full Board or a committee may receive additional reports from those executive officers who are deemed responsible for particular risks. The chair of each of the committees will also discuss and review significant matters with management outside of the quarterly Board meetings as needed. When a committee receives a separate report, or the chair has separate discussions, the committee chair may discuss that report with the full Board.

 

Environmental Risks

As part of our commitment to long-term value creation, the Board and our executive team are committed to monitoring how the Company’s performance, opportunities and strategy are impacted by, and impact, the environment. This review, which is part of the Company’s general risk management process, includes an evaluation of the Company’s material climate-related risks; all material risks identified in the risk management process are assessed by management and reported to the Board. We strive to adhere to environmentally responsible practices and to keep environmental impacts a focus of our research and development initiatives.

Cybersecurity Risks

To guard against the threat of security breaches and cyber-attacks, the Company’s Vice President of Information Technology manages our cybersecurity initiative, which is focused on protecting and preserving the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. The Vice President of Information Technology works closely with the General Counsel in this effort.

The Audit Committee receives regular reports from the Vice President of Information Technology related to cybersecurity (including any incidents), privacy and security and controls. As part of this, the Audit Committee will review the results of periodic exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our internal preparedness.

 

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BOARD GOVERNANCE AND STRUCTURE

 

In addition, our internal audit team will also periodically review and report to the Audit Committee on aspects of cybersecurity as part of its audits.

People Risks

The Board and our executive team are committed to promoting a healthy and ethical culture throughout the organization. The Board receives regular reports from the Company’s General Counsel, who serves as Chief Compliance Officer, regarding the Company’s compliance program. As part of this, the Board regularly reviews all complaints received through the anonymous whistleblower hotline as well as key data related to ongoing legal proceedings. We also have strict Board reporting obligations such that the General Counsel immediately reports to the Board and Audit Committee Chair any complaint – however reported – regarding an executive officer.

The Board also receives regular reports from our senior management team about our other people-related strategies, programs and initiatives, including recruitment, retention, engagement, training and development, health and safety, talent management and diversity.

Board Structure

Our bylaws provide that the Board shall consist of a number of directors to be determined from time to time by the Board. Pursuant to our Corporate Governance Guidelines (discussed below), the Board’s size is assessed at least annually by the Nominating and Governance Committee and any necessary or advisable changes are recommended to the Board, as appropriate. Our Board currently consists of seven directors classified into three classes of directors, designated Class I, Class II and Class III, with each class to consist, as nearly as practicable, of one-third of the total number of directors then constituting the entire Board and each class to have a three-year term. The Board has three standing committees to assist in discharging its responsibilities: Audit Committee, Compensation Committee and Nominating and Governance Committee.

The following table identifies the current members of the Board, their respective classes, the standing committees of the Board on which they serve, and the chair of each committee as of the date of this Proxy Statement.

 

Name of Director		Independent		Class		Audit Committee		Compensation Committee		Nominating and Governance Committee
Donald Gawick(1)				III
Patrick Murray		+		III
Stuart Brightman		+		I				*		*
John Kennedy		+		II		*				*
Steven Mueller		+		III		*		*
Michael Roemer		+		II				*		*
Michael Zawadzki		+		I				*		*

 

*	Committee Member

 

Committee Chair

 

+

The NYSE and SEC require that each of the Audit Committee, Compensation Committee and Nominating and Governance Committee be comprised solely of independent directors, with heightened standards applicable to Audit Committee and Compensation Committee members. We also significantly exceed the NYSE requirement that a majority of the directors be independent.

 

(1)	President and Chief Executive Officer.

Board Leadership Structure

The Board recognizes that one of its key responsibilities is to evaluate and determine an appropriate board leadership structure to provide for independent oversight of management. The Board believes that there is no single, generally accepted board leadership structure that is appropriate for all companies, and that the right structure may vary for a single company as circumstances change. As such, our independent directors, led by the Nominating and Governance Committee, consider the Board’s leadership structure at least annually, and may modify this structure from time to time to best address the Company’s unique circumstances and advance the best interests of all stockholders, as and when appropriate. In connection with this review, the Board Chair is selected annually by the independent directors.

 

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The Board has determined that the roles of Board Chair and CEO should continue to remain separate, and that it is advisable and in the best interest of the Company to have an independent director serve as Chair. On December 11, 2018, it was determined that Mr. Murray should continue to serve as the chair of the Board. The Board believes that this governance structure will allow Mr. Gawick to focus his time and energy on managing the Company and Mr. Murray to lead the Board in its fundamental role of providing guidance, advice and counsel regarding our business, operations and strategy, and that having a separate chair will better position the Board in evaluating the performance of management and our overall corporate performance. The Board believes that Mr. Murray’s deep knowledge and understanding of our industry, along with his prior experience as a board chair and chief executive officer in other companies, puts him in the best position to lead our Board. In order to ensure continued independent oversight, in the absence of the Board Chair, the chair of the Nominating and Governance Committee would act as Board chair.

Under our current leadership structure, the responsibilities of the Board Chair include:

 

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Presiding over meetings of the Board;

 

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Presiding over meetings of stockholders;

 

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Regularly consulting with the CEO and serving as a liaison between the independent directors and the CEO on sensitive issues and otherwise when appropriate;

 

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Encouraging and facilitating active participation of all directors;

 

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Monitoring and coordinating with the CEO and/or Corporate Secretary on corporate governance issues and developments, as needed;

 

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Calling meetings of the independent directors, as needed; and

 

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Being available for consultation and direct communication with major stockholders, if requested.

Board Committees

As noted above, our Board has three standing committees: Audit Committee, Compensation Committee and Nominating and Governance Committee. Each committee has a charter, which is available on our website at http://www.cjenergy.com/about-us/corporate-governance/ under “Corporate Governance.” Stockholders may obtain printed copies of any charter, free of charge, by sending a written request to C&J Energy Services, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary, or by emailing ShareholderEngagement@cjes.com.

A summary description of each committee, its function and charter, are provided below:

Audit Committee

Our Audit Committee assists the Board in its oversight of the accounting and financial reporting process of the Company, including the review, integrity and/or audit of the Company’s financial statements, the Company’s legal and regulatory compliance, the independent registered public accounting firm’s qualifications, independence, performance and related matters, and the performance of the Company’s internal audit function.

Pursuant to its charter, the purposes, authority and responsibilities of the Audit Committee include the following:

 

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Oversee the quality, integrity and reliability of our financial statements, our accounting and financial reporting processes and our financial statement audits;

 

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Oversee the effectiveness of our systems of disclosure controls and procedures and internal controls over financial reporting;

 

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Encourage continuous improvement and foster adherence to our policies, procedures and practices at all levels;

 

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Oversee the effectiveness and performance of our external audit function, including the qualifications, independence and performance of the independent registered public accounting firm engaged for the purposes of preparing or issuing an audit report or performing other audit, review or attest services;

 

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Oversee the effectiveness and performance of our internal audit function;

 

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Oversee our policies with respect to risk assessment and risk management;

 

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Oversee our compliance with legal and regulatory requirements, as well as our ethical standards and significant corporate policies, procedures and practices, including through the establishment of reporting procedures;

 

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Provide for and foster open communication between and among itself, our independent registered public accounting firm, financial and senior management, the internal audit department and our Board, always emphasizing that the independent registered public accounting firm is accountable to the Audit Committee; and

 

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Annually prepare an “Audit Committee Report” for inclusion in the proxy statement for each annual meeting of stockholders, in accordance with applicable rules and regulations.

Our Audit Committee meets regularly with our Legal and Finance teams, as well as internal auditors and independent registered public accounting firm, regarding the adequacy of our financial controls and our compliance with legal, tax and regulatory matters and our significant corporate policies. Our Audit Committee also receives regular reports regarding issues such as the status and findings of audits being conducted by the internal and independent auditors, accounting changes that could affect our financial statements and proposed audit adjustments.

In connection with these purposes and to satisfy its oversight responsibilities, our Audit Committee annually selects, engages and evaluates the performance and ongoing qualifications (including independence) of, and determines the compensation for, our independent registered public accounting firm.

Our Audit Committee chair routinely meets between formal committee meetings with our CFO, Chief Accounting Officer ("CAO") and other members of our Finance team, as well as our General Counsel and other members of our Legal team, our internal auditors and our independent audit firm.

While our Audit Committee has the responsibilities and powers set forth in its charter, it is not the duty of our Audit Committee to plan or conduct audits, to determine that our financial statements are complete and accurate or to determine that such statements are in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and other applicable rules and regulations. Our management is responsible for the preparation of our financial statements in accordance with U.S. GAAP and our internal controls. Our independent registered public accounting firm is responsible for the audit work on our financial statements.

The current members of the Audit Committee are Messrs. Roemer (chair), Kennedy and Mueller. Our Board has determined that all members of our Audit Committee are independent as that term is defined by the listing requirements of the NYSE and by Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended. Additionally, our Board has determined that each member of the Audit Committee is financially literate, and that Mr. Roemer has accounting and financial expertise that is advantageous for service as chair. Our Board has also determined that Messrs. Roemer and Mr. Kennedy are each an “audit committee financial expert” following a determination that each met the criteria for such designation under the rules and regulations of the SEC. For information regarding Messrs. Roemer’s and Kennedy’s business experience please read “Directors and Nominees—Director Biographies and Qualifications.”

Compensation Committee

Our Compensation Committee assists the Board in discharging its responsibilities with regard to executive compensation, as well as the compensation of our outside directors. The Compensation Committee also has oversight of risks relating to our overall compensation and benefit plans, policies and programs.

Pursuant to its charter, the purposes, authority and responsibilities of the Compensation Committee include the following:

 

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Assist the Board in discharging its responsibilities relating to the compensation of our CEO and other executive officers, including with respect to the review, evaluation and approval of compensation agreements, plans, policies and programs as they affect our executive officers;

 

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Assist the Board in establishing the appropriate incentive compensation and equity-based plans, and to administer such plans;

 

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Assist the Board in fulfilling its oversight responsibilities of risks relating to our overall compensation and employee benefit plans, policies and programs as they affect all employees;

 

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Assist the Board in discharging its responsibilities relating to the compensation of our directors;

 

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Review and discuss with management the “Compensation Discussion and Analysis” disclosures proposed to be included in our proxy statement for each annual meeting of stockholders or our annual report on Form 10-K, as applicable, and determine whether to recommend to our Board that the proposed Compensation Discussion and Analysis disclosure be included in the proxy statement or annual report, in accordance with applicable rules and regulations; and

 

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Annually prepare a “Compensation Committee Report” for inclusion in the proxy statement for each annual meeting of stockholders or annual report on Form 10-K, as applicable, in accordance with applicable rules and regulations of the SEC.

