DEF 14A
Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE
14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
 
Filed by the Registrant
 
Filed by a Party other than the Registrant
Check the appropriate box
 
Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only
 (as
permitted
by Rule
14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Under
§240.14a-12
 
 
LOGO
BAKER HUGHES COMPANY
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
Payment of Filing Fee (Check all boxes that apply):
 
No fee required.
 
Fee paid previously with preliminary materials
 
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11.
Executive Compensation


Table of Contents

LOGO


Table of Contents

LOGO

 

Letter to our shareholders

 

On behalf of the leadership team and the Board of Directors, I want to thank you for your investment and commitment to Baker Hughes. I remain honored to continue to serve as the Company's Chairman, President, and Chief Executive Officer, and I continue to appreciate the trust you place in me to drive Baker Hughes forward.

In 2023, Baker Hughes delivered a record-breaking year across the Company. Our order backlog reached historic levels, while at the same time we are making significant progress in transforming our organization. Our unique portfolio of assets, technologies, and long-term strategy has allowed us to maintain a strong balance sheet and invest in differentiated solutions to better deliver for energy and industrial customers and enhance shareholder value.

We achieved strong results during another year of volatility thanks to a strong commitment to our strategy and generally favorable market forces. We believe that natural gas – and within it, Liquified Natural Gas (LNG) – will remain critical to meet global energy demand and further reduce the use of more carbon-intensive sources of energy, including coal. Our work throughout 2023 resulted in several significant achievements that yielded benefits for shareholders, including:

 

    Growth in orders, revenues, and margins compared to 2022. We booked $30.5 billion in orders, increased adjusted EBITDA* by 26%, and generated strong net cash flow from operations of $3.1 billion and free cash flow* of $2.0 billion.

 

    Record bookings of LNG awards – $5.6 billion – further emphasizing Baker Hughes' role as the energy technology provider of choice for this critical resource. Our Industrial & Energy Technology business segment ended the year with a record backlog of $30 billion, and the pipeline of opportunities remains robust.

 

    Continued to expand our leadership in new energy, exceeding our original full year guidance and booking orders of $750 million. We expect total company new energy orders of $800 million to $1 billion in 2024, in key areas including hydrogen, carbon capture, utilization and storage, geothermal, and emissions abatement.

 

    Returned $1.3 billion to shareholders through dividends and share buybacks. We increased our dividend to $0.20 in the third quarter of 2023, and further increased the dividend to $0.21 in the first quarter of 2024.

Amidst global economic uncertainty and geopolitical risk at levels not seen in decades, the need to push ahead in a balanced energy transition became more apparent in 2024 with another year of extreme climate impacts worldwide. These events have sharpened policymakers' focus on better balancing the energy trilemma across security, sustainability, and affordability. To resolve the energy trilemma over the longer term, all forms of energy will be required with heightened focus on lowering and/or eliminating emissions, as well as increasing efficiencies. Technologies for sustainable energy development will continue to require public incentives to scale up, and our customers expect new partnerships, commercial models, and new solutions to deliver productivity improvements with a lower carbon footprint. We see opportunities in 2024 to be recognized and rewarded financially for the risk we are taking in building and delivering these new technology solutions.

Our Board of Directors has remained engaged and focused on growth at Baker Hughes. Since our 2023 shareholders meeting, we welcomed Abdulaziz M. Al Gudaimi to the Board, adding further global and integrated energy and chemicals experience from his decades at Aramco. On behalf of our Company, I also want to share my sincere thanks to our Board members for their commitment to our strategy and our transformation in 2023.

Thank you to our customers, shareholders, and employees for their continued support of Baker Hughes. Our unique portfolio, strong balance sheet, and continued winning strategy will continue to guide us in another year of taking energy forward.

 

 

LOGO

Sincerely,

Lorenzo Simonelli

Chairman, President, and Chief Executive Officer

 

*

Adjusted EBITDA and free cash flow are non-GAAP measures. A reconciliation of GAAP to non-GAAP measures is included in the Proxy Statement in Annex B.

 

 


Table of Contents

Notice of 2024 Annual Meeting

of Shareholders

 

LOGO   When:   LOGO   Virtual Meeting Access:
 

May 13, 2024

8:00 a.m. CDT*

 

To attend, register at

www.proxydocs.com/bakerhughes

 

Agenda

        

Proposal 1

  

The election of directors

   

Proposal 2

  

An advisory vote related to the Company's executive compensation program

   

Proposal 3

  

The ratification of KPMG LLP as the Company's independent registered public accounting firm for fiscal year 2024

   

Proposal 4

  

Amendment and Restatement of the Certificate of Incorporation to limit the liability of certain officers of the Company

   

Proposal 5

  

Amendment and Restatement of the Certificate of Incorporation to add a federal forum selection provision

   

Proposal 6

  

Amendment and Restatement of the Certificate of Incorporation to clarify and modernize the Certificate of Incorporation

   

Such other business as may properly come before the meeting and any reconvened meeting after an adjournment thereof.

   

Record date

The Board of Directors of Baker Hughes Company (the "Company," "Baker Hughes," "we," "us" or "our") has fixed March 22, 2024 as the record date for determining the shareholders of the Company entitled to notice of, and to vote at the meeting and any reconvened meeting after an adjournment thereof, and only holders of Class A Common Stock and Class B Common Stock of the Company (collectively, the "Common Stock") of record at the close of business on that date will be entitled to notice of, and to vote at the meeting and any reconvened meeting after an adjournment.

Proxy voting

You are invited to attend the meeting via live webcast. Whether or not you plan to attend the live webcast, we urge you to promptly vote your shares by telephone, by the Internet, or if this proxy statement ("Proxy Statement") was mailed to you, by completing, signing, dating, and returning it as soon as possible in the enclosed postage prepaid envelope in order that your vote may be cast at the Annual Meeting of Shareholders (the "Annual Meeting"). You may revoke your proxy any time prior to its exercise, and you may vote at the live webcast, even if you have previously returned your proxy.

By order of the Board of Directors,

 

 

LOGO

Fernando Contreras

Vice President - Legal Governance & Corporate Secretary

Houston, Texas, April 2, 2024

* It is possible that an adjournment or postponement may be necessary due to a national emergency that makes us unable to hold the meeting on the date as planned.

How to vote in advance

 

 

Even if you plan to attend the meeting via live webcast, we urge you to vote in advance using one of these voting methods:

 

   

LOGO

  Registered holders

1-855-658-0965

 

Beneficial holders

Follow instructions provided by your broker, bank, or other nominee

 
   

LOGO

 

Registered holders

www.proxypush.com/bakerhughes

 

Beneficial holders

Follow instructions provided by your broker, bank, or other nominee

 
   

LOGO

  Mail your signed proxy card or voting instruction to the address listed on the envelope

Who can vote:

Holders of Baker Hughes Class A Common Stock and Class B Common Stock at the close of business on March 22, 2024

Virtual Meeting Access:

To attend, register at:

www.proxydocs.com/bakerhughes

Date of mailing

A Notice of Internet Availability of Proxy Materials will be mailed on or about April 2, 2024

 

Important notice regarding the availability of proxy materials for the Annual Meeting of Shareholders to be held on May 13, 2024

 

Baker Hughes 2024 Proxy Statement and 2023 Annual Report are available on the Internet:

 

Registered holders

www.proxydocs.com/bakerhughes

 

Beneficial holders

Follow instructions provided by your broker, bank, or other nominee

   
 


Table of Contents

Table of contents

 

Proxy Statement Summary

    1  

Proposal No. 1. Election of Directors

    9  

Corporate Governance

    19  

Ownership Structure

    19  

Board Attendance

    19  

Director Independence

    20  

The Board's Leadership Structure

    20  

Committees of the Board of Directors

    21  

Risk Oversight

    23  

CEO and Senior Management Succession Planning

    25  

Shareholder Engagement

    25  

Shareholder Communications with the Board

    26  

Code of Conduct

    26  

Director Compensation

    27  

Stock Ownership

    29  

Certain Relationships and Related Party Transactions

    31  

Executive Compensation

    32  

Compensation Discussion and Analysis

    33  

Executive Summary

    33  

Total Direct Compensation for NEOs

    36  

Other Elements of Compensation

    44  

Decision-Making Process and Key Inputs

    45  

Additional Compensation Program Features and Policies

    47  

Human Capital and Compensation Committee Report

    48  

Summary Compensation Table

    49  

Grants of Plan-Based Awards

    51  

Outstanding Equity Awards at Fiscal Year-End

    52  

Option Exercises and Stock Vested

    53  

Pension Benefits

    54  

Nonqualified Deferred Compensation

    54  

Potential Payments Upon Change in Control or Termination

    55  

CEO Pay Ratio Disclosure

    60  

Pay versus Performance

    62  

Human Capital and Compensation Committee Interlocks and Insider Participation

    65  

Proposal No. 2. Advisory Vote related to the Company's Executive Compensation Program

    66  

Audit Committee Report

    67  

Fees Paid to KPMG LLP

    68  

Proposal No. 3. Ratification of the Company's Independent Registered Public Accounting Firm

    69  

Proposal No. 4. Amendment and Restatement of the Certificate of Incorporation to Limit Liability of Certain Officers

    70  

Proposal No. 5. Amendment and Restatement of the Certificate of Incorporation to Add Federal Forum Selection Provision

    71  

Proposal No. 6. Amendment and Restatement of the Certificate of Incorporation to Clarify and Modernize the Certificate of Incorporation

    72  

General Information

    73  

Information About the Notice of Internet Availability of Proxy Materials

    73  

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 13, 2024

    73  

Shareholder of Record; Shares Registered in Your Name

    73  

Beneficial Owner; Shares Registered in the Name of the Broker, Bank, or Other Agent

    73  

Voting

    73  

Confidential Voting

    74  

Solicitation of Proxies

    74  

Attendance

    74  

Householding

    74  

Annual Report

    75  

Incorporation by Reference

    75  

Shareholder Proposals

    75  

Other Matters

    75  

Voting Securities

    76  

Forward Looking Statements

    76  

Annex A Third Amended and Restated Certificate of Incorporation

    A-1  

Annex B Reconciliation of GAAP Measures to Non-GAAP Measures

    B-1  


Table of Contents

 

Proxy statement summary

This Proxy statement summary highlights information contained elsewhere in this Proxy Statement, which is first being made available to shareholders on or about April 2, 2024. We plan to begin mailing a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy materials, how to vote online, and how to obtain a paper copy of the proxy materials, on or about April 2, 2024. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement carefully before voting.

2024 Annual Meeting information

 

LOGO   When:   LOGO   Virtual Meeting Access:
 

Monday, May 13, 2024

8:00 a.m. CDT*

 

To attend, register at

www.proxydocs.com/bakerhughes

Virtual Meeting

 

 

The Board has determined that the 2024 Annual Meeting will be a completely virtual meeting. The Annual Meeting will be conducted only via live webcast. You will have the same rights and opportunities to participate as you would have at a physical meeting. You may attend the meeting, vote your shares, and submit questions electronically during the live webcast by visiting www.proxydocs.com/bakerhughes.

To participate in the Annual Meeting, you will need to register prior to the start of the meeting. Upon completing your registration, you will receive further instructions via email one hour prior to the start of the Annual Meeting, including your unique link that will allow you access to the Annual Meeting. You will have the ability to submit questions during the registration process and fifteen minutes prior to and during the Annual Meeting. We look forward to answering your questions during the meeting. All questions must comply with the rules of conduct, which will be posted on the virtual meeting website.

Technical assistance will be available one hour prior to and during the Annual Meeting. Information related to technical assistance will be provided in the email with the sign-in instructions.

 

Matters to be voted upon         

How to vote in advance

                      
 No.    Proposal    Board Recommendation     
Page Reference
(For More Detail)
 
 
     

Even if you plan to attend the meeting via live
webcast, we urge you to vote in advance using
one of these voting methods
  1    The election of directors    FOR EACH NOMINEE      9         LOGO    

Registered holders

1-855-658-0965

 

Beneficial holders

Follow instructions provided by your broker, bank, or other nominee

              
  2    An advisory vote related to the Company's executive compensation program    FOR      73         LOGO    

Registered holders

www.proxypush.com/bakerhughes

 

Beneficial holders

Follow instructions provided by your broker, bank, or other nominee

              
  3   

The ratification of KPMG LLP as the Company's independent registered public accounting firm for fiscal year 2024

 

   FOR      76      

 

 

 

 

LOGO

 

 

 

 

 

 

Mail your signed proxy card or voting instructions to the address listed on the envelope

 

              
  4   

Amendment and Restatement of the Certificate of Incorporation to limit the liability of certain officers of the Company

 

   FOR      77        
              
  5   

Amendment and Restatement of the Certificate of Incorporation to add a federal forum selection

 

   FOR      78        
              
  6   

Amendment and Restatement of the Certificate of Incorporation to clarify and modernize the Certificate of Incorporation

 

   FOR      79        

Such other business as may properly come before the meeting and any reconvened meeting after an adjournment thereof.

         

* It is possible that an adjournment or postponement may be necessary due to a national emergency that makes us unable to hold the meeting on the date as planned.

 

   LOGO     1


Table of Contents

Proxy statement summary

 

 

Important notice regarding the availability of proxy materials for the Annual Meeting of Shareholders to be held on May 13, 2024

 

Baker Hughes' 2024 Proxy Statement and 2023 Annual Report are available for registered holders at www.proxydocs.com/bakerhughes and beneficial holders should follow the instructions provided by their broker, bank, or other nominee.

Changes from Prior Year

We continually review our approach to sustainability, corporate governance, human capital management, and executive compensation to ensure that we are in a position to consistently deliver on our strategy and the long-term interests of our shareholders.

 

  Appointed Mr. Abdulaziz M. Al Gudaimi to our Board effective on January 1, 2024. Mr. Al Gudaimi brings extensive operational and leadership experience in the industries in which we operate and has experience in international markets

 

  Continued our commitment to diversity, equity, and inclusion by requiring diverse candidates in our director recruitment pool

 

  The Board established the Finance Committee to assist in its oversight of the Company's capital structure and financial resources and to advise on financial risks

 

  

  Amended our bylaws and propose amending the Articles of Incorporation to:

 

  limit the liability of certain officers of the Company;

 

  add a federal forum selection; and

 

  remove references to terminated agreements and relationships with GE as a result of GE's exit from its investment in the Company

 

 

2023 operational highlights

2023 proved to be a pivotal year for Baker Hughes as we continue our journey to reshape the company. We successfully removed $150 million of costs, realigned our Industrial & Energy Technology ("IET") business, and recently launched actions to further streamline our Oilfield Services & Equipment ("OFSE") business. Our strategy to transform the way we operate is working.

Baker Hughes is focused on building a differentiated energy technology company. With our integrated portfolio of energy solutions plus new technology and digital offerings, we believe we are uniquely positioned to help enable the energy transition. In 2023, we accelerated our strategy and began simplifying our structure to better position Baker Hughes, this included the realignment of IET into five product lines effective at the beginning of the fourth quarter. This work to streamline our organization and drive our transformation was a continuation of the initial steps taken in 2022, with the re-segmentation of the Company into two business segments, OFSE and IET. Baker Hughes was successful in 2023, with key commercial successes and solid margin improvements in OFSE. Commercially in IET, order performance in LNG and new energy hit new highs. In 2023, we had a record year for LNG equipment orders, and achieved significant growth in new energy orders compared to 2022.

 

     

Performance

    

 

Technology and Innovation

    

ESG Leadership

         
     

$30.5B

 

in orders

    

$658M

 

in research and

development

    

AA

 

ESG rating by MSCI

     

26%

 

increase in adjusted

EBITDA*

    

>2,000

 

patents granted

    

28%

 

reduction in Scope 1 & 2

GHG emissions**

     

$2.0B

 

free cash flow*

    

$750M

 

in new energy orders

    

199

 

HSE Perfect Days***

 

  *

Adjusted EBITDA and free cash flow are non-GAAP measures. A reconciliation of GAAP to non-GAAP measures is included in the Proxy Statement in Annex B

 

  **

2022 actual compared to 2019 base year

 

  ***

An HSE Perfect Day is a day without injury, vehicle accidents, or harm to the environment

 

2  2024 Proxy Statement     


Table of Contents

Proxy Statement Summary

 

Purpose: We take energy forward - making it safer, cleaner, and more efficient for people and the planet.

Our commitment to people, planet, and principles is embedded at every level within the Company, and oversight rests with the Board of Directors (the "Board"). We view sustainability as a key part of our business strategy. We believe that operating Baker Hughes responsibly and providing products and services that help our customers achieve their sustainability goals afford us opportunities to grow our business; increase customer collaboration; attract, retain, and motivate employees; and differentiate us from our competitors.

Our strategy - first launched in 2020 - is built on three key pillars: transform the core, invest for growth, and position for new energy frontiers. This strategy is driving our execution over three time horizons that look out to 2030 and beyond, culminating in a Baker Hughes which has an elevated margin and returns profile, differentiated shareholder returns, and strong exposure across the industrial and energy growth vectors. We believe our transformation over these three horizons will deliver significant long-term value to our shareholders and achieve our purpose of taking energy forward.

Our unique portfolio of assets, technologies, and long-term strategy has allowed us to maintain a strong balance sheet and invest in differentiated solutions while we transform our operations to better deliver for energy and industrial customers and enhance shareholder value.

