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CHEVRON CORPORATION
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[LOGO OF CHEVRON]
CHEVRON CORPORATION
Notice of Annual Meeting
of Stockholders and
Proxy Statement
May 2, 1995
George R. Brown Convention Center
1001 Avenida De Las Americas
Entrance C
Houston, Texas
[LOGO OF CHEVRON]
San Francisco, California
March 24, 1995
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--MAY 2, 1995
To the Stockholders:
The Annual Meeting of Stockholders of Chevron Corporation will be held at 9:30
a.m., local time, on Tuesday, May 2, 1995, in the George R. Brown Convention
Center, 1001 Avenida de las Americas, Entrance C, Houston, Texas (the
"Meeting").
As set forth in the attached proxy statement, the Meeting will be held for the
following purposes:
. ITEM 1--to elect 10 Directors;
. ITEM 2--to vote on a proposal, unanimously recommended by the Board of
Directors of Chevron Corporation, to permit the merger of the employee
Profit Sharing/Savings Plan and the Savings Plus Plan;
. ITEM 3--to ratify the appointment of independent public accountants;
. ITEMS 4 AND 5--to take action on stockholder proposals;
and to act upon such other matters as may properly be brought before the
Meeting.
Stockholders of record at the close of business on March 9, 1995 are entitled
to vote at the Meeting. The number of outstanding voting securities of Chevron
Corporation on February 16, 1995 was 651,922,688 shares of Common Stock, $1.50
par value. Each share is entitled to one vote.
In accordance with Delaware law, a list of stockholders entitled to vote at the
Meeting will be available at the George R. Brown Convention Center on May 2,
1995 and for 10 days prior to the Meeting, between the hours of 8:00 a.m. and
4:00 p.m. at the offices of Chevron U.S.A. Inc., 1301 McKinney Street, Houston,
Texas.
Please carefully read the attached proxy statement for information on the
matters to be considered and acted upon at the Meeting. We hope that you will
attend the Meeting. If you cannot, please vote on the listed items by marking,
signing and returning the enclosed proxy card. Your shares cannot be voted
unless you sign and return a proxy or vote by ballot at the Meeting.
By Order of the Board of Directors
/s/ M. J. McAULEY
M. J. McAULEY
Secretary
If you require special accommodations at the Meeting due to a disability,
please call the Secretary's office at (415) 894-0631 by April 14, 1995.
TABLE OF CONTENTS
Page
----
General Information for Stockholders...................................... 1
Voting Procedures....................................................... 1
Expenses of Solicitation................................................ 1
Stockholder Proposals................................................... 2
ITEM 1 Election of Directors.............................................. 2
Nominees for Directors.................................................. 2
Stock Ownership of Directors and Executive Officers..................... 5
Board Committees and Meeting Attendance................................. 5
Non-employee Directors' Compensation.................................... 6
Executive Compensation.................................................. 7
Management Compensation Committee Report on Executive Compensation.... 7
Summary Compensation Table............................................ 11
Option Grants in 1994 Table........................................... 12
Aggregated Option Exercises and 1994 Year-End Option Value Table...... 12
Long-Term Incentive Plan--1994 Performance Unit Awards Table.......... 12
Pension Plan Table.................................................... 13
Performance Graph..................................................... 14
ITEM 2 Approval of the Proposal to Permit the Merger of the Profit
Sharing/Savings Plan and the Savings Plus Plan..................... 15
ITEM 3 Approval of the Appointment of Independent Public Accountants...... 17
ITEM 4 Stockholder Proposal to Pay Directors Exclusively in Common Stock.. 18
ITEM 5 Stockholder Proposal on Environmental Hazards Assessment........... 19
Other Matters............................................................. 21
CHEVRON CORPORATION
225 Bush Street
San Francisco, California
94104
March 24, 1995
PROXY STATEMENT
This proxy statement is furnished by the Board of Directors of Chevron
Corporation ("Chevron") to help you exercise your voting rights at the May 2,
1995 Annual Meeting of Stockholders (the "Meeting"). The accompanying proxy
card represents your holdings of Chevron Corporation Common Stock, $1.50 par
value ("Chevron Stock").
GENERAL INFORMATION FOR STOCKHOLDERS
VOTING PROCEDURES
If you are a stockholder of Chevron, you can be represented at the Meeting and
have your shares voted as you direct by means of the enclosed proxy card. The
proxy holders, K. T. Derr, C. M. Pigott and G. H. Weyerhaeuser, will vote all
shares of Chevron Stock represented by proxy cards that are properly signed and
returned by stockholders. Your shares will be voted by the proxy holders as you
have directed. You may specify your voting choices by marking the appropriate
boxes on the proxy card. If you properly sign and return your proxy card, but
do not specify your choices, your shares will be voted as recommended by the
Board of Directors. The proxy card also authorizes the proxy holders to vote
the shares represented on any matters not known at the time this proxy
statement was printed that may properly be presented for action at the Meeting.
YOU MUST RETURN A SIGNED PROXY CARD TO PERMIT THE PROXY HOLDERS TO VOTE YOUR
SHARES.
The Board of Directors encourages you to complete and return the proxy card
even if you expect to attend the Meeting. You may revoke your proxy at any time
before it is voted at the Meeting. If you attend the Meeting and wish to vote,
your ballot at the Meeting will cancel any proxy that you have previously
given.
Corporation policy is to handle proxies and ballots from all stockholders in a
manner that protects stockholder voting privacy. Only the proxy solicitor, the
Judges of Election and the few other persons necessary to inspect and process
the ballots and proxies have access to them. None of these persons is a
Director or officer of Chevron. Every such person pledges to treat in
confidence all information from proxies and ballots. Information concerning the
ballots and proxies may be disclosed only in the event of a proxy contest or as
otherwise required by law. Your Directors believe these procedures are in the
best interests of Chevron and are adequate to protect stockholder voting
privacy.
Under Chevron's Restated Certificate of Incorporation and By-Laws, each
outstanding share of Chevron Stock is entitled to cast one vote for as many
separate nominees as there are Directors to be elected and for or against all
other matters presented.
The nominees receiving the most support for the number of positions to be
filled are elected Directors. Proposals are approved if the number of shares
voted in favor exceed the number voted against. Abstentions and broker non-
votes do not affect the calculation.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by Chevron. Chevron has retained
Georgeson & Company Inc. to solicit proxies at an estimated cost of $25,000.
Employees of Chevron and its subsidiaries may also solicit proxies personally
and by telephone, for which the expense would be nominal.
STOCKHOLDER PROPOSALS
You may be asked to vote on proposals which were submitted by stockholders who
are not members of management or the Board of Directors. The proposals are
included as action items in the Notice of Meeting and are set forth and
discussed in this proxy statement because they are proper subjects for action
by stockholders and for inclusion in the proxy statement, have been submitted
to Chevron on a timely basis, and otherwise comply with the rules of the
Securities Exchange Act of 1934, as amended, the laws of the State of Delaware
and applicable provisions of Chevron's Restated Certificate of Incorporation.
These proposals have been printed in this proxy statement as submitted.
When submitted, each proposal included the name and address of the stockholder
making the proposal, the number of shares owned by the stockholder and the
dates upon which the shares were acquired. Each proposal also included a
statement that the stockholder had held the shares for more than one year at
the time of the submission and intended to hold the shares through the date of
the Meeting. Persons who claimed beneficial ownership of stock held of record
by others were permitted to submit proposals if they submitted appropriate
documentation of their claim of beneficial ownership. The names and addresses
of the stockholders submitting the proposals, as well as the number of shares
held, will be furnished by Chevron, either orally or in writing as requested,
promptly upon the receipt of any oral or written request therefor.
Stockholders submitting a proposal must appear personally or by proxy at the
Meeting to move the proposal for consideration. A proposal will be approved if
it is introduced and voted on at the Meeting and it is supported by a majority
of the shares that are voted.
For a stockholder proposal to be considered for inclusion in the proxy
materials for the 1996 Annual Meeting of Stockholders, it must be received by
the Corporate Secretary at the corporate headquarters address before November
23, 1995. It is suggested that a proponent submit any proposal by Certified
Mail--Return Receipt Requested.
ITEM 1 ON THE PROXY CARD
ELECTION OF DIRECTORS
It is intended that the shares represented by the enclosed proxy card will be
voted, unless such authority is withheld, for the election of the 10 Director
nominees named in the following section. Each nominee is presently a Director
of Chevron. The Directors will be elected to serve for the ensuing year and
until their successors have been elected. In the event that any Director
nominee should become unavailable to serve as a Director, which is not
anticipated, the proxy will be voted for a nominee who shall be designated by
the present Board to fill such vacancy or the Board of Directors may provide by
resolution for a lesser number of Directors.