Among other responsibilities, the Compensation Committee annually reviews and approves the compensation structure for the Company’s CEO and executive officers, including base salary, annual cash incentive and long-term incentives. As part of this, the

 

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Compensation Committee will review incentive compensation and equity-based plans, and, at least annually, advise management and the Board on the design and structure of the Company’s compensation and benefits programs and policies and approve changes thereto, or to recommend changes to the Board, as the Compensation Committee determines appropriate. The Compensation Committee is also responsible for approving all employment agreements related to our executive officers. Additionally, following each stockholder meeting at which “say-on-pay” resolutions are proposed for a stockholder advisory vote, the Compensation Committee will review the results of the stockholder advisory vote, and consider whether to make any adjustments to our executive compensation program.

In addition, our Board has delegated to the Compensation Committee the responsibility for establishing, implementing and monitoring the compensation for our outside directors. Our Compensation Committee establishes, reviews and approves the compensation of our directors and makes appropriate adjustments based on their performance, duties and responsibilities and competitive environment. Our Compensation Committee’s primary objectives in establishing and implementing director compensation are to:

 

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Ensure the ability to attract, motivate and retain the talent necessary to provide qualified Board leadership; and

 

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Use the appropriate mix of long-term and short-term compensation to ensure high Board and/or committee performance.

Under its charter, our Compensation Committee has the authority to select, retain, approve the fees and other retention terms of, and terminate the services of an independent compensation consultant or other experts to assist the Compensation Committee in fulfilling its responsibilities, including the evaluation of the compensation of our executive officers and directors.

The current members of the Compensation Committee are Messrs. Kennedy (chair), Brightman, Mueller, Roemer and Zawadzki, each of whom our Board has determined to be independent and eligible for service on the Compensation Committee under the rules and regulations of the SEC and the NYSE.

 

Nominating and Governance Committee

Our Nominating and Corporate Governance Committee is responsible for the oversight of risks relating to corporate governance, Board organization, membership and structure, and succession planning for our senior management team, including our CEO.

Pursuant to its charter, the purposes, authority and responsibilities of our Nominating and Governance Committee include the following:

 

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Advise our Board and make recommendations regarding appropriate corporate governance practices and assist our Board in implementing those practices;

 

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Assist our Board by identifying individuals qualified to become members of our Board, consistent with criteria approved by the Board, and recommending director nominees for election to the Board at each annual meeting of stockholders or for appointment to fill vacancies on the Board;

 

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Advise our Board and make recommendations regarding the appropriate composition of our Board and its committees;

 

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Lead our Board in its annual performance evaluation of the Board, its committees and the directors, as required and determined appropriate, and of our CEO and senior executive officers, as required and determined appropriate; and

 

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Direct all matters relating to succession planning for our CEO, as well as succession planning for the other members of our executive team in consultation with our CEO and succession planning of our senior accounting and financial personnel in consultation with the Audit Committee.

 

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In connection with these purposes, our Nominating and Governance Committee evaluates potential new members of our Board, actively monitors and advises the Board about appropriate corporate governance practices, evaluates director independence under the applicable standards, and identifies the qualities and characteristics necessary for an effective CEO.

Our Nominating and Governance Committee is responsible for developing and recommending to the Board appropriate criteria for selecting new directors and actively seeking out candidates for recommendation to our Board. In considering candidates for our Board, our Nominating and Governance Committee considers the entirety of each candidate’s credentials. There is currently no set of specific minimum qualifications that must be met by a nominee recommended by our Nominating and Governance Committee, as different factors may assume greater or lesser significance at particular times. Furthermore, the needs of our Board may vary in light of its composition, and our Nominating and Governance Committee’s perceptions about future issues and needs. However, while the Board does not maintain a formal list of qualifications, in making its evaluation and recommendation of candidates, our Nominating and Governance Committee may consider, among other factors, diversity, age, skill, experience in the context of the needs of our Board, independence qualifications and whether a prospective nominee has relevant business and financial experience, industry or other specialized expertise and a high moral character.

Our Nominating and Governance Committee may consider candidates for our Board from any reasonable source, including from a search firm engaged by our Nominating and Governance Committee or stockholder recommendations. Our Nominating and Governance Committee does not typically alter the manner in which it evaluates candidates based on whether the candidate is recommended by a stockholder. In evaluating a candidate’s relevant experience, our Nominating and Governance Committee considers previous experience as a member of our Board.

The current members of the Nominating and Governance Committee are Messrs. Mueller (chair), Brightman, Kennedy, Roemer and Zawadzki, each of whom our Board has determined to be independent under the rules and regulations of the SEC and the NYSE.

Meetings of the Board and Committees

During 2018, the Board and Committees formally met as follows:

 

Board			14
Audit Committee			9
Compensation Committee			5
Nominating and Governance Committee			3

Each of our directors attended at least 75% of the meetings of the Board and the committees on which he served in 2018. Pursuant to our Corporate Governance Guidelines, directors are expected to attend meetings of the Board and of committees on which they serve and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. Directors are encouraged but not required to attend our annual stockholder meetings, and the Company will make all appropriate arrangements for directors who choose to attend. Four of our directors attended our 2018 annual meeting of stockholders.

From time to time between meetings, Board and committee members confer with each other as well as with management and independent consultants regarding relevant issues, and representatives of management may also meet with such the consultants on behalf of the Board or relevant committee.

Board Governance

We are committed to adhering to sound principles of corporate governance. Our Board has adopted Corporate Governance Guidelines and charters for the standing committees, which together with the Company’s certificate of incorporation and bylaws form the framework for the governance of the Company and promote the effective functioning of the Board, its committees and the Company. The Nominating and Governance Committee periodically, and at least annually, reviews our Corporate Governance Guidelines and leads the committees in review of their respective charters to ensure that they reflect the Board’s corporate governance objectives and commitments. Any proposed modifications to the Corporate Governance Guidelines are presented to the Board for its approval.

A discussion of certain key matters governed by the Corporate Governance Guidelines follows immediately below, and summaries of each committee charter are set forth above under “—Board Committees.” The Corporate Governance Guidelines and committee charters are available on our website at http://www.cjenergy.com/about-us/corporate-governance/ under “Corporate Governance.” Stockholders may also obtain printed copies of these documents, free of charge, by sending a written request to C&J Energy Services, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary or by emailing ShareholderEngagement@cjes.com.

 

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Executive Sessions

To facilitate candid discussion among the directors, our non-employee directors regularly meet in executive session as part of Board and Committee meetings. Generally, executive sessions are held without management present. Executive sessions are consistently held in conjunction with regular Board and/or committee meetings. The chair of the Board or of the respective committee presides at each executive session in conjunction with Board and/or committee meetings.

Board Tenure

Our Board evaluates its composition holistically, in the context of our long-term strategy, future needs and current business environment, among other considerations. The Board does not believe it is in the best interest of the Company and its stockholders to establish limits on director service. As an alternative to term limits or mandatory retirement requirements, the Nominating and Governance Committee will review each director’s continuation on the Board during the final year of such director’s term. This will allow each director the opportunity to confirm such person’s desire to continue as a member of the Board, and it allows the Board the opportunity to routinely assess the skills and characteristics required of directors in the context of the current composition of the Board, the operating requirements of the Company and the long-term interests of stockholders.

Board Access to Independent Advisors and Our People

Our Board and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary, without consulting or obtaining approval of any executive officer of the Company in advance.

Directors have full and free access to officers and employees of the Company, and they are encouraged and provided opportunities to talk directly to any officer or employee regarding any questions or concerns the director may have.

Annual Performance Evaluations, Review of Committee Charters

The Board recognizes that a robust and constructive evaluation process is an essential component of good corporate governance and Board effectiveness. The Board, each committee and each director conduct a self-evaluation of its performance and effectiveness on an annual basis. The Nominating and Governance Committee leads and oversees this evaluation process focused on three components: (1) the Board, (2) Board committees and (3) individual directors.

In addition to evaluating composition and effectiveness, the Nominating and Governance Committee also assists each Committee in the review and evaluation of its charter. The chair of each committee then reports to the full Board about the committee’s annual evaluation of its performance and evaluation of its charter.

 

 

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Management Performance Evaluation and Succession Planning

Each year, the Nominating and Governance Committee will lead the Board in the annual performance review of our CEO. The Nominating and Governance Committee may also review the performance of the other members of our executive team as deemed appropriate, including in connection with the Company’s succession planning.

The Nominating and Governance Committee will meet annually on succession planning for our CEO, as well as for the other members of our executive team in consultation with our CEO, and succession planning of our senior accounting and financial personnel in consultation with the Audit Committee, so that qualified candidates are available for executive positions, including in emergency situations, and so that development plans are being utilized to strengthen the skills and qualifications of candidates.

Stock Ownership Guidelines

The Board expects all directors and executive officers to display confidence in the Company by requiring directors and officers to hold a significant amount of our common stock. The Board has established meaningful stock ownership guidelines for all non-employee directors and executive officers, which includes a requirement to retain ownership of at least 50% of the net after-tax shares of common stock pursuant to any equity-based awards received from the Company unless such person has met and is in compliance with the applicable ownership requirements. The Compensation Committee periodically assesses these guidelines and our directors’ and executive officers’ stock ownership relative to the guidelines, and makes recommendations as appropriate. For a description of the stock ownership guidelines applicable to our non-employee directors and executive officers, please see “Compensation Discussion and Analysis—Stock Ownership Guidelines.”

Director Orientation and Continuing Education

The Nominating and Governance Committee is responsible for developing and annually evaluating orientation and continuing education programs for directors, and for making appropriate recommendations to the Board.

Service on Other Boards

Our directors are expected to limit their other board memberships to a number which permits them, given their individual circumstances, to responsibly perform all of their director duties. No director may serve on the board of directors of more than three other public companies, unless the Board approves an exception. None of our directors currently serve on the board of directors of more than three other public companies.

Communications with the Board

Our Board welcomes communications from our stockholders and other interested parties. The Board has established a process for all interested parties to send communications, other than sales-related communications, to one or more of its members, including to the independent or non-management directors as a group. Interested parties may contact the Board, any Committee of the Board, or any Board member (including the chair of the Board), by writing to them at the following address:

C&J Energy Services, Inc.

3990 Rogerdale Rd.

Houston, Texas 77042

Attn: General Counsel and Corporate Secretary

ShareholderEngagement@cjes.com

The envelope containing each communication, or the email subject line, should be clearly marked as “Board of Director Communication” and clearly identify the intended recipient(s) of the communication so that the communication can be forwarded to the specified parties.

