UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

 

SUPERIOR ENERGY SERVICES, INC.

(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 the appropriate box):

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
	(2)		Aggregate number of securities to which transaction applies:
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

SUPERIOR ENERGY SERVICES, INC.
601 Poydras Street, Suite 2400
New Orleans, LA 70130

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

To the Stockholders:

 

Superior’s annual stockholders’ meeting will be held at 9:00 a.m. on Friday, May 20, 2011, at the InterContinental New Orleans, Acadian I/II Room, 444 St. Charles Ave., 3rd Floor, New Orleans, LA 70130. At the meeting, stockholders will be asked to:

 

 

Only holders of record of our common stock as of the close of business on March 31, 2011 are entitled to receive notice of, attend and vote at the meeting.

 

Your vote is important. Whether or not you plan to attend the meeting, please complete, sign and date the enclosed proxy or voting instruction card and return it promptly in the enclosed envelope, or vote by one of the other methods specified in this proxy statement. If you attend the annual meeting, you may vote your shares in person, even if you have sent in your proxy.

 

By Order of the Board of Directors,

 

 

Greg Rosenstein

Secretary

 

New Orleans, Louisiana

April 15, 2011

 

 

 

SUPERIOR ENERGY SERVICES, INC.
601 Poydras Street, Suite 2400
New Orleans, LA 70130

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS

 

This Proxy Statement is being mailed to our stockholders on or about April 15, 2011.

 

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

 

 

 

 

 

ELECTION OF DIRECTORS

 

The size of the Board is currently fixed at seven directors. The Board nominated each of the following seven persons for election as a director at the annual meeting. Proxies cannot be voted for a greater number of persons. Unless you specify otherwise in your proxy card, your shares will be voted by the proxy holder FOR the election of each of the seven nominees named below to serve until the next annual meeting and until their successors are duly elected and qualified. If any nominee should decline or be unable to serve for any reason, votes will be cast for a substitute nominee designated by the Board. The nominees have advised us that they will serve on the Board if elected.

 

Information About Directors

 

The biographies below provide certain information as of March 31, 2011, with respect to each director nominee and contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board to determine that the person should be nominated to serve as a director. Unless otherwise indicated, each person has been engaged in the principal occupation shown for the past five years.

 

The Nominating and Corporate Governance Committee recommends, and the Board nominates, the following seven individuals for election as directors at the annual meeting:

 

Harold J. Bouillion, 67, has served as a Director since November 2006. Mr. Bouillion is currently the Managing Director of Bouillion & Associates, LLC, which provides tax and financial planning services, a position he has held since 2002. From 1966 until 2002, Mr. Bouillion was with KPMG LLP where he served as Managing Partner of the New Orleans office from 1991 through 2002. Mr. Bouillion holds a Master of Science in Accounting from Louisiana State University.

 

Mr. Bouillion’s tax and financial planning services experience and his 36-year career in tax with an international accounting firm, where he served in various leadership positions, make him a valuable member of the Board and Audit Committee and distinctively qualified to chair our Compensation Committee. His prior management experiences add valuable perspective on the challenges faced at the Board level.

 

Enoch L. Dawkins, 73, has served as a Director since August 2003. He has approximately 50 years of experience in the energy industry. From 1991 until his retirement in March 2003, Mr. Dawkins served as president of Murphy Exploration and Production Company, a subsidiary of Murphy Oil. His career included numerous management positions domestically and internationally with Ocean Drilling and Exploration Company (known as ODECO), a company he joined in 1964, including serving as President from 1989 until its acquisition by Murphy Oil Company in 1991. Mr. Dawkins began his career as a drilling engineer with The California Co., a predecessor to Chevron USA. Mr. Dawkins was previously on the board of Murphy Oil Canada, Ltd.

 

Mr. Dawkins’ employment history as an executive in the domestic and international oil and gas industry makes him uniquely suited to understand and oversee the complex managerial, strategic and financial considerations necessary to serve on our Board and as our Lead Director. Mr. Dawkins’ service on other private, non-profit and industry boards allows him to provide our Board with a variety of perspectives on corporate governance issues.