NOMINEES FOR DIRECTORS
[PHOTO OF SAMUEL H. ARMACOST, 55, is a General Partner of Weiss, Peck &
SAMUEL H. Greer, an investment firm. Mr. Armacost was President, Director
ARMACOST and Chief Executive Officer of BankAmerica Corporation from 1981
APPEARS to 1986. From 1987-1990, he was a Managing Director of Merrill
HERE] Lynch Capital Markets. He assumed his current position in 1990.
He has been a Director of Chevron since 1982. He is a Director
of SRI International, the Irvine Foundation, The Failure Group,
Inc. and CoreLink Resources Inc.; and a member of The Business
Council, The Conference Board and the Advisory Council of the
California Academy of Sciences.
2
[PHOTO OF J. DENNIS BONNEY, 64, is a Vice-Chairman of the Board of
J. DENNIS Chevron. He joined Chevron in 1960. After a succession of
BONNEY assignments in its international operations, he advanced to
APPEARS Assistant Manager of the Foreign Operations Staff in 1967 and
HERE] Manager in 1971. He was elected a Vice-President in 1972 and
assumed his present position in 1987. He has been a Director of
Chevron since 1986. He is a Director of the American Petroleum
Institute, the San Francisco Opera and San Francisco
Performances. He is a Trustee of the Asian Art Museum and the
World Affairs Council of Northern California. He is a member of
the Board of Overseers of the Hoover Institution, a member of
the National Council of the World Wildlife Fund and a member of
the Council on Foreign Relations. Mr. Bonney is scheduled to
retire as an officer and employee on January 1, 1996. At such
time, in accordance with corporation policy, he would resign
from the Board of Directors.
[PHOTO OF KENNETH T. DERR, 58, is Chairman of the Board of Chevron. He
KENNETH T. joined Chevron in 1960. After a succession of assignments in the
DERR Comptroller's and Manufacturing Departments, he became Assistant
APPEARS to the President in 1969. He was elected a Vice-President in
HERE] 1972, a Vice-Chairman in 1985 and assumed his present position
in 1989. He served as President and Chief Executive Officer of
Chevron U.S.A. Inc. from 1979 to 1984. He has been a Director of
Chevron since 1981. He is a Director of Citicorp, Potlatch
Corporation, The Bay Area Council, Invest-in-America and the
American Productivity and Quality Center; Chairman of the
American Petroleum Institute; a Trustee of Cornell University;
and a member of the National Petroleum Council, the California
Business Roundtable, The Business Council, The Business
Roundtable and the President's Council on Sustainable
Development.
[PHOTO OF SAM GINN, 57, has been Chairman of the Board and Chief Executive
SAM GINN Officer of AirTouch Communications, formerly PacTel Corporation,
APPEARS a worldwide wireless telecommunications company, since December
HERE] 1993. From 1988 until April 1, 1994, Mr. Ginn served as Chairman
of the Board, President and Chief Executive Officer of Pacific
Telesis Group. He was Chairman of the Board of Pacific Bell from
1988 until April 1, 1994. He has been a Director of Chevron
since 1989. He is also a Director of Transamerica Corporation
and Safeway Inc. Mr. Ginn is Chairman of The California Business
Roundtable and a member of The Business Roundtable, The Business
Council, The Institute for International Studies at Stanford and
the California Council on Competitiveness.
[PHOTO OF CARLA ANDERSON HILLS, 61, is Chairman and Chief Executive
CARLA Officer of the Hills & Company International Consultants, a
ANDERSON company giving advice on investment, trade and risk issues
HILLS abroad. In 1994 Mrs. Hills joined the law firm of Mudge Rose
APPEARS Guthrie Alexander & Ferdon. From 1989 to 1993, she served as
HERE] United States Trade Representative. Prior to her government
service, she was a co-managing partner in the law firm of Weil,
Gotshal & Manges. She is a Director of American International
Group, American Telephone and Telegraph Company, Bechtel
Enterprises, Inc, Bechtel Group, Inc., Time Warner Inc. and
Trust Company of the West. Mrs. Hills was a Director of Chevron
from 1977 through 1988 prior to serving as U.S. Trade
Representative, and rejoined the Board of Directors in 1993.
3
[PHOTO OF CHARLES M. PIGOTT, 65, is Chairman of the Board and Chief
CHARLES M. Executive Officer of PACCAR Inc, a manufacturer of
PIGOTT transportation equipment. He was elected President of PACCAR Inc
APPEARS in 1965, became its Chief Executive Officer in 1967 and Chairman
HERE] of the Board in 1986. He has been a Director of Chevron since
1973. He is a Director of The Boeing Company and Seattle Times
Company; and a member of The Business Council.
[PHOTO OF CONDOLEEZZA RICE, 40, is Provost and Vice President of Stanford
CONDOLEEZZA University. She was named Provost in September 1993. Ms. Rice
RICE joined the Stanford University faculty in 1981. From 1986 to
APPEARS 1987, she served on a fellowship with the Joint Chiefs of Staff
HERE] acting as Special Assistant to the Director of the Joint Staff
for strategic nuclear policy. From 1989 until April 1991, she
served on the Bush Administration's National Security Council,
as Director for Soviet and East European Affairs and also as
Senior Director for Soviet Affairs. She also served as Special
Assistant to President Bush for National Security Affairs. She
has been a Director of Chevron since 1991. She is a Director of
Transamerica Corporation and the Rand Corporation. She is a
member of the Council on Foreign Relations and the Aspen
Strategy Group.
[PHOTO OF JAMES N. SULLIVAN, 57, is a Vice-Chairman of the Board of
JAMES N. Chevron. He joined Chevron in 1961 as a Process Engineer and
SULLIVAN held a succession of manufacturing assignments. He was elected a
APPEARS Vice-President of Chevron in 1983. He assumed his present
HERE] position in 1989. He has been a Director of Chevron since 1988.
He is a member of the Board of Trustees of the University of San
Francisco, the California Academy of Sciences and the Committee
for Economic Development. He is a Director of the U.S. Chamber
of Commerce, the National Association of Manufacturers and the
American Petroleum Institute.
[PHOTO OF GEORGE H. WEYERHAEUSER, 68, has been Chairman of the Board of
GEORGE H. Weyerhaeuser Company, a forest products company, since 1988. He
WEYERHAEUSER joined Weyerhaeuser Company in 1949, became its President in
APPEARS 1966 and was its Chief Executive Officer from 1966 to 1991. He
HERE] has been a Director of Chevron since 1977. He is a Director of
The Boeing Company and SAFECO Corporation and a member of The
Business Council.
[PHOTO OF JOHN A. YOUNG, 62, retired as President, Director and Chief
JOHN A. Executive Officer of Hewlett-Packard Company, a manufacturer of
YOUNG electronic equipment, in 1992. He joined Hewlett-Packard in
APPEARS 1958, became its President in 1977 and its Chief Executive
HERE] Officer in 1978. He has been a Director of Chevron since 1985.
He is a Director of Affymetrix, Inc., Abiotic Systems, Inc.,
General Magic Inc., Novell, Inc., Shaman Pharmaceuticals, Inc.,
SmithKline Beecham PLC and Wells Fargo & Company. He is a member
of The Business Council and the Executive Committee of the
Council on Competitiveness. He is Chairman of the Board of Smart
Valley Inc., a non-profit corporation aimed at creating an
electronic community in Silicon Valley.
4
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Under applicable rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to be the beneficial owner of Chevron Stock if he or she
directly or indirectly has or shares voting power and/or investment power with
respect to a security. A person is also considered to own shares which he or
she does not own currently but has the right to acquire presently or at some
time within the next 60 days. Restricted stock units awarded under Chevron
compensation plans do not carry voting rights and may not be sold. Nonetheless,
they may ultimately be paid in shares of Chevron Stock and represent economic
ownership.
The following table contains information about economic and beneficial
ownership of Chevron Stock as of January 25, 1995, for each Director, for each
executive officer named in the Summary Compensation Table on page 11 and for
all Directors and executive officers of Chevron as a group. All amounts shown
in the table represent less than one percent of the outstanding shares of
Chevron Stock.