 

   LOGO     3


Table of Contents

Proxy Statement Summary

 

LOGO

Our responsibility

We organize our sustainability efforts into the areas of people, planet, and principles, and we work hard to make measurable progress each year. We strive to improve the transparency of our reporting and challenge ourselves to perform at the level of the most responsible companies in the world, not just in our own industry. We strive to embed sustainability throughout our global operations by implementation of our sustainability strategic goals.

 

4  2024 Proxy Statement     


Table of Contents

Proxy Statement Summary

 

People

At Baker Hughes, our people are central contributors to our purpose of taking energy forward. As an energy technology company with operations around the world, we believe that a diverse workforce is critical to our success, and we aim to attract the best and most diverse talent to support the energy transition. We strive to be an inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by learning and development opportunities, competitive compensation, benefits and health and wellness programs, and programs that build connections between our employees and their communities.

Diversity, Equity, and Inclusion ("DEI"): We believe unique ideas and perspectives fuel innovation and our differences make us stronger. We value difference in gender, race, ethnicity, age, gender identity, sexual orientation, ability, cultural background, religion, veteran status, experience, thought and more across the globe. We recognize the importance of diverse teams, an equitable workplace and an inclusive culture in driving innovation and competitiveness as both are critical to our business success and our mission of taking energy forward for our customers and the industry. We believe that our DEI strategic framework and our commitment to DEI will enable us to continue to recruit and retain a diverse workforce, promote an inclusive culture, expand our supplier diversity, and be a stronger partner to our customers and our community.

As we continue to prioritize DEI, we are focused on progressing diversity, equity and inclusion across our organization, with a particular emphasis on supporting gender representation. In 2023, the percentage of people who identify as women in our workforce, senior leadership positions, and on the Board, was 19%, 18%, and 33%, respectively. Specific to the U.S., 38% of our employees identify as people of color.

We work to ensure we have access to and support diverse pipelines of talent across the globe while prioritizing development and retention. We hold leadership accountable for integrating DEI principles into their respective parts of the business. Our enterprise-wide strategy allows us to measure the outcomes and progress of our DEI efforts, assign goals, develop accountability, and ensure transparency. And our corporate memberships with respected nonprofits, such as Ally Energy, Catalyst, Disability:IN, and the Women's Energy Network, provide partnership and guidance to support our goals. Our talent acquisition efforts as well as our eight global employee resource groups support the engagement, development and retention of diverse talent.

Talent Acquisition: We have enacted a number of initiatives to support our global goals related to DEI. We have conducted training on unconscious bias and launched pilot projects on blind resumes and debiasing job descriptions, interview templates, and assessments as well as expanded our talent acquisition focus to include executive search services and initiatives with universities to expand our new talent pipeline.

Employee Resource Groups ("ERGs"): ERGs consist of employees who have joined together based on shared interests, characteristics, or life experiences. These groups can have a powerful influence on driving change by elevating the conversation and awareness around key issues and engaging with the communities where we operate while also providing opportunities for employee development, education, and professional growth. In 2023, we continued our support of the ERGs in several ways, including the opportunity for ERGs to nominate charitable organizations to receive grants from the Baker Hughes Foundation. We also formalized and enhanced support and impact for our five communities of interest groups, which bring together employees based on shared interests and enable employees to share information and ideas, find opportunities to participate in philanthropy and volunteerism, and learn best practices by engaging with colleagues on a specific topic or area of interest. These efforts have helped our DEI focus and have fostered closer connections between employees in communities around the world.

Inclusive Culture: We have several programs and initiatives that cultivate an inclusive culture. The Baker Hughes Culture & Inclusion Council, comprised of executives across the organization, supports the success of our DEI mission and workplace culture ambitions and meets regularly to review progress and discuss ways in which to continue to advance our efforts. The DEI Community of Practice facilitates sharing best practices across the enterprise. Our DEI Knowledge Center, located on the Baker Hughes intranet, enables us to provide our workforce with tools, resources, and learning opportunities that raise awareness, foster inclusive behaviors, and build cross-cultural competences.

Charitable Work: Baker Hughes seeks to make a positive impact in the communities where we operate around the world through stakeholder engagement, community service, and charitable contributions. Consistent with our purpose and values, we work to advance environmental quality, educational opportunities, and health and wellness. We benefit our communities through financial contributions, in-kind donations of goods and services, and volunteer projects. The Baker Hughes Foundation makes strategic philanthropic contributions, matches Baker Hughes employee charitable contributions, and awards volunteer recognition grants for outstanding employee community service. In 2023, the Baker Hughes Foundation globally provided $1 million in grants for educational opportunity, $955,000 in grants benefiting the environment, and an additional $418,000 in grants for health, safety and wellness and disaster recovery. The Baker Hughes Foundation supported disaster relief fundraising efforts in Alberta, Hawaii, Italy, Libya and Turkey, and global reforestation efforts that resulted in one million trees being planted across 17 countries. In addition, the Baker Hughes Foundation provided $855,000 in employee contribution matching, and Baker Hughes employees provided approximately 39,000 volunteer hours.

Planet

Getting to Net-Zero: It is a priority for us to innovate and to offer lower carbon products and services, improve our operational efficiency, and reduce our emissions. We are actively engaged in helping our customers meet their carbon and methane emissions reduction goals. We advocate for policies and technology that we believe will advance the energy transition such as carbon capture, utilization and storage ("CCUS"), hydrogen, carbon pricing, and methane emissions reduction.

 

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Table of Contents

Proxy Statement Summary

 

In 2019, we announced our commitment to reduce Scope 1 and 2 carbon dioxide equivalent emissions from our operations by 50% by 2030 and achieve carbon dioxide equivalent net-zero emissions by 2050. This goal encompasses emissions from our operations ("Scope 1 and 2 emissions") in alignment with the Paris Accord and the specific recommendations of the United Nations ("UN") Intergovernmental Panel on Climate Change's Special Report on Global Warming of 1.5oC. In 2020, we reset our carbon emissions reduction base year for this goal from 2012 to 2019 to account for corporate changes, new acquisitions, divestitures, and to reflect changes in methodology in accordance with the Greenhouse Gas ("GHG") Protocol.

Our net-zero roadmap is based on nine key building blocks necessary to achieve net-zero Scope 1 and 2 carbon emissions by 2050. This includes defining and operationalizing our efforts for the enterprise transformation, implementing a comprehensive sustainable supply-chain framework, and continuing to innovate and advance our research and development of low-carbon technology.

Our reporting frameworks are informed by the standards most frequently referenced by our stakeholders, including the Task Force on Climate-related Financial Disclosure ("TCFD") standards, the GHG Protocol, the Sustainability Accounting Standards Board ("SASB") Oil & Gas Services Industry Standard, Extractives and Mineral Processing Sector, as well as other relevant sector standards.

Principles

Protecting people and the environment: At Baker Hughes, the health and safety of our employees is a top priority. We value the health and safety of our people and are dedicated to doing what's right to safeguard our employees, customers, communities, and the environment. We implement proactive programs designed to ensure safe and sustainable operations, meeting or exceeding global regulatory requirements.

Culture of Compliance: Integrity and compliance are foundational elements of our culture and business and serve to mitigate risk, foster a positive workplace culture and support long-term commercial success. We are committed to complying with all laws, regulations and ethical standards in letter and spirit. Integrity is a core value of Baker Hughes that is embodied throughout our global operations that creates an environment where doing the right thing is second nature. Our Code of Conduct sets high expectations for ethical behavior, and our global ethics and compliance program is designed to prevent and detect potential violations of law, our Code of Conduct, and other Company policies and procedures.

Privacy and Cybersecurity: We take cybersecurity and data privacy very seriously, and we are committed to individuals' rights to data protection and privacy. We protect our digital systems and data through a comprehensive cybersecurity management program, and we operate a comprehensive Cyber Fusion Center to coordinate resources, reduce incident response time, and shift toward a proactive cyber-defense model. We leverage the National Institute of Standards and Technology security framework to drive strategic direction and maturity improvement and engage third party security experts for risk assessments and program enhancements. Our Global Data Privacy Program is designed to ensure that personal data will be protected and handled in accordance with applicable law and applicable contractual obligations.

Sustainable Supply Chains: We are part of a broad global supply chain, and we source materials from many countries around the world. In addition to managing our own corporate sustainability performance, we also have a desire to ensure that the suppliers we work with adhere to high standards. Our Supplier Integrity Guide governs our relationships with suppliers, contractors, consortium partners, and consultants. Our Supplier Social Responsibility Program is intended to set standards and monitor compliance with high standards of HSE performance, ethics, compliance, and respect for human rights.

Additional information on our People, Planet and Principles can be found in our Corporate Sustainability Report located on our website. Information contained on or connected to our website, including our Corporate Sustainability Report, is not incorporated by reference into this Proxy Statement and should not be considered part of this Proxy Statement or any filing we make with the Securities and Exchange Commission ("SEC").

 

6  2024 Proxy Statement     


Table of Contents

Proxy Statement Summary

 

Director nominee highlights

The nine director nominees, if elected, will serve a one-year term expiring at the 2025 Annual Meeting. Our priority is to bring together areas of expertise for the benefit of the Company and long-term shareholder value. We strive to maintain a Board that reflects diversity, varied knowledge and experiences, and relevant skills and personal qualities. Our candidates possess leadership skills, global business experience, and expertise in finance and the energy industry. More information about our director nominees may be found under "Proposal No. 1—Election of Directors."

 

                       Committee Memberships
   

Name, Primary Occupation(1)

   Age(2)      Director
Since
     AC    FC    GCR    HCC    Independent

LOGO

 

Lorenzo Simonelli

Chairman, President and CEO

Baker Hughes Company

     50        2017      N/A    N/A    N/A    N/A    No

LOGO

 

W. Geoffrey Beattie *

Chief Executive Officer

Generation Capital

     64        2017                      Yes

LOGO

 

Abdulaziz M. Al Gudaimi

Former Executive Vice President

Saudi Arabian Oil Company

     61        2024                      Yes

LOGO

 

Gregory D. Brenneman

Executive Chairman

CCMP Capital Advisors, LLC

     62        2017        

 

LOGO

             Yes

LOGO

 

Cynthia B. Carroll

Former Chief Executive Officer

Anglo American plc

     67        2020                  

 

LOGO

   Yes

LOGO

 

Michael R. Dumais

Former Executive Vice President & Chief

Transformation Officer Raytheon Technologies

     57        2022                      Yes

LOGO

 

Lynn L. Elsenhans

Former Executive Chairman, President and CEO

Sunoco, Inc.

     68        2017               

 

LOGO

      Yes

LOGO

 

John G. Rice**

Former Chairman

GE Gas Power

     67        2017     

 

LOGO

                Yes

LOGO

 

Mohsen M. Sohi **

Chief Executive Officer

Freudenberg SE

     65        2023                      Yes
 Member    

LOGO

   Chair   * Lead Director  ** Audit Committee Financial Expert on Audit Committee

 

AC Audit Committee

  

FC Finance Committee

 

GCR Governance & Corporate Responsibility Committee

HCC Human Capital and Compensation Committee

 

 

(1)

Nelda J. Connors has notified the Board of her decision not to stand for re-election at the 2024 Annual Meeting.

(2)

Ages listed are as of May 13, 2024.

Compensation highlights

Our executive compensation program is designed to attract, motivate, and retain our executives, including our named executive officers (each an "NEO"), who are critical to our long-term success. The program is designed to align with three core principles:

 

     
Align executive and shareholder interests   

 

   Provide a significant portion of total compensation that is performance-based and at risk   

 

   Attract and retain talented executives

Our executive compensation program emphasizes performance-based compensation tied to increases in Baker Hughes' stock price and drives strategic imperatives. Approximately 90% of Mr. Simonelli's target total compensation is performance-based and at risk, while the other NEOs have an average of 78% performance-based and at-risk compensation.

 

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Table of Contents

Proxy Statement Summary

 

Key compensation decisions in 2023

The Company continued to reinforce market-aligned and pay-for-performance elements of its compensation programs.

2023 Compensation decisions

 

     

 

LOGO

     

 

LOGO

     

 

LOGO

     
Approved selective NEO base salary increases for 2023, to align with the market.      

Approved overall payout of 2023

Annual bonus at 140% of target, 2021 Performance Share Units ("PSUs") at 88.51% of target, and 2021 Transformation Incentive awards at 82.44% of target.

      Awarded annual long-term incentive grants with 60% Performance Share Unit ("PSUs") weighting for the CEO with an emphasis on outperforming the market.

 

8  2024 Proxy Statement     


Table of Contents

 

Proposal 1

Election of directors

 

The Board of Directors recommends that you vote FOR each nominee.

        

Board highlights

 

In analyzing director nominations, the Governance & Corporate Responsibility Committee strives to recommend candidates for director positions who will create a collective membership on the Board with varied experience and perspective and maintains a Board that reflects diversity, including but not limited to gender, ethnicity, background, and experience. Candidates should also demonstrate leadership, comprehend the role of a public company director, and exemplify relevant expertise, experience, and a substantive understanding of domestic and international considerations and geopolitics. The Governance & Corporate Responsibility Committee also looks for candidates who will help progress Baker Hughes' strategy as an energy technology company and as a leader through the energy transition.

 

When analyzing whether directors and nominees have the experience, qualifications, attributes, and skills to enable the Board to satisfy its oversight responsibilities effectively in light of the Company's business and structure, the Governance & Corporate Responsibility Committee and the Board assess the information summarized in each of the directors' individual biographies set forth in this Proxy Statement as well as the director skills matrix. Each of the current directors, other than Nelda J. Connors who has decided not to stand for re-election at the end of her current term, has been nominated for election by the Board upon recommendation by the Governance & Corporate Responsibility Committee and has decided to stand for election.

 

Ms. Connors has notified the Company and the Board of her decision not to stand for re-election at the 2024 Annual Meeting. Ms. Connors intends to serve on the Board through the date of the 2024 Annual Meeting, and her decision not to stand for re-election is not the result of any disagreement with the Company. The authorized number of directors is presently ten, and, in connection with the election of directors at the 2024 Annual Meeting, the authorized number of directors is being reduced to nine.

 

All directors who are elected at the Annual Meeting will serve for a one-year term expiring at the Annual Meeting expected to be held in May 2025; until his or her successor is elected and qualified; or until his or her earlier death, retirement, resignation, or removal. The proxy holders will vote FOR the nine persons listed below under "Company Nominees for Director," unless contrary instructions are given.

 

If you sign your proxy card but do not give instructions with respect to the voting of directors, your shares will be voted FOR the nine persons recommended by the Board. If you wish to give specific instructions with respect to the voting of directors, you must do so with respect to each individual nominee.

   

Our director nominees exhibit an effective mix of skills, experience, diversity, and perspective. Our Board is committed to supporting diverse board membership. Our Governance & Corporate Responsibility Committee is actively evaluating candidates, and, in accordance with our Committee charter, is considering a pool of candidates that includes persons reflecting diversity of race, ethnicity, and gender.

 

   

GENDER DIVERSITY

 

22%

2 females both of whom chair a standing committee

   

 

RACIAL/ETHNIC DIVERSITY

11%

1 racial/ethnic minority

   

 

INDEPENDENCE

8 of 9

are independent

   
   

 

ENVIRONMENTAL AND SAFETY

5 of 9

directors have environmental and safety, risk and regulatory experience

   

 

BOARD REFRESHMENT

44%

new directors added since 2020

   

 

INDUSTRY AND OPERATIONAL EXPERIENCE

78%

have industry and operational experience

   

 

 

LOGO

 

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Proposal 1 Election of Directors

 

Board nominees for director

The following table sets forth each nominee director's name, principal occupation and prior work experience, age, and year in which the nominee first became a director of the Company. Each nominee director has agreed to serve if elected.

Director nominees

 

W. Geoffrey Beattie   Age: 64 | Ethnicity: Caucasian/White | Director since: 2017
Committees:   

  Governance & Corporate Responsibility (Member)

  Finance (Member)

 

 

LOGO

  

Biography:

W. Geoffrey Beattie serves as the Lead Independent Director. Mr. Beattie has been the Chief Executive Officer of Generation Capital, a private investment company based in Toronto, Canada, since September 2013. He served previously as Chief Executive Officer of the Woodbridge Company Limited, a privately held investment company, and the majority shareholder of Thomson Reuters from March 1998 to December 2012, where he also served as Deputy Chairman from May 2000 to May 2013. Mr. Beattie currently serves as the Chairman of Relay Ventures, a Canadian venture capital firm.

 

Other Public Company Board Memberships in the Past Five Years:

•  Maple Leaf Foods (2008 – 2023)

•  Fiera Capital Corporation (2018 – 2023)

•  General Electric Company (2009 – 2019)

 

Qualifications:

The Board believes Mr. Beattie's qualifications to serve on the Board include his leadership experience as chief executive officer of two privately held investment companies, his investment experience as the majority shareholder of a publicly traded professional information provider, his service on several public company boards, and his technology and risk management expertise.