David D. Dunlap, 49, has served as the Chief Executive Officer since April 2010, as a Director since May 2010 and as President since February 2011. Prior to joining the Company, Mr. Dunlap had served since 2007 as Executive Vice President — Chief Operating Officer of BJ Services Company (“BJ Services”), a well services provider. He joined BJ Services in 1984 as a District Engineer. Prior to being promoted to Executive Vice President and Chief Operating Officer, Mr. Dunlap held the position of Vice President — International Division from 1995 through 2007. He also previously served as Vice President — Sales for the Coastal Division of North America and U.S. Sales and Marketing Manager.

 

Mr. Dunlap has worked and held leadership positions in the oil and energy industry for more than 25 years. Under his direction, BJ Services significantly expanded internationally and successfully transformed into a global leader in multiple well service product lines, demonstrating his exceptional leadership abilities in developing and executing a global business strategy. His extensive knowledge, experience and expertise and his insight on global expansion in the oil and energy industry make him a valuable member of our Board and uniquely position him to assist the Board in the successful implementation of the Company’s business strategy.

 

James M. Funk, 61, has served as a director since May 2005. Dr. Funk is currently the President of J.M. Funk & Associates, an oil and gas business consulting firm, and has more than 30 years of experience in the energy industry. Dr. Funk served as Senior Vice President of Equitable Resources (now EQT) and President of Equitable Production Co. from June 2000 until December of 2003. Previously, Dr. Funk worked for 23 years with Shell Oil Company and its affiliates. Dr. Funk has previously served on the boards of Westport Resources (April 2000 to June 2004) and Matador Resources Company (January 2003 to December 2008). Dr. Funk currently serves as a Director of Range Resources Corporation and Sonde Resources Corp. Dr. Funk holds a PhD in Geology and is a Certified Petroleum Geologist.

 

Dr. Funk’s extensive experience in the energy industry in similar areas as the Company’s operations gives him a unique understanding of our business and the challenges and strategic opportunities facing us. His career has also provided him with substantial personnel management experience making him highly qualified to serve as a member of our Compensation and Nominating and Corporate Governance Committees. In addition, his service on the board of directors of a number of public companies adds valuable perspective in connection with the role of the board and positions him well to handle challenges faced at the Board level.

 

Terence E. Hall, 65, has served as the Chairman of the Board and a Director since December 1995. From 1995 to April 2010, he served as our Chief Executive Officer, and from December 1995 until November 2004, he also served as our President. Mr. Hall is the founder of the Company and served as Chief Executive Officer of the Company and its predecessors since 1980 until April 2010. Mr. Hall also serves as a director of Whitney Holding Corp.

 

As founder of the Company, Mr. Hall has led the Company through tremendous growth through all industry cycles. His detailed knowledge of every aspect of our business and perspective regarding strategic and operational opportunities and challenges facing the Company and the oil and gas industry enable him to guide the Company’s business strategy and focus the Board on the most significant business issues.

 

Ernest E. “Wyn” Howard, III, 68, has served as a Director since January 2005. Mr. Howard retired as a director of Stratus Properties, Inc. in 1996, where he previously served as President and Chief Executive Officer. He also previously served as Chief Financial Officer, Executive Vice President and a director of Freeport-McMoRan Copper & Gold Inc. (FCX). In the 1970s and 1980s, Mr. Howard served in a variety of executive capacities with FCX’s former parent company, Freeport-McMoRan, Inc., and its predecessor company, McMoRan Oil & Gas Co. Mr. Howard also served as a Trustee and member of the Audit Committee and Nominating Committee of Capital One Funds from 2003 to 2007.

 

Mr. Howard’s extensive experience serving as an executive and a director for various publicly traded companies provides him with a wealth of knowledge in dealing with financial, accounting and regulatory matters at the Board level and gives him a deep understanding of the role of the Board and expectations of our directors. His prior business and board experiences make him highly qualified to serve as the chair of our Nominating and Corporate Governance Committee and as a member of our Audit Committee.