Restricted Shares
Stock Currently Exercisable
Units(1) Owned(2) Options(3)
---------- --------- -----------
Samuel H. Armacost...................... 2,550 2,100 -0-
J. Dennis Bonney........................ 24,694 76,757 182,800
Kenneth T. Derr......................... -0- 130,867 329,400
Raymond E. Galvin....................... 2,950 18,674 73,000
Sam Ginn................................ 1,982 2,000 -0-
Carla A. Hills.......................... 951 600 -0-
Martin R. Klitten....................... -0- 23,270 102,200
Charles M. Pigott....................... 2,550 68,904 -0-
Condoleezza Rice........................ 1,125 -0- -0-
James N. Sullivan....................... -0- 56,922 182,800
George H. Weyerhaeuser.................. 2,550 12,800 -0-
John A. Young........................... 2,550 1,000 -0-
Directors and executive officers as a
group (16 persons)..................... 79,640 475,741 1,075,600
- --------
(1) Includes, for non-employee Directors, stock units awarded under the Chevron
Restricted Stock Plan for Non-Employee Directors, and for executive
officers, stock units deferred under the Management Incentive Plan and
stock units awarded under the Long-Term Incentive Plan. The stock units
awarded under the Long-Term Incentive Plan remain subject to possible
forfeiture under applicable provisions of the plan.
(2) Includes, for executive officers, restricted shares and shares held in
trust under various profit sharing or incentive plans, some of which may
remain subject to forfeiture under applicable provisions of such plans.
(3) Represents all currently exercisable stock options awarded under the Long-
Term Incentive Plan.
BOARD COMMITTEES AND MEETING ATTENDANCE
The Board of Directors has established permanent Audit, Board Nominating,
Management Compensation and Public Policy committees. The membership of each of
these committees is determined from time to time by the Board.
The Audit Committee, which consists of George H. Weyerhaeuser, Chairman, Samuel
H. Armacost, Sam Ginn, Carla A. Hills and John A. Young, held 3 meetings during
1994. The committee selects a firm of independent certified public accountants
to audit the books and accounts of Chevron and its subsidiaries for the fiscal
year for which they are appointed. In addition, the committee reviews and
approves the scope and cost of all services (including nonaudit services)
provided by the firm selected to conduct the audit. The committee also monitors
the effectiveness of the audit effort and financial reporting, and inquires
into the adequacy of financial and operating controls.
5
The Board Nominating Committee, which consists of Samuel H. Armacost, Chairman,
Charles M. Pigott, Condoleezza Rice, S. Bruce Smart, Jr. and John A. Young,
held 2 meetings during 1994. The committee assesses the size and composition of
the Board and recommends prospective Directors, without regard to race,
religion or sex, to assist in creating a balance of knowledge, experience and
capability on the Board. The committee will consider nominees recommended by
stockholders. If a stockholder wishes to recommend a nominee for the Board of
Directors, the stockholder should write to the Corporate Secretary of Chevron
specifying the name of the nominee and the qualifications of such nominee for
membership on the Board of Directors. All such recommendations will be brought
to the attention of the Board Nominating Committee.
The Management Compensation Committee, which consists of Charles M. Pigott,
Chairman, Samuel H. Armacost, Sam Ginn, Carla A. Hills, Condoleezza Rice,
S. Bruce Smart, Jr., George H. Weyerhaeuser and John A. Young, held 6 meetings
during 1994. The committee reviews and approves salaries and other matters
relating to compensation of the principal officers and all executives of Chevron
and its subsidiaries above a specified salary grade. The committee also
administers the Excess Benefit, Management Incentive and Long-Term Incentive
Plans of Chevron.
The Public Policy Committee, which consists of S. Bruce Smart, Jr., Chairman,
Kenneth T. Derr, Sam Ginn, Carla A. Hills, Charles M. Pigott and Condoleezza
Rice, held 3 meetings during 1994. The committee identifies, monitors and
evaluates domestic and foreign social, political and environmental trends,
issues and concerns which affect or could affect Chevron or to which Chevron
could make a unique contribution. The committee reviews and develops
recommendations to the Board to assist it in formulating and adopting policies
and strategies concerning public policy issues.
Chevron's Board of Directors met 10 times during 1994. There were a total of 24
meetings of the Board and its committees. Attendance by all Directors at these
meetings averaged over 91 percent.
NON-EMPLOYEE DIRECTORS' COMPENSATION
Non-employee Directors receive an annual retainer of $35,000 and an attendance
fee of $1,250 for each meeting of the Board or a Committee of the Board
attended. Committee Chairmen are paid an additional fee of $1,250 for each
meeting chaired. Any non-employee Director may elect to defer receipt of all or
any portion of the annual retainers and meeting fees. Deferred amounts are
credited each quarter with interest at a variable rate, or alternatively, at
the election of the Director are converted into stock units representing the
value of an equal number of shares of Chevron Stock. In such event, unpaid
stock units are credited each quarter with dividend equivalents in the same
amounts as the dividends paid on Chevron Stock. The amount ultimately
distributed to the Director will reflect changes in the market value of Chevron
Stock during the deferral period. Any deferred amounts remaining unpaid at the
time of a Director's death are distributed to the Director's beneficiary.
In addition, non-employee Directors receive deferred compensation to supplement
their cash retainers and attendance fees under the Chevron Restricted Stock
Plan for Non-Employee Directors (the "Restricted Stock Plan"). Benefits under
the Restricted Stock Plan accrue in the form of stock units and are payable in
an equal number of shares of Chevron Stock after any non-employee Director
terminates service as a Director of Chevron and attains the age of 65. Pursuant
to the Restricted Stock Plan, the stock unit accounts of non-employee Directors
are credited annually with stock units representing $10,000 worth of Chevron
Stock and quarterly with stock units representing converted dividend
equivalents earned on the stock units in the non-employee Directors' accounts.
Annual awards under the Restricted Stock Plan are subject to forfeiture if any
non-employee Director fails to serve as a Director of Chevron for five years.
However, such forfeiture does not apply if a Director reaches age 72 while
serving.
Non-employee Directors are reimbursed for expenses which may be incurred by
them in connection with the business and affairs of Chevron.
6
EXECUTIVE COMPENSATION
The compensation of K. T. Derr, Chevron's Chief Executive Officer, and the four
other most highly paid executive officers during 1994 is discussed in the
report from the Management Compensation Committee of the Board of Directors
below and is shown on the following pages in five tables.
MANAGEMENT COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is provided by the Management Compensation Committee of the Board
of Directors (the "Committee") to assist stockholders in understanding the
Committee's objectives and procedures in establishing the compensation of
Chevron's Chief Executive Officer and other senior Chevron executives.
The Committee, consisting of all eight of the non-employee Directors, is
responsible for establishing and administering Chevron's executive compensation
program. The Committee met 6 times during 1994.
In structuring Chevron's incentive programs, the Committee has been advised on
plan design by external compensation consultants, as well as Chevron's
compensation staff. The Committee has been provided with competitive pay and
performance information by an outside consultant. Chevron's compensation staff
provided additional data and analysis that was requested by the Committee.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee believes that compensation of Chevron's key executives should:
. link rewards to business results and stockholder returns,
. encourage creation of stockholder value and achievement of strategic
objectives,
. provide total compensation opportunity that is competitive with major oil
and non-oil companies, taking into account relative company size and
performance as well as individual experience, responsibility and
performance,
. maintain an appropriate balance between base salary and short- and long-term
incentive opportunity, with more compensation at risk at the higher salary
grades, and
. attract and retain high caliber personnel on a long-term basis.
Chevron uses seven major oil companies as its competition when determining
competitive compensation practice: Amoco, Arco, Exxon, Mobil, Shell, Texaco and
Unocal. These seven are the primary competition in the marketplaces in which
Chevron operates and are strong competitors for human resources.
Five of these competitors (Amoco, Arco, Exxon, Mobil and Texaco) are also used
as the competitor peer group when determining relative total stockholder return
("TSR"), which is stock price appreciation plus dividends on a reinvested
basis. Shell is excluded because it is a subsidiary of Royal Dutch Shell and
does not issue stock, making it difficult to determine a return to
stockholders. Unocal is excluded from the peer group because its assets and
scope of operations are significantly smaller than the other members of the
peer group.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Chevron's existing executive compensation program consists of three elements:
Base Pay, Short-Term Incentives and Long-Term Incentives. For senior
executives, the Committee believes short-and long-term incentive pay, linked to
Chevron's financial performance, should represent half or more of their total
7
compensation opportunity. Payout of the short-term incentives depends on
assessments of corporate performance measured against both annual business
plan objectives and performance relative to the five peer group competitors
(Amoco, Arco, Exxon, Mobil and Texaco). Payout of the long-term incentives
depends on performance of Chevron Stock and on TSR performance relative to the
same five competitors.