Our General Counsel will review and forward, as expeditiously as reasonably practicable, each communication received to the addressees if the communication falls within the scope of matters generally considered by our Board.

 

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CORPORATE GOVERNANCE

 

CORPORATE GOVERNANCE

We are committed to adhering to sound principles of ethical conduct and good corporate governance. We have adopted corporate governance policies and practices that are consistent with C&J’s core values, reflect prevailing governance standards and many “best practices” features, promote the effective functioning of our Company and ensure that it is managed with integrity and in the best interest of our stockholders. The following is a summary of some our corporate governance practices and policies:

 

		Strong Governance Practices •  Directors elected by majority vote in uncontested elections   •  Regular executive sessions   •  Annual Board and committee evaluations   •  Meaningful stock ownership guidelines   •  Clawback policy   •  Directors and employees prohibited from hedging Company stock   •  Directors and employees prohibited from pledging Company stock   •  No Company funds or assets permitted for political purposes   Independent Oversight •  All but 1 director is independent   •  Independent chair   •  Nominating and Governance Committee chair, who is independent, to preside     in the Board Chair’s absence   •  Committees composed entirely of independent directors who meet applicable     heightened standards

Foundation for Certain Governing Document Provisions

Upon emergence from the Chapter 11 financial restructuring in January 2017, the Company adopted a certificate of incorporation and bylaws that contained provisions regarding, among other things, a classified board and certain supermajority provisions. The Company’s certificate of incorporation requires a supermajority vote to amend C&J’s bylaws and portions of the certificate of incorporation. The supermajority requirements are limited to fundamental corporate governance provisions and serves as a protection against arbitrary amendment to certain provisions. These provisions provided stability and were seen as being necessary, appropriate and in the best interest of the Company and our stockholders at that time.

The Board recognizes that the general sentiment among the investment community with respect to these provisions varies, and the Company engages with our stockholders to understand their views on these important governance matters. As discussed above, overall stockholder feedback during our 2018 outreach was understanding of the benefits and rationale for the continuance of these governance provisions at this time, and multiple stockholders expressly supported their continuance.

Our Board continues, and will continue, to routinely evaluate the necessity and appropriateness of our governance structures and solicit feedback from stockholders, including regrding the classified board and certain super majority provisions. After careful consideration, with siginificant weight given to stockholder feedback on these points, our Board has determined that at this time, it is not in the best interest of the Company or its stockholders to change these governance structures. The Board believes that, in light of the Company’s relatively recent emergence from bankruptcy and current volatility in the oilfield services industry, the classified structure and supermajority vote provisions contribute to the Company’s stability and continuity of leadership and strategies and enhances the ability of our Board to look to the long-term best interest of the Company and our stockholders. Our Board strongly believes that these provisions do not diminish the rights of our stockholders generally, or come at the cost of directors’ accountability to our stockholders.

Code of Conduct and Corporate Policies

We have adopted a Corporate Code of Business Conduct and Ethics (the “Code of Conduct”), which applies to all of our directors, officers and employees. The Code of Conduct provides basic principles and guidelines to assist our people in complying with the legal and ethical requirements governing our business conduct.

The Code of Conduct is supplemented by our other corporate policies, including our Financial Code of Ethics (the “Financial Code of Ethics”), which sets forth the ethical principles by which our CEO, CFO, CAO, controllers and other senior financial and accounting officers are expected to conduct themselves when carrying out their duties and responsibilities.

 

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Any waivers to our Code of Conduct or Financial Code of Ethics can only be made by the Board or a committee thereof. Any amendment to, or waiver from, a provision of the Code of Conduct or Financial Code of Ethics that (i) applies to our CEO, CFO, CAO, controllers or other persons performing similar functions to the foregoing, and (ii) relates to any element of the code of ethics definitions, as enumerated in Item 406(b) of SEC Regulation S-K, will be posted on the Company’s website at www.cjenergy.com within four business days following the date of the amendment or waiver. There were no waivers of the Code of Conduct or Financial Code of Ethics during 2018 or in 2019 to date.

Copies of the Code of Conduct and the Financial Code of Ethics are available on our website at http://www.cjenergy.com/about-us/compliance-ethics/ . Information on or accessible from our website is not incorporated by reference into this Proxy Statement. Stockholders may also obtain electronic or printed copies free of charge by sending a written request to C&J Energy Services, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary, or by emailing ShareholderEngagement@cjes.com.

Other important corporate policies and practices include the following:

 

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Compliance Reporting Policy and Procedures . In keeping with our commitment to maintaining the highest standards of ethical and legal conduct, and pursuant to the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and applicable rules and regulations of the SEC, our Compliance Reporting Policy and Procedures (also known as the “Compliance Reporting Policy”) sets forth established procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding (a) financial reporting, accounting, disclosure controls and procedures and internal controls over financial reporting or auditing matters, (b) potential violations of the laws, rules and regulations that govern the Company’s business or of the Company’s codes, standards, policies and procedures and (c) any other activities which otherwise may amount to unethical or improper conduct, and (ii) the confidential and anonymous submission by stakeholders (including employees, contractors, agents, representatives, customers, suppliers and other affiliates) of concerns regarding questionable or potentially questionable accounting matters, compliance matters or ethical matters. A copy of the Compliance Reporting Policy is available on our website at http://www.cjenergy.com/about-us/compliance-ethics/ . Stockholders may also obtain electronic or printed copies of the policy, free of charge, by sending a written request to C&J Energy Services, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary, or by emailing ShareholderEngagement@cjes.com.

 

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Related Persons Transaction Policy . Our Board has adopted a written policy governing related persons transactions as part of the Board’s commitment to good governance and independent oversight. This policy provides for the review and approval of certain transactions or arrangements involving the Company, on one side, and, on the other side, a “Related Person,” which includes any of our directors (or nominees for director), executive officers, stockholders owning more than 5% of the Company, and/or any immediate family members of any of the foregoing. As a general matter, we discourage “Related Persons Transactions” because they may present potential or actual conflicts of interest and create the appearance that decisions are based on considerations other than the best interest of the Company and its stockholders. We will only enter into or ratify Related Persons Transactions when the Audit Committee or the Board, as applicable, determines such transactions are in our best interests and the best interests of our stockholders. Additionally, our Code of Conduct restricts our directors, officers and employees from engaging in any business or conduct, or entering into any agreement or arrangement, that would give rise to an actual or potential conflict of interest. Under the Code of Conduct, conflicts of interest occur, among other circumstances, when an individual’s private or family interests interfere in any way with the interests of the Company or its stockholders. We have processes for reporting actual or potential conflicts of interests, including Related Persons Transactions, under our Code of Conduct. Our Related Persons Transaction Policy supplements our Code of Conduct and is intended to assist us in complying with the disclosure obligations concerning certain Related Persons Transactions under the SEC rules. Please see “Transactions with Related Persons—Policies and Procedures for Identifying, Assessing and Approving Related Persons Transactions” for additional information regarding our Related Persons Transaction Policy.

 

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Insider  Trading  Policy . Our Insider Trading Policy provides guidelines to our directors, officers, employees, agents, advisors and consultants with respect to transactions in the Company’s securities for the purposes of promoting compliance with applicable securities laws. Integrity and fair dealing are fundamental to the way we do business and we believe that it is vitally important that we maintain the confidence of our stockholders and the public markets. Our commitment to integrity and fair dealing means that our directors, officers and employees do not misuse material, non-public information, or take personal advantage of such information, to the detriment of or unfair advantage over others who do not have material, non-public information. We are determined to preserve our reputation, and we take our obligation to prevent insider trading violations seriously. Our Insider Trading Policy also prohibits short-term or speculative transactions involving C&J securities, including purchase of C&J stock on margin, short sales of C&J stock, buying or selling puts or calls on C&J stock, and pledging C&J stock. Additionally, we believe it is inappropriate for our people to be creditors of the Company due to actual or perceived conflicts of interest that may arise in connection therewith. Therefore, transactions in C&J debt securities, whether or not those securities are convertible into C&J stock, are prohibited by the Insider Trading Policy.

 

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Anti-Hedging Policy . The Anti-Hedging Policy supplements our Insider Trading Policy and prohibits our people (including our directors) from engaging in hedging, monetization and other speculative transactions that are designed to hedge or offset any

 

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decrease in the market value of the Company’s securities. Such transactions are prohibited because they present the appearance of a “bet” against the Company. They also allow the holder to own the Company’s securities without the full risks and rewards of ownership, which potentially separates the holder’s interest from that of the Company and its other stockholders. Transactions involving Company-based derivative securities are also prohibited, whether or not entered into for hedging or monetization purposes.

 

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International Business Requirements Compliance Program . We are committed to maintaining the highest ethical and legal standards, complying with both the letter and spirit of applicable laws and regulations in each country in which we do business. We have adopted robust policies and procedures to provide additional guidance to our directors, officers, employees, agents, contractors, partners and other third parties representing the Company to ensure that our business practices and operations are in compliance with applicable laws, including the following:

 

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Anti-Corruption Policy and related Compliance Procedures , to ensure compliance with the United States Foreign Corrupt Practices Act of 1977 (“FCPA”), which makes it a crime to give, or to offer to give, anything of value to non-U.S. government officials (including employees of state-owned companies, such as national oil and transportation companies) or to improperly influence the performance of the officials’ duties. The FCPA also includes requirements that public companies, like the Company, have strong internal controls and accurate books and records. Many other countries have also adopted their own domestic anti-corruption and anti-bribery laws. Our Anti-Corruption Policy and related Compliance Procedures are designed to ensure that our business practices and operations are in compliance with applicable anti-corruption, anti-bribery and record keeping laws, including the FCPA and Sarbanes-Oxley;

 

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Compliance Policy on Trade Restrictions, Sanctions  & Anti-Money Laundering Requirements and related Compliance Procedures , to ensure compliance with trade sanctions maintained by the U.S. government against targeted foreign countries, as well as terrorists and international drug traffickers, according to U.S. foreign policy and national security objectives; and

 

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Export Compliance Policy and related Compliance Procedures , to ensure compliance with U.S. laws and regulations governing the export of goods, technologies and services from the U.S., the release of sensitive technologies to foreign persons in the U.S., and the retransfer of U.S.-origin goods and technologies abroad.