Justin L. Sullivan, 71, has served as a Director since December 1995. Mr. Sullivan has been a private investor and has served as a business consultant since May 1993. Prior to May 1993, he held senior operating and financial management positions with various companies in the forest products industry, including Plywood Panels, Inc. and its predecessors where he served as President from 1992 until 1993 and Vice President, Treasurer and Director from 1967 until 1992. Mr. Sullivan also was an accounting faculty member of the University of New Orleans and Tulane University for over ten years. Mr. Sullivan holds an MBA (accounting option) from Tulane University and is a certified public accountant.

 

As our longest serving non-management director, Mr. Sullivan brings important institutional knowledge to the Board. Mr. Sullivan’s educational background, experience in financial management and extensive involvement in accounting matters provide him with the necessary skills to lead the Audit Committee and evaluate financial results and generally oversee the financial reporting process of our Company. Mr. Sullivan also brings significant business and accounting experience to our Board and provides insight into strategies and solutions to address an increasingly complex business environment.

 

CORPORATE GOVERNANCE

 

The Board is responsible for our management and direction and for establishing broad corporate policies. The Board and various committees of the Board regularly meet to review and discuss operating, compensatory and financial reports presented by management, as well as reports by experts and other advisors. In recent years, the Board has actively focused on succession planning and management development activities, seeking input from members of the Board and senior management to find candidates for potential successors to the Chief Executive Officer and other senior executives. As discussed below, during 2010 Mr. Hall, our former Chief Executive Officer, retired and the Board appointed David D. Dunlap as Chief Executive Officer of the Company effective April 28, 2010. The Board continues to discuss the Company’s organizational needs, competitive challenges, the potential of senior leadership, future development and possible emergency situations in order to determine if additions are needed to the management team, and also discusses the experience, skills, areas of expertise, accomplishments and goals of potential talent from which the Board would be able to select successors to our senior executives.

 

Director Independence; Board’s Leadership Structure

 

The Board of Directors has determined that the following directors are “independent” within the meaning of the New York Stock Exchange (NYSE) listing standards currently in effect: Ernest E. Howard, III, Justin L. Sullivan, James M. Funk and Harold J. Bouillion. Under NYSE listing standards, the Board is not able to consider our fifth non-management director, Enoch L. Dawkins, “independent” because one of his sons-in-law is a consulting principal with KPMG LLP, our independent registered public accounting firm. The Board is not able to consider our Chairman, Terence E. Hall, “independent” because he had served as the Company’s Chief Executive Officer until April of 2010 and Executive Chairman of the Board of Directors from April 2010 to December 2010, at which time he transitioned to the position of Chairman of the Board and senior advisor.

 

The Board of Directors takes a flexible approach to the issue of whether the offices of Chairman and Chief Executive Officer should be separate or combined, considering the tenure and experience of the Chief Executive Officer along with the broader economic and operating environment of the Company. This approach allows the Board to regularly evaluate whether it is in the best interests of the Company for the Chief Executive Officer or another director to hold the position of Chairman.

 

These roles were previously combined, as Terence E. Hall had served as the Company’s Chairman and Chief Executive Officer since December 1995. However, the Board separated these positions when it appointed David D. Dunlap as Chief Executive Officer of the Company effective April 28, 2010, at which time Mr. Hall assumed the role of Executive Chairman of the Board of Directors to, among other things, facilitate the transition of Mr. Dunlap as Chief Executive Officer. Mr. Hall served in this capacity through December 10, 2010, at which time he assumed the position of Chairman of the Board and senior advisor.

Mr. Hall continues to serve as Chairman of the Board of Directors. As former Chief Executive Officer and founder of the Company, Mr. Hall possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company and its businesses and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. The Board determined that the separation of these roles would maximize management’s efficiency by allowing our new Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing guidance to and oversight of management.