Base Pay
. Salary structures are targeted to average pay levels of the seven major
oil competitors noted previously. The Committee also reviews pay
information of companies outside of the oil industry supplied by outside
consultants when establishing salary structures to ensure compensation
opportunity is appropriate on a broad industry basis.
. Salaries within these structures vary by individual and are based on
sustained performance toward achievement of Chevron's goals, objectives
and strategic intents. The Committee also considers experience, time
since last increase, and current salary compared to market rates when
considering salary actions.
. Executive salaries and proposed changes are reviewed and approved
annually by the Committee. Pay increases under the executive salary
program are administered throughout the salary program year.
Short-Term Incentive (Management Incentive Plan)
. The Management Incentive Plan ("MIP") is an annual cash incentive plan
which links awards to performance results of the prior year. Individual
target awards vary by salary grade and are based on competitive practice
of the seven oils (Amoco, Arco, Exxon, Mobil, Shell, Texaco and Unocal).
Actual individual awards typically vary from 150% of target to 0%. Awards
are based on the Committee's assessments of performance vs. objectives on
three components: corporate results, business unit results and individual
performance, each weighted about 1/3 of the target award. Performance
assessments within each of the three components are aggregate judgments;
there is no specific weighting formula for each factor within a
component.
. Corporate and business unit financial and strategic objectives are set at
the beginning of each year. Financial objectives are developed for:
earnings, return on capital employed ("ROCE"), cash flow, and operating
expense. Results are measured against these objectives and against major
oil competitor results.
. An individual's key job responsibilities and objectives are also
established at the beginning of each year. Individual objectives include
achievement of business unit financial objectives as well as objectives
related to business operations (e.g., refinery throughput, production
volumes, product quality, safety, environmental performance, etc.).
Performance assessments are also made on other factors including
leadership, teamwork, communication, planning and organizing, creativity
and innovation, and quality improvement.
. The corporate performance assessment is the same for all MIP
participants. Individuals will have differing business unit and
individual performance assessments.
Long-Term Incentive (Long-Term Incentive Plan)
. The Long-Term Incentive Plan ("LTIP") is designed specifically to link a
substantial portion of executive pay to increases in stockholder value.
Individual grants vary by salary grade, and are based on valuations of
grants made by the seven oils (Amoco, Arco, Exxon, Mobil, Shell, Texaco
and Unocal) which are provided by an outside consultant. Grants are
typically in the form of non-qualified stock options and performance
units.
. Stock options are awarded at market price on the day of grant, vest after
one year, and have a ten-year term. Their ultimate value depends entirely
on appreciation of Chevron Stock. The Committee does not grant discounted
options.
8
. The ultimate value of performance units (denominated in shares of Chevron
Stock) is tied to Chevron's TSR as compared to TSRs for Amoco, Arco,
Exxon, Mobil and Texaco. Performance units have a three-year vesting
period, with a performance modifier based on relative TSR ranking that
can vary from 0% to 150%. If Chevron's TSR is the lowest of the group,
the modifier is 0%; if fifth, 30%; if fourth, 60%; if third, 90%; if
second, 120%; if first, 150%. Moreover, if one or more competitor's TSR
is within one percentage point of Chevron's TSR, the TSR ranking
modifiers are averaged. Payout (in cash) is equal to the number of units
multiplied by the performance modifier and then multiplied by the Chevron
Stock price at the end of the performance period.
EXECUTIVE STOCK OWNERSHIP
Chevron has no formal stock ownership guidelines. Executives participate in
Chevron's Profit Sharing/Savings and Savings Plus Plans (broad-based employee
stock ownership and savings plans) in addition to having the option to defer
MIP awards and LTIP performance unit payouts into Chevron Stock accounts. As a
result of these opportunities, the value of Chevron Stock holdings of
executives as a group is on average more than 4 times their salaries.
1993 OBRA--EXECUTIVE COMPENSATION TAX DEDUCTIBILITY
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") included a provision
which eliminates a company's tax deduction for any compensation over one
million dollars paid to any one of the five executives who appear in the
Summary Compensation Table, subject to several statutory exceptions. Final
regulations for this section of OBRA have not been issued by the Treasury
Department. However, based on the proposed regulations and transition rules,
the Committee believes both the MIP and the LTIP currently qualify for
statutory exceptions. Therefore, the Committee does not anticipate additional
tax exposure from grants or awards made under these plans.
1994 CEO COMPENSATION
BASE PAY
In 1993, Chevron's adjusted earnings were $2.1 billion, up 38% from 1992 and
19% over the 1993 objective of $1.8 billion. (Adjusted earnings for this
purpose represent reported earnings before special items and accounting
changes. Competitor reported earnings are similarly adjusted, based on publicly
available data.) Chevron's reported earnings were $1.3 billion, down 19% from
1992 and reported ROCE was 6.8% compared to 8.5% in 1992. (Reported earnings in
1992 includes the cumulative effects of accounting changes for Chevron's
adoption of accounting standards FAS 106 and FAS 109). 1993 adjusted ROCE of
10.9% compares to 8.4% in 1992. Cash flow from operations was $4.2 billion, up
8% from 1992.
Operating expenses were reduced an additional $0.40 per barrel in 1993,
bringing the cumulative reduction since 1991 to over $1 billion a year. For the
year, Chevron's TSR was 30.6%, 2 1/2 times the competitor average (12.4%), and
3 times the S&P average (10.0%).
Mr. Derr became Chairman on January 1, 1989, and in the five-year period 1989-
93, Chevron achieved an average TSR of 18.9% per year, which ranked Chevron
first among major oil companies. During this same period the peer oil companies
(Amoco, Arco, Exxon, Mobil and Texaco) achieved returns for their stockholders
ranging from 10.4% to 17.0% and averaging 13.2%.
Based on the above results, the Committee granted Mr. Derr a salary increase of
$100,000 (11.1%), effective January 1, 1994. This increase brought his annual
salary to $1,000,000.
9
ANNUAL BONUS (MIP)
Chevron's 1994 earnings were below objective for the year. Adjusted earnings
decreased 22% from 1993 to 1994, moving Chevron's relative rank from third to
fourth among the peer group. Reported earnings of $1.7 billion increased 34%
from 1993, moving Chevron from fourth place relative to its peers in 1993 to
third place in 1994. Cash flow from operations was $2.9 billion, down 31% from
1993.
Chevron's 1994 TSR was 6.8%, third among the LTIP competitors and well above
the 1.3% posted by the S&P 500. Reported ROCE increased from 6.8% in 1993 to
8.7% in 1994, which moved Chevron from fifth place relative to the peer group
to fourth place. Adjusted ROCE declined to 8.6% from 10.9% in 1993. Operating
expense was essentially unchanged from last year, and still remained
significantly below the 1991 and 1992 levels.
Since 1994 performance fell short of objectives, the Committee granted Mr. Derr
a below target MIP award of $700,000, which was 23% less than his award for
1993 performance. (NOTE: The 1994 MIP awards for the other four highest paid
officers were also less than their target awards.)
LONG-TERM INCENTIVES
Mr. Derr was granted performance units in 1991 for the performance period
January 1, 1992 through December 31, 1994. Chevron's TSR of 14.2% for this
three year period was the highest of the competitor group. However, since the
second highest TSR (13.8%) was within one percentage point, the payout modifier
was 135% (the average of the 150% first place and 120% second place modifiers)
which resulted in a $1,402,981 performance unit payout to Mr. Derr.
Chevron's LTIP grants are made under the same determination rules for all LTIP
Plan participants. Mr. Derr's 1994 LTIP grant was 125,300 stock options and
29,000 performance units. Based on data provided by an outside consultant, the
Committee believes this grant is reasonable and well within competitive
practice for his level of responsibilities. The value of the stock options
granted will depend on the price of Chevron Stock at the time they are
exercised. The performance period for the performance units began on January 1,
1995 and will end on December 31, 1997; payout will be based on Chevron's TSR
ranking relative to the five competitor companies (Amoco, Arco, Exxon, Mobil
and Texaco).
The Committee also notes that Mr. Derr was allocated $3,374 from his
participation in Chevron's Profit Sharing/Savings Plan, a broad-based employee
stock ownership and savings plan. The 1994 allocation to this Plan was based on
Chevron's income.