 

•

Conflict Minerals Policy and Compliance Program . Our Conflict Minerals Policy is part of our commitment to being a responsible corporate citizen and complying with SEC regulations requiring publicly traded companies to file annual reports disclosing certain “conflict minerals” (defined as columbite-tantalite/coltan (tantalum), cassiterite (tin), wolframite (tungsten), gold, or their derivatives that originate from the Democratic Republic of Congo and its adjoining countries (“Conflict Areas”) and are necessary to the functionality of products we manufacture or contract to manufacture. We are committed to the responsible sourcing of materials, products and components and to exercising diligence over our sourcing practices so as not to support conflict, human rights abuses or crimes against humanity. We have taken steps to establish a due diligence framework and compliance program and have implemented the Conflict Minerals Policy across the Company. We also communicate to our suppliers our expectation that they will cooperate with our efforts to procure materials, products, and components that either do not originate from the Conflict Areas or are otherwise conflict-free. A copy of the Conflict Minerals is available on our website at http://www.cjenergy.com/about-us/compliance-ethics/supplier-conduct under “Materials Sourcing and Our Commitment to a Conflict-Free Supply Chain.” Stockholders may also obtain electronic or printed copies of the policy, free of charge, by sending a written request to C&J Energy Services, Inc. at 3990 Rogerdale Rd. Houston, Texas 77042, Attn: Corporate Secretary, or by emailing ShareholderEngagement@cjes.com.

 

•

Lobbying and Political Action Restrictions. We do not permit the use of Company funds or assets for political purposes, including for contributions to any political party, candidate or committee, whether federal, state or local. In addition, we do not lobby or contribute to any third-party political action committees or other political entities organized under Section 527 of the Internal Revenue Code.

 

•

Clawback Policy . In October 2018, we adopted a clawback policy which allows our Board to recoup incentive-based compensation – whether cash or equity - in specified instances. See “Compensation Discussion and Analysis—Clawback Policy.”

 

•

Compensation Policies . Our compensation-related policies and practices reflect prevailing governance standards and include many “best practices” features intended to strengthen the alignment of compensation with stockholder interest, support short- and long-term objectives, and promote long-term value creation, which are discussed throughout “Compensation Discussion and Analysis.”

 

28      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

2 People EXECUTIVE MANAGEMENT TEAM 30 SHARE OWNERSHIP INFORMATION 33 Section 16(a) Beneficial Ownership Reporting Compliance 33 Largest Owners of Company Stock 33 Security Ownership of Management 34 Equity Compensation Plan Information 35 TRANSACTIONS WITH RELATED PERSONS 36 Policies and Procedures for Identifying, Assessing and Approving Related Persons Transactions 36 Related Persons Transactions 37

EXECUTIVE MANAGEMENT TEAM

 

EXECUTIVE MANAGEMENT TEAM

Our executive officers serve at the discretion of our Board. The following table sets forth certain information as of the date of this Proxy Statement regarding our executive officers:

 

Name		Age				Position
Donald Gawick (1)			61			President and Chief Executive Officer and Director
Michael Hobbs			56			Chief Operating Officer
Jan Kees van Gaalen			63			Chief Financial Officer
Danielle Hunter			36			Executive Vice President, General Counsel, Chief Risk and Compliance Officer and Corporate Secretary
Patrick Bixenman			58			President – Research & Technology
William Driver			52			President – Well Construction, Intervention and Completion Services
Edward Keppler			54			President – Corporate Operational Development
Sterling Renshaw			50			President – Well Support Services
Timothy Wallace			57			President – Strategic Planning
Michael Galvan (2)			50			Senior Vice President – Chief Accounting Officer and Treasurer

 

(1)	Mr. Gawick’s biographical information is provided in the section of this Proxy Statement entitled “Proposal 1 — Election of Directors.”

 

(2)	Mark Cashiola, our former CFO, resigned from the Company effective as of March 20, 2018. Michael Galvan, our Senior Vice President and Chief Accounting Officer, assumed the additional role of CFO on an interim basis until Mr. van Gaalen was appointed in September of 2018.

 

Michael Hobbs		Mr. Hobbs serves as C&J’s Chief Operating Officer, a position he has held since August 2016. He previously served as President of C&J’s Well Services division since June 2015. Mr. Hobbs was Chief Operating Officer of the Company’s wireline division, Casedhole Solutions, at the time C&J acquired it in June 2012. Following C&J’s acquisition of Casedhole Solutions through October 2012, he served as Vice President—Operations for Casedhole Solutions. Mike first joined Casedhole Solutions in April 2010 as Vice President and General Manager for the Southern region, before being promoted to Chief Operating Officer in 2011. Mike is a 37-year veteran of the oilfield services industry, starting his career in 1980. He spent the early fourteen years of his career with Schlumberger, holding numerous operational and management positions in the Permian Basin. After leaving Schlumberger in 1997, Mr. Hobbs founded E.M. Hobbs, Inc. where he was influential in the development and implementation of many of the multi-stage completion procedures and techniques that are currently used today within the wireline service industry. Before leaving E.M. Hobbs, Inc. in 2004, Mike grew the company to 21 units in five locations in Texas and New Mexico. E.M. Hobbs is now known as E&P Wireline owned by Schlumberger.
Jan Kees van Gaalen		Mr. van Gaalen serves Chief Financial Officer of the Company, a position he has held since September 17, 2018. He is a seasoned, strategic financial executive with more than 35 years of global experience in business analytics, treasury, audit, business development and commercial management. Mr. van Gaalen served as Vice President and Chief Financial Officer of Kennametal, Inc. from September 2015 until joining C&J. Prior to joining Kennametal, Inc., he served as Executive Vice President and Chief Financial Officer for Dresser-Rand Group, Inc. from April 2013 to July 2015. He previously served as Vice President and Treasurer for Baker Hughes, Inc. from January 2008 to April 2013, as well as Vice President - Finance and Chief Financial Officer for PT Vale Inco TBK (formerly PT Inco TBK) in Jakarta, Indonesia from 2004 to 2008. From 1996 to 2004 he worked for Anglo American PLC and prior to that for Carlton Communications Plc (1994-1996); he started his career with Schlumberger. He holds a bachelor’s degree in economics from the Erasmus University in Rotterdam, Netherlands and a Master of Business Administration degree from the HEC Management School in France.
Danielle Hunter		Ms. Hunter serves as C&J’s Executive Vice President, General Counsel and Chief Risk & Compliance Officer, a position she has held since June 2016. She also serves as the Company’s Corporate Secretary. Ms. Hunter joined C&J in June 2011 and previously served as the Company’s Vice President—Corporate & Compliance and Associate General Counsel. Prior to joining C&J, Ms. Hunter practiced corporate / transactional law at Vinson & Elkins L.L.P. from 2007 through 2011, representing public and private companies and investment banking firms in numerous capital markets offerings, and mergers and acquisitions, primarily in the oil and gas industry. She also counseled clients with respect to corporate governance, compliance, SEC disclosure /

 

30      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

EXECUTIVE MANAGEMENT TEAM

 

		reporting, and general corporate matters. Ms. Hunter served as a judicial law clerk to the Honorable Judge Tucker Melancon, United States District Court—Western District of Louisiana, from 2006 to 2007. Ms. Hunter graduated magna cum laude and order of the coif with a J.D. from Tulane Law School in 2006.
Patrick Bixenman		Mr. Bixenman serves as President of C&J’s Research & Technology division, having joined C&J in October 2012 to build this division from the ground up. Through the Research & Technology division, C&J develops products and provides technical support to C&J’s core service lines. He also served as C&J’s Chief Administrative Officer from January 2017 until October 2018. Prior to joining C&J, he was employed by Schlumberger from 1985 through 2012, where he gained significant technology development and manufacturing experience in wireline logging, coiled tubing, completions tools, artificial lift, drill stem testing, and subsea intervention trees. While employed by Schlumberger, he held numerous key management positions, including Engineering Manager, Manufacturing Center Manager and Technology Center Manager. Mr. Bixenman graduated from Tennessee Technology University with a B.S. in Mechanical Engineering in 1983 and Rice University with a Masters in Mechanical Engineering in 1988.
William Driver		Mr. Driver serves as President – Well Construction, Intervention and Completion Services, leading both C&J’s Well Construction and Intervention Services division and Completion Services division. He previously led C&J’s fracturing business as Senior Vice President – Fracturing from October 2012 through May 2018 when he was promoted to President – Completion Services. He joined C&J in August 2007 as Vice President – Fracturing, a position he held through October 2012. Throughout his tenure at C&J, he has been instrumental in overseeing the operational growth and success of C&J’s hydraulic fracturing business. Mr. Driver has nearly 30 years of experience in the oilfield services industry. Prior to joining C&J, he worked for Halliburton in multiple roles, including equipment operator, service supervisor, field service quality coordinator, operations manager and camp manager from August 1990 to August 2007.
Edward Keppler		Mr. Keppler serves as C&J’s President – Corporate Operational Development, a position he has held since October 2016. He is responsible for structural and tactical operational issues across all of C&J’s service lines to provide strategic direction and support through the development of standards, processes, and systems to increase efficiency and quality for C&J’s operations. Mr. Keppler previously served as President of the Company’s Drilling & Completion Services division. Prior to assuming the role of President—Drilling & Completion Services in March 2015, he served as the Company’s Senior Vice President—Corporate Oilfield Operations from July 2013. Mr. Keppler first joined C&J with the Company’s acquisition of its wireline business, Casedhole Solutions, in June 2012. He previously served as the President of Casedhole Solutions from October 2012 through July 2013, having joined Casedhole Solutions as its Vice President and General Manager for the North Region in May 2010. Prior to joining Casedhole Solutions, Mr. Keppler was employed by Schlumberger from 1991 through 2010, where he gained significant wireline experience in the North American market with extensive expertise in cased-hole operations, perforating, open-hole logging, and wellbore formation sampling. While employed by Schlumberger, Mr. Keppler held numerous key management positions, including wireline district manager in six different locations, regional operations manager for the state of Alaska, Engineering Sustaining Manager and Cased-Hole Service Delivery Manager for the U.S. Mr. Keppler’s last position before joining Casedhole Solutions was Global Wireline Technical Support Manager for Weatherford. Mr. Keppler graduated from New Mexico State University with a B.S. in Mechanical Engineering in 1990.
Sterling Renshaw		Mr. Renshaw serves as President of C&J’s Well Support Services, a position he has held since August 2017. Mr. Renshaw joined C&J in March 2015 as Senior Vice President for Northwest Well Services when C&J combined with the completion and production services business of Nabors. Since then, Mr. Renshaw has served in various senior management roles with C&J, including Senior Vice President of California and the Rocky Mountains and most recently as Senior Vice President of Operations for C&J’s Well Support Services business. Mr. Renshaw first joined Pool Company, which was subsequently acquired by Nabors and then C&J, in 1988 and held numerous operational and management positions of increasing responsibility during his 28-year tenure. He was serving as Director of Nabors’ Well Services / Special Services division at the time that C&J acquired that business in March 2015.
Timothy Wallace		Mr. Wallace serves as C&J’s President – Strategic Planning, a position he has held since May 2018. Mr. Wallace previously served as President of C&J’s Completion Services division from October 2016 to May 2018, as well as Senior Vice President – Sales & Marketing for Completion Services from January to October 2016, and Senior Vice President – Wireline and Pumping from July 2013 through January 2016. He first joined C&J with the Company’s acquisition of its wireline business, Casedhole Solutions, in June 2012, and from that time through July 2013 he served as C&J’s Vice President of Wireline Operations. Mr. Wallace joined Casedhole Solutions in October 2011 as the Southwest Regional Wireline Operations Manager.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      31