 

As described above, four of our seven directors are independent, and the Board believes that the independent directors provide effective oversight of management. Moreover, in addition to feedback provided during the course of Board meetings, the Board has adopted a policy providing that the non-management directors meet regularly in executive session. Under our Corporate Governance Principles, the Board may elect annually a non-management Lead Director who has been recommended by the Nominating and Corporate Governance Committee. If elected, the Lead Director will communicate any issues discussed by the non-management directors back to the Chief Executive Officer, confer with the Chief Executive Officer at intervals between Board meetings, and assist in planning for Board and Board committee meetings. In addition, he will act as a liaison between the Board and the Chief Executive Officer to ensure close communication and coordination between them and to promote a harmonious and effective relationship. The Board has elected Mr. Dawkins to serve as Lead Director of the Board until the 2011 annual meeting of stockholders.

 

The Board believes that the foregoing leadership structure and polices strengthen Board leadership, foster cohesive decision-making at the Board level, solidify director collegiality, improve problem solving and enhance strategy formulation and implementation.

 

Meetings of the Board; Meeting Attendance

 

There were nine Board meetings in 2010. All but one of our directors attended 100% of the meetings of the Board and the committees of which he was a member. One director attended 94% of the meetings of the Board and the committees of which he was a member, as he was unable to attend one committee meeting. The Board has adopted a policy that recommends that all directors personally attend each stockholders meeting. At the last annual meeting of stockholders held on May 21, 2010, all of our directors were in attendance.

 

Board Committees

 

Our Board has three standing committees comprised of an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. These committees regularly report back to the full Board with specific findings and recommendations in their areas of oversight and liaise regularly with the Lead Director. The Board has affirmatively determined that each member of each of our standing committees has no material relationship with the Company and is also “independent” within the meaning of NYSE listing standards. Members of the individual committees are named below:

 

				Nominating and
Audit		Compensation		Corporate Governance
J.L. Sullivan*		H.J. Bouillion*		E.E. Howard III*
E.E. Howard III		J.L. Sullivan		J.M. Funk
H.J. Bouillion		J.M. Funk		J.L. Sullivan

 

 

 

Each of the Board’s standing committees has adopted a written charter that has been approved by the Board. Copies of these charters, as well as copies of our Corporate Governance Principles and our Code of Business Ethics and Conduct, are available on the investor relations page of our website at www.superiorenergy.com and are available in print upon request to our Secretary, Superior Energy Services, Inc. 601 Poydras Street, Suite 2400, New Orleans, LA 70130.

Audit Committee

 

The Audit Committee is primarily responsible for assisting the Board in fulfilling its fiduciary duties to our stockholders with respect to financial matters. The Audit Committee is also primarily responsible for selecting and evaluating the qualifications, performance, and independence of our independent registered accounting firm, approving the nature and scope of audit and non-audit services performed by the independent registered accounting firm and reviewing the range of fees for such services, conferring with the independent registered accounting firm and reviewing the results of its audits, overseeing our annual evaluation of the effectiveness of internal control over financial reporting and our internal audit function. The Audit Committee met six times during 2010. The Board has determined that each of Justin L. Sullivan, Ernest E. Howard, III and Harold J. Bouillion qualify as an “audit committee financial expert,” as such term is defined by the rules of the Securities and Exchange Commission.

 

Compensation Committee

 

The Compensation Committee has the authority and responsibility to establish, evaluate and approve the overall compensation philosophy of the Company. The Compensation Committee determines the nature and amount of compensation of all of our executive officers, including our Chief Executive Officer, determines the amount of equity awards granted to employees, provides guidance and makes recommendations to management regarding employee benefit programs, administers our long-term incentive plans, administers awards under non-qualified deferred compensation or non-qualified retirement programs, reviews and approves any special or supplemental benefits or perquisites to be offered to our Chief Executive Officer and other executive officers, establishes, reviews and administers the Company’s executive stock ownership program and reviews, approves and submits to the Board for its approval any proposed employment, severance, or change in control agreement between the Company and any executive officer or proposed executive officer, as well as any proposed extension or amendment thereto. The Compensation Committee met ten times during 2010.