January 25, 1995 MANAGEMENT COMPENSATION COMMITTEE
C. M. PIGOTT, CHAIRMAN
S. H. ARMACOST
SAM GINN
C. A. HILLS
C. RICE
S. B. SMART, JR.
G. H. WEYERHAEUSER
J. A. YOUNG
10
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------ ---------------------- -----------
Name Restricted Securities Vested All Other
and Bonus ($) Stock Underlying Performance Compen-
Principal Salary (Year Award(s)(1) Options Units sation(2)
Position Year ($) Earned) ($) (#) ($) ($)
---------- ---- --------- --------- ----------- ---------- ----------- ---------
K. T. Derr 1994 1,000,000 700,000 -0- 125,300 1,402,981 50,095
Chairman 1993 900,000 914,000 -0- 93,600 909,437 58,073
1992 800,000 759,000 -0- 94,600 311,328 36,628
J. D. Bonney 1994 620,000 375,000 -0- 68,800 787,327 34,252
Vice-Chairman 1993 550,000 469,000 -0- 51,400 509,284 35,490
1992 512,500 421,000 -0- 52,000 174,344 23,668
J. N. Sullivan 1994 575,000 348,000 -0- 68,800 787,327 27,935
Vice-Chairman 1993 500,000 427,000 -0- 51,400 509,284 32,263
1992 451,250 371,000 -0- 52,000 174,344 20,924
M. R. Klitten 1994 381,250 208,000 -0- 40,200 473,580 19,438
Vice-President 1993 356,250 248,000 -0- 30,000 227,359 23,007
1992 323,750 215,000 -0- 31,000 77,832 14,965
R. E. Galvin 1994 380,000 184,000 -0- 28,700 301,907 18,402
Vice-President 1993 354,167 240,000 -0- 21,400 200,076 22,867
1992 331,250 230,000 -0- 21,200 68,492 15,265
- --------
(1) Aggregate number of shares of restricted stock and/or restricted stock
units and their value at fiscal year-end ($44.625 per share) is as follows:
K. T. Derr--13,500 shares, $602,437.50; J. D. Bonney--7,550 stock units,
$336,918.75; J. N. Sullivan--7,550 shares, $336,918.75; M. R. Klitten--
3,550 shares, $158,418.75 and R. E. Galvin--2,950 stock units, $131,643.75.
Holders of restricted stock/restricted stock units receive
dividends/dividend equivalents paid on their holdings.
(2) Includes Chevron's contribution to the Profit Sharing/Savings Plan, the
Savings Plus Plan and allocations under the Excess Benefit Plan for these
plans. For 1994, contributions under the Profit Sharing/Savings Plan for
the five named individuals were as follows: K. T. Derr, $3,374, J. D.
Bonney, $3,374, J. N. Sullivan, $3,440, M. R. Klitten, $3,964 and R. E.
Galvin, $3,552; contributions under the Savings Plus Plan for the five
named individuals were as follows: K. T. Derr, $3,020, J. D. Bonney,
$3,020, J. N. Sullivan, $3,021, M. R. Klitten, $3,031 and R. E. Galvin,
$2,777; and contributions under the Excess Benefit Plan for the five named
individuals were as follows: K. T. Derr, $43,701, J. D. Bonney, $27,858, J.
N. Sullivan, $21,474, M. R. Klitten, $12,443 and R. E. Galvin, $12,073.
11
OPTION GRANTS IN 1994 TABLE
Individual Grants
---------------------------------
Percentage Potential Realizable Value on 6/29/04
Number of of Total based on Assumed Compounded
Securities Options Exercise Annual Rates of Stock Price Appreciation
Underlying Granted to or Base ---------------------------------------------
Options Employees Price Expiration
Name Granted(1) in 1994 (per Share) Date 0% per Year 5% per Year 10% per Year
- ---- ---------- ---------- ----------- ---------- ------------- -------------- ---------------
K. T. Derr.............. 125,300 7.1% $42.375 6/29/04 $ -0- $ 3,339,171 $ 8,462,115
J. D. Bonney............ 68,800 3.9 42.375 6/29/04 -0- 1,833,479 4,646,397
J. N. Sullivan.......... 68,800 3.9 42.375 6/29/04 -0- 1,833,479 4,646,397
M. R. Klitten........... 40,200 2.3 42.375 6/29/04 -0- 1,071,306 2,714,900
R. E. Galvin............ 28,700 1.6 42.375 6/29/04 -0- 764,838 1,938,250
Stock Price per Share... $42.375 $ 69.02 $ 109.91
All Optionees........... -0- $47 Million $119 Million
All Stockholders(2)..... -0- $17 Billion $ 44 Billion
Optionee Gain as % of
All Stockholders' Gain. -0- .3% .3%
- --------
(1) Non-qualified stock options are granted to Chevron's senior managers and
executives (less than one percent of Chevron's employees). The options have
a ten-year term and are 100% vested one year after date of grant. The
exercise price is the fair market value on the date of grant.
(2) Represents aggregate increases in market capitalization of Chevron based
upon the outstanding shares (651,750,633) of Chevron Stock as of December
31, 1994.
AGGREGATED OPTION EXERCISES AND 1994 YEAR-END OPTION VALUE TABLE
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Options at
December 31, December 31,
1994 (#) 1994 ($)
--------------- -------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ---- --------------- -------------------
K. T. Derr.................................. 329,400/125,300 $2,408,513/$281,925
J. D. Bonney................................ 182,800/68,800 1,341,113/154,800
J. N. Sullivan.............................. 182,800/68,800 1,341,113/154,800
M. R. Klitten............................... 102,200/40,200 739,163/90,450
R. E. Galvin................................ 73,000/28,700 528,075/64,575
No stock options were exercised by the above named executive officers during
1994.
LONG-TERM INCENTIVE PLAN-1994 PERFORMANCE UNIT AWARDS TABLE
Number of Number at Payout Performance
Performance ------------------------ Period Until
Name Units Maximum Target Threshold Payout
- ---- ----------- ------- ------ --------- ------------
K. T. Derr.................... 29,000 43,500 29,000 8,700 3 Years
J. D. Bonney.................. 15,900 23,850 15,900 4,770 3 Years
J. N. Sullivan................ 15,900 23,850 15,900 4,770 3 Years
M. R. Klitten................. 9,300 13,950 9,300 2,790 3 Years
R. E. Galvin.................. 6,650 9,975 6,650 1,995 3 Years
12
The payout can vary depending on Chevron's TSR vs. its peer group (Amoco, Arco,
Exxon, Mobil and Texaco). A performance modifier provides incentive to maximize
TSR relative to the peer group by modifying the payout value (i.e., the
modifier is 150% for highest relative TSR and 0% for lowest relative TSR).
Payout (in dollars) is equal to the number of units times a performance
modifier based on relative TSR times the 20-day trailing average of the price
of Chevron Stock at the end of the performance period.
PENSION PLAN TABLE
The following table illustrates the approximate annual pension that the named
executive officers in the Summary Compensation Table would receive under the
Chevron Retirement Plan and the Retirement Plan portion of the Excess Benefit
Plan if the plans remained in effect and the named executive officers retired
at age 65 and elected an individual life pension. However, because of changes
in the tax laws or future adjustments to benefit plan provisions, actual
pension benefits could differ significantly from the amounts set forth in the
table.
Estimated Annual Pension
--------------------------------------------------
Average Annual Earnings Years of Credited Service
During Highest 3 --------------------------------------------------
Consecutive Years 25 30 35 40 45
------------------------ -------- -------- ---------- ---------- ----------
$ 500,000.............. $187,400 $221,200 $ 256,100 $ 291,100 $ 326,000
$ 750,000.............. $281,100 $331,700 $ 384,200 $ 436,600 $ 489,100
$1,000,000.............. $374,800 $442,300 $ 512,300 $ 582,200 $ 652,200
$1,250,000.............. $468,500 $552,900 $ 640,300 $ 727,800 $ 815,300
$1,500,000.............. $562,100 $663,500 $ 768,400 $ 873,400 $ 978,300
$1,750,000.............. $655,800 $774,000 $ 896,500 $1,019,000 $1,141,400
$2,000,000.............. $749,500 $884,600 $1,024,600 $1,164,500 $1,304,500
If they remain employees until they reach age 65, the Years of Credited Service
for Messrs. K. T. Derr, J. D. Bonney, J. N. Sullivan, M. R. Klitten and R. E.