EXECUTIVE MANAGEMENT TEAM

 

		Before arriving at Casedhole Solutions, Mr. Wallace was employed for 28 years with Schlumberger. While at Schlumberger, he held positions in operations management, sales management, software project management, corporate sales, field sales and field operations at various locations in North America, with extensive international travel. Mr. Wallace graduated from Louisiana Tech University with a B.S. in Petroleum Engineering in 1984.
Michael Galvan		Mr. Galvan serves as C&J’s Senior Vice President – Chief Accounting Officer and Treasurer, a position he has held since May 2017. During 2018, Mr. Galvan also served as Interim Chief Financial Officer, a position he held from March 2018 until September 2018. He joined C&J in 2014, serving as Vice President of Technical Accounting, before being promoted to Senior Vice President—Chief Accounting Officer. He has almost 25 years of accounting and financial experience and, among other duties, is currently responsible for the Company’s finance and accounting functions. Prior to joining C&J, Mr. Galvan served as Senior Vice President and Chief Accounting Officer at Mattress Firm from December 2012 to May 2014, and as Vice President and Chief Accounting Officer at Main Street Capital Corporation from January 2008 to December 2012. Prior to 2008, he served in various accounting and financial capacities with increasing responsibility at numerous companies, including Direct Energy and Enron Corporation. Mr. Galvan started his career in 1994 with Arthur Anderson LLP in Houston, Texas, most recently having served as senior auditor. Mr. Galvan graduated with an MPA from the University of Texas in 1994.

 

32      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

SHARE OWNERSHIP INFORMATION

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act (“Section 16(a)”) requires our executive officers and directors, and any persons who own more than 10% of a registered class of the Company’s equity securities (the “Section 16 Reporting Persons”), to file with the SEC reports of ownership of the Company’s equity securities and changes in reported ownership. The Section 16 Reporting Persons are required by SEC rules to furnish us with copies of all Section 16(a) reports that they file.

Based solely on a review of the reports furnished to the Company by, or written representations from, the Section 16 Reporting Persons that all reportable transactions were reported, we believe that during the fiscal year ended December 31, 2018, the Section 16 Reporting Persons timely filed all reports that such persons were required to file under Section 16(a) of the Exchange Act.

Largest Owners of Company Stock

The table below provides information as to each person or entity known to us to be the beneficial owner of more than five percent of our common stock:

 

Name and Address of Beneficial Owner		Aggregate Number of Shares Beneficially Owned				Percent of Class
Blackrock, Inc. (1) 55 East 52nd Street New York, NY 10055			9,322,848				13.8	%
The Vanguard Group, Inc. (2) 100 Vanguard Blvd. Malvern, PA 19355			6,431,373				9.6	%
Hotchkis and Wiley Capital Management, LLC (3) 725 South Figueroa St., 39th Floor Los Angeles, CA 90017			5,902,350				8.8	%
Point72 Asset Management, L.P. (4) 72 Cummings Point Road Stamford, CT 06902			3,604,430				5.4	%
Solus Alternative Asset Management (5) 410 Park Avenue, 11th Floor New York, NY 10022			3,540,856				5.3	%

 

(1)

The information contained in the table and this footnote is based solely on a Schedule 13G/A filed with the SEC on January 24, 2019, by Blackrock, Inc. The filing indicates that as of December 31, 2018, BlackRock, Inc. had sole voting power for 9,163,797 shares and sole dispositive power over 9,322,848. The filing also indicated that iShares Core S&P Small-Cap ETF, is more than five percent of the total outstanding common stock of the Company. The subsidiaries of Black Rock, Inc. that acquired shares reported by the BlackRock, Inc. are as follows: BlackRock Advisors, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock Fund Advisors, BlackRock Asset Management Ireland Limited, BlackRock Institutional Trust Company, National Association, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, and BlackRock Investment Management, LLC.

 

(2)

The information contained in the table and this footnote is based solely on a Schedule 13G/A filed with the SEC on February 11, 2019, by The Vanguard Group. The filing indicates that as of December 31, 2018, The Vanguard Group, Inc. reported that it had sole voting power for 63,104 shares, shared voting power for 17,400 shares, sole dispositive power for 6,356,699 shares and shared dispositive power for 74,674 shares. The Vanguard Group, Inc. also reported that (i) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 57,274 shares as a result of its serving as investment manager of collective trust accounts and (ii) Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 23,230 shares as a result of its serving as investment manager of Australian investment offerings.

 

(3)

The information contained in the table and this footnote is based solely on a Schedule 13G filed with the SEC on February 13, 2019 by Hotchkis and Wiley Capital Management, LLC (“Hotchkis”). Hotchkis reported that it was an investment advisor having sole dispositive power as to 5,902,350 common shares and having the power to direct the vote of 5,250,750 common shares.

 

(4)

The information contained in the table and this footnote is based solely on a Schedule 13G/A filed with the SEC on February 14, 2019, by Point72 Asset Management L.P. (“Point72 Asset Management”), Point72 Capital Advisors Inc. (“Point72 Capital Advisors”), Point72 Asset Management, Point72 Capital Advisors Inc., Cubist Systematic Strategies, and Steven A. Cohen own directly no common stock. Pursuant to an investment management agreement, Point72 Asset Management maintains investment and voting power with respect to the securities held by certain

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      33

SHARE OWNERSHIP INFORMATION

 

investment funds it manages. Point72 Capital Advisors Inc. is the general partner of Point72 Asset Management. Pursuant to an investment management agreement, Cubist Systematic Strategies maintains investment and voting power with respect to the securities held by certain investment funds it manages. Mr. Cohen controls each of Point72 Asset Management, Point72 Capital Advisors Inc. and Cubist Systematic Strategies. As of December 31, 2018, by reason of the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, each of (i) Point72 Asset Management, Point72 Capital Advisors Inc. and Mr. Cohen may be deemed to beneficially own 3,601,202 Shares (constituting approximately 5.3% of the Shares outstanding) and (ii) Cubist Systematic Strategies and Mr. Cohen may be deemed to beneficially own 3,228 Shares (constituting <0.1% of the Shares outstanding). Each of Point72 Asset Management, Point72 Capital Advisors Inc., Cubist Systematic Strategies and Mr. Cohen disclaims beneficial ownership of any of the shares of common stock described in this footnote.

 

(5)

The information contained in the table and this footnote is based solely on a Schedule 13G/A filed with the SEC on February 14, 2019 by Solus Alternative Asset Management LP (the “Investment Manager”), Solus GP LLC (the “GP”) and Mr. Christopher Pucillo (“Mr. Pucillo”). The Investment Manager serves as the investment manager to certain investment funds and/or accounts (the “Funds”), with respect to the shares of C&J common stock held by the Funds. The GP serves as the general partner to the Investment Manager, with respect to the shares of C&J common stock held by the Funds; and Mr. Pucillo is the managing member to the GP. Each of Solus Alternative Asset Management LP, Solus GP LLC and Christopher Pucillo have shared voting power and shared dispositive power with respect to the 3,540,856 shares of common stock held by the Funds. Each of the foregoing entities and individuals disclaims beneficial ownership of the shares of common stock described in this footnote.

Security Ownership of Management

The following table shows the number of shares of common stock beneficially owned as of April 2, 2019 by (1) each of our NEOs, (2) each of our directors and director nominees and (3) all of our current directors and executive officers as a group.

 

Name of Beneficial Owner		Aggregate Number of Shares Owned (1)				Acquirable within 60 Days (2)				Percent of Class Outstanding (3)
Donald Gawick			410,920				91,427			*
Michael Hobbs			137,000				36,871			*
Mark Cashiola (4)			76,202				36,217			*
Jan Kees van Gaalen			36,047				0			*
Danielle Hunter			94,536				23,278			*
Sterling Renshaw			37,203				1,870			*
Michael Galvan			10,152				30			*
Patrick Murray			19,981				0			*
Stuart Brightman			14,280				0			*
John Kennedy			15,310				0			*
Steven Mueller			15,310				0			*
Michael Roemer			15,880				226			*
Michael Zawadzki (5)			—				0			*
Executive Officers and Directors as Group (16 persons)			1,028,297				199,150			1.5%

 

*	Represents less than 1% of the outstanding common stock.

 

(1)

The number of shares beneficially owned by the named person includes (a) any shares of restricted stock, whether vested or unvested, held by such person, (b) any shares that could be purchased upon the exercise of options and/or warrants held by such person as of April 4, 2019, or within 60 days after April 4, 2019, and (c) the target number of shares underlying the outstanding performance shares held by such person as of April 4, 2019. Unless otherwise indicated, each named person has sole voting and investment power with respect to the shares beneficially owned by such person.

 

(2)	Reflects the number of shares that could be purchased upon the exercise of options and/or warrants held by the named person as of April 4, 2018 or within 60 days after April 4, 2018.

 

(3)	Based on 66,047,447 common shares issued and outstanding as of April 2, 2018.

 

(4)	Mark Cashiola, our former CFO, resigned from the Company effective as of March 20, 2018. Michael Galvan, our Senior Vice President and Chief Accounting Officer, assumed the additional role of CFO on an interim basis until Mr. van Gaalen was appointed.

 

(5)	Michael Zawadzki is an employee of GSO Capital Partners LP and/or one of its affiliates. Mr. Zawadzki disclaims beneficial ownership of our common stock held by GSO CSF II Lux.

 

34      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

EQUITY COMPENSATION PLAN INFORMATION

 

EQUITY COMPENSATION PLAN INFORMATION

The C&J Energy Services, Inc. 2017 Management Incentive Plan (the “MIP”), effective as of January 6, 2017, provides that a maximum of 8,046,021 shares of our common stock may be issued or transferred pursuant to awards under the MIP. Persons eligible to receive awards under the MIP include our non-employee directors and our employees. As of April 4, 2019, 4,923,403 shares remained available for future issuances of equity awards under the MIP.