 

Our Chief Executive Officer makes recommendations to the Compensation Committee for salary, bonus, and long-term incentive awards for all executive officers except himself. He develops these recommendations based on competitive market information, the Company’s compensation strategy, his assessment of the individual’s performance and tenure of the executives. The Compensation Committee discusses the recommendations with the Chief Executive Officer, then either approves or modifies the recommendations as it determines is appropriate. Regarding the Chief Executive Officer’s compensation, the Compensation Committee reviews the competitive market information and determines changes to pay and incentive awards based on the compensation philosophy and the committee’s assessment of his performance.

 

Since May 2007, the Compensation Committee has engaged Pearl Meyer & Partners (“PM&P”), an independent compensation consultant, to advise the committee on matters relating to executive compensation and assist it in maintaining and administering our executive compensation programs. The Compensation Committee annually requests PM&P to conduct an executive compensation review to evaluate the Company’s senior executive compensation relative to an industry peer group selected by the Compensation Committee with input from the compensation consultant and management and published market survey data. See “Executive Compensation — Compensation Discussion and Analysis — Compensation Principles and Processes — Role of Compensation Consultant” herein for more information.

 

The terms of our proposed 2011 Stock Incentive Plan and our prior stock incentive plans permit the Compensation Committee to delegate to appropriate personnel its authority to make awards to employees other than those subject to Section 16 of the Securities Exchange Act of 1934; however, the committee has not delegated this authority to any individual.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee assists the Board in identifying qualified individuals to become directors, determining the composition of the Board and Board committees, monitoring the process to assess Board effectiveness and developing and implementing our Corporate Governance Principles. The Nominating and Corporate Governance Committee also reviews the compensation of our

non-management directors. The Nominating and Corporate Governance Committee met three times during 2010.

 

Nominee Qualifications

 

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board, on an annual basis, the appropriate skills and characteristics required of directors in the context of the current make-up of the Board. Our Corporate Governance Principles provide that this assessment should include issues of judgment, diversity, age, skills such as an understanding of the Company’s industry, international background and similar attributes, all in the context of an assessment of the perceived needs of the Board at that point in time. When seeking candidates for director, other than potential nominees who are current directors standing for re-election, the Nominating and Corporate Governance Committee identifies potential nominees for director through business and other contacts. The committee will also consider director nominees recommended by stockholders in accordance with the procedures described in our By-laws. We did not pay any fee to any third party to identify, or evaluate or assist in identifying or evaluating, potential nominees for election as director at the 2011 annual meeting of stockholders. However, the committee may in the future choose to retain a professional search firm to identify potential nominees for director.

 

As provided in our Corporate Governance Principles, stockholders may propose director nominees for consideration by the Nominating and Corporate Governance Committee by submitting names and supporting information in accordance with our By-laws by mail, c/o Secretary, Superior Energy Services, Inc., 601 Poydras Street, Suite 2400, New Orleans, LA 70130. For the 2011 annual meeting, we did not receive timely notice of director nominations from any stockholder. In accordance with our By-laws, stockholder recommendations to the Nominating and Corporate Governance Committee for the 2012 annual meeting will be considered by the Nominating and Corporate Governance Committee for inclusion in our proxy materials only if received not more than 120 days and not less than 90 days in advance of the first anniversary of the 2011 annual meeting of stockholders (between and including January 21, 2012 and February 20, 2012).

 

The Nominating and Corporate Governance Committee believes that nominees to our Board must meet the following minimum qualifications: have achieved significant success in the energy industry or have extensive financial expertise, particularly in the energy industry; be committed to representing the long-term interests of our stockholders; and have high ethical and moral standards and integrity. The committee evaluates a potential nominee by considering whether the potential nominee meets the minimum qualifications described above, as well as by considering the following factors:

 

 

There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates nominees for director suggested by stockholders using the process set forth in our By-laws.

 

In addition, with respect to an incumbent director whom the Nominating and Corporate Governance Committee is considering as a potential nominee for re-election, the committee reviews and considers the incumbent director’s service to us during his or her term, including the number of meetings attended, level of participation, and overall contribution to the Board. Each of the nominees for director at the 2011 annual meeting of stockholders is a current director standing for re-election.