Galvin will be as follows: K. T. Derr, 40 years; J. D. Bonney, 35 years; J. N.
Sullivan, 40 years; M. R. Klitten, 39 years and R. E. Galvin, 44 years. The
amounts set forth in the table above do not include modest reductions to
reflect the offset for federal Social Security benefits required by the
Retirement Plan. As a former executive of Gulf Oil Corporation, Mr. R. E.
Galvin is also entitled to receive a single lump-sum payment upon retirement of
$180,000.
The Retirement Plan is a defined benefit pension plan. Employees of Chevron and
certain consolidated subsidiaries automatically participate in the Plan and
start accruing benefits from their first day of employment. Eligible employees
become fully vested in their benefits after completing five years of service.
Benefits under the Plan are calculated on a "final average pay formula" based
on length of credited service and the average of the highest three consecutive
years of annual earnings. For executive officers, annual earnings include
unrestricted incentive awards and generally correspond with the combined
amounts set forth in the "Salary" and "Bonus" columns in the Summary
Compensation Table on page 11. The same 36-month period is used to determine
the highest average earnings for both salary and unrestricted incentive awards.
The total pension benefit is equal to the sum of 1.4% of average earnings (less
$600) multiplied by years of credited service prior to July 1, 1971; plus 1.35%
of average earnings multiplied by years of credited service after June 30, 1971
and prior to July 1, 1986; plus 1.6% of average earnings multiplied by years of
credited service after June 30, 1986. The basic pension is reduced by a portion
of the federal Social Security benefit. Employees of acquired companies might
receive benefits calculated under different formulas for their service under
plans merged into the Retirement Plan. Benefits are ordinarily payable monthly
in the form of an individual life pension upon retirement at age 65, although
reduced benefits are available to eligible employees who terminate employment
before attaining age 65. Instead of an individual life pension, eligible
employees may elect to receive a 50 percent or 100 percent joint-and-survivor
pension, or a lump sum payment.
13
PERFORMANCE GRAPH
The following graph, prepared by Value Line, Inc., shows how an initial
investment of $100 in Chevron Stock would have compared to an equal investment
in the S&P 500 Index or in an index of peer group companies over a five-year
period beginning December 31, 1989 and ending December 31, 1994 weighted by
market capitalization as of the beginning of each year. The graph reflects the
reinvestment of all dividends that an investor would be entitled to receive,
with the reinvestment made on the ex dividend trading date. The interim
measurement points show the TSR as of the end of each year between 1989 and
1994.
The peer group index is made up of Amoco, Arco, Exxon, Mobil and Texaco.
Chevron competes directly against the companies in the peer group, and for a
number of years has measured its performance against these companies for
purposes of its Management Incentive Plan and Long-Term Incentive Plan.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
CHEVRON CORPORATION, S&P 500, PEER GROUP
(PERFORMANCE RESULTS FROM 12/31/89 THROUGH 12/31/94)
Measurement Period CHEVRON S&P
(Fiscal Year Covered) CORPORATION 500 INDEX Peer Group
- ------------------- ----------- --------- ----------
Measurement Pt-FYE 1989 $100 $100 $100
FYE 1990 $111.69 $ 96.83 $105.83
FYE 1991 $110.95 $126.41 $119.20
FYE 1992 $117.24 $136.25 $124.34
FYE 1993 $153.05 $150.00 $138.75
FYE 1994 $163.61 $151.73 $145.51
14
ITEM 2 ON THE PROXY CARD
APPROVAL OF THE PROPOSAL TO PERMIT THE MERGER OF THE PROFIT SHARING/SAVINGS
PLAN AND THE SAVINGS PLUS PLAN
Your Directors are presenting, for approval by the stockholders, a proposal to
permit Chevron to merge its two existing broad-based employee profit-sharing
plans and to make such further changes thereto as Chevron may from time to time
desire. The merger is expected to produce a modest amount of administrative
cost savings by eliminating duplicative tasks and may produce additional cost
savings as described below under "The New PS/SP".
Chevron has long maintained broad-based, profit sharing plans to encourage
employees to save for the future and to invest in the equity of Chevron.
Currently, Chevron and substantially all of its U.S. consolidated subsidiaries
are participating companies in the Chevron Corporation Profit Sharing/Savings
Plan (the "PS/SP") and the Chevron Corporation Savings Plus Plan, which is
designed to supplement the PS/SP.
Both plans are qualified under relevant provisions of the United States
Internal Revenue Code that limit the aggregate amount of benefits that can be
received by any individual employee under all such qualified plans.
Accordingly, this proposal would not result in any increase in benefits paid to
any of Chevron's Directors or officers. However, it would give Chevron
additional flexibility to design the manner in which such benefits are
provided, and could in the future result in an increase in aggregate benefits
provided to employees generally. Approximately 34,841 employees are currently
eligible to participate in the plans, and they would continue to be eligible to
participate in the combined plan (the "New PS/SP").
THE PS/SP. Employees of participating companies may elect to participate in the
current PS/SP after completing one year of service. The PS/SP has two
components: a profit sharing component, which includes a leveraged employee
stock ownership plan ("ESOP") feature, and a savings component.
Under the profit sharing component, the participating companies contribute,
each quarter, an aggregate amount based on a formula relating to Chevron's
consolidated pre-tax net income from the preceding quarter (the "Company Profit
Sharing Contribution"). An employee may contribute two percent of regular pay
on a before-tax or after-tax basis to the profit sharing component of the PS/SP
through payroll deductions. Employees must make this contribution in order to
receive a proportionate share of the Company Profit Sharing Contribution.
Employee contributions and the Company Profit Sharing Contribution are invested
in shares of Chevron Stock and credited to the employees' plan accounts. The
PS/SP incorporates a leveraged ESOP, which incurred debt to fund the
acquisition of Chevron Stock needed for the plan. As the debt is retired,
shares are released to employee accounts in accordance with the profit-sharing
formula. Employees have the right to direct the plan trustee how to vote any
shares allocated to their accounts; if no direction is given by the employee,
the shares may not be voted. All shares held in the ESOP's "suspense account"
pending allocation to employee accounts are voted by the plan trustee, but in
such a manner that it "mirrors" the aggregate vote of the employee accounts for
which voting instructions have been given. Dividends paid on Chevron Stock held
in profit-sharing accounts are reinvested in additional shares and credited to
the same accounts. As of December 31, 1994, approximately 21 million shares
were held in the ESOP suspense account and approximately 54 million shares were
held in allocated employee accounts.
Under the savings component, employees may make voluntary contributions through
payroll deductions of up to ten percent of regular pay on a before-tax basis
though salary reduction agreements and up to ten percent of regular pay on an
after-tax basis. However, the maximum amount of both types of voluntary
contributions may be reduced to assure compliance with limitations imposed
under applicable tax law. All such contributions are invested for the account
of and in accordance with the direction of the employee in one or more of five
investment funds, including a Chevron Stock fund. Each employee may direct the
trustee
15
how to vote any shares of Chevron Stock credited to his or her savings accounts
under the plan; the shares are not voted unless instructions have been given.
As of December 31, 1994, approximately 9 million shares of Chevron Stock were
held in employee savings accounts under the plan.
SAVINGS PLUS PLAN. Effective July 1, 1990, Chevron implemented the Savings Plus
Plan to help employees better meet financial and retirement needs. All regular,
full-time and part-time employees who participate in the profit sharing
component of the PS/SP automatically participate in the Savings Plus Plan.
Under the Savings Plus Plan, the participating companies make an aggregate cash
contribution (the "Company Savings Plus Contribution") each pay period equal to
two percent of regular pay for each participating employee, up to the limit
imposed by federal tax law. Participants may direct the Company Savings Plus
Contribution into any of the same five investment funds offered under the
savings component of the PS/SP. Each employee may direct the plan trustee how
to vote the Chevron Stock credited to his or her account under the plan;
undirected shares are voted by the trustee in direct proportion to the vote of
the directed shares. As of December 31, 1994, approximately 1 million shares of
Chevron Stock were held in employee accounts under the Savings Plus Plan.
CURRENT AMENDMENT AUTHORITY. Currently, Chevron may amend or terminate the
PS/SP or the Savings Plus Plan at any time, except that the Board may not,
without the prior approval of Chevron's stockholders, amend the PS/SP to (i)
increase the rate of the Company Profit Sharing Contribution or (ii) permit the
voting of Chevron Stock allocated to employees' accounts except as specifically
directed by such employees. As a result of these provisions, it is unclear
whether Chevron may merge the two plans without stockholder approval. For this
reason, stockholder approval is being sought to permit the plans to be merged
and to grant Chevron general amendment authority with respect to future plan
changes.