The following table sets forth certain information regarding the MIP as of December 31, 2018:

 

						COLUMN A								COLUMN B								COLUMN C
Plan Category						Number of securities to be issued upon exercise of outstanding options, warrants and rights								Weighted-average exercise price of outstanding options, warrants and rights								Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column (A))
Equity compensation plans approved by security holders							351,306								39.43								4,895,247
Equity compensation plans not approved by security holders							—								—								—
Total							351,306								39.43								4,895,247

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      35

TRANSACTIONS WITH RELATED PERSONS

 

TRANSACTIONS WITH RELATED PERSONS

The Board has adopted a Related Persons Transactions Policy (the “Related Persons Transactions Policy”), which provides guidelines for the review and approval of transactions or arrangements involving the Company, on one side, and, on the other side, and any of our directors (or nominees for director), executive officers, stockholders owning more than 5% of the Company, and/or any immediate family members of any of the foregoing (each, a “Related Person” and a “Related Persons Transactions”). As a matter of good corporate governance and to assist us in complying with SEC disclosure obligations, the Related Persons Transactions Policy specifically covers any transaction (i) in which the aggregate amount involved exceeds or may be expected to exceed $120,000 in any calendar year, (ii) the Company is or will be a participant, and (iii) any Related Person has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).

Any Related Persons Transactions are also subject to our Code of Conduct, which restricts our people from engaging in any business or conduct or entering into any agreement or arrangement that would give rise to an actual or potential conflict of interest. Under our Code of Conduct, conflicts of interest occur, among other scenarios, when private or family interests interfere, or appear to interfere, in any way with C&J’s interests.

As a best practice and matter of good corporate governance, we discourage any Related Persons Transactions because they may present potential or actual conflicts of interest and create the appearance that decisions are based on considerations other than the best interest of the Company and its stockholders. We will only enter into or ratify Related Persons Transactions when the Audit Committee or the Board, as applicable, determines such transactions are in the Company’s best interests and the best interests of our stockholders. Since the beginning of 2018, there were no new Related Persons Transactions under the relevant standards.

Procedures for Identifying, Assessing and Approving Related Persons Transactions

Under the terms of our Code of Conduct, our General Counsel is primarily responsible for developing and implementing procedures and controls for the identification, assessment and approval of any proposed transaction or arrangement that may constitute a potential conflict of interest, including with respect to Related Persons Transactions. Our General Counsel is required to report to the Board any actual or potential conflict of interest involving a Related Person, and the Board will determine whether a conflict of interest exists and whether it is appropriate to approve or disapprove such transaction. Board approval is required prior to the consummation of any proposed transaction or arrangement that involves a Related Person. Any director who has an interest in the transaction will be recused from the review and approval process.

Pursuant to our Related Persons Transactions Policy, the Audit Committee is required to review the material facts and either approve or disapprove, those Related Persons Transactions, in which (1) the aggregate amount involved exceeds, or is expected to exceed, $120,000 in any calendar year and (2) any Related Person has or will have a direct or indirect interest (other than solely as a result of being a director of, or holding less than a 10% beneficial ownership interest in, another entity).

In determining whether to approve a Related Persons Transaction, the Audit Committee or the Board, as applicable, will take into account, among other factors it deems appropriate with respect to the particular transaction:

 

•

The nature and extent of the Related Person’s interest in the transaction;

 

•

The material terms of the transaction, including, without limitation, the amount and type of transaction;

 

•

Whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances;

 

•

Whether there are alternative sources for the subject matter of the transaction;

 

•

The importance of the transaction to the Related Person;

 

•

The importance of the transaction to us; and

 

•

Whether the transaction would impair the judgment of a director or executive officer to act in the best interest of our Company.

If the Related Persons Transaction is approved and entered into, on at least an annual basis thereafter, the Audit Committee is required to review, assess and, as appropriate, ratify any ongoing transaction, arrangement or relationship with the Related Person to confirm that such transaction, arrangement or relationship remains appropriate. Any member of the Audit Committee who is a Related Person with respect to the transaction will be recused from the review and approval process.

We annually distribute a questionnaire to our executive officers and directors requesting certain information regarding, among other things, their immediate family members, employment and beneficial ownership interests. This information is then reviewed for any

 

36      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

TRANSACTIONS WITH RELATED PERSONS

 

potential conflicts of interest or disclosable transaction or arrangement under the Code of Conduct and Related Persons Transaction Policy. At the completion of the annual audit, our Audit Committee and our independent registered public accounting firm review with our General Counsel, any identified transactions with Related Persons and potential conflicts of interest. Additionally, the Nominating and Governance Committee and the Board review any transactions or arrangements involving non-employee directors as part of the annual independence determination.

Related Persons Transactions

Since the beginning of 2018, there were no Related Persons Transactions.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      37

PROPOSAL 2—NON-BINDING VOTE TO APPROVE EXECUTIVE COMPENSATION

 

Proposal 2—Non-Binding Vote to Approve Executive Compensation

We are asking our stockholders to approve, on a non-binding basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement, including under “Compensation Discussion and Analysis,” and “Executive Compensation Tables”. This proposal, referred to as a “Say on Pay” vote, is not intended to address any specific item of executive compensation, but rather our overall executive compensation program and the total compensation paid to our Named Executive Officers (defined in “Compensation Discussion and Analysis”) for the year ended December 31, 2018.

We urge stockholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement which discusses the objectives, principles, policies and practices of our executive compensation program; how the Compensation Committee sets executive compensation and certain decisions made by the Compensation Committee with respect to 2018 executive compensation; the components of our 2018 executive compensation program, including the nature, type, size and purpose of those components; and any exceptional circumstances and other factors that the Compensation Committee considered in making decisions and designing our 2018 executive compensation program. Stockholders should also read the section of the Proxy Statement entitled “Executive Compensation Tables” for detailed information about the 2018 compensation of our Named Executive Officers, as required to be reported. We believe our executive compensation program achieves the following objectives as identified in “Compensation Discussion and Analysis” below, which we believe are critical to our ongoing growth and success, the creation of long-term value and the realization of competitive stockholder returns:

 

•

Attract, motivate and retain talented, experienced and dedicated people by providing compensation packages that are competitive, market driven and in-line with industry practice;

 

•

Support our business strategies and motivate best-in-class performance by linking compensation with the achievement of strategic, operational, financial and personal objectives to further incentivize our people; and

 

•

Align the interests of our people with those of our stockholders by providing a direct relationship between compensation and Company performance on both a short-term and long-term basis, and rewarding our people for individual and collective efforts, contributions and successes.

We request that you indicate your support for our executive compensation program by voting in favor of the following resolution:

 

		“RESOLVED , that the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the Compensation Discussion and Analysis and the Executive Compensation Tables, including the compensation tables, notes and narrative, in this Proxy Statement is hereby APPROVED.”

A majority of the votes cast is required to approve this “Say on Pay” vote. This is an advisory vote and is not binding upon the Company, the Compensation Committee or the Board. However, we value the views of our stockholders. As such, our Compensation Committee, which is comprised solely of independent directors and is responsible for, among other things, designing and administering the Company’s executive compensation program, will carefully consider the results of this vote, along with all other expressions of stockholder views it receives on specific policies and desirable actions, when considering future decisions with respect to executive compensation.

The Board has determined to provide for an annual “say-on-pay” advisory vote. Unless the Board of Directors modifies this position on the frequency of holding “say-on-pay” advisory votes, the next “say-on-pay” advisory vote will occur in 2020.

 

✓		OUR BOARD RECOMMENDS A VOTE “ FOR ” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      39

COMPENSATION DISCUSSION AND ANALYSIS

 

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) describes (1) the principles, objectives, policies and practices of our executive compensation program; (2) the components of our executive compensation program and how the Compensation Committee sets compensation for our executive officers; and (3) decisions made by the Compensation Committee with respect to 2018 executive compensation specifically for to our named executive officers (“Named Executive Officers” or “NEOs”) listed below. To aid in the understanding of the compensation-related disclosures included in this Proxy Statement This CD&A also discusses the history of our executive compensation programs in 2017 and 2018, including the special facts and circumstances giving rise to those programs and their impact on our current executive compensation program. Our Named Executive Officers for 2018 are:

 

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Donald Gawick , President and Chief Executive Officer

 

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Michael Hobbs , Chief Operating Officer

 

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Jan Kees van Gaalen , Chief Financial Officer

 

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Danielle Hunter , Executive Vice President, General Counsel, Chief Risk and Compliance Officer, and Corporate Secretary

 

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Sterling Renshaw , President—Well Support Services

Additionally, in accordance with Item 402 of Regulation S-K, we have provided compensation information for our former CFO, Mark Cashiola , who departed on March 20, 2018, and for Michael Galvan , our continuing Senior Vice President—Chief Accounting Officer and Treasurer, who served as interim CFO from March 20, 2018 until Mr. van Gaalen’s appointment as CFO on September 17, 2018. Mr. Galvan continues to be part of our executive team. Biographical information about each of our executive officers is included under “Executive Management Team” in this Proxy Statement.

Review of Executive Compensation Program in Light of Last Year’s Say-on-Pay Results

We are committed to using executive compensation as a way to align closely the interests of management and our stockholders and to retain and incentivize key talent. We have faced unique challenges relating to our executive compensation in recent years, including a need to respond to our evolving status as a company that emerged from bankruptcy in 2017 with no employee equity and limited historical performance-based compensation, our quick transition in 2017 to public company status after our re-IPO and important changes to our organization and business throughout 2018. At the 2018 annual meeting of stockholders, we received a 58.5% vote on our say-on-pay proposal to 2017 NEO compensation. To ensure responsiveness to stockholders, our Compensation Committee oversaw a comprehensive review of our executive compensation programs in 2018 and 2019, working with management, consulting with external compensation advisors and incorporating extensive feedback from our stockholders. Our process for review is summarized below.