Role of the Board in Risk Oversight

 

The Board is responsible for oversight of the company’s risk assessment and risk management processes. This responsibility requires the Board to assess and understand the risks the Company faces, the steps management is taking to manage these risks and the level of risk that is appropriate for the Company at any given time. In 2007, the Company implemented an enterprise risk management (ERM) program to assist the Board in fulfilling this responsibility. The ERM program establishes a framework that enables management to identify, assess and manage risks and a process by which management will provide information to the Board on the most significant risks and how those risks are being managed. It also establishes procedures to align risk tolerance and strategy, link risk with growth and return, enhance risk response decisions, minimize operational surprises and losses, identify and manage cross-enterprise risks and provide integrated responses to multiple risks.

 

The Board is responsible for determining whether the Company is appropriately identifying, assessing and managing all facets of the risks the Company faces. Pursuant to the ERM program, management established a risk committee, principally comprised of senior executive officers, which is responsible for the ongoing execution of the ERM program. The risk committee uses risk-based information in strategy development. The Audit Committee is updated periodically on the overall operation of the ERM program. Management will also bring more significant risks and risk management decisions to the full Board as required.

 

In addition to the ERM program, our internal audit manager reports directly to the Audit Committee on a quarterly basis and to our Chief Financial Officer regularly.

 

Stock Ownership Guidelines

 

On March 2, 2007, the Board of Directors approved stock ownership guidelines applicable to our non-management directors. Under the guidelines, each non-management director is required to own shares of our common stock equal in value to five times the annual retainer paid to the non-management directors. Non-management directors will have five years from their election to comply with the guidelines, and the restricted stock units held by directors are counted towards their ownership requirements. As of the date of this proxy statement, all of our non-management directors exceeded the required ownership level. See “Stock Ownership of Management” for the number of shares of our common stock beneficially owned by our non-management directors as of March 31, 2011.

 

Communications with the Board

 

Stockholders and other interested parties may communicate directly with one or more members of our Board, or the non-management directors as a group, by sending a letter by mail addressed to Secretary, Superior Energy Services, Inc., 601 Poydras Street, Suite 2400, New Orleans, LA 70130. The secretary will forward the communication directly to the appropriate director or directors.

 

Compensation Committee Interlocks and Insider Participation

 

During 2010, the Compensation Committee was composed entirely of non-management directors and none of our executive officers served as a director or member of the compensation committee of another entity whose executive officers served on the Board.

 

DIRECTOR COMPENSATION

 

Our non-management directors receive an annual retainer of $60,000 a year. The chairman of the Audit Committee receives an additional retainer of $20,000 a year; the chairman of the Compensation Committee receives an additional retainer of $15,000 a year; the chairman of the Nominating and Corporate Governance Committee receives an additional retainer of $10,000 a year; and our Lead Director receives an additional retainer of $25,000 a year. These amounts are paid in equal monthly installments. Non-management directors also receive a $2,000 fee for each Board and committee meeting attended.

In order to closely align the non-management directors’ compensation with the financial interests of our stockholders, a significant portion of their compensation is paid in equity in accordance with the terms of our Amended and Restated 2004 Directors Restricted Stock Units Plan (the “Directors Plan”). Under the terms of the Directors Plan, on the day following each annual meeting of stockholders, each non-management director is automatically granted a number of restricted stock units (“RSUs”) having an aggregate value equal to a specified dollar amount set by the Board (the “RSU Compensation Amount”), which was $190,000 for 2010. The exact number of units granted is determined by dividing the RSU Compensation Amount by the closing price of our common stock on the day of the annual meeting. An RSU represents the right to automatically receive from us, within 30 days of the date the participant ceases to serve on the Board, one share of our common stock. In addition, upon any person’s initial election or appointment as an eligible director, other than at an annual meeting of stockholders, such person will receive a pro rata number of RSUs based on the number of full calendar months between the date of election and the first anniversary of the previous annual meeting. The Board has set the RSU Compensation Amount for 2011 at $190,000.