  
Abdulaziz M. Al Gudaimi   Age: 61 | Ethnicity: Asian/Middle Eastern | Director since: 2024
Committees:   

  Governance & Corporate Responsibility (Member)

  Human Capital and Compensation (Member)

 

 

LOGO

  

Biography:

Mr. Al Gudaimi had an over 38-year career at Saudi Arabian Oil Company ("Aramco"), an integrated energy and chemical company listed on the Saudi Stock Exchange (Tadawul), culminating in numerous senior management and leadership roles. He retired from Aramco as its Executive Vice President Corporate Development in November 2022, having been responsible for Aramco's mergers and acquisitions transactions and divestment strategy, a position he held since September 2020. Prior to that, from May 2015 to September 2020, he served as Executive Vice President Downstream leading all Aramco downstream refining, chemicals, power, infrastructures, marketing & trading, and retail businesses units of Aramco.

 

Other Public Company Board Memberships in the Past Five Years:

•  Banque Saudi Fransi (2023 – Present)

•  S-Oil Corp (2017 – 2021)

 

Qualifications:

The Board believes Mr. Al Gudaimi's qualifications to serve on the Board include his operational and leadership experience in the industries in which we operate and his experience in international markets.

 

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Table of Contents

Proposal 1 Election of Directors

 

Gregory D. Brenneman   Age: 62 | Ethnicity: Caucasian/White | Director since: 2017
Committees:   

  Finance (Chair)

  Audit (Member)

 

 

LOGO

  

Biography:

Greg Brenneman has served as the Executive Chairman of CCMP Capital Advisors, LP, a private equity firm with over $3 billion under management, since October 2016. Previously, he served as Chairman of CCMP from 2008 until October 2016 and as its President and Chief Executive Officer from February 2015 until October 2016. He is also Chairman and Chief Executive Officer of TurnWorks, Inc., a private equity firm focusing on corporate turnarounds, which he founded in 1994. Prior to joining CCMP, Mr. Brenneman led restructuring and turnaround efforts at Quiznos, Burger King Corporation, PwC Consulting, a division of PricewaterhouseCoopers ("PwC"), and Continental Airlines, Inc. that resulted in improved customer service, profitability and financial returns.

 

Other Public Company Board Memberships in the Past Five Years:

•  Hayward Holdings, Inc. (2021 – 2023)

•  The Home Depot, Inc. (2000 – present)

•  Ecovyst Inc. (2014 – 2022)

•  Baker Hughes GE (predecessor of Baker Hughes Company) (2017 – 2019)

•  Baker Hughes Incorporated (predecessor of Baker Hughes Company) (2014 – 2017)

 

Qualifications:

The Board believes Mr. Brenneman's qualifications to serve on the Board include his experience in several executive and leadership roles in the private equity space, his service on other public company boards, and his finance, investment, global business, and human resources expertise.

  
Cynthia B. Carroll   Age: 67 | Ethnicity: Caucasian/White | Director since: 2020
Committees:   

  Human Capital and Compensation (Chair)

  Audit (Member)

 

 

LOGO

  

Biography:

Cynthia Carroll was the Chief Executive Officer of Anglo American plc from 2007 to 2013. Ms. Carroll worked for Alcan Aluminum Corporation from 1989 to 2006, serving as the Chief Executive Officer for Primary Metal Group, Alcan's core business from 2002 to 2006 and President of the Bauxite, Alumina and Specialty Chemicals division from 1998 to 2001. She served in other various management and leadership positions from 1989 to 2001. She started her career in 1982 as a geologist working for Amoco Production Company.

 

Other Public Company Board Memberships in the Past Five Years:

•  Glencore (2021 – present)

•  Pembina Pipeline Corporation (2020 – present)

•  Hitachi, Ltd. (2013 – present)

•  Century Aluminum Company (2020 – 2021)

 

Qualifications:

The Board believes Ms. Carroll's qualifications to serve on the Board include her leadership experience as a former chief executive officer of a global mining company, her comprehensive industry knowledge, her service on several public company boards, and her environmental, sustainability, technology, and operational expertise.

 

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Proposal 1 Election of Directors

 

Michael R. Dumais   Age: 57 | Ethnicity: Caucasian/White | Director since: 2022
Committees:   

  Finance (Member)

  Governance & Corporate Responsibility (Member)

 

LOGO

  

Biography:

Michael Dumais was formerly the Raytheon Technologies Chief Transformation Officer and led corporate strategy and development from 2020 to 2022. From 2017 to 2020, he was the Executive Vice President of Operations and Strategy for United Technologies Corporation ("UTC") prior to its merger with Raytheon Company. He was previously President of UTC's Hamilton Sundstrand Division and held numerous leadership positions at UTC from 1998 to 2017. From 1993 to 1997, he held various strategic business roles with Bain & Company. He currently serves as an Executive Leadership Advisor to Ernst & Young and as an Adjunct Professor at the NYU Stern School of Business.

 

Other Public Company Board Memberships in the Past Five Years:

None

 

Qualifications:

The Board believes Mr. Dumais' qualifications to serve on the Board include his leadership experience in several executive roles at a multinational company, his experience in implementation and technology transformations, and his finance, investment, operational, risk management, environmental, and human resources expertise.

  
Lynn L. Elsenhans   Age: 68 | Ethnicity: Caucasian/White | Director since: 2017
Committees:   

•  Governance & Corporate Responsibility (Chair)

•  Human Capital and Compensation (Member)

 

LOGO

  

Biography:

Lynn Elsenhans was the Executive Chairman of Sunoco, Inc. from January 2009 until May 2012, and Chief Executive Officer and President from August 2008 until March 2012. She also served as Chairman of Sunoco Logistics Partners L.P. from October 2008 until May 2012, and Chief Executive Officer from July 2010 until March 2012. Ms. Elsenhans worked at Royal Dutch Shell for more than 28 years, where she held a number of senior roles, including Executive Vice President, Global Manufacturing from 2005 to 2008.

 

Other Public Company Board Memberships in the Past Five Years:

•  Aramco (2018 – present)

•  GlaxoSmithKline (2012 – 2022)

•  Baker Hughes GE (predecessor of Baker Hughes Company) (2017 – 2019)

•  Baker Hughes Incorporated (predecessor of Baker Hughes Company) (2012 – 2017)

 

Qualifications:

The Board believes Ms. Elsenhans' qualifications to serve on the Board include her leadership experience as a former chair and chief executive officer of a publicly traded energy company, her industry knowledge gained from many years at a global oil and gas company, her service on other public company boards, and her finance, operational, risk management, human resources, environmental, and sustainability expertise.

  

 

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Table of Contents

Proposal 1 Election of Directors

 

John G. Rice   Age: 67 | Ethnicity: Caucasian/White | Director since: 2017
Committees:   

•  Audit (Chair)

•  Finance (Member)

 

LOGO

  

Biography:

John Rice served as Chairman of GE Gas Power from December 2018 through August 2020. He was previously Vice Chairman, GE until March 2018 and Chief Executive Officer, GE Global Growth Organization from November 2010 until December 2017. He served in other various leadership positions across GE, including Vice Chairman, GE, President and Chief Executive Officer of GE Technology Infrastructure from 2007 until November 2010, Vice Chairman of GE's industrial and infrastructure businesses from 2005 until 2007, and President and Chief Executive Officer of GE Energy from 2000 until 2005.

 

Other Public Company Board Memberships in the Past Five Years:

•  AIG (2022 – present)

•  Li and Fung (2018 – 2020)

•  Baker Hughes GE (predecessor of Baker Hughes Company) (2017 – 2019)

 

Qualifications:

The Board believes Mr. Rice's qualifications to serve on the Board include his extensive leadership experience in a number of leadership roles at companies working in global energy and infrastructure markets, his global business experience, his service on other public company boards and his finance, investment, operations, technology, and human resources expertise.

  
Lorenzo Simonelli   Age: 50 | Ethnicity: Caucasian/White | Director since: 2017
Committees   

  N/A

 

LOGO

  

Biography:

Lorenzo Simonelli has been the Chairman of the Board of Directors of the Company since October 2017, and a Director, President and Chief Executive Officer of the Company since July 2017. Before joining the Company in July 2017, Mr. Simonelli was Senior Vice President, GE and President and Chief Executive Officer, GE Oil & Gas from October 2013 to July 2017. Before joining GE Oil & Gas, he was the President and Chief Executive Officer of GE Transportation from July 2008 to October 2013. Mr. Simonelli joined GE in 1994 and held various finance and leadership roles from 1994 to 2008.

 

Other Public Company Board Memberships in the Past Five Years:

•  Iveco Group N.V. (2021 – present)

•  CNH Industrial (2019 – 2021)

•  C3.ai, Inc. (2020 – 2021)

 

Qualifications:

The Board believes Mr. Simonelli's qualifications to serve on the board include his extensive leadership experience in business and operational decisions during his tenure as Chief Executive Officer of Baker Hughes in addition to his experience in the oil and gas industry and his financial, investor, technology, sustainability, and risk management expertise.

  

 

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Proposal 1 Election of Directors

 

Mohsen M. Sohi   Age: 65 | Ethnicity: Caucasian/White | Director since: 2023
Committees:   

  Audit (Member)

   Human Capital and Compensation (Member)

 

LOGO

  

Biography:

Dr. Mohsen Sohi has served as the Chief Executive Officer of Freudenberg and Co. since July 2012. From April 2010 to June 2021, Dr. Sohi served as Managing Partner of Freudenberg and Co. Dr. Sohi served as President and Chief Executive Officer of Freudenberg-NOK, a privately-held joint venture partnership between Freudenberg Group and NOK Corp. of Japan from March 2003 through March 2010. Prior to Freudenberg, Dr. Sohi was with NCR Corporation as the Senior Vice President, Retail Solutions Division from January 2001 to February 2003. Prior to NCR, Dr. Sohi was with Honeywell International Inc. and its pre-merger constituent, Allied Signal, Inc., for 14 years in positions of increasing leadership and lastly serving as President of Honeywell Electronic Materials from July 2000 to January 2001.

 

Other Public Company Board Memberships in the Past Five Years:

•  STERIS plc (2005 – present)

 

Qualifications:

The Board believes Dr. Sohi's qualifications to serve on the Board include his leadership experience in various executive roles at multinational conglomerate and consulting companies, his extensive experience in the technology industry, and his finance, operational, risk management, human resources, environmental, and sustainability expertise.

 

         

BOARD DIVERSITY MATRIX (as of April 2, 2024)(1)

                                   

Total Number of Directors = 10(2)

           

Gender Identity:

   Female      Male      Non-Binary     

Did not

Disclose
Gender

 

Directors

     3        7                

Demographic Background:

                           

African American or Black

     1                       

Asian/Middle Eastern

            1                

White

     2        6                

 

(1)

To see the Company's Board Diversity Matrix as of March 31, 2023, please see the Company's proxy statement filed with the SEC on March 31, 2023.

 

(2)

Nelda J. Connors has notified the Board of her decision not to stand for re-election at the 2024 Annual Meeting. Immediately after the 2024 Annual Meeting, assuming that all director nominees are elected, the total number of directors on the Board will be nine, with approximately 22% female directors and 11% ethnically diverse directors.

 

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Table of Contents

Proposal 1 Election of Directors

 

Director skills and experience matrix

 

Skills and Experience

  Al Gudaimi   Beattie   Brenneman   Carroll   Connors(1)   Dumais   Elsenhans   Rice   Simonelli   Sohi   %

Leadership

Business and strategic management experience from service in a significant leadership position, such as a CEO, CFO or other senior leadership position

                      100%

Finance and Accounting

Understanding of finance and financial reporting processes

                      100%

Investor

Overseeing investments and decisions

                      100%

Industry and Operations

Operational experience in the industries in which Baker Hughes operates

                          80%

Technology

Developing and investing in new technologies and ideas

                            70%

Risk Oversight/Cybersecurity

Understanding significant risks facing companies, including cybersecurity

                        90%

Global

Non-U.S. businesses and cultures through living or working outside of the U.S.

                      100%

Environmental and Safety

Safety and environmental regulations

                              60%

Prior BOD Experience

Service on public company boards

                        90%

HR and Talent Development

HR and talent development to obtain the most qualified and satisfied employees

                        90%

Legal and Corporate Governance

Legal and corporate governance issues in which public companies must abide

                            70%

Independent

Satisfies the independence requirements of Nasdaq and the SEC

                        90%

Sustainability

Experience in Environmental Social Governance ("ESG")

                            70%

 

(1)

Nelda J. Connors has notified the Board of her decision not to stand for re-election at the 2024 Annual Meeting. Immediately after the 2024 Annual Meeting, assuming that all director nominees are elected, the total number of directors on the Board will be nine.

 

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Table of Contents

Proposal 1 Election of Directors

 

Election and resignation policy

Size and term of Board

Under the provisions of the Second Amended and Restated Certificate of Incorporation, dated October 17, 2019 (the "Certificate of Incorporation"), and the Sixth Amended and Restated Bylaws of the Company, dated February 1, 2024 (the "Bylaws"), the total number of directors constituting the Board may be fixed from time to time by resolution of the Board. The total number of directors as determined by the Board is presently ten. In connection with the election of directors at the 2024 Annual Meeting, the authorized number of directors is being reduced to nine.

Each director will serve for a term of one year, ending on the date of the next Annual Meeting of Shareholders following the date of such director's election or appointment; provided that the term of each director will continue until the election and qualification of his or her successor, subject to his or her earlier death, resignation, disqualification, or removal.

 

Shareholder nominations of directors

 

Shareholders may also propose nominees for consideration by the Governance & Corporate Responsibility Committee by submitting the names and other supporting information required under the Company's Bylaws to:

 

Attn: Corporate Secretary

Baker Hughes Company

575 N. Dairy Ashford Road, Suite 100

Houston, Texas 77079

Resignation and removal

Any director may resign by delivering a resignation in writing or by electronic transmission to the Company at its principal office or to the Chairman of the Board, the Chief Executive Officer, or the Vice President and Corporate Secretary. Such resignation will be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event. Our Governance Principles provide that each incumbent director being nominated for further service on the Board submit an irrevocable resignation letter that becomes effective if (1) the director does not receive a majority of the votes cast "FOR" with respect to that nominee's election in an election that is not a contested election; and, (2) thereafter the Board accepts that resignation. The Governance & Corporate Responsibility Committee will have the right to fill any vacancy resulting from the death, resignation, retirement, disqualification, or removal from office or other cause for any director.

 

Board term limits and retirement age

 

The Board has a 15-year term limit for all directors, other than the Company's CEO. Additionally, with limited exceptions, directors will not be nominated for election to the Board after his or her 75th birthday. The full Board may nominate director candidates who have served past the 15-year term limit or the retirement age in special circumstances.

 

16  2024 Proxy Statement     


Table of Contents

Proposal 1 Election of Directors

 

Process for identifying and adding new directors

The Governance & Corporate Responsibility Committee identifies, screens, and recommends director candidates for nomination to the Board. Candidates are evaluated in light of the then-existing composition of the Board and the background and areas of expertise of existing directors and potential nominees.

 

 

LOGO

 

   LOGO     17


Table of Contents

Proposal 1 Election of Directors

 

Director education

Our director education program assists Board members in fulfilling their responsibilities. In addition to the onboarding program, directors are provided ongoing education through in-depth presentations on topics such as strategy, operations, the energy transition, cybersecurity, ESG related issues, enterprise risk management, DEI, and legal and regulatory matters. These presentations can be from management or with outside experts as needed. The Board periodically holds board meetings at facilities or other sites important to the business where directors engage with employees in a more informal setting. Directors are also encouraged to attend third-party educational programs and training.

Board evaluation

Board and Committee evaluations play a critical role in ensuring the effective functioning of our Board. It is important to review Board, Committee, and director performance and to solicit and act upon feedback received from each member of our Board. Our Lead Independent Director manages and has oversight over the Board evaluation process.

 

 

LOGO

 

The Board evaluation process considers the following topics:

 

 General board practices, including fostering a culture that promotes candid discussion

 

 The adequacy, number, and length of Board and committee meetings

 

 Suggestions for new skills and experiences for potential future candidates

 

 Peer Review

 

 The Board's access to Company executives and operations

 

 Committee effectiveness

  

 Adequacy of information received, including access to non-management resources

 

 The quality and scope of materials distributed in advance of the meeting

 

 The promotion of rigorous decision-making by the Board and the committees

 

 The strategic planning process

 

 The overall function of the Board and its committees

 

 Technology use

 

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Corporate governance

The Company's Board believes the purpose of corporate governance is to maximize shareholder value in a manner consistent with legal requirements and the highest standards of integrity. The Board has adopted and adheres to corporate governance practices, which the Board and management believe promote this purpose, are sound, and represent best practices. The Board periodically reviews these governance practices, Delaware law (the state in which the Company is incorporated), the rules and listing standards of Nasdaq and SEC regulations, as well as best practices suggested by recognized governance authorities. The Governance Principles are posted under the "Investors-Company Information-Corporate Governance" section of the Company's website at www.bakerhughes.com and are also available upon request to the Company's Corporate Secretary. Neither these documents nor the website are incorporated by reference to this Proxy Statement.