 

		DESIGN PROCESS		ACTIVITIES COMPLETED/ONGOING
1		INPUT		∎ Reviewed history of compensation and underlying objectives from 2017 and 2018 ∎  Reviewed feedback from 2017/2018 stockholder engagement cycle and say-on-pay result, as well as       proxy advisory service reports ∎ Solicited further stockholder feedback to understand say-on-pay result ∎  Based on the feedback, assessed compensation structure and performance against compensation, as       well as alignment with future business objectives
2		DESIGN AND   CONFIRM		∎  Discussed engagement and design alternatives with the Compensation Committee and external       compensation advisors at various meetings throughout the year ∎  Developed design changes based upon stockholder feedback and in conjunction with business strategy ∎  Discussed proposed changes to compensation with stockholders
3		FINALIZE		∎  Finalized executive compensation program changes with the Compensation Committee, incorporating       final feedback from stockholder engagement ∎ Incorporated engagement results into our disclosure for the 2019 proxy season

 

40      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

COMPENSATION DISCUSSION AND ANALYSIS

 

We believe that key changes made to our compensation in 2019, as compared to 2018, and, in part, 2017, reflect deeply the input of our stockholders and of the current market for executive compensation. In December 2018, following robust discussion and evaluation of our executive compensation program against the data and analysis provided by Pearl Meyer & Partners, the Compensation Committee’s independent compensation consultant (“Pearl Meyer”), the Compensation Committee made the determinations summarized below.

 

Element of Executive Compensation		Key Facts About Our Executive Compensation Program
		2018		2019
Salary		Held base salaries flat from 2017 to 2018 for all NEOs, as well as most executive officers, with the exception of Mr. Galvan (who received additional compensation as interim CFO and a subsequent base salary increase later in 2018 due to additional responsibilities as Treasurer).		It was determined that on average, base salaries were at the market median, therefore, we generally held base salaries flat from 2018 to 2019 for most of our executive team, except for Ms. Hunter, who received a 6% increase, and Mr. Renshaw, who received an 8% increase to bring their base salaries in line with the median range.
Short-Term Incentive (“STI”) Plan (“STIP”)		80% of 2018 STI target opportunity for our CEO and most executive officers was based on consolidated Adjusted EBITDA goals, with the remainder split between consolidated Selling General and Administrative (“SG&A”) reduction goals and Total Recordable Injury Rate (“TRIR”) goals.		Reflecting a commitment to disciplined capital allocation and sustainable returns, 20% of 2019 STI target opportunity for our CEO and most other executives is subject to Return on Capital Employed goals, in addition to 60% subject to Adjusted EBITDA goals. Similarly, we added Return on Operating Investment and Primary Working Capital to the 2019 STIP for our operational executives, which includes Mr. Renshaw.
Long-Term Incentive (“LTI”) Plan (“LTIP”)		Increased the 2018 LTIP award values for our executive officers (with the exception of Mr. Galvan, who was not part of our senior executive team at the time of determination), while reducing their 2018 STI target opportunity in order to be at levels for each component more consistent with our compensation peer group and to strengthen the alignment with long-term stockholder interest.		Increased the percentage of relative TSR based performance shares in the 2019 LTIP (granted December 2018) to 40% for our senior executives, and introduced relative TSR based performance shares to our next level of senior management (including Mr. Galvan) at 10% of their respective 2019 LTI grants.   Increased the 2019 LTIP award value for our CEO to 500%, while proportionally reducing his 2019 STI target opportunity to 100%, to put components at levels more consistent with our compensation peer group and strengthen alignment with the long-term stockholder interests.   Decreased the 2019 LTIP award value to our COO by approximately 12% due to his anticipated transition to a non-executive role in the latter part of 2019.   Decreased the 2019 LTIP award value to Mr. Galvan and others in our senior management team to better align with market levels, without adjusting other compensation elements.
Other Key Facts about 2018 Executive Compensation
1.   Despite strong performance, none of our executive team achieved the threshold goal for consolidated Adjusted EBITDA under the 2018 STI and, as a result, our executive team did not earn payout under this component. As a result, the payout under the 2018 STIP for our CEO was 30% of his target opportunity. Excluding Mr. Renshaw, the payout for our executive team 2018 STIP was, on average, approximately 41% of the target opportunity; Mr. Renshaw’s payout under the 2018 STIP was 158% of his target opportunity due to the performance of our Well Support Services under his leadership.   2.   Our CEO’s 2018 total reported compensation was $10.1 million less, or 62% lower, than his 2017 total reported compensation.   3.   Our CEO’s 2018 total realized compensation was CEO’s 2018 total realized compensation was 58% lower than his reported 2018 total compensation and 46% lower than his 2017 total realized compensation.   4.   100% of our CEO’s and other executives’ stock options were “under water” as of January 1, 2019.

 

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      41

COMPENSATION DISCUSSION AND ANALYSIS

 

Recent History of Executive Compensation Programs

In explaining its review of compensation in response to the 2017 compensation say-on-pay vote, our Compensation Committee finds it important to highlight to stockholders our recent history as it affects executive compensation, namely: (1) the challenges we faced upon emergence from a Chapter 11 financial restructuring in early January 2017, which created a need for special and isolated compensation decisions in 2017 that are not expected to recur; (2) our initiative to looking forward to long-term financial performance following this emergence, which led to the establishment of annual compensation awards in late 2017 as a way of setting up 2018 compensation; and (3) our maturation into a more established company in 2018, which led us to adopt 2019 executive compensation that more closely follows the competitive compensation practices of peers and continues to take into account the accretion of stockholder value.

Compensation for 2017

2017 compensation represented a one-time, short-term response to an isolated and unusual scenario. Following severe industry downturn, in July 2016, our Predecessor Companies voluntarily filed for reorganization under Chapter 11. On January 6, 2017, after a complex financial restructuring, we emerged from the Chapter 11 proceeding positioned for sustainable growth.

Upon emergence, we faced the challenge of retaining and motivating a management team, which had experienced severe changes in its compensation before and during our reorganization, to guide our business effectively in a complicated post-emergence period and to continue a focus on building stockholder value. At the time, none of our employees owned any Company stock, as we had cancelled all prior C&J equity (including outstanding equity awards) and issued all of our stock as a reorganized company to our secured lenders who became our new stockholders upon emergence under the terms of the Restructuring Plan. Additionally, before our emergence, we had taken several austerity measures that curtailed non-equity compensation, paying no cash bonuses in 2015 and 2016, reducing salaries by 10% across the organization (including for the NEOs) in 2016 through part of 2017, eliminating our employer 401(k) match for 2016 and the first half of 2017 and reducing or illuminating other benefits and perquisites in 2015 and 2016. To complicate this backdrop, our common stock was delisted in connection with the Chapter 11 proceeding, so upon emergence we began immediately preparing for an underwritten public offering of our common stock and re-listing on the NYSE (our “re-IPO”), which required us to consider the interests of public stockholders in our executive compensation. The re-IPO ultimately closed in April 2017.

After consultation with the independent compensation consultant, Pearl Meyer, and outreach from stockholders (described in more depth in “Say-on-Pay Results and Stockholder Engagement” below), our newly-constituted Board and Compensation Committee determined to provide (1) special non-recurring awards, including a time-vesting equity award tied to our emergence and a performance-based cash award tied to our re-IPO, and (2) an annual short-term cash performance-based incentive plan.

 

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Special Non-Recurring Compensation : Due to the unique circumstances of emergence from bankruptcy and need for a subsequent re-IPO, the Compensation Committee, with the assistance of Pearl Meyer, determined to make isolated awards to certain key employees. These awards, although made in 2017, were not part of the ongoing compensation framework for 2017, but rather standalone, non-recurring compensation stemming from exigent circumstances. We made these awards to reward key contributors for their efforts and dedication in our emergence from bankruptcy, to align their interests with those of stockholders and to retain key talent through the post-emergence period.

 

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Emergence Grants: In February 2017, we made one-time emergence grants to our NEOs and certain other employees consisting of 80% restricted stock and 20% stock options, vesting 34% at grant with ratable three-year time-based vesting for the remaining 66% (the “Emergence Grants”). The Compensation Committee believed that time-based equity awards with a portion immediately vesting was critical to retaining and motivating our executives and creating alignment with stockholder interests.

 

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Re-IPO Performance-Based Cash Awards: In May 2017, certain key contributors, including NEOs, earned a special short-term incentive cash award equal to approximately 20% of their then-effective base salary. The award was based on the achievement of specific performance metrics, namely the closing of our re-IPO with net proceeds of approximately $215.9 million (above the performance threshold for net proceeds of at least $200 million) in April 2017 (before the performance deadline of June 30, 2017).

 

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Annual Short-Term Incentive Award: To launch our annual compensation program in line with public company standards, in February 2017, the Compensation Committee, based on stockholder input and the advice of Pearl Meyer, established the annual STIP for performance-based cash awards. The STIP was intended to strengthen the Company’s pay-for-performance culture by rewarding our people for achieving strategic business or operational and financial objectives and connecting individual cash compensation directly to our financial and operational performance. Under the STIP, the Compensation Committee sets annual performance metrics for the purpose of establishing objectively determinable incentive opportunities that ensure pay-for-performance alignment. For more information, see “Framework for Setting Executive Compensation—

 

42      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

COMPENSATION DISCUSSION AND ANALYSIS

 

Components of our Executive Compensation Program.” The 2017 STIP cash awards for NEOs were based on the Company’s achievement of specific performance goals based on quantitative performance metrics. Specifically, the STIP for our CEO and most of our other executives was subject 80% to Adjusted EBITDA goals and 20% to TRIR goals.

Compensation for 2018

Throughout 2017, the Company’s Board and Compensation Committee continuously reviewed the Company’s compensation program, looking ahead to a more long-term and regular, annual approach to compensation, beginning in 2018. For an explanation of the timing of the compensation review process, see “Framework for Setting Executive Compensation—The Decision-Making Process—The Role of the Compensation Committee.”

The decision to do so stemmed in part from our having accomplished a number of strategic and corporate objectives, while managing the business to respond to improving market conditions. Among other initiatives, we sharpened our focus and concentrated our resources on businesses that complement our core competencies and represent our most profitable opportunities. For example, we accelerated the growth of our cementing business with the acquisition of O-Tex Pumping in the fourth quarter of 2017, which transformed us into one of the leading cementing service providers in the United States and strengthened our well construction and intervention services platform. Additionally, our financial results for full year 2017 reflected our growth as a company early maturation out of emergence from bankruptcy. We delivered four consecutive quarters of double-digit revenue growth with an increase of approximately 69% compared to full year 2016, improved profitability by approximately $966.7 million over full year 2016, and we ended the year with a cash balance of approximately $113.9 million and no borrowings drawn on our credit facility.