THE NEW PS/SP. If this proposal is approved by stockholders, Chevron intends to
merge the PS/SP and Savings Plus Plan to form the New PS/SP. The New PS/SP will
permit shares of Chevron Stock that are released in connection with the
retirement of ESOP debt to be allocated to employee accounts in accordance with
the Company Savings Plus Contribution to the extent (if any) the shares exceed
the amount needed under the PS/SP profit-sharing formula, thus possibly
achieving some cost savings to Chevron. While Chevron currently intends to
continue all other relevant features of the existing plans in the New PS/SP,
your Directors consider it advisable to provide for the possibility of future
amendments without having to seek prior stockholder approval, as such a
requirement adds expense to the process of making plan changes and could delay
or impede necessary or appropriate changes to Chevron's benefit programs.
Accordingly, the New PS/SP will provide that Chevron may terminate the plan,
combine it with other plans, or amend any of the plan's provisions at any time,
without stockholder approval. Under relevant provisions of the Internal Revenue
Code as currently in effect, however, no such change would result in any
increase in the benefits actually received by any of Chevron's officers or
Directors under the plan. In addition, under both the current PS/SP and the New
PS/SP, no amendment may (i) reduce the plan benefits of any employee that have
accrued under the plan prior to the amendment, nor (ii) divert any of the
plan's assets to purposes other than providing benefits to the intended
beneficiaries who have an interest in the plan and defraying the reasonable
expense of administering the plan. Finally, any change to the provisions of the
plan concerning the voting of Chevron Stock would be subject to Chevron's
fiduciary duty to administer the plan in the interests of the plan participants
and their beneficiaries.
16
The following table sets forth the benefits allocated to each of the following
persons for the year ended December 31, 1994 under the PS/SP and the Savings
Plus Plan, which are the same amounts that would have been allocated to such
persons under the New PS/SP if it had been in effect during the period.
PLAN BENEFITS
NEW PS/SP
Name and Position Dollar Value ($)(1)
- ----------------- -------------------
K. T. Derr.................................................. $ 6,394.08
Chairman
J. D. Bonney................................................ 6,394.14
Vice-Chairman
J. N. Sullivan.............................................. 6,460.97
Vice-Chairman
M. R. Klitten............................................... 6,995.40
Vice-President
R. E. Galvin................................................ 6,328.93
Vice-President
Executive Group............................................. 54,739.68
Non-Executive Director Group................................ (2)
Non-Executive Officer Employee Group........................ 76,774,509.84
- --------
(1) The allocated benefits consist of Chevron Stock and such other securities
held in the investment funds into which participants may direct the Company
Savings Plus Contribution.
(2) Non-employee Directors are not eligible to participate in the PS/SP or the
Savings Plus Plan and will not be eligible to participate in the New PS/SP.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSAL TO PERMIT THE MERGER OF THE PROFIT SHARING/SAVINGS PLAN AND THE
SAVINGS PLUS PLAN.
ITEM 3 ON THE PROXY CARD
APPROVAL OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board, which is composed entirely of non-employee
Directors, has selected Price Waterhouse LLP ("Price Waterhouse") as
independent public accountants to audit the books, records and accounts of
Chevron and its subsidiaries for the year 1995. The Board has endorsed this
appointment and it is being presented to the stockholders for approval.
Price Waterhouse has audited the books, records and accounts of Chevron for
many years and during the year ended December 31, 1994, provided both audit and
nonaudit services. Audit services included: (1) regular examination of the
consolidated financial statements, including work relating to quarterly
reviews, SEC filings, and consultation on accounting and financial reporting
matters; (2) audit of the financial statements of certain subsidiary companies
to meet statutory or local regulatory requirements; (3) audit of specific
financial and statistical information in connection with sales contracts and
other agreements; and (4) examination of the financial statements of various
Chevron employee benefit plans. Nonaudit services provided by Price Waterhouse
included income tax consulting, employee benefit advisory services and systems
consulting projects.
All audit and nonaudit services provided by Price Waterhouse are approved by
the Audit Committee which will give due consideration to the potential impact
of nonaudit services on auditor independence.
17
Representatives of Price Waterhouse will be present at the Meeting, will have
an opportunity to make statements if they desire, and will be available to
respond to appropriate questions.
If the stockholders do not approve the appointment of Price Waterhouse, the
Audit Committee will select another firm of auditors for the ensuing year.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE APPOINTMENT OF PRICE
WATERHOUSE AS INDEPENDENT PUBLIC ACCOUNTANTS.
ITEM 4 ON THE PROXY CARD
STOCKHOLDER PROPOSAL TO PAY DIRECTORS EXCLUSIVELY IN COMMON STOCK
The shareholders of Chevron Corporation request the Board of Directors take
the necessary steps to amend the company's governing instruments to adopt the
following:
Beginning on the 1996 [sic] Chevron Corporation fiscal year all members of the
Board of Director's total compensation will be 1000 shares of Chevron
Corporation common stock each year. No other compensation of any kind will be
paid.
SUPPORTING STATEMENT
For many years the Rossi family have been submitting for shareholder vote, at
this corporation as well as other corporations, proposals aimed at putting
management on the same playing field as the shareholders. This proposal would
do just that.
A few corporations have seen the wisdom in paying directors solely in stock.
Most notably, Scott Paper and Travelers. Ownership in the company is the
American way. We feel that this method of compensation should be welcomed by
anyone who feels they have the ability to direct a major corporation's
fortunes.
The directors would receive 1000 shares each year. If the corporation does
well, the directors will make more money in the value of the stock they receive
and the dividend that usually rise with more profits. If things go bad, they
will be much more inclined to correct things, because it will be coming
directly out of their pockets. Instead of the way it is done now, where
directors receive the same compensation for good or bad performance.
RECOMMENDATION OF THE BOARD AGAINST THIS PROPOSAL
Chevron believes it is in the best interests of the Corporation and its
stockholders to attract and retain exceptional individuals to serve as non-
employee Directors on the Board of Directors. To successfully do this, Chevron
must offer a fair and competitive total compensation package to non-employee
Directors (employee Directors are not compensated for services as Directors).
Chevron believes that the Directors' current compensation package consisting of
cash retainers and attendance fees and the Chevron Restricted Stock Plan for
Non-Employee Directors (the "Restricted Stock Plan") is competitive with
industry standards, allowing Chevron to attract highly valued individuals to
serve on its Board.
As discussed on page 6 under "Non-employee Directors' Compensation," the
Restricted Stock Plan supplements the non-employee Directors' cash compensation
with deferred compensation in the form of stock units, which are payable in an
equal number of shares of Chevron Stock after any non-employee Director
terminates service as a Director of Chevron and attains the age of 65. Annual
awards under the Restricted Stock Plan are subject to forfeiture if any non-
employee Director fails to serve as a Director of Chevron for five years. In
addition, any non-employee Director may elect to defer receipt of all or any
portion of the
18
annual retainers and meeting fees. At the election of the Director, such
deferred amounts are converted into stock units representing the value of an
equal number of shares of Chevron Stock. The amount ultimately distributed to
the Director will reflect changes in the market price of Chevron Stock during
the deferral period. Each of these forms of compensation gives the Directors an
ownership interest in Chevron and further aligns their interests with the
interests of stockholders.
Chevron believes that the current compensation package is fair and appropriate
in light of the obligations and responsibilities of corporate directors. The
cash portion of the compensation provides flexibility to non-employee Directors
to use such cash as their particular needs may require, including the payment
of income taxes which are the sole responsibility of the non-employee
Directors. Requiring that all Directors' compensation be paid in the form of
Chevron Stock may cause a hardship if cash is not available to pay for the tax
liability related to the stock received as compensation. Chevron's current
compensation package also aligns non-employee Directors' interests with
stockholders' interests through stock units issued under the Restricted Stock
Plan and through Directors' deferral elections. Implementation of this proposal
would decrease the competitiveness of the compensation package for non-employee
Directors and thereby decrease the ability of Chevron to attract and retain
outstanding individuals to serve on Chevron's Board.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE AGAINST THIS PROPOSAL.