CORPORATE GOVERNANCE HIGHLIGHTS

 

     

BOARD STRUCTURE AND INDEPENDENCE

   LOGO    Board diversity relative to personal characteristics and experiences
   LOGO    Range of tenures ensures balance between historical experience and fresh perspectives
   LOGO    Skills and background aligned to our strategic direction
   LOGO    Director nominees are approximately 90% independent
   LOGO    Lead Independent Director, with expanded responsibilities, including formal responsibilities relative to Board evaluation processes
   LOGO    Lead Independent Director empowered to call special Board meetings at any time for any reason

STRONG CORPORATE GOVERNANCE PRACTICES

   LOGO    Annual election of directors
   LOGO    All members of all committees are independent directors
   LOGO    Annual Board assessment to enable adequate Board refreshment and appropriate evolution of Board skills, experience, and perspectives; results shared and discussed in executive session
   LOGO    Mandatory director retirement age of 75 and 15-year term limits
   LOGO    Active board engagement in managing talent and long-term succession planning for executives and directors
   LOGO    Robust shareholder engagement with independent director participation
   LOGO    No pledging or hedging of Company stock by executive officers and directors
   LOGO    Significant stock ownership requirements for executive officers and directors
     LOGO    Comprehensive director on-boarding program

Ownership structure

The Company was formed in July 2017 as the result of a combination between Baker Hughes Incorporated ("BHI") and the oil and gas business ("GE O&G") of General Electric Company ("GE") (the "Transactions"). As a result of the Transactions, substantially all of the business of GE O&G and BHI was transferred to a subsidiary of the Company, Baker Hughes Holdings LLC ("BHH LLC"). GE previously held its voting interest through our Class B Common Stock and its economic interest through a corresponding number of units of BHH LLC. In December 2022, GE exchanged all of its Class B Common Stock and equity interests representing its economic interests in BHH LLC for shares of our Class A Common Stock. There were no shares of our Class B Common Stock outstanding as of December 31, 2022. Following the exchange and GE's exit from its ownership position in the Company, the Stockholders Agreement (the "Stockholders Agreement") between GE and the Company was terminated and in March 2023, the Board updated the Company's governance documents, policies, and procedures to eliminate requirements relevant to the period when the Company was affiliated with GE, including those related to approval of related party transactions as discussed below.

Board attendance

During the fiscal year ended December 31, 2023, the Board held 6 meetings. Each director attended more than 93% of the total number of meetings of the Company's Board and of the respective Committees on which he or she served. It is the Company's policy to request and encourage all of the Company's directors and nominees for election as directors to attend the Annual Meeting. Each director attended the 2023 Annual Meeting.

 

   LOGO     19


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Corporate Governance

 

Director independence

The Board has adopted Governance Principles and charters for the Audit Committee, Human Capital and Compensation Committee and the Governance & Corporate Responsibility Committee that include independence requirements for directors to assist it in determining director independence. These requirements conform to the independence requirements set forth in Nasdaq listing standards and SEC rules. In addition to applying these requirements, the Board considers all relevant facts and circumstances in making an independence determination. The Board has determined that all the nominees for election at this Annual Meeting other than Mr. Simonelli meet these independence requirements and that all members of these committees meet the relevant committee independence requirements.

When considering the independence of Mohsen Sohi, the Board recognized that Dr. Sohi serves as the Chief Executive Officer of Freudenberg and Co. ("Freudenberg"), a company that enters into purchase and sale transactions with us from time to time that may exceed $120,000 in the aggregate annually. The Board also considered that such transactions have historically been made in the ordinary course by each of the Company and Freudenberg with terms in line with those offered to other third parties. Additionally, our Governance & Corporate Responsibility Committee has determined that Dr. Sohi has no direct or indirect material interest in these transactions.

When considering the independence of Cynthia B. Carroll, the Board noted that Ms. Carroll's son is employed by us. He is not one of our executive officers, and his 2023 compensation did not require disclosure as a related person transaction. He is emancipated and does not share Ms. Carroll's household and our Governance & Corporate Responsibility Committee has determined that Ms. Carroll does not have a direct or indirect material interest in his compensation.

The Board's leadership structure

Our Governance Principles require the election of a Lead Independent Director who leads meetings of the independent directors and regularly meets with the Chairman/CEO for a discussion of matters arising from these meetings.

 

Lead independent director duties:

 

         

 

LOGO

W. Geoffrey Beattie

Lead Independent Director

 

    

•  reviews the agenda, schedule, and information sent to the directors for Board meetings

 

•  works with the Chairman/CEO to propose an annual schedule of major discussion items

 

•  leads meetings of the independent directors and regularly meets with the Chairman/CEO for a discussion of matters arising from these meetings

 

•  develops and leads the Board evaluation process

    

•  calls additional meetings of the independent directors or the entire Board as deemed appropriate

 

•  provides leadership to the Board if circumstances arise in which the role of the Chairman/CEO may be, or may be perceived to be, in conflict

 

•  serves as a liaison on Board-related issues between the Chairman/CEO and the independent directors

 

•  develops and leads the Chairman evaluation process

 

The Board has determined that the current structure, with a combined CEO and Chairman of the Board and a Lead Independent Director, is in the best interests of the Company and our shareholders. The combined role of CEO and Chairman provides an effective balance between management of the Company and director participation in our board process and allows for management to focus on the execution of our strategic and business plans. As indicated above, our Lead Independent Director was elected by the independent Board members and has a clear set of comprehensive duties that provide an effective check on management.

 

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Corporate Governance

 

Committees of the board

The Board of Directors has an Audit Committee, a Human Capital and Compensation Committee, a Governance & Corporate Responsibility Committee, and a Finance Committee. The charter for each committee has been posted and is available for public viewing under the "Investors-Company Information-Corporate Governance" section of the Company's website at www.bakerhughes.com and is also available upon request to the Company's Corporate Secretary. Neither the charters nor the website are incorporated by reference to this Proxy Statement.

 

LOGO  

 

Audit CommitteeNumber of Meetings in 2023: 10

 

John G. Rice Chairperson

 

The responsibilities of the Audit Committee include:

 

 

assisting the Board in overseeing matters relating to the accounting and reporting practices of the Company;

 

 

reviewing the adequacy of the Company's internal controls and other financial controls;

 

 

reviewing the quarterly and annual financial statements of the Company;

 

 

reviewing the performance of the Company's internal audit function;

 

 

reviewing and pre-approving the current year audit and non-audit services;

 

 

overseeing the Company's compliance programs related to legal and regulatory requirements;

 

 

selecting and hiring the Company's independent registered public accounting firm; and

 

 

monitoring and discussing with management the Company's risk assessment and risk management policies and processes, including risks related to financial reporting, cybersecurity, and compliance.

 

The Audit Committee shall have at least three directors. The Board has determined that each member of the Audit Committee is independent and financially literate and that Mr. Rice and Dr. Sohi, two of the committee members, are qualified as an "audit committee financial expert" within the meaning of the rules and regulations promulgated by the SEC and under applicable provisions of the Nasdaq listing standards.

 

To promote independence of the audit, the Audit Committee consults separately and jointly with the Company's independent registered public accounting firm, the internal auditors, and management.

 

LOGO  

 

Finance Committee   Number of Meetings in 2023: 2

 

Gregory D. Brenneman Chairperson

 

The responsibilities of the Finance Committee include:

 

 

reviewing the Company's financial and investment policies;

 

 

reviewing the Company's capital structure and financing requirements;

 

 

reviewing the principal terms and conditions of significant proposed borrowings and issuances of debt or equity securities;

 

 

reviewing the Company's annual capital plan and plans for capital expenditures and significant capital investments;

 

 

reviewing the Company's principal treasury, banking and finance matters;

 

 

overseeing the Investor Relations program;

 

 

reviewing the Company's dividend policy and share repurchase program; and

 

 

reviewing the adequacy of the Company's insurance and self-insurance programs.

 

The Finance Committee shall have at least three directors. The Board has determined that each member of the Finance Committee is independent.

 

   LOGO     21


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Corporate Governance

 

LOGO  

 

Governance & Corporate Responsibility CommitteeNumber of Meetings in 2023: 4

 

Lynn L. Elsenhans Chairperson

 

The responsibilities of the Governance & Corporate Responsibility Committee include:

 

 

identifying qualified individuals to become Board members;

 

 

determining the composition of the Board and its committees;

 

 

monitoring a process to assess Board effectiveness;

 

 

reviewing and implementing the Company's Governance Principles;

 

 

overseeing Health, Safety, & Environment compliance;

 

 

overseeing and monitoring risks related to the Company's governance structure and processes, geopolitical risks and risks arising from related party transactions; and

 

 

monitoring and discussing the Company's positions on sustainability, corporate social responsibilities, and public issues of significance which affect investors and other key stakeholders, and reviewing the annual Corporate Sustainability Report.

 

The Governance & Corporate Responsibility Committee shall have at least three directors. The Board has determined that each member of the Governance & Corporate Responsibility Committee is independent.

 

LOGO  

 

Human Capital and Compensation Committee  Number of Meetings in 2023: 4

 

Cynthia B. Carroll Chairperson

 

The responsibilities of the Human Capital and Compensation Committee include:

 

 

establishing the Company's general compensation philosophy in consultation with senior management;

 

 

assisting the Board in developing and evaluating potential candidates for executive positions and developing executive succession plans;

 

 

overseeing the Company's diversity, equity, and inclusion practices;

 

 

overseeing and monitoring risks related to incentive compensation practices;

 

 

reviewing and approving the corporate goals and objectives of the compensation of the CEO and determining, or recommending to the Board to determine, the CEO's annual compensation;

 

 

reviewing and approving the evaluation process and compensation structure for the other senior officers and determining, or recommending to the Board to determine, the compensation of such senior officers, based on initial recommendations from the CEO;

 

 

recommending to the Board compensation for non-employee directors;

 

 

overseeing any clawback policy allowing the Company to recoup compensation paid to employees;

 

 

reviewing the Company's equity incentive compensation and other stock- or cash-based plans; and

 

 

recommending changes in such plans to the Board, reviewing levels of stock ownership by officers, and evaluating incentive compensation arrangements.

 

The Human Capital and Compensation Committee shall have at least three directors. The Board has determined that each member of the Human Capital and Compensation Committee is independent.

 

Among other responsibilities, the Human Capital and Compensation Committee is responsible for reviewing incentive compensation arrangements to confirm that incentive pay does not encourage unnecessary risk-taking and to review and discuss, at least annually, the relationship between risk management policies and practices, corporate strategy, and senior executive compensation to assess whether any such risk is reasonably likely to have a material adverse effect on the Company. The Company's stock ownership guidelines established by the Board also serve to mitigate compensation-related risks. During fiscal year 2023, the Human Capital and Compensation Committee determined the Company's compensation policies and practices for employees were not reasonably likely to have a material adverse effect on the Company.

 

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Corporate Governance

 

Risk oversight

We face a myriad of risks including operational, financial, strategic, and reputational risks that affect every segment of our business. The Board is actively involved in the oversight and monitoring of these risks in several ways. Each committee of the Board is responsible for the oversight of certain areas of risk that pertain to that committee's area of focus and receives regular updates at committee meetings throughout the year from management on each risk.

We have an enterprise risk management program that includes the identification of a broad range of risks that affect the Company, their probabilities and severity, and incorporates a review of the Company's approach to managing and prioritizing those risks based on input from the officers responsible for the management of those risks. Enterprise Risk Management is a continuous exercise at Baker Hughes. Annually, we seek input from each business segment to refresh existing risks and identify new or emerging risks (including sustainability and climate-related risks) that have enterprise-wide impact. This process spans from identifying, categorizing, and rating the risks based on reputational, operational, regulatory impact, financial impact, likelihood, and existing controls for risk mitigation. Proposed mitigation action plans are then created based on identified gaps and assigned to executive leadership for accountability and execution. These actions and key risk indicators are regularly reviewed by the executive leadership team. A selection of the top risks is also reviewed with our Board at each regularly scheduled meeting.

 

 

The Board's Role in Risk Oversight

The Board oversees all operational, financial, strategic, and reputational risks with oversight of specific risks undertaken with the committee structure including:

 

Audit Committee

 risks related to financial and other regulatory reporting

 risks related to cybersecurity, privacy, and technology

 risks related to complex projects

 risks related to internal controls, compliance, and legal matters, including third-party risk management and complaints from whistleblowers

 

Finance Committee

 financial risk exposure

 risks related to the adequacy of the Company's insurance coverage

 risks related to investment activities

 

Governance & Corporate Responsibility Committee

 risks related to health, safety and environment ("HSE") and sustainability/ESG matters, including greenhouse gas emissions and climate change

 risks related to a changing regulatory environment

 risks related to public policy and political activities

 risks related to geopolitical events

 

Human Capital and Compensation Committee

 risks related to compensation practices

 risks related to CEO and management succession

 risks related to human capital management, including DEI, talent recruitment, and retention

 

   LOGO     23


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Corporate Governance

 

Board and committee oversight of environmental, social, and governance matters

Our Board recognizes that striving to operate responsibly – minimizing the environmental impact of our operations, fostering employee engagement, and respecting human rights by creating an environment of respect, integrity, and fairness for our employees and customers wherever we do business – is fundamental to the long-term success of our Company. The Board and committees oversee significant ESG topics as follows:

 

    

  

 

BOARD OF DIRECTORS

 

Oversight of energy transition strategy and initiatives

       

 

       

AUDIT

COMMITTEE

  FINANCE COMMITTEE   GOVERNANCE & CORPORATE RESPONSIBILITY COMMITTEE   HUMAN CAPITAL AND COMPENSATION COMMITTEE

  ESG disclosures in SEC filings

 

  Compliance program, including human rights concerns

 

  Cybersecurity

 

  Supplier audit program

 

  ESG Investments

 

  Investor Relations

 

  Corporate Sustainability Report

 

  ESG reporting standards/metrics

 

  HSE program

 

  Social responsibility

 

  Policy/regulatory updates

 

  Charitable giving

 

  Political contributions

 

  Board composition and governance

 

  Diversity, equity, and inclusion

 

  Compensation tied to ESG

 

  Competitive benefits and compensation

 

  Talent retention

 

  Succession planning

 

  Training and development

 

  Talent planning/culture for energy transition

Sustainability Oversight

As noted in the table above, the Board has charged the Governance & Corporate Responsibility Committee with oversight responsibility of the Company's environmental matters as well as assessing its sustainability strategy and initiatives, including the publication of our Corporate Sustainability Report. The Governance & Corporate Responsibility Committee receives regular reports from management on the Company's environmental and sustainability priorities and risks, including progress on our emission reduction goals and execution, our ESG reporting frameworks, ESG ratings, and execution of our sustainability strategy.

Cybersecurity Oversight

Cybersecurity risk management processes are an integral part of risk management at Baker Hughes. The Board appreciates the rapidly evolving nature of threats presented by cybersecurity incidents and is committed to the prevention, timely detection, and mitigation of the effects of any such incidents on the Company and our stakeholders. Our Board is actively engaged in the oversight of our cybersecurity program.

 

   

Our Audit Committee receives reports on the Company's cybersecurity program and developments from our Chief Information Officer (reports to the CEO) and Chief Information Security Officer (reports to the CIO) at each of our regular meetings, which occur five times a year. These reports include analyses of recent cybersecurity threats and incidents across the industry, as well as a review of our own security controls, assessments and program maturity, and risk mitigation status;

 

   

We have a cross-functional approach to addressing cybersecurity risk, with digital technology, legal, and the corporate audit functions presenting to the Audit Committee on key cybersecurity topics; and

 

   

On at least an annual basis, the full Board receives a comprehensive cybersecurity review.

We leverage the National Institute of Standards and Technology security framework to drive strategic direction and maturity improvement and engage third party security experts for risk assessments and program enhancements. We also maintain information security risk insurance coverage. The Company has not experienced a material cybersecurity breach.

We also include multi-domain cybersecurity training as part of our required annual training program. In addition, training and awareness is integrated and continues throughout the year, utilizing various delivery methods such as phishing campaigns, live training sessions, and informational articles.

 

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Corporate Governance

 

Human Capital Management Oversight

Attracting, developing, retaining, and inspiring the best people globally is crucial to all aspects of our business, and the Board believes that the Company's strong ethical leadership grounded in the values expressed in Our Code of Conduct is central to the Company's long-term success. To that end, the Board and its committees are actively engaged in overseeing the Company's human capital management strategy. The Human Capital and Compensation Committee assists the Board in discharging its oversight responsibility for the Company's human capital management matters, including its diversity, equity, and inclusion initiatives, talent development, and corporate culture, among other programs. Management provides regular updates to the Human Capital and Compensation Committee on human capital management strategy and programs, and the Board is kept apprised of any developments in these areas.

The Human Capital and Compensation Committee considers the impact of our executive compensation program and the incentives created by compensation awards on Baker Hughes' overall risk profile. It also oversees management's annual assessment of compensation risk arising from our compensation policies and practices.

CEO and senior management succession planning

Our Human Capital and Compensation Committee monitors and reviews and our Board oversees management succession planning and talent development. At each committee meeting during the year, the Human Capital and Compensation Committee is engaged on the topics related to leadership and talent development, with one meeting dedicated to an in-depth review of succession planning for key executive officer roles, including the CEO. The succession plans are reviewed with the full Board at least annually. The Board also reviews succession planning in the context of our overall business strategy. Potential leaders are visible to Board members through formal presentations and informal events to allow directors to personally assess candidates.