 

In February 2011, we adopted the Superior Energy Services, Inc. Directors Deferred Compensation Plan, under which non-management directors may elect to defer compensation received from the Company for service on the Board. Deferred cash compensation will earn a rate of return based on hypothetical investments in certain mutual funds from which the director may select, and deferred restricted stock units will be paid out in shares of common stock and will be credited with dividend equivalents if the Company were to pay dividends on its common stock. Director participants may elect the timing of the distributions of their deferred compensation, which may be made in a lump sum payment or installments, provided that all payments are made no later than 10 years following the director’s termination of service on the Board.

 

The table below summarizes the compensation of our non-management directors for the fiscal year ended December 31, 2010. Mr. Dunlap does not receive any special compensation for his service as a director. His compensation as an executive is reflected in the “Summary Compensation Table” herein. In addition, Mr. Hall will not receive any special compensation for his service as a director until May 20, 2011, the original termination date of Mr. Hall’s Executive Chairman Agreement. His compensation as an executive is also reflected in the “Summary Compensation Table” herein. All non-management directors are reimbursed for reasonable expenses incurred in attending Board and committee meetings.

 

2010 Director Compensation

 

 

 

 

 

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

The following table shows the number of shares of our common stock beneficially owned as of December 31, 2010 by persons known by us to beneficially own more than 5% of the outstanding shares of our common stock. The information in the table is based on our review of filings with the Securities and Exchange Commission. Each person listed below has sole voting and investment power with respect to the shares beneficially owned unless otherwise stated.

 

 

 

 

STOCK OWNERSHIP OF MANAGEMENT

 

The following table shows the number of shares of our common stock beneficially owned as of March 31, 2011 by (i) our non-management directors, (ii) our “named executive officers,” as defined below in “Executive Compensation — Compensation Discussion and Analysis,” and (iii) all of our directors and executive officers as a group. The information in the table is based on our review of filings with the Securities

and Exchange Commission. Each person listed below has sole voting and investment power with respect to the shares beneficially owned unless otherwise stated.

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and 10% stockholders to file with the Securities and Exchange Commission reports of ownership and changes in ownership of our equity securities. Based solely upon our review of the Forms 3, 4 and 5 filed during 2010, and written representations from certain reporting persons that no Forms 5 were required, we reasonably believe that all required reports were timely filed.

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis is designed to provide stockholders with an understanding of our compensation philosophy and objectives as well as the analysis that we performed in setting executive compensation. It discusses the Compensation Committee’s determination of how and why, in addition to what, compensation actions were taken during the last fiscal year for each person serving as our chief executive officer during 2010, our chief financial officer, and the following other executive officers (the “named executive officers”).

 

 

In this CD&A, we first provide an Executive Summary of our actions and highlights from the fiscal year. We next explain the Compensation Principles that guide our Compensation Committee’s executive compensation decisions and the process we follow when setting executive compensation. Finally, we discuss in detail the Component of Executive Compensation, including the actual results yielded under our programs in fiscal 2010.

 

Executive Summary

 

We are a leading provider of oilfield services and equipment focused on serving the drilling-related needs of oil and gas companies primarily through our drilling products and services segment, and production-related needs of oil and gas companies through our subsea and well enhancement, drilling products and services, and marine segments. In recent years, we have expanded geographically into select domestic land and international markets. Our compensation program for executive officers is structured to link executive pay, Company performance, and results for stockholders. The committee seeks to increase stockholder value by 1) rewarding performance with cost-effective compensation; 2) developing a succession plan for key executives and ensuring that the plan is implemented in a manner that preserves the continuity and stability of our business operations and executive team; and 3) ensuring that we can attract and retain executives with the skills, educational background, experience and personal qualities needed to successfully manage our business.

 

2010 Company Performance Highlights

 

 

 

2010 Executive Compensation Decisions and Highlights

 

During 2010, our Compensation Committee took the following actions with respect to our executive compensation program:

 

 

2010 Management Transition

 

As noted above, 2010 was a year of significant management transition for us. Effective April 28, 2010, Mr. Hall, our founder and former Chairman and Chief Executive Officer, retired as Chief Executive Officer, and Mr. Blanchard, our former President and Chief Operating Officer, announced his intention to retire as of December 31, 2010. Concurrently with these announcements, the Board of Directors appointed David D. Dunlap