 

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Annual Long-Term Incentive Grant : Over the latter half of 2017, Pearl Meyer assisted the Compensation Committee in evaluating executive compensation and designing the compensation program for 2018, as more fully described in this CD&A. The Compensation Committee, including based on Pearl Meyer’s advice, believed it was necessary and appropriate to provide a regular annual LTI grant in December, as a supplement to the annual STI that is paid out – to the extent earned – in the first quarter of the subsequent year. In determining the 2018 LTI awards, the Compensation Committee sought to design a program that the Compensation Committee believed would, among other targeted benefits, align the interests of executives with the interests of stockholders, drive appropriate performance, be market competitive, be effective for retention purposes, be tax efficient, minimize earnings volatility, reinforce strategic planning processes and balance short- and long-term decision making. The Compensation Committee also considered the continued need to establish meaningful stock ownership for the executive officers, given the impact of the Company’s Chapter 11 proceeding.

As a result of its analysis, the Compensation Committee granted to certain executive officers, including our NEOs, LTIs consisting of 60% restricted stock, 25% performance shares and 15% stock options, as it was determined that the mix of time-based restricted stock and stock options together with performance-based restricted stock awards best accomplished the Compensation Committee’s stated objectives. For more information, see “Framework for Setting Executive Compensation—Components of our Executive Compensation Program.”

 

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Compensation Mix : The 2018 LTI awards were granted simultaneous with Compensation Committee approval of the 2018 executive compensation program. The Compensation Committee determined to increase the 2018 LTI award values for our executive officers while decreasing their 2018 STI target opportunity, in order to be at levels for each component more consistent with our compensation peer group and to strengthen the alignment with long-term stockholder interest, among other purposes. Base salaries were held flat from 2017 to 2018 for our CEO and most executive officers.

Compensation for 2019

As we continue the development and maturation of our Company, the Compensation Committee continues to evolve our executive compensation program, incorporating stockholder feedback, benchmarking results, and independent compensation consultant guidance. Our program for 2019 in part takes into account our financial and operational performance in 2018, as well as our strategic plan and goals for 2019 and beyond.

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      43

COMPENSATION DISCUSSION AND ANALYSIS

 

2018 was a difficult year for our Company and for oilfield services companies as a whole. During the year, our business and our stock price were negatively impacted by continued industry uncertainty that created unfavorable market conditions. After a relatively strong and promising start to the year, the latter half of 2018 was characterized by low customer demand and pricing pressure across our core serve lines and major markets. This industry performance continues to put pressure on the executive compensation programs to ensure that they appropriately motivate the key employees who will drive stockholder value over the long term. Despite these challenges, we delivered solid financial results by generating targeted returns, maintaining a disciplined capital deployment strategy and generating free cash flow, as summarized below.

 

Additionally, we achieved many of our strategic objectives, including the deployment of both new and refurbished equipment in our core service lines, the integration of the O-Tex cementing business, the disposition of non-core businesses and rationalization of assets, and the deployment of new technologies from our research and technology division. We also progressed on our finance transformation initiative, including required improvements to our SAP platform and the strengthening of our executive team with the successful recruitment and transition of Mr. van Gaalen into the role of CFO.

For insight into key changes for 2019, see the “Key Changes to our Compensation Program After Last Year’s Say-on-Pay Vote” below.

Say-on-Pay Results and Stockholder Engagement

Our 2017, 2018 and 2019 compensation program reflect the results of broad stockholder engagement, including in response to the 58.5% vote on 2017 NEO compensation in 2018. The Company regularly evaluates its compensation programs and considers feedback received directly from stockholders through ongoing engagement, as well as the results of its most recent “say-on-pay” vote.

Company Participants in Stockholder Engagement

Board and management participants in our stockholder engagement include the following to ensure access to key roles in the executive compensation planning process:

 

•   Chief Executive Officer   •   Chief Financial Officer   •   General Counsel   •   Vice President of Investor Relations		•   Participation by the Board Chair and chair of the Compensation Committee is offered to all firms within our outreach upon request.

 

44      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT

COMPENSATION DISCUSSION AND ANALYSIS

 

2017 Compensation Stockholder Engagement

The Compensation Committee’s design of 2017 compensation relied heavily on stockholder outreach, both before and after emergence from the Chapter 11 proceeding. During the reorganization and before emergence, the compensation arrangements and employment agreements for our CEO and our executives were directly negotiated with the secured lenders who would own all of our stock upon emergence.

In early 2017, following emergence from the Chapter 11 proceeding, our newly-constituted Compensation Committee reviewed this pre-emergence level of stockholder support and continued discussions with certain large stockholders party to the Stockholders Agreement, who would come to represent approximately 16% of our post-IPO stockholder base. Upon emergence, pursuant to the Stockholders Agreement then in effect, our largest stockholder had designated two directors to serve on the Board and had an active board observer, and our second largest stockholder had a direct representative on the Board along with two other director designees.

Although the Compensation Committee considered the pre-emergence support as an endorsement of the 2017 executive compensation program by certain of our stockholders, it determined that certain modifications were warranted to ensure our executive compensation program aligned our executives’ interest with that of our stockholders and reflected current market practices and prevailing governance standards. Also, because the re-IPO had not yet occurred, the Compensation Committee recognized the need to design compensation that would align with the interests of public stockholders whose position and perspectives might differ from the stockholders who received stock in the restructuring.

Additionally, leading up to the 2018 annual meeting, our CEO, General Counsel and head of Investor Relations contacted 17 of our largest stockholders, representing 66% of our outstanding common stock, and spoke with nine of them, representing 44% of our outstanding common stock, to seek their views on our executive compensation program, among other matters. Our Board Chair and Compensation Committee chair were available to participate and did so when requested.

Stockholder Engagement Related to Say-on-Pay Vote for 2017 Compensation and 2018 Compensation Stockholder Engagement

In response to the outcome of the say-on-pay vote at the 2018 annual meeting of stockholders, the Compensation Committee directed those regular management participants in stockholder engagement to extend invitations to our largest stockholders to discuss our executive compensation program. In our discussions with our stockholders we sought to:

 

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better understand why they did not approve our fiscal 2017 compensation;

 

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better understand their views regarding our executive compensation, including 2018 compensation, to inform our decisions in seeking to align our compensation programs with shareholder interests; and

 

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discuss any other views or concerns of our stockholders.

In September 2018, we reached out to our 26 largest stockholders, representing 76% of our outstanding common stock, and spoke to twelve of these stockholders, representing 28% of our outstanding common stock. Our Chief Executive Officer, Chief Financial Officer and General Counsel engaged in open and productive discussions about our executive compensation program and also discussed environmental, social and governance (commonly referred to as “ESG”) related matters.

The shareholders who chose to participate in calls provided their concerns with the compensation paid to our executives for 2017, as well as support for changes that we made to our compensation program for 2018. Our General Counsel and Corporate Secretary reported on these discussions to the Compensation Committee, the Nominating and Governance Committee and full Board. In response to specific stockholder feedback, the Compensation Committee determined that certain additional modifications were warranted to ensure that our executive compensation program strongly aligns our executives’ interest with that of our stockholders and appropriately reflects market practices and prevailing governance standards. Many of these changes, highlighted below, went into effect this year and will be reflected in our 2019 executive compensation program (and subsequent disclosures).

 

		C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT      45

COMPENSATION DISCUSSION AND ANALYSIS

 

Key Changes to our Compensation Program After Last Year’s Say-on-Pay Vote

Special, Non-Recurring Compensation . As discussed above, in February 2017, our NEOs and certain other key people received Emergence Grants associated with C&J’s successful emergence from a Chapter 11 proceeding. The Emergence Grants to our executive officers were in the form of restricted shares and stock options, subject to a time-based vesting schedule. Other than the Emergence Grants, our executive officers (including our NEOs) did not receive any equity-based awards in respect of fiscal year 2017 service.

 

What We Heard from Stockholders Regarding 2017 Compensation		What We Did for 2018 Compensation and 2019 Compensation
◾    Stockholders familiar with the severe effects of a financial restructuring and the significant initial needs to successfully launch the reorganized company, and with how Boards address those special circumstances, were supportive of the Emergence Grants, including the size and structure.   ◾    Some of our stockholders stated that the size and structure of the Emergence Grant made too large a portion of total executive compensation not subject to performance requirements.		✓   In 2018, none of our NEOs or other executives received any significant exceptional compensation.   ✓   The limited special, one-time compensation for 2018 included a performance-based component. Specifically, Mr. van Gaalen received a $425,000 “sign-on” bonus for joining C&J as CFO, which was granted as part of his 2019 LTI award and comprised 40% performance shares, 50% restricted stock units, and 10% restricted cash.

STIP Awards . As discussed above, we designed and implemented C&J’s first performance-based short-term incentive plan, or “STIP,” for annual performance-based cash awards as part of our 2017 compensation program. The 2017 STIP for our CEO and most of our other executives was based on Adjusted EBTIDA goals (80%) and TRIR goals (20%).

 

What We Heard from Stockholders Regarding 2017 Compensation		What We Did for 2018 Compensation and 2019 Compensation
◾    Some stockholders encouraged us to include returns-focused metrics in the STIP, and also to include more purposeful quantitative and qualitative metrics.		✓   2018 : We increased the weighting of quantitative financial objectives in the 2018 STIP for our executives to 90% from 80% the prior year. In addition to 80% of the STI opportunity for our executives being subject to consolidated Adjusted EBITDA goals, we focused the executive team on cost-cutting by basing 10% of the target opportunity based on quantitative SG&A reduction goals.   ✓   2019 : With respect to 2019 STIP for our CEO and most of our other executives, 20% is subject to the achievement of quantitative Return on Capital Employed goals, in addition to 60% subject to quantitative Adjusted EBITDA goals. We added Return on Operating Investment and Primary Working Capital to the 2019 STIP for our operational executives, which includes Mr. Renshaw.

LTIP Awards . Performance-based LTIs were introduced with the December 2017 grant of the 2018 LTIP awards to executive officers, which served to re-establish a retention-focused annual LTI equity award cycle. We increased the percentage of LTI value in the form of performance shares from 2018 to 2019 as part of a phased transition to a heavier weighted performance-based mix of total compensation. For the performance shares, payout is based on the Company’s relative TSR as measured against a pre-established performance peer group, with no payout if the Company’s TSR ranks last amongst such performance peer group.

 

What We Heard from Stockholders Regarding 2017 Compensation		What We Did for 2018 Compensation and 2019 Compensation
◾    Some stockholders encouraged us to continue increasing the LTIP mix of perfor25mance-based shares, and overall stockholder feedback supported relative TSR as a preferred metric.		✓   2018: Performance shares represented 25% of the 2018 LTI awards to executives (granted December 2017).   ✓   2019: Performance shares represented 40% of the 2019 LTI awards to executives (granted December 2018).

 

46      C&J ENERGY SERVICES, INC.    2019 PROXY  STATEMENT