ITEM 5 ON THE PROXY CARD
STOCKHOLDER PROPOSAL ON ENVIRONMENTAL HAZARDS ASSESSMENT
WHEREAS:
Over 34,500 industrial chemical accidents were reported during 1988-92--nearly
one every hour--in the United States. Over 2000 of these resulted in injuries,
evacuations or deaths. Some 40% occurred concentratedly in just 2% of the
counties in the U.S., primarily in California, Texas, and Louisiana. The New
York Times reports this as one of the deadliest periods for the American
petrochemical industry's history: "Alarm[ing] company executives, the 12 worst
explosions killed 79 people, injured 833, and caused roughly $2 billion in
damage." The Congressional subcommittee chairman overseeing OSHA believes these
accidents are linked to the use of less-trained contract workers. Nevertheless,
firms surveyed in 1994 further cut safety expenditures in response to
competitive pressures, despite risks to communities and shareholders.
WHEREAS WE BELIEVE:
These problems are exemplified by explosions at facilities of companies such as
Union Carbide, Chevron, and others;
Many companies are doing extensive studies of their chemical risks, with
recommendations for improvement. Even when studies of plant safety and hazard
prevention are required by OSHA and EPA, they are not disclosed to the local
communities. We believe that unless such studies are shared with those
potentially affected by the hazards, local citizens are unable to avoid
needless deaths and injuries;
Investors, citizens, environmental and labor groups are increasingly asking
about: worst-case accident scenarios and consequence analysis; groundwater
contamination; hazardous waste disposal practices; safety audits and "self-
audits' under the CMA Responsible Care Program; and toxic use reduction plans.
Residents wish to inspect facilities and publicly discuss such documents with
the company;
Some companies are agreeing to furnish this information under Good Neighbor
Agreements which allow mutually-agreed-upon experts to give technical
assistance to the community. Given our Company's past record and problems, we
believe that it should meet community requests, make information public, and
show itself to be accountable.
19
RESOLVED: Shareholders request the Company to adopt a policy to make publicly
available at each facility information that will allow concerned persons or
organizations (i) to assess that facility's (a) actual environmental and safety
hazards to local communities, (b) pertinent Company policies and procedures,
and (c) arrangements for emergency preparedness; and (ii) inspect such
facilities with regard to these hazards.
SUPPORTING STATEMENT
To be effective, this information should be readily accessible to local
residents, employees, and concerned environmental or community organizations.
It should cover hazards to specific communities, evaluating the risks and
consequences of chemical accidents, preventative measures, and plans to reduce
the use of toxics. Our Company needs to deal adequately with the public's
concerns about environmental health and safety, if it is to be viewed as
environmentally responsible. We ask shareholders concerned with our Company's
image, its treatment of local concerns about environmental health and safety,
the financial and human costs of accidents, and the negative repercussion of
negative publicity to vote FOR this resolution.
RECOMMENDATION OF THE BOARD AGAINST THIS PROPOSAL
Your Board of Directors believes that Chevron's existing safety, fire, health
and environment policy addresses the concerns raised in the proposal. This
policy, adopted in 1989 and continuously reviewed to ensure currency, was
supported by a vote of 98.3% of the stockholders at the 1991 Annual Meeting.
In 1992, Chevron issued a detailed guidance directive called PROTECTING PEOPLE
AND THE ENVIRONMENT to assure the policy's full and consistent implementation.
Along with sections covering compliance assurance, safe operations, emergency
preparedness and pollution prevention, PROTECTING PEOPLE AND THE ENVIRONMENT
requires Chevron facilities to communicate with community representatives and
work to resolve community concerns. Specifically, each facility is required to:
. Put systems in place that ensure an ongoing dialogue with employees,
contractors and local citizens to address safety, fire, health and
environmental concerns, and
. Develop and maintain a convenient process that helps familiarize interested
people with the facility, its operations and products and its efforts to
protect safety, fire, health and the environment.
Chevron believes that its existing practice of dialogue with concerned citizens
and organizations, as required by corporation policy and as implemented through
PROTECTING PEOPLE AND THE ENVIRONMENT, satisfies the concerns raised in the
stockholder proposal.
The stockholder proposal also requests that Chevron adopt a policy supporting
citizen inspections of its facilities. Chevron does not believe that citizen
inspections are necessary or appropriate, and therefore opposes this aspect of
the proposal. Environmental and safety inspections require a detailed knowledge
of the applicable regulatory requirements and are therefore the responsibility
of the many regulatory agencies which oversee Chevron's operations. In 1993,
Chevron facilities received over 4,700 regulatory agency inspections and the
results of these inspections are available in public records.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE AGAINST THIS PROPOSAL.
20
OTHER MATTERS
The Board of Directors does not know of any other business which will be
presented for consideration at the Meeting. Except as the Board of Directors
may otherwise permit, only the business set forth and discussed in this Notice
of Meeting and Proxy Statement may be acted on at the Meeting. If any other
business does properly come before the Meeting or any adjournment thereof, the
proxy holders will vote in regard thereto according to their discretion insofar
as such proxies are not limited to the contrary.
SEC regulations require Chevron to identify the names of persons who failed to
file or filed a late report required under Section 16 of the Securities
Exchange Act of 1934, as amended. Generally, the reporting regulations under
Section 16 require Directors and officers to report changes in ownership in
Chevron securities. Mr. J. E. Peppercorn, an officer of Chevron, participated
passively in Chevron's Dividend Reinvestment Plan, which resulted in quarterly
increases in his holdings of Chevron Stock as dividends paid on his
stockholdings were reinvested for his account in additional shares of Chevron
Stock. The balance of Mr. Peppercorn's dividend reinvestment account at
December 31, 1994 was 53.699 shares. Due to the passive and modest nature of
the investment, Mr. Peppercorn inadvertently failed to report such acquisitions
as required by Form 5 for each of the years ended 1991, 1992 and 1993. These
transactions have now been reported on Mr. Peppercorn's Form 5 for the year
ended 1994.
By Order of the Board of Directors
/s/ M. J. McAULEY
M. J. McAuley
Secretary
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE.
21
Proxy
Chevron
This proxy is solicited on behalf of the Board of Directors.
K. T. Derr, C. M. Pigott and G. H. Weyerhaeuser, and each of them, each with the
power of substitution, are hereby authorized to represent and to vote the stock
of the undersigned in CHEVRON CORPORATION at the annual meeting of its
stockholders to be held on May 2, 1995, and any adjournment thereof.
Management recommends and will vote FOR the election of the following as
Directors (unless otherwise directed):
1. S. H. Armacost, J. D. Bonney, K. T. Derr, S. Ginn, C. A. Hills, C. M.
Pigott, C. Rice, J. N. Sullivan, G. H. Weyerhaeuser and J. A. Young.
To vote for all nominees, check this box. [ ]
To withhold authority to vote for all nominees, check this box. [ ]
To withhold authority to vote for any individual nominee while voting for
the remainder, write this nominee's name in the space following:
- --------------------------------------------------------------------------------
Management recommends and will vote FOR the following (unless otherwise
directed):
2. Proposal to Permit the Merger of the Profit Sharing/Savings Plan and the
Savings Plus Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Appointment of Price Waterhouse as Independent Public Accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Management does not recommend and will vote AGAINST the following stockholder
proposals (unless otherwise directed):
4. Proposal to Pay Directors Exclusively in Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Proposal on Environmental Hazards Assessment.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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DETACH HERE
[CHEVRON LOGO] Chevron
March 24, 1995
Chevron Corporation
225 Bush Street
San Francisco, CA 94104
Dear Stockholders:
Attached is your 1995 Chevron Corporation Proxy Card. Please read both sides of
the Proxy Card and mark, sign, and date it. Then detach and return it promptly
using the enclosed reply envelope. If you properly sign and return your Proxy
Card, but do not specify your choices, your shares will be voted as recommended
by the Board of Directors. We urge you to vote your shares.
We are pleased to invite you to attend the 1995 Annual Meeting of Stockholders
of Chevron Corporation to be held at 9:30 a.m. local time on Tuesday, May 2, at
the George R. Brown Convention Center in Houston, Texas.
Sincerely,
/s/ M.J. McAuley
M.J. McAuley
Secretary
TRANS-180-L (2-95)
(OVER)
This Proxy will be voted as directed, but if not otherwise directed, FOR the
nominees, FOR the Proposals 2 and 3 and AGAINST the Stockholder Proposals 4 and
5. This Proxy will also be voted on such other matters as may properly come
before the meeting (unless this sentence is stricken).
Please sign as name appears hereon, date, and return this Proxy Card promptly
using the enclosed envelope.
Signature/Date
- ------------------------------------
Signature/Date
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