Our Board also establishes steps to address emergency CEO succession planning in extraordinary circumstances. Our emergency CEO succession planning is intended to enable our Company to respond to unexpected emergencies and minimize potential disruption or loss of continuity to our Company's business and operations.

Shareholder engagement

Our directors and management recognize the benefits that come from robust dialogue with shareholders and other relevant stakeholders. We maintain an ongoing, proactive communication effort with our shareholders through our Investor Relations team as well as an integrated outreach program that includes our Chief Sustainability Officer, Corporate Secretary's office, and Executive Compensation and Investor Relations teams. This group engages with our shareholders, and, in consultation with our Board, thoughtfully adopts and applies developing practices in a manner that best supports our business and our culture.

 

 

LOGO

 

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Table of Contents

Corporate Governance

 

   

 

TOTAL INVESTOR

OUTREACH FOLLOWING

OUR 2023 ANNUAL

MEETING

 

Invited at least the top ten
shareholders of our outstanding
Class A Common Stock to
engage with our team.

    

 

BROAD RANGE OF ENVIRONMENTAL, SOCIAL, GOVERNANCE, AND COMPENSATION TOPICS, INCLUDING:

 

  Business strategy and execution

 

  Sustainability reporting standards

 

  Diversity, equity, and inclusion

 

  Emissions reduction progress and environmental performance

 

  Compensation practices

 

  Risk oversight

 

  Board skills, diversity, and refreshment

 

  Board governance framework

 

Shareholder communications with the Board of Directors

To provide the Company's shareholders and other interested parties with a direct and open line of communication to the Company's Board of Directors, shareholders may communicate with any member of the Board, including the Company's Lead Independent Director, the Chair of any committee, or with the non-employee directors of the Company as a group, by sending such written communication to the Company's Corporate Secretary, c/o Baker Hughes Company, 575 N. Dairy Ashford Road, Suite 100, Houston, Texas 77079. The Corporate Secretary will forward any communications to the Board or any member of the Board.

Code of conduct

The Company's Board has adopted a code of conduct, "Our Way" (the "Code of Conduct"), which applies to all officers, directors, and employees of the Company and its subsidiaries and affiliates. It sets forth the Company's policies on several topics, including conflicts of interest, health, safety, and environment, compliance with laws (including insider trading laws), corporate branding, sustainability and business ethics. The Code of Conduct also prohibits individuals from engaging in, or giving the appearance of engaging in any activity involving a conflict, or potential conflict, between personal interests and those of the Company. The Audit Committee oversees the administration of the Code of Conduct and responsibility for the corporate compliance effort with the Company. On an annual basis, the Company's Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, and all other persons performing similar functions within the meaning of the securities laws and regulations certify compliance with the Company's Code of Conduct and the applicable Nasdaq and SOX provisions. The Company's Code of Conduct and Code of Ethical Conduct Certifications are not incorporated herein by reference, but are posted under the "Investors-Company Information-Corporate Governance" section of the Company's website at www.bakerhughes.com and are also available upon request to the Company's Corporate Secretary.

We encourage our employees, customers, suppliers, and shareholders to speak up about any compliance concerns by reaching out via a variety of channels.

 

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Director compensation

In 2023, Frederick W. Cook & Co., Inc. ("FW Cook"), the compensation consultant hired by the Human Capital and Compensation Committee, conducted a competitive review of our non-employee director compensation program, including a review of the director compensation programs of companies within our peer group. Based on the analysis provided by FW Cook, the Human Capital and Compensation Committee made no changes to our non-employee director compensation. Mr. Simonelli, our President and CEO and Chairman of the Board, does not receive additional compensation for his service as a director and his compensation and equity awards for service as President and CEO are reflected in the Summary Compensation Table and accompanying tables below in the Executive Compensation section of this proxy and are not reflected in the tables immediately below.

The following sets forth the current compensation structure for our non-employee directors:

 

       Cash
Compensation
       Equity
Compensation
 

2023 Directors' Annual Retainer

       $120,000(1)          $175,000(2)  

 

       Cash
Compensation
 

Lead Director Retainer

     $ 35,000  

Audit Committee Chair Retainer

     $ 25,000  

Other Committee Chair Retainer

     $ 20,000  

Audit Committee Members Retainer

     $ 10,000  

Other Committee Members Retainer

     $ 7,500  

 

(1)

Each non-employee director is paid an annual cash retainer fee of $120,000, as well as fees for service on committees of the Board.

 

(2)

On the date of each Annual Meeting, each non-employee director is expected to receive an annual equity grant in the form of a restricted stock unit award ("RSU award") with a grant date value of $175,000.

Director deferral plan

Under the Baker Hughes Non-Employee Director Deferral Plan (the "Deferral Plan"), non-employee directors may elect to receive their annual retainers and committee fees in shares of Common Stock, with the shares delivered either in the year in which the retainers otherwise would have been paid or in a future year. If directors defer the receipt of these shares of Common Stock, they will instead receive Deferred Stock Units ("DSUs") which represent the right to receive the equivalent number of shares of Common Stock when the deferral period ends. The number of shares of Common Stock received in lieu of the fees is determined by dividing the amount of the retainer earned for that year by the average closing price of a share on each date on which the retainer for that year otherwise would have been paid. Directors may also elect to defer receipt of the shares covered by their RSU awards, which otherwise are delivered when the awards vest.

Directors receive dividend equivalents on their DSUs. These dividend equivalents are paid in cash currently with the payment of the dividend to other shareholders.

Director stock ownership requirements

Under the Governance Principles, each non-employee director is expected to own at least five times his or her annual retainer in Class A Common Stock while serving as a director of the Company. The retainer included in the calculation is the base retainer (currently $120,000) and does not include retainers for committee or other positions held on the Board. Such ownership level should be obtained within five years from the date elected or appointed to the Board. The Governance & Corporate Responsibility Committee reviews director stock ownership on an annual basis. All directors are in compliance with such requirements or are on track to be in compliance within the 5-year period.

 

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Director Compensation

 

2023 Director compensation

The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to each of the Company's non-employee directors during the fiscal year ended December 31, 2023.

Abdulaziz M. Al Gudaimi was elected to the Board effective January 1, 2024 and therefore is not included in the table.

 

Name

     Fees Earned or
Paid in Cash
(1)
($)
       Stock
Awards
(2)(4)
($)
       All Other
Compensation
(3)
($)
       Total
($)
 

W. Geoffrey Beattie

       170,000          175,000          56,001          401,001  

Gregory D. Brenneman

       149,395          175,000          53,785          378,180  

Cynthia B. Carroll

       158,495          175,000                   333,495  

Nelda J. Connors

       162,789          175,000                   337,789  

Michael R. Dumais

       151,331          175,000                   326,331  

Lynn L. Elsenhans

       160,605          175,000                   335,605  

John G. Rice

       152,500          175,000          25,189          352,689  

Mohsen M. Sohi

       126,855          175,000          3,762          305,617  

 

(1)

Messrs. Beattie, Brenneman, and Sohi elected to receive their 2023 director fees in Class A Common Stock and defer delivery under the Deferral Plan. As a result of these deferrals, these directors received DSUs which defer their receipt of these shares until they cease serving as a director, except for Dr. Sohi who elected to defer his directors fees until December 15, 2025. The value of these DSUs is not included in the Stock Awards column above. The number of DSUs they received in 2023 in lieu of director fees is as follows:

 

Name

    

Total Number of DSUs

 

Received in 2023 in

 

lieu of Cash Retainer

 

W. Geoffrey Beattie

       5,270  

Gregory D. Brenneman

       4,631  

Mohsen M. Sohi

       3,932  

 

(2)

On May 16, 2023, each non-employee director received an immediately vesting RSU award. Messrs. Beattie, Brenneman, Rice and Sohi elected to defer delivery of the shares underlying their RSU award under the Deferral Plan and received the equivalent number of DSUs. The value of the award shown for each director reflects the $175,000 aggregate grant date fair value of the RSU award computed in accordance with Accounting Standards Codification (ASC) Topic 718. These RSU awards vested on the date of grant and the number of shares each director was entitled to receive was calculated by dividing the aggregate grant date fair value of the award by $26.75 per share, the closing price on the date of grant. For a discussion of valuation assumptions, see "Note 12 – Stock-Based Compensation" of the Notes to Consolidated Financial Statements included in our Annual Report under Item 8 of the Form 10-K for the year ended December 31, 2023.

 

(3)

This column includes dividend equivalents paid during the year ended December 31, 2023 on deferred RSU awards and cash fees that were deferred under the Deferral Plan.

 

(4)

The following table shows the aggregate number of stock awards outstanding for each non-employee director as of December 31, 2023. These stock awards are all vested DSUs.

 

Name

    

Aggregate Stock Awards

 

Outstanding as of

 

December 31, 2023

 

(#)

 

W. Geoffrey Beattie

       43,559  

Gregory D. Brenneman

       43,559  

Cynthia B. Carroll

        

Nelda J. Connors

        

Michael R. Dumais

        

Lynn L. Elsenhans

        

John G. Rice

       11,354  

Mohsen M. Sohi

       6,377  

 

28  2024 Proxy Statement     


Table of Contents

Stock ownership

Stock ownership of certain beneficial owners

The following table sets forth information about the holders of our Common Stock known to the Company on March 22, 2024 that own beneficially 5% or more of each class of Common Stock, based on filings by the holders with the SEC. For purposes of this Proxy Statement, beneficial ownership of securities is defined in accordance with the rules of the SEC to mean generally the power to vote or dispose of securities regardless of any economic interest therein.

 

Name and Address

     Title of Class      Shares        Percent of
Class
 

The Vanguard Group (1)
100 Vanguard Boulevard
Malvern, PA 19355

     Class A Common Stock        121,897,643          12.18%  

BlackRock, Inc. (2)

55 East 52nd Street

New York, NY 10055

     Class A Common Stock        100,938,292          10.08%  

Capital World Investors (3)
333 South Hope Street
Los Angeles, CA 90071

     Class A Common Stock        74,341,552          7.43%  

State Street Corporation (4)

One Lincoln Street

Boston, MA 02111

     Class A Common Stock        65,170,011          6.51%  

JPMorgan Chase & Co. (5)

383 Madison Avenue

New York, NY 10179

     Class A Common Stock        52,840,457          5.28%  

 

(1)

The number of shares is based on the Schedule 13G/A filed on February 13, 2024. According to the filing, the Vanguard Group has (i) shared power to vote 1,227,417 shares and does not have sole power to vote any of the shares and (ii) sole power to dispose of 117,608,930 shares and shared power to dispose of 4,288,713 shares.

 

(2)

The number of shares is based on the Schedule 13G filed on February 7, 2024. According to the filing, BlackRock, Inc. has (i) sole power to vote 88,299,038 shares and does not share power to vote any of the shares and (ii) sole power to dispose of 100,938,292 shares and does not share power to dispose of any of the shares.

 

(3)

The number of shares is based on the Schedule 13G/A filed on February 9, 2024. According to the filing, Capital World Investors ("CWI") has (i) sole power to vote 73,866,870 shares and does not share power to vote any of the shares and (ii) sole power to dispose of 74,341,552 shares and does not share power to dispose of any of the shares. CWI is a division of Capital Research and Management Company ("CRMC"), as well as its investment management subsidiaries and affiliates Capital Bank and Trust Company, Capital International, Inc., Capital International Limited, Capital International Sarl, Capital International K.K., Capital Group Private Client Services, Inc., and Capital Group Investment Management Private Limited (together with CRMC, the "investment management entities"). CWI's divisions of each of the investment management entities collectively provide investment management services under the name "Capital World Investors."

 

(4)

The number of shares is based on the Schedule 13G/A filed on January 30, 2024. According to the filing, State Street Corporation has (i) shared power to vote 45,156,376 shares and does not have sole power to vote any of the shares and (ii) shared power to dispose of 65,065,678 shares and does not have sole power to dispose of any of the shares.

 

(5)

The number of shares is based on the Schedule 13G/A filed on January 16, 2024. According to the filing, JPMorgan Chase & Co. has (i) sole power to vote 47,209,363 shares and shared power to vote 98,031 shares and (ii) sole power to dispose of 52,681,178 and shared power to dispose of 149,954 shares.

 

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Table of Contents

Stock Ownership

 

Stock ownership of directors and executive officers

Set forth below is certain information with respect to beneficial ownership of our Common Stock as of March 22, 2024 by each current director, the persons named in the Summary Compensation Table, and the current directors and current executive officers as a group. The table includes transactions effected prior to the close of business on March 22, 2024.

 

 

Shares beneficially owned

 

Name

   Title of Class    Shares Owned
as of March 22, 2024
     Shares Subject to
Options and
RSU's Which are or
Will Become
Exercisable or
Vested Prior to
May 21, 2024
     Total Beneficial
Ownership as of
March 22, 2024
     % of
Class
(1)
 

Abdulaziz M. Al Gudaimi

   Class A Common Stock                            

W. Geoffrey Beattie

   Class A Common Stock      17,343        78,619        95,962         

Gregory D. Brenneman

   Class A Common Stock      16,842        75,140        91,982         

Cynthia B. Carroll

   Class A Common Stock      30,826               30,826         

Nelda J. Connors

   Class A Common Stock      30,826               30,826         

Michael R. Dumais

   Class A Common Stock      31,374               31,374         

Lynn L. Elsenhans

   Class A Common Stock      82,967               82,967         

John G. Rice

   Class A Common Stock      52,182        28,870        81,052         

Mohsen M. Sohi

   Class A Common Stock             10,309        10,309         

Lorenzo Simonelli

   Class A Common Stock      730,625        927,727        1,658,352         

Nancy Buese

   Class A Common Stock      51,817               51,817         

Georgia Magno

   Class A Common Stock      8,240        16,016        24,256         

Maria Claudia Borras

   Class A Common Stock      130,015        129,453        259,468         

Ganesh Ramaswamy

   Class A Common Stock      9,593               9,593         

James E. Apostolides

   Class A Common Stock      19,998        20,226        40,224         

Roderick Christie

   Class A Common Stock      117,239        84,694        201,933         

Regina B. Jones

   Class A Common Stock                            

All current directors and current executive
officers as a group (15 persons)

   Class A Common Stock      1,212,648        1,286,360        2,499,008         

 

(1)

No percent of class is shown for holdings of less than 1%.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires executive officers, directors, and persons who beneficially own more than 10% of the Common Stock to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on a review of the copies of those forms filed electronically with the SEC and written representations from the executive officers and directors, the Company believes that, its executive officers and directors complied with all applicable Section 16(a) filing requirements during the fiscal year ended December 31, 2023, except for the following: Mr. Geoffrey Beattie filed a Form 4 on December 19, 2023 that included the late reporting of an open market purchase of 4,000 shares on September 11, 2019.

Prohibition of pledging and hedging under the insider trading policy

The Company's Insider Trading Policy and Governance Principles prohibit our directors and executive officers from entering into any derivative transaction in Company stock (including short sales, forwards, equity swaps, options or collars, or other instruments that are based on the Company's stock price). In addition, directors and executive officers are prohibited from pledging shares of Company stock as collateral or security for indebtedness.

 

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Table of Contents

 

Certain relationships and related party transactions

The Board expects its directors, as well as officers and employees, to act ethically at all times and to acknowledge their adherence to the policies comprising the Company's Code of Conduct. The Company will not make any personal loans or extensions of credit to directors or executive officers. No independent director may provide personal services for compensation to the Company, other than in connection with serving as a director.

If an actual or potential conflict of interest arises for a director, the director will promptly inform the Chairman/CEO, the Lead Independent Director, and the Chair of the Governance & Corporate Responsibility Committee. The Governance & Corporate Responsibility Committee will resolve any such conflicts, subject to the specific rules governing related person transactions.

The Governance & Corporate Responsibility Committee will review and approve or ratify, in accordance with the Company's Governance Principles and Related Person Transactions Policy, any transaction between the Company and a related person which is required to be disclosed under the rules of the SEC. For purposes of this requirement, the terms "transaction" and "related person" were based on the terms of Item 404 of Regulation S-K. If a significant conflict exists and cannot be resolved, the director should resign. All directors will recuse themselves from any discussion or decision affecting their personal, business, or professional interests. The Governance & Corporate Responsibility Committee will resolve conflict of interest issues involving the CEO or an executive officer reporting directly to the CEO, and the CEO will resolve conflict of interest issues involving any other officer of the Company.

Prior to GE's exit from its ownership position in the Company in the first quarter of 2023, all transactions between the Company and GE were subject to additional considerations set forth in the Stockholders Agreement between the Company and GE, including the requirement that any transactions with GE be at arms-length and in the best interests of the Company and be approved by the Conflicts Committee in accordance therewith. The Stockholders Agreement has been terminated and the Conflicts Committee has been disbanded in connection with GE's exit from its ownership position in the Company.

Related party transactions

Elisa de Castro Barbosa, an immediate family member of one of our executive officers, is employed by us as a Senior HR Manager. In 2023, Ms. Barbosa received total compensation, consisting of base salary, bonus, and other compensation, of approximately $242,000.

 

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Executive compensation

Aligning strategy and rewards to drive us forward in 2023

The energy industry faces the dual challenge of meeting near-term energy needs while transitioning for the long-term. In 2023, Baker Hughes advanced its strategy within the energy trilemma of sustainability, affordability, and security. Now, as we look to the future, our three horizons focus on transforming core operations, investing in growth areas, and exploring opportunities in the energy transition, aligning with our ongoing commitment to address industry challenges.

