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Principles of conduct by which we govern our business affairs
• Bylaws
• Governance Principles
• Board Committee Charters
• Code of Conduct and related policies
Our Board of Directors
Operating responsibly and with accountability to serve the best interests of our stakeholders requires sound corporate governance, and that commitment begins with our Board of Directors. Our Board is led by our Chairman, President and CEO, Lorenzo Simonelli. As required by our Governance Principles, our independent directors also elected an independent lead director, W. Geoffrey Beattie, who regularly meets with the Chairman, leads meetings of the independent directors and has a clear set of additional comprehensive duties that provide an effective check on management. Our Board has determined that the current Board leadership structure provides the appropriate balance between aligned focus on strategic execution and independent Board oversight.
Collectively, our Board demonstrates leadership and a substantive understanding of domestic and international considerations and geopolitics relevant to our strategy as an energy technology company. Our Governance and Nominating Committee, which recommends director candidates for annual election, strives to maintain a Board with varied expertise and perspective, and that reflects diversity, including but not limited to gender, ethnicity, background, and experience.
As part of our ongoing commitment to board refreshment and diversity, we added two new directors, Nelda Connors and Cynthia Carroll, to our Board in May 2020. Their strong industrial and international experience align with our integrated portfolio, contributing valuable insight to the Board as part of its strategic oversight responsibilities.
The Stockholders Agreement entered into with GE in July 2017, as further amended, sets forth a number of minority stockholder protections and additional corporate governance requirements. Among other terms, GE has the right to designate one director for nomination by the Board for election until GE no longer beneficially owns at least 20% of the voting power of our outstanding Common Stock.
Board oversight of People, Planet and Principles
Our company strategy is underpinned by our sustainability framework, and accordingly our Board’s oversight responsibilities require ongoing, in-depth consideration of economic, social, and environmental risks and opportunities. Our strategy to become a leader in the energy transition is a consistent area of Board focus, extending beyond the annual Board strategy session usually held in July, and reviewed as part of every operational assessment and Board deliberation.
While our full Board oversees and guides our strategic direction, primary oversight for many of our People, Planet and Principles priorities, including corporate responsibility, governance, and environmental, health and safety matters (together, ESG), has been delegated to the Governance and Nominating Committee. In addition to assessing our material impacts and discussing associated risks with management, the Governance and Nominating Committee reviews and considers stakeholder feedback on ESG topics and our Compensation Committee oversees human capital management, including inclusion and diversity. Other committees of the Board oversee additional People, Planet and Principles priorities within their subject matter, including related risks assessed and evaluated as part of our Enterprise Risk Management (ERM) review process.
Leadership responsibility
Primary responsibility for developing, managing, and executing our strategy, including our People, Planet and Principles priorities, rests with our management team. In 2019, we formalized our ESG management structure with designated executive sponsors that report to the Board. We also appointed Allyson Book, Vice President of Energy Transition, to oversee our energy transition strategy and serve as the primary point of contact on day-to-day ESG matters. Ms. Book chairs our newly formed ESG Steering Team that, together with subject matter working teams, manages our ESG priorities, sets goals, monitors our progress, and coordinates our ESG reporting.
Corporate governance and ESG
Aligning compensation practices with our priorities
Our executive compensation program is designed to attract, motivate and retain our executives, who are critical to our strategic success. We are committed to a pay for performance philosophy, and we design our compensation programs to support our long-term strategy and to align the interests of our executives and our shareholders. Our executive compensation framework emphasizes performance-based compensation, and focuses our leaders on the achievement of certain financial goals and progress against strategic imperatives.
Approximately 88% of Mr. Simonelli’s target total compensation is performance-based and at risk. Our other named executive officers have an average of 81% performance-based and at risk compensation.
Our incentive-based compensation plans balance financial metrics with quantitative and qualitative performance goals. Payouts under our annual bonus plan in 2019 were weighted 70% based on achievement of formulaic, financial metrics and 30% based on achievement of strategic goals. The strategic objectives included several of our People, Planet and Principles priorities, demonstrating our Board’s commitment to our sustainability framework. Our Compensation Committee specifically considered, among other metrics, performance related to “Perfect HSE Day” improvement, increased leadership supporting compliance first culture, development of low carbon emissions strategies, and focus on diversity and inclusion.
A more detailed discussion of our executive compensation program is available in our 2020 proxy statement.
Contacting the Board
To provide our shareholders and other interested parties with a direct and open line of communication to the Baker Hughes Board, shareholders may communicate with any member of the Board, including our independent lead director, the chair of any committee or with the non-management directors of the company as a group, by sending such written communication to our Corporate Secretary, c/o Baker Hughes Company, 17021 Aldine Westfield Road, Houston, Texas, 77073, USA.