2023 was a pivotal year for Baker Hughes and we are encouraged by all that we accomplished:

 

 

Outstanding Execution and Financial Performance in 2023

 

 

 

• The Company successfully cut costs, realigned its IET business, and initiated optimization measures within its OFSE division.

 

• This resulted in record performance on primary financial metrics reflecting strong execution supported by above target payouts under the short-term incentive plan.

 

   

 

Strong Shareholder Returns

 

• Strong shareholder returns reflect the successful execution on the Company's differentiated strategy.

Progress Against Strategic Transformation Strategy

 

 

 

 

• Progressed initiatives to adapt the organization for the future and to lead in energy transformation technology. These efforts were supported by payouts under the 2021 Transformation Incentive Award Program covering the 2021 to 2023 period.

 

• In January of 2023, we appointed Ganesh Ramaswamy, a proven business leader with over 25 years of diversified experience across industrial sectors, as EVP, Industrial & Energy Technology.

 

 

32  2024 Proxy Statement     


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Executive Compensation

 

Compensation discussion and analysis

This Compensation Discussion and Analysis ("CD&A") outlines Baker Hughes' executive compensation program for 2023 for our current NEOs who are listed below and appear in the Summary Compensation Table.

 

LOGO   LOGO   LOGO   LOGO   LOGO
Lorenzo Simonelli

Chairman, President
and CEO

  Nancy Buese

Executive Vice
President and
Chief Financial
Officer

  Maria Claudia
Borras

Executive Vice
President,
Oilfield Services &
Equipment

  Ganesh Ramaswamy

Executive
Vice President,
Industrial & Energy
Technology

  James E. Apostolides

Senior Vice President -
Enterprise
Operations Excellence

The NEOs also include two former executive officers who exited the Company in 2023. Mr. Christie exited in connection with our strategic transformation and restructuring efforts and Ms. Jones' exit was a voluntary resignation.

Roderick Christie

Former Executive Vice President - IET

Regina Jones

Former Chief Legal Officer

 

Executive summary

    33       

Grants of plan-based awards in 2023

    51  

Total direct compensation for NEOs

    36       

Outstanding equity awards at fiscal year-end

    52  

Base salaries

    37       

Option exercises and stock vested

    53  

Short-Term incentive compensation

    37       

Pension benefits

    54  

Long-Term incentive compensation

    41       

Nonqualified deferred compensation

    54  

Other elements of compensation and hiring on bonuses

    44       

Potential payments upon change in control or termination

    55  

Decision-making process and key inputs

    45       

CEO pay ratio disclosure

    60  

Additional compensation program features and policies

    47       

Pay versus Performance

    62  

Human Capital and Compensation Committee report

    48       

Human Capital and Compensation Committee interlocks and insider participation

    65  

Summary compensation table

    49     

Executive summary

The purpose of our rewards strategy is to attract and align the executive talent needed to execute on the Company's financial and strategic priorities. We aim to create strong linkages between pay and performance and reward our executives for achieving both short and long-term results.

Aligning Executive Compensation with Strategy and Performance

To deliver on our commitment to create shareholder value, the objectives of our executive compensation programs are to:

 

     
Align the compensation and interests of our executives with the long-term interests of our shareholders       Provide a significant portion of total compensation that is performance-based and at risk       Attract, retain, and engage top caliber talent to execute our strategic priorities

Background and Market Context

Baker Hughes is a world-leading energy technology company focused on providing solutions to help solve the world's greatest energy challenges. The macro backdrop against which we operated in 2023 continued to be a world grappling with challenges including economic uncertainty in some of the world's largest economies, additional geopolitical turmoil driven by conflict in the Middle East, and continued tightness on the aeroderivative supply chain. Despite these macro headwinds and recent volatility, we maintain a positive outlook looking ahead into 2024 and beyond as we see areas of strength across our portfolio. We continue to believe in a multiyear upstream spending

 

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Table of Contents

Executive Compensation

 

cycle, which, we believe, will be more durable and less sensitive to commodity price swings relative to prior cycles and led by international and offshore markets. Continued discipline from the world's largest producers and the pace of oil demand growth in the face of economic uncertainty will remain important factors to monitor as we look into 2024. We also remain optimistic on the LNG outlook, seeing a continued shift towards the development of natural gas and LNG as the world increasingly recognizes the crucial role natural gas is expected to play in the energy transition, serving as both a transition and destination fuel.

2023 was an important year for Baker Hughes on a number of fronts. Our journey of transformation continues. The business has undertaken significant structural changes and we see the cost-out performance coming through our financial results. During the third quarter of 2023, we announced a realignment of our IET product lines, effective October 1, 2023, which further streamlines our organizational structure to focus operations and decision-making on driving margin and returns higher. Through this realignment, we are also providing increased transparency for our Climate Technology Solutions ("CTS") business, a key growth area for Baker Hughes. In OFSE, we announced a restructuring plan to simplify and create efficiencies and modernize how the business operates which will be executed in the first quarter of 2024.

To execute on changes in the way we lead and our leadership, the Human Capital and Compensation Committee made and approved a number of compensation-related decisions to support these transitions, as evident throughout this CD&A. The Committee feels strongly that these thoughtful and deliberate actions are both required and appropriate to shape the Company for strength and future growth.

2023 Highlights

We delivered strong shareholder returns in 2023 through maintaining a strong balance sheet that enables financial flexibility and prioritizing free cash flow.

 

     

Performance

     Technology and Innovation     

ESG Leadership

         
     

$30.5B

 

in orders

    

$658M

 

in research and development

    

AA

 

ESG rating by MSCI

     

26%

 

increase in adjusted EBITDA*

    

>2,000

 

patents granted

    

28%

 

reduction in Scope 1 & 2 GHG emissions**

     

$2.0B

 

in free cash flow*

    

$750M

 

in new energy orders

    

199

 

HSE Perfect Days***

 

  *

Adjusted EBITDA and free cash flow are non-GAAP measures. A reconciliation of GAAP to non-GAAP measures is included in the Proxy Statement in Annex B

 

  **

2022 actual compared to 2019 base year

 

  ***

An HSE Perfect Day is a day without injury, vehicle accidents, or harm to the environment

Highlights of 2023 Compensation Decisions

The Company continued to reinforce market-aligned and pay-for-performance elements of its compensation programs.

 

 

 

2023 Compensation Decisions

 

       

Approved selective NEO base salary increases for 2023, to align with the market.

   

Approved overall payout of 2023 Annual bonus at 140% of target, 2021 Performance Share Units ("PSUs") at 88.51% of target, and 2021 Transformation Incentive awards at 82.44% of target.

 

   

Awarded annual long-term incentive grants with 60% PSUs weighting for the CEO with an emphasis on outperforming the market.

     

Page 37

   

Pages 35 & 37

   

Page 41

 

34  2024 Proxy Statement     


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Executive Compensation

 

CEO Three-Year Realizable Compensation

Our compensation programs are designed to closely align our executives' interests to those of our shareholders and to the long-term performance of the Company. A significant portion of executive pay is delivered in the form of long-term incentives with strong alignment to the stock price returns our shareholders' experience. As shown in the below chart, the Company's three-year Total Shareholder Return ("TSR") increased by more than our CEO's average three-year realizable pay, demonstrating directional alignment and the Human Capital and Compensation Committee's commitment to pay-for-performance.

 

 

LOGO

In the chart above, "2021-2023 Average CEO Target Compensation" refers to the average of the target compensation opportunity offered to our CEO over the 2021 to 2023 performance years. Target compensation includes base salary, the annual short-term incentive ("STI") target compensation opportunity, and the target long-term incentive ("LTI") grant values granted in each of the three years.

In the chart above, "2021-2023 Average CEO Realizable Compensation" refers to the three-year average of the actual base salary earned during each year, the actual annual STI award value earned for each performance year, and LTI awards valued based on the December 29, 2023 share price and assuming estimated earned amounts for outstanding Performance Share Units. For the 2021 awards, annual Performance Share Units were calculated at 88.51% and the Transformation Incentive awards at 82.44%. The 2022 and 2023 annual Performance Share Unit awards were each estimated at 100%.

Compensation features and governance

As we focus on creating a best in class compensation program that aligns with our key objectives and our shareholders' long-term interests, we have adopted a number of practices that guide our program. The following table highlights the best governance practices that we employ and the poor practices that we avoid when setting our compensation program.

 

 

 

  

What we do

 

    X   

What we don't do

 

       
LOGO    Pay for performance     LOGO    No hedging or pledging of Company stock
LOGO    Include a comprehensive clawback policy, covering SEC requirements as well as misconduct unrelated to a financial restatement     LOGO    No backdating or repricing of stock option awards
    LOGO    No excessive perquisites
LOGO    Engage an independent compensation consultant     LOGO    No guaranteed bonuses for NEOs
LOGO    Use a representative and relevant peer group     LOGO    No gross-ups in new executive arrangements
LOGO    Evaluate the risk of our compensation programs     LOGO    No dividend equivalents paid on unearned RSUs or PSUs
LOGO    Apply robust stock ownership guidelines       
LOGO    Mandate "double-trigger" provisions for change-in-control severance payments       
LOGO    Align executive compensation with shareholder returns through long-term incentives       
LOGO   

Reference the market median for all elements of NEOs'

compensation

 

      

 

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Executive Compensation

 

2023 Say-on-Pay advisory vote on executive compensation and shareholder engagement

Each year, Baker Hughes submits our executive compensation program to our shareholders for a "say-on-pay" advisory vote, the results of which are considered when determining compensation practices. In 2023, Baker Hughes' compensation program and policies received the support of 87.9% of the total votes cast at our annual meeting. While the say-on-pay vote is advisory and not binding on the Company, the Human Capital and Compensation Committee strongly values the opinions of our shareholders as expressed in the say-on-pay outcome. The Human Capital and Compensation Committee believes that the high shareholder say-on-pay approval demonstrates a strong alignment with our shareholders' interests.

We held an advisory vote on the frequency of future "say-on-pay" advisory votes (referred to as the "say-on-frequency" vote) at our 2023 annual meeting of shareholders, pursuant to which the majority of the advisory votes cast voted to hold our "say-on-pay" votes every year. The Board considered the outcome of this advisory vote and determined that future "say-on-pay" votes will continue to be conducted every year. The Board will re-evaluate this determination after the next stockholder advisory "say-on-frequency" vote (which will be at the Company's 2029 annual meeting of stockholders unless presented earlier).

Engagement with our shareholders is very important to us. Even with substantial support of our executive compensation program, in 2023, members of the senior management team routinely invited institutional shareholders to engage with the team on Baker Hughes' strategy, ESG program, governance structure, and key executive compensation practices and to listen to their feedback and priorities. We believe that by engaging with our shareholders, we can further align our compensation objectives with shareholders' long-term interests.

Total direct compensation for NEOs

We use market-standard compensation elements of base salary, annual short-term incentives, long-term incentives, and employee benefits to deliver both attractive and competitive rewards to our executives. Collectively, these elements comprise total direct compensation. We benchmark both compensation and Company performance in evaluating the appropriateness of our pay practices. Our executive pay decisions are made by the Human Capital and Compensation Committee of our Board and reviewed with the full Board. Our CEO assists the Human Capital and Compensation Committee in reviewing compensation paid to our NEOs but does not participate in discussions regarding his own compensation.

2023 Target total direct compensation

Our executive compensation program emphasizes performance-based compensation tied to increases in Baker Hughes stock price and drives strategic imperatives. Approximately 90% of Mr. Simonelli's target total compensation is performance-based and at risk, while the other NEOs have an average of 78% performance-based and at-risk compensation.

Our NEOs' target compensation for 2023 consisted of the components described below:

 

 

LOGO

*ROIC is defined as: Net Operating Profit after tax / (non-cash net working capital + Property Plant & Equipment + Goodwill + Intangibles)

 

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Executive Compensation

 

Base salaries

The Human Capital and Compensation Committee references compensation data for the Reference Group (as described below) for determining the appropriate positioning of base salaries of our executive officers. Typically, when considering an adjustment to an NEO's base salary, the Human Capital and Compensation Committee reviews the market data and evaluates the NEO's position relative to the market, his or her level of responsibility, experience, internal placement, and overall performance. The Human Capital and Compensation Committee also considers the NEO's success in achieving business objectives, promoting our values and keys to success, improving health and safety, demonstrating leadership, and achieving specific individual performance goals.

In determining global salary budgets, the Human Capital and Compensation Committee also considers the financial performance of the Company and effective execution of the strategy approved by our Board.

The Committee approved the following NEO base salary adjustments in 2023 to align with desired external and internal positioning:

 

Name

   2022 Salary      2023 Salary  

Lorenzo Simonelli
Chairman, President and CEO

     $1,570,000        $1,620,000  

Nancy Buese
Executive Vice President and Chief Financial Officer

     $900,000        $950,000  

Maria Claudia Borras
Executive Vice President – OFSE

     $950,000        $950,000  

Ganesh Ramaswamy (1) 
Executive Vice President – IET

     N/A        $875,000  

James E. Apostolides

Senior Vice President – Enterprise Operations Excellence

     $475,000        $475,000  

Roderick Christie
Former Executive Vice President – IET

     $850,000        $850,000  

Regina Jones

Former Chief Legal Officer

     $675,000        $705,000  

 

(1) 

Mr. Ramaswamy joined the company in 2023 and therefore the table does not show a salary for him for 2022.

Short-Term incentive compensation

 

Key action

 

The Human Capital and Compensation Committee approved the Company-wide, overall payout of the 2023 annual short-term bonus at 140%. This was based on out-performance against financial metrics (weighted 70%) and partial achievement of strategic priorities (weighted 30%).

 

The short-term incentive compensation programs are designed to provide executive officers with the opportunity to earn cash bonuses based on the achievement of specific Company-wide, business unit, functional, and individual performance goals. The short-term incentive compensation opportunity is determined using two factors: achievement of pre-determined financial goals and achievement of strategic priorities. Greater weight is placed on the financial component of the short-term incentives, consistent with the Company's goal of providing a meaningful link between compensation and Company performance.

Key Baker Hughes short-term incentive design features are as follows:

 

   

Formulaic, financial metrics weighted at 70% and with a maximum potential payout of up to 200% of target; and

 

   

Strategic goals weighted at 30% and with a maximum potential payout of up to 200% of target.

In January 2023, the Human Capital and Compensation Committee approved a bonus design with financial and strategic goals under the Baker Hughes Executive Officer Short-Term Incentive Compensation Plan and the broad-based employee plan.

 

     
Overall weighting      Financial metrics      Strategic Blueprint priorities
70%    30%      1.   Revenue      1.  

Safety & compliance

    

 

2.

 

 

Adjusted EBITDA – adjusted for

restructuring & other charges

 

FCF

 

     2.  

Growth & capital allocation

 

 Financial

 Metrics

  

 

Strategic

Blueprint

Priorities

    

 

3.

     3.

 

 

ESG & Leadership

 

        4.

 

 

Shareholder returns

 

             

 

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Executive Compensation

 

Consistent with determining base salaries, the Human Capital and Compensation Committee reviews compensation data for the Reference Group (as described below) to determine the appropriate total cash position of our executive officers. Typically, when considering an adjustment to an NEO's bonus target, the Human Capital and Compensation Committee reviews the market data and evaluates the NEO's position relative to the market, his or her level of responsibility, experience, internal placement, and overall performance. The Human Capital and Compensation Committee also considers the NEO's success in achieving business objectives, promoting our values and keys to success, improving health and safety, demonstrating leadership, and achieving specific individual performance goals.

The table below summarizes the changes to target bonuses (as a percentage of base salary) in 2023 for the NEOs that received an increase. The Human Capital and Compensation Committee approved an adjustment to the CEOs short-term incentive bonus target in 2023 to align with the competitive market and external positioning:

 

Name

   2022 Bonus Target      2023 Bonus Target  

Lorenzo Simonelli
Chairman, President and CEO

     160%        170%  

All other NEOs retained their bonus target of 100% in 2023.

Bonus based on financial metrics

The Human Capital and Compensation Committee approved three weighted financial metrics: (1) Revenue; (2) Adjusted EBITDA; and (3) FCF, as a measure of management's overall success in executing Baker Hughes' strategies and initiatives; and maintained the highest weighting towards the FCF metric. The Human Capital and Compensation Committee also approved performance levels with respect to the achievement of the financial metrics: (1) Threshold; (2) Target; and (3) Maximum. Each year, the Board approves financial targets for the Company and the annual bonus plan as part of a rigorous planning process incorporating the external market and internal strategic business initiatives with an emphasis on stretch goals. The table below represents each of the performance levels and the associated achievement.

 

Baker Hughes 2023 Financial Goals

(70% Weight)

   Metric
Weighting
     Threshold
(50%)
     Target
(100%)
     Maximum
(200%)
     Results      Payout
Multiple
    Weighted
Payout
 

Revenue

     10%        $23.5B        $24.6B        $26.5B        $25.5B        150     15%  

Adjusted EBITDA *

     25%        $3.4B        $3.65B        $3.95B        $3.76B        140     35%  

FCF*

     35%        $1.25B        $1.5B        $1.8B        $2.05B        200 %**      70%  

Weighted Payout

     70%                                                    120%  

 

*

Adjusted EBITDA and FCF are non-GAAP measures. A reconciliation of GAAP to non-GAAP measures is included in this Proxy Statement in Annex B. Note: There were no adjustments made to as-reported revenue and FCF.

**

Capped based on 200% per metric maximum cap.

In 2023, our strong FCF performance was driven by higher adjusted EBITDA and an increase in cash flow generated from working capital, namely progress collections on equipment orders. The overall achievement of the financial metrics was 171.4% of target.

Bonus outcome for Strategic Blueprint priorities

While the financial metrics reward executive officers for the achievement of specific formulaic measures, the Human Capital and Compensation Committee approved "Strategic Blueprint" priorities for the executive officers to reward them based upon the Human Capital and Compensation Committee's assessment of the achievement of specific performance goals that are critical to the execution of the Company's strategy, but may or may not be formulaic in nature. These Strategic Blueprint priorities consist of the following performance objectives: (1) safety and compliance; (2) growth and capital allocation; (3) ESG and leadership; and (4) shareholder returns.

The maximum funds available for the payment of bonuses related to the Strategic Blueprint priorities may not exceed two times the weighted targets for any participant. The Human Capital and Compensation Committee's assessment of the Strategic Blueprint priorities is determined independent of the financial metrics.

The Human Capital and Compensation Committee assesses the CEO's performance relative to the established performance goals for the period and determines an appropriate payout level. The same process is conducted for the other NEOs, with Committee members also incorporating feedback and recommendations from the CEO. The Committee carefully considers all of the factors influencing the results and the NEO's performance impacting those results.

 

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The Human Capital and Compensation Committee considered the achievement for the Strategic Blueprint priorities below for 2023 and provided the following assessments on each priority:

 

Performance

Component

   2023 Performance Expectation    Results

Safety & Compliance

  

• HSE day, leading & lagging metrics improvement versus 2022

  

• Perfect HSE days decreased by 21 days to 199 and TRIR increased by 27%

  

• Compliance culture & ERM operationalization

  

• Employee fatality occurred in 2023

       

• Compliance training 100% completion

         

 

2023 Assessment: Missed Objectives

Growth & Capital Allocation

  

• Outpace peer group performance for EBITDA % and FCF %

 

• Drive exit run rate of $150+ cost out & additional ~$250 from new operating model

 

• Full cash cycle focus: Billings, Past Due, Working Capital

  

• Peer group performance for EBITDA % was 12 out of 16*; For FCF we ranked 5 out of 16*

  

• Exceeded goal of $150M of cost out

  

• Working Capital and Collections were stronger than planned while accounts receivable past due levels was worse than planned

       

• Further investment completed in CCUS, Hydrogen & Clean Power

         

 

2023 Assessment: Met Objectives

ESG & Leadership

  

• Progress diversity and inclusion initiatives

 

• Scope 1 / 2 reduction against baseline; Scope 3 decarbonization plan

 

• Advancement of work around succession pipeline

  

• Increased Female representation; Increased U.S. People of Color representation

  

• Exceeded Scope 1/2 reduction targets (39.5K vs. 25K); created plan for Scope 3

  

• Advanced work on succession pipeline

         

 

2023 Assessment: Met Objectives

Shareholder Returns

  

• TSR and ROIC improvement above peer benchmarks

  

• TSR of 18% exceeded direct peers (HAL and SLB) and OSX Index

  

• Broaden investor base as part of Company strategic pillars

 

• Work to achieve full value in BKR shares for IET delivery and potential

  

• Increased international ownership by 3% to 21%

    

• Reduced ownership concentration – Top 20 at 59% vs. 67% at beginning of year

  

• ESG ownership grew from 620 funds to 678

       

 

2023 Assessment: Exceeded Objectives

         

 

Payout Multiple: 66.67%

         

 

Total Weighted Payout: 20%

 

*

Peer data based on third quarter 2023 year to date and fourth quarter 2023 consensus

For Messrs. Simonelli and Apostolides and Mses. Buese and Jones, the entire portion of the short-term incentive plan tied to Strategic Blueprint priorities is indexed to the Baker Hughes Strategic Blueprint priorities as outlined above.

 

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Executive Compensation

 

For Ms. Borras and Messrs. Christie and Ramaswamy, 25% of the portion of the short-term incentive plan tied to Strategic Blueprint priorities is indexed to the Baker Hughes Strategic Blueprint priorities as outlined above, and 75% is based on the business unit's Strategic Blueprint priorities outlined below:

 

OFSE Strategic Blueprint Priorities

   Results

• Integrate & improve SSPS

  

• SSPS exceeded plan on key financial metrics

• Digital Leadership

  

• Digital leadership activity in line with plan

• FCF% structural improvement

  

• Key financial metrics ahead of plan except FCF and Past due

• Contribution to Baker Hughes Results

    
   2023 Assessment: Met Objectives

IET Strategic Blueprint Priorities

   Results

• Deliver CTS/IAM growth

  

• CTS orders and revenue stronger than plan

• Gas Technology execution

  

• Gas Tech revenue lower than plan

• Establish Industrial Technology

  

• Industrial Technology established

• Contribution to Baker Hughes Results

  

• Orders and FCF stronger than plan, Revenue and EBITDA were below plan

     2023 Assessment: Met Objectives

The Human Capital and Compensation Committee determines the overall Strategic Blueprint payout for the Company and the two business units and may adjust the associated payout for executive officers based on individual performance. In determining the payout for each NEO under the Strategic Blueprint portion of the short-term incentive plan, the Human Capital and Compensation Committee considered the individual achievement of the Company's goals and in his or her areas of direct responsibilities and the magnitude of those contributions relative to the benefit of the Company.

Mr. Simonelli also made recommendations to the Human Capital and Compensation Committee on the payouts for his team, including the NEOs, based on their results, leadership, and contributions in 2023, but was not involved in discussions regarding his own bonus payout.

Final 2023 short-term incentive payout

The Human Capital and Compensation Committee approved an overall bonus payout under the short-term incentive plan of 140% of target, with 120% recognizing the achievement against Financial metrics and 20% recognizing the achievement against Strategic Blueprint Priorities. These outcomes were also consistently applied to the employee population eligible to participate in the short-term incentive plan.

The table below represents the 2023 target and actual payout for each of the NEOs based upon the established financial and strategic metrics described above.

 

Name

   Target Bonus      Actual Bonus      % Of Target  

Lorenzo Simonelli
Chairman, President and CEO

     $2,754,000        $3,855,600        140%  

Nancy Buese
Executive Vice President and Chief Financial Officer

     $950,000        $1,330,000        140%  

Maria Claudia Borras
Executive Vice President – OFSE

     $950,000        $1,330,000        140%  

Ganesh Ramaswamy (1) 
Executive Vice President – IET

     $839,041        $1,174,658        140%  

James E. Apostolides

Senior Vice President – Enterprise Operations Excellence

     $475,000        $665,000        140%  

Roderick Christie (2) 
Former Executive Vice President – IET

     $281,781        $338,137        120% (3) 

Regina Jones (4)

Former Chief Legal Officer

     $705,000        N/A        N/A  

 

(1)

Pro-rata payout from date of hire

 

(2) 

Pro-rata payout to date of termination

 

(3) 

Following the appointment of Mr. Ramaswamy on January 16, 2023, Mr. Christie moved into an advisory and transition role until his termination date of May 1, 2023. Mr. Christie's bonus payout was adjusted to reflect this change in role

 

(4) 

No payout as a result of Ms. Jones' voluntary termination under the terms of the short-term incentive plan

 

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Executive Compensation

 

Long-Term incentive compensation

 

Key action: Awarded annual long-term incentive grants with an emphasis on outperforming the market

 

With the intention of incentivizing strong performance and ensuring a heavy weighting of at-risk performance incentives, the Human Capital and Compensation Committee granted 60% of Mr. Simonelli's and 50% of the other NEOs' annual long-term incentives during the 2023 grant cycle in the form of Performance-based Share Units ("PSUs"). The vesting of the PSUs is subject to the Company's FCF conversion, ROIC, and TSR relative to the Performance Peer Group measured over a three-year performance period ending in 2025.

2023 annual long-term incentive awards

The long-term incentive program allows executive officers to earn compensation based on sustained multi-year financial and/or superior stock price performance. Consistent with our at-risk pay philosophy, long-term incentives comprise the largest portion of an executive officer's compensation package. Approximately 73% of Mr. Simonelli's annual target total compensation is based on long-term incentives, while the other NEOs have an average of 56% based on long-term incentives.

A primary objective of the long-term incentive plan is to align the interests of executive officers with those of our shareholders. The Human Capital and Compensation Committee determines the total grant date values of long-term incentives to be granted to the executive officers as well as the form of long-term incentive compensation vehicles to be utilized. The awards granted to executive officers by the Human Capital and Compensation Committee vary each year and are based on factors such as the demand for talent, cost considerations, the performance of the Company, the executive officer's performance, competitive compensation information, and the overall value of each NEO's total compensation package as well as other factors the Human Capital and Compensation Committee deems critical to achieving the Company's business objectives.

In January 2023, the Human Capital and Compensation Committee approved long-term incentive awards aligned with the NEOs target compensation package in the form of 50% PSUs and 50% RSUs for NEOs other than Mr. Simonelli. Mr. Simonelli's award was in the form of 60% PSUs and 40% RSUs. The PSUs vest upon achievement of performance goals after three years and the RSUs vest one-third each year over three years subject to continued employment. The Human Capital and Compensation Committee believes that these splits provide a balanced focus on stock price appreciation, the successful achievement of financial results, and aids in the retention of key leaders.

The Human Capital and Compensation Committee approved an adjustment to the CEO's long-term incentive target grant value in 2023 to recognize Mr. Simonelli's leadership and to align with the competitive market. The table below summarizes the 2023 long-term incentive awards granted to our NEOs:

 

Target Annual LTI Awards

   Performance
Shares Units
(1)
     Restricted
Stock Units
(1)
     Total(1)  

Lorenzo Simonelli
Chairman, President and CEO

     $6,900,000        $4,600,000        $11,500,000  

Nancy Buese
Executive Vice President and Chief Financial Officer

     $1,750,000        $1,750,000        $3,500,000  

Maria Claudia Borras
Executive Vice President – Oilfield Equipment & Services

     $1,500,000        $1,500,000        $3,000,000  

Ganesh Ramaswamy
Executive Vice President – Industrial Energy Technology

     $1,250,000        $1,250,000        $2,500,000  

James E. Apostolides
Senior Vice President – Enterprise Excellence Operations

     $356,250        $356,250        $712,500  

Roderick Christie (2) 
Former Executive Vice President – Industrial Energy Technology

                    

Regina Jones (3) 
Former Chief Legal Officer

     $850,000        $850,000        $1,700,000  

 

(1)

Amounts above represent rounded target values as of the date of grant, based on the Company's stock price, and differ from the amounts set forth in the Summary Compensation Table and Grants of Plan-Based Awards Table, which are computed in accordance with FASB ASC Topic 718.

 

(2)

In anticipation of the termination of Mr. Christie's employment, he did not receive a 2023 award.

 

(3) 

Upon Ms. Jones' termination of employment, her RSUs and PSUs granted in January 2023 were forfeited.

 

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Executive Compensation

 

The PSU design:

 

   

Utilizes relative metrics for FCF conversion and ROIC, with a payout modifier for relative TSR outcomes;

 

   

Delivers any payout that is actually earned at the end of the three-year performance period;

 

   

Compares Baker Hughes' performance versus the Performance Peer Group during the three-year performance period; and

 

   

Balances stock returns with capital investment returns.

 

Relative FCF

Conversion

50% of Units

 

   

 

Relative ROIC

50% of Units

   

 

Percentile Rank

(Core Metric)

 

 

 Payout

Multiple(1)

   

 

Relative TSR Modifier

+/-50%

 

FCF divided by

adjusted EBITDA

 

  +   

 

• 3 Year Absolute Change (2022 versus 2025)

 

• 3 Year Cumulative Average (2023 through 2025)

 

 

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75th Percentile or Greater

 

50th Percentile

 

25th Percentile

 

Below 25th Percentile

 

 

 

150%

 

100%

 

50%

 

0%

  x   

 

Three-year performance period beginning December 31, 2022 and December 31, 2025, including dividends

 

(1)

The number of the PSUs will be determined by straight-line interpolation for performance between the 25th percentile and the 50th percentile and between the 50th percentile and the 75th percentile.

2021 annual long-term incentive PSU payout

The PSUs granted in 2021, which vested based on performance through December 31, 2023, were based on FCF conversion (50%) and ROIC (50%), with a payout modifier for TSR outcomes versus the Company's Performance Peer Group during the three-year performance period ending in 2023.

 

Relative FCF

Conversion

50% of Units

 

   

 

Relative ROIC

50% of Units

   

 

Percentile Rank

(Core Metric)

 

 

 Payout

Multiple(1)

   

 

Relative TSR Modifier

+/-50%

 

FCF divided by

adjusted EBITDA

  +   

 

• 3 Year Absolute Change (2020 versus 2023)

 

• 3 Year Cumulative Average (2021
through 2023)

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75th Percentile or Greater

 

50th Percentile

 

25th Percentile

 

Below 25th Percentile

 

 

 

150%

 

100%

 

50%

 

0%

  x   

 

Three-year performance period beginning December 31, 2020 and December 31, 2023, including dividends

 

(1) 

The number of the PSUs will be determined by straight-line interpolation for performance between the 25th percentile and the 50th percentile and between the 50th percentile and the 75th percentile.

The table below represents each of the performance levels and the associated achievement for the 2021 PSUs.

 

2021 PSU measure

   Weighting      Results      Percentile
Rank
     Payout
multiple
     Weighted
Payout
 

Relative FCF Conversion

     50%        53%        80%        150%        75%  

3 year Absolute Change ROIC

     25%        74.9%        100%        150%        37.5%  

3 year Cumulative Average ROIC

     25%        3.2%        40%        80%        20%  

Weighted payout

                                         132.5%  

Relative TSR Modifier

              +69.5%        33.4%                 0.668x  

Total payout

                                         88.51%  

2021 performance-based Transformation Incentive award payout

The one-off Transformation Incentive award was granted in 2021 to key leadership of the Company to incentivize successful execution of the Company's transition over a three-year period of significant change. It covers the performance period January 1, 2021 through December 31, 2023 and has a potential cash payout ranging from zero to 200% of target depending on Company performance against predetermined goals, including:

 

   

70% relative adjusted EBITDA margin versus the 2021 OSX Index + TechnipFMC; and

 

   

30% strategic transformational objectives.

 

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Executive Compensation

 

 

Relative Financial

Component 70%

   

 

Percentile Rank

(Core Metric)

  

 

Payout

Multiple(1)

     Strategic Component 30%

 

• 35% Adjusted EBITDA

Margin Improvement

 

• 35% Adjusted EBITDA

Margin Cumulative

Average

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75th Percentile or Greater

 

55th Percentile

 

25th Percentile

 

Below 25th Percentile

  

 

200%

 

100%

 

50%

 

0%

 

  +    

 

• Non O&G Growth

 

• Energy Transition and Growth

 

• Scope 1/2/3 Baseline reduction

 

• Digital Growth and Enablement

 

• Financial: EBITDA /Revenue %

 

(1)

The payout on the financial component will be determined by straight-line interpolation for performance between the 25th percentile and the 55th percentile and between the 55th percentile and the 75th percentile.

The cash-based Transformation Incentive awards vested on December 31, 2023 with an overall payout of 82.44%. The tables below represent the performance against the financial and strategic goals:

 

Financial component goals

   Weighting      Results      Percentile
Rank
     Payout
multiple
     Weighted
Payout
 

Adjusted EBITDA% Improvement

     35%        3.4%        47%        86%        30.1%  

Adjusted EBITDA% Cumulative Average

     35%        14%        33%        63.83%        22.34%  

Weighted payout

                                         52.44%  

The 2021 Transformation Incentive awards were 100% performance-based. At the time goals were established, the Company did not have sufficient visibility into these emerging markets and technologies to set ranges around the targets for the strategic component goals. Rather, Company performance against these aspirational goals was evaluated against 2020 baseline, the pre-established target, the Company's actual performance, and the progress against each goal. These inputs were determined as Missed, Met, or Exceeded Objectives.

 

Strategic component goals

  

2020

Baseline

 

2023

Target

  

2023

Actual

  Assessment

Non-O&G Growth

   $1,632   $2,618    $2,183  

$2.2B of Non-O&G Orders booked in 2023. 34% growth vs. baseline but 17% under target.

 

  

 

         

Assessment: Missed Objectives

 

  

 

Energy transition growth Group 1 only

   $94   $744    $750  

Positioned company for Energy Transition – $750M New Energy orders booked in 2023, projections for further growth in 2024.

Energy transition technology Group 1/ Group 2

   $27/ $117   $109/$81    N/A  

$135M cumulative spend in CTS R&D 2021 to 2023. $220M inorganic investment in acquisitions and partnerships.

 

  

 

         

Assessment: Met Objectives

 

  

 

Scope 1-2 baseline reduction

   8011  

~29%

reduction ambition

   28% completed through 2022. Add'l 39K removed in 2023  

28% achieved by end of 2022 as per CSR report. Finalization of 2023 is ongoing and will be reported as part of CSR report. Expected to meet expectation.

  

 

         

Assessment: Exceeded Objectives

 

  

 

Digital growth (software)

   $116   $225    $200  

$200M of Software orders booked in 2023, 73% growth vs. 2020 baseline, $25M under 2023 target.

Digital enablement

   $5,498   $6,694    $7,243  

$7.2B of Digital enabled Orders. 32% Growth vs. baseline. Exceeded target by 8%.

 

  

 

         

Assessment: Met Objectives

 

  

 

Financial: EBITDA/ Revenue %

   11.4%   15%    14.8%  

14.8% EBITDA margin in 2023. 340bps expansion vs. baseline.

 

  

 

         

Assessment: Met Objectives

         
                 

Total Payout: 30%

 

 

(1) 

Baseline is 2019 subject to annual revision

 

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Executive Compensation

 

Final cash-based Transformation Incentive award payout

The Human Capital and Compensation Committee approved an overall payout of 82.44% for the cash-based Transformation Incentive awards based upon the established financial and strategic components described above. The table below represents the target and actual payout for the NEOs.

 

Name

   Target award      Actual award  

Lorenzo Simonelli
Chairman, President and CEO

     $3,000,000        $2,473,247  

Maria Claudia Borras
Executive Vice President – OFSE

     $1,500,000        $1,236,623  

James E. Apostolides

Senior Vice President – Enterprise Operations Excellence

     $250,000        $206,104  

Roderick Christie
Former Executive Vice President – IET

     $1,500,000        $1,236,623  

Other elements of compensation

As a part of his hiring process, the incoming Executive Vice President—IET, Ganesh Ramaswamy received one-time sign-on awards. On January 24, 2023, he was granted a RSU award with a target value of $2 million with cliff vesting at the end of a two-year period. He was also granted a one-time cash sign-on award of $2.5 million, paid upon hire and subject to eighteen-month payback provisions should he voluntarily resign or be terminated for cause during that period. The intent of these awards was to incentivize recruitment by recognizing a portion of the outstanding compensation Mr. Ramaswamy was forfeiting by terminating his employment with his former employer.

Baker Hughes offers a variety of health and welfare and retirement programs to all eligible employees. The NEOs are generally eligible for the same broad-based benefit programs on the same basis as the rest of our employees who work in their respective countries. Programs that provide different levels of benefits for executive officers are noted in the descriptions below, including long-term disability, life insurance, the Baker Hughes Supplemental Retirement Plan (the "SRP"), the frozen Baker Hughes Supplementary Pension Plan, the Executive Severance Plan, and financial counseling.

We routinely benchmark our benefit programs against the competitive market and make modifications as we deem appropriate. Outlined below is a summary of benefits provided in 2023 to Baker Hughes executives.

Executive benefits

Life insurance

The Company provides life insurance and accidental death and dismemberment programs to provide financial protection for employees or their beneficiaries in the event of death. In the U.S., executive officers receive life insurance and accidental death and dismemberment coverage at two times base salary. Executive officers may also purchase perquisite life insurance and accidental death and dismemberment coverage from one to three times pay. All employees have the option of purchasing supplemental life insurance, spouse and child life insurance as well as voluntary accidental death and dismemberment insurance. Various limits apply to each program.

The Company also provides a long-term disability program with continuation of a percentage of the employee's base pay up to age 65 if the employee has a qualifying disability lasting longer than 26 weeks. Disability coverage options include Company paid core coverage equal to 50% income replacement or optional buy-up coverage equal to 60% income replacement. NEOs receive the buy-up option at no additional cost.

As part of benefits transition through 2023, Mr. Simonelli and Ms. Borras are eligible to receive taxable payments to cover premiums for universal life insurance policies as they did under GE plans. These policies include: (1) Executive Life, which provides universal life insurance policies for the NEOs totaling $3 million in coverage at the time of enrollment and increases by 4% annually thereafter; and (2) Leadership Life, which provides universal life insurance policies for the NEOs with coverage of two times their annual pay (salary + most recent bonus).

Retirement plans

The SRP offered to U.S. executives is a nonqualified defined contribution retirement plan intended to supplement the retirement benefits of a select group of management. It provides for a basic contribution of 5% of the participant's elective deferral under the SRP and 5% of the sum of the participant's base compensation and bonus for the calendar year (whether or not deferred) that exceeds the dollar limit under Section 401(a)(17) of the Code ($330,000 in 2023); and the base contribution that would have been made under the Baker Hughes 401(k) Plan but for the participant's elective deferral under the SRP or the dollar limit under Section 401(a)(17) of the Code; plus deemed interest credits based upon the rate of earnings on selected notional investment funds.

 

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Executive Compensation

 

Executive severance plan

The Baker Hughes Executive Severance Plan provides assistance to executive officers, including NEOs, while they seek other employment following an involuntary separation from service. Under the plan, NEOs are eligible for severance of twelve months of base salary and outplacement services up to twelve months. Our NEOs may also have additional severance benefits through individual agreements, which are described in the Payments Upon Change in Control or Termination section later in this Proxy Statement.

Change in Control plan

The Baker Hughes Company Executive Change in Control Severance Plan (the "Executive Change in Control Plan") covers top management of the Company, including the NEOs. The plan provides market-aligned, double-trigger protections to participants in the event of a change in control. Potential payments under this plan are outlined in the Payments Upon Change in Control or Termination section later in this Proxy Statement.

Financial counseling

In addition to Company-wide benefits, Baker Hughes provides NEOs with elective Company-paid professional financial planning and tax preparation services through a third party. We believe this service improves their understanding of the compensation and benefits programs offered by the Company and serves to maximize the retention and engagement value of our programs. It also allows the NEOs to more fully concentrate on our business success and comply with plan requirements. We do not reimburse executives for taxes paid on income attributable to this benefit.

Indemnification agreements

We entered into an indemnification agreement with each of our directors and executive officers. These agreements provide that we will indemnify such persons against certain liabilities that may arise by reason of their status or service as directors or officers, to advance their expenses incurred as a result of a proceeding as to which they may be indemnified and to cover such persons under any directors' and officers' liability insurance policy we choose, in our discretion, to maintain. These indemnification agreements are intended to provide indemnification rights to the fullest extent permitted in the State of Delaware and are in addition to any other rights the indemnitee may have under the Company's Second Amended and Restated Certificate of Incorporation, Sixth Amended and Restated Bylaws, and applicable law. We believe these indemnification agreements enhance our ability to attract and retain knowledgeable and experienced executive officers and directors.

Decision-making process and key inputs

Human Capital and Compensation Committee process

Annually, the Human Capital and Compensation Committee reviews each compensation element for the CEO and each of the other NEOs. The independent consultant to the Human Capital and Compensation Committee provides benchmark data based on the established Compensation Reference Group, as well as, market trends and legislative updates. When reviewing compensation for the NEOs, the Human Capital and Compensation Committee balances each NEO's scope of responsibilities and experience against competitive compensation levels.

Each January, our CEO meets with the Human Capital and Compensation Committee and with the Board to review Baker Hughes' performance for the past year. The review focuses on the financial results and the quantitative and qualitative performance objectives from the Strategic Blueprint priorities. At this time, they also review and approve the short-term incentive goals for the upcoming year and new long-term incentive grants.

At each meeting during the year, the Human Capital and Compensation Committee is engaged on the topics related to leadership and talent development, including in-depth reviews of succession planning for key executive officer roles, including the CEO.

In 2023, our Human Capital and Compensation Committee had four meetings.

Compensation consultant and conflict of interest analysis

The Human Capital and Compensation Committee retains Frederic W. Cook & Co., Inc. ("FW Cook") as its independent compensation consultant. FW Cook advised the Human Capital and Compensation Committee on matters related to the executive officer's compensation and general compensation programs, including industry best practices. As described above, FW Cook has also been engaged by the Board to review our non-employee director compensation program.

In accordance with the requirements of Item 407(e)(3)(iv) of Regulation S-K, the Human Capital and Compensation Committee considered the relationships FW Cook had with the Company, the members of the Human Capital and Compensation Committee, and Baker Hughes' executive officers, as well as the policies that FW Cook had in place to maintain its independence and objectivity, and determined that no conflicts of interest arose concerning the work performed by FW Cook.

Benchmarking

The high level of competition for executive talent magnifies the need to ensure that our executive compensation programs are appropriately positioned against peer companies. To appropriately benchmark compensation and measure performance, Baker Hughes utilizes two primary benchmarking sources: (1) a Compensation "Reference Group" and (2) a Performance "Peer Group."

 

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Executive Compensation

 

Compensation "Reference Group"

The Human Capital and Compensation Committee regularly assesses the market competitiveness of the Company's executive compensation program based on data from a comparator peer group. The companies comprising the Reference Group include industry peers and companies in the broader energy and general industry sectors with similar business characteristics, size, margins, competition for talent, and other key compensable factors. There are challenges developing a reference group based solely on our industry. The direct industry is small and the majority are significantly smaller in size and scale of operations. Consequently, expansion beyond the direct industry is necessary to maintain a sufficient sample size of suitable comparison companies.

The chart below represents the key criteria that were considered in selecting the Reference Group.

 

 
Primary selection criteria

 

 

Similar Business Characteristics: global scale, engineering, industrial, and technology applications, multiple divisions, logistical complexity, business services, asset/people intensity, and mature stage business

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Labor Market Competitors: Baker Hughes' market for executive talent extends throughout multiple industries

   

Scale: Primary – Revenue, Secondary – Market Cap. Generally, within a 1/3x to 3x range but larger comparators may be appropriate if the prior criteria are met

The Reference Group for Baker Hughes is comprised of 26 companies. Baker Hughes is positioned at the median for revenue, similar to our executive compensation which is also aligned with the median of the Reference Group.

 

 
Compensation Reference Group

 

 
26 companies—Blend of General Industry, Capital Intensive and Global Oil & Gas Peers
   

3M Company

 

Caterpillar Inc.

 

ConocoPhillips

 

Cummins Inc.

 

Danaher Corporation

 

Deere & Company

 

Devon Energy Corporation

 

Eaton Corporation plc

 

Emerson Electric Co.

 

EOG Resources, Inc.

 

Fluor Corporation

 

General Dynamics Corporation

 

Halliburton Company

 

Honeywell International Inc.

 

Illinois Tool Works Inc.

 

International Paper Company

 

Johnson Controls International plc

 

L3Harris Technologies, Inc.

 

Northrop Grumman Corporation

 

NOV Inc.

 

Occidental Petroleum Corporation

 

PACCAR Inc.

 

Parker-Hannifin Corporation

 

Schlumberger Limited

 

TechnipFMC plc

 

Textron Inc.

 
Used to identify and compare executive pay practices such as pay mix, levels and magnitude, competitiveness, prevalence of long-term incentive vehicles, and pay-for-performance plans.

The Human Capital and Compensation Committee considers executive compensation at these companies as just one among several factors in setting pay. The Committee uses the comparative data as a reference point in exercising judgment about compensation types and amounts, generally referencing the median of the appropriate peer group. The use of Reference Group proxy data and published survey data in both the general industry and the energy industry satisfies the need for both statistical validity and industry factors. The Reference Group data is used to assess the competitive market value for executive jobs, assess pay practices, validate targets for pay plans, test the compensation strategy, observe trends, and provide a general competitive backdrop for decision making.

 

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Executive Compensation

 

Performance "Peer Group"

The Human Capital and Compensation Committee assesses the Company's long-term performance in part through PSUs based on the companies in the OSX index (plus TechnipFMC) each year to align with the wider portfolio of Baker Hughes. Because of the technical nature of the industry, cyclical nature of the markets, high labor needs, capital requirements, and changing portfolio, for PSU awards in 2023, the Human Capital and Compensation Committee believed the oilfield service companies in the OSX index, TechnipFMC and S&P 500 Industrials index (median performing company) provided the best competitive comparison for benchmarking performance over the long-term and competing for similar shareholder investments. The Committee reviews this peer group at least annually, including to consider whether this peer group should evolve over time in conjunction with a shifting portfolio.

 

 
Performance Peer Group

 

     

Cactus, Inc.

 

ChampionX Corporation

 

Core Laboratories N.V.

 

Dril-Quip Inc.

 

Golar LNG Limited

 

Halliburton Company

 

  

Helmerich & Payne, Inc.

 

Liberty Oilfield Services, Inc.

 

Nabors Industries Ltd.

 

NOV, Inc.

 

Oceaneering International, Inc.

 

Oil States International, Inc.

 

  

Schlumberger Limited

 

TechnipFMC plc

 

Transocean Ltd.

 

USA Compression Partners LP

 

S&P 500 Industrials Index (Median Performing Company)

Additional compensation program features and policies

Stock ownership guidelines

The Baker Hughes Board adopted stock ownership guidelines for our executive officers to ensure that they have a meaningful economic stake in the Company. The guidelines are designed to satisfy an individual executive officer's need for portfolio diversification, while maintaining management stock ownership at levels intended to be high enough to maximize alignment and to assure our shareholders of management's commitment to value creation. Executive officers are required to hold the number of shares valued at a multiple of their base salary, in the amounts listed below:

 

Role

   Guidelines  

Chairman, President and Chief Executive Officer

     6X Base Salary  

Executive Vice President and Chief Financial Officer

     3X Base Salary  

Other executive officers reporting to the CEO

     2X Base Salary  

An executive officer has five years to comply with the ownership requirement starting from the date of appointment to a position noted above. If an executive officer is promoted to a position with a higher ownership salary multiple, the executive officer has five years from the date of the change in position to reach the higher expected stock ownership level but he or she still must meet the prior expected stock ownership level within the original five years of the date first appointed to such prior position. Executive officers who have not met the applicable stock ownership level within the time required are required to hold 75% of the net shares acquired from the future exercise or vesting of awards received under the Company's equity compensation programs until the ownership levels are met. Executive officers are required to meet their stock ownership requirement by holding at least 30% of their shares in the long position.

The Human Capital and Compensation Committee annually reviews each executive officer's compensation and stock ownership levels to determine whether they are appropriate. In 2023, all of the NEOs were in compliance with the stock ownership guidelines.

Risk assessment

Baker Hughes conducts an annual review of its compensation programs and practices to assess any inherent risks which are reasonably likely to have a material adverse effect on the Company and presents a report to the Human Capital and Compensation Committee to facilitate a discussion. For purposes of this review, risk was defined as any compensation arrangements for all employees, including NEOs, that could motivate behavior that could be reasonably likely to have a material adverse effect on the Company.

The review evaluates certain areas of potential risk and tools for mitigating risk specifically related to compensation. Overall, the Company's compensation programs are designed to manage risk at appropriate levels and do not include features which encourage behaviors that lead to excessive risk-taking. The Human Capital and Compensation Committee retains the discretion to increase, reduce, or eliminate payouts under the Baker Hughes Executive Officer Short-Term Incentive Compensation Plan. Generally, under the long-term incentive awards, payouts are eliminated in the event of terminations of employment for cause (as defined in the applicable long-term incentive plan). The long-term incentive awards provide that the awards are subject to the Company's clawback policy now or hereafter in effect.

Based on the review, the Human Capital and Compensation Committee concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

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Executive Compensation

 

Clawback policy

Following the approval of the SEC rule and Nasdaq listing standard requiring adoption of a clawback policy, Baker Hughes adopted the Baker Hughes Recovery of Compensation Policy in October 2023. The policy applies to current and former Section 16 officers. It provides that the Company will recoup incentive-based compensation in the event of an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under securities laws. Additionally, it provides that the Company may recoup incentive-based compensation in the event the Board determines the covered executive officer committed misconduct resulting in material inaccuracy in the financial statements or in the performance metrics used for incentive-based compensation.

Compensation Committee report

The Human Capital and Compensation Committee has reviewed and discussed the "Compensation Discussion and Analysis" required by Item 402(b) of Regulation S-K with management. Based upon such review, the related discussions and such other matters deemed relevant and appropriate by the Human Capital and Compensation Committee, the Human Capital and Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Human Capital and Compensation Committee:

 

Cynthia B. Carroll, Chair     Lynn L. Elsenhans
Abdulaziz M. Al Gudaimi     Mohsen M. Sohi
Nelda J. Connors   

 

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Executive Compensation

 

Summary compensation table

The following table summarizes the total compensation paid or earned for 2023, 2022, and 2021 by each of the NEOs, comprised of our principal executive officer, our principal financial officer, and our three other most highly compensated executive officers in each case during the year ended December 31, 2023, and two former executive officers for whom disclosure would have been provided but for the fact that the individuals were not serving as executive officers as of December 31, 2023.

 

Name and

Principal Position

  Year    

Salary

($)

    Bonus(1)
($)
   

Stock

Awards(2)

($)

   

Non-Equity

Incentive Plan

Compensation(3)

($)

    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
(4) ($)
   

All Other

Compensation(5)

($)

   

Total

($)

 

Lorenzo Simonelli

Chairman,

President and CEO

    2023       1,589,230               12,083,545       6,328,847       992,907       686,207       21,680,736  
    2022       1,542,308               12,056,262       1,632,800             860,218       16,091,588  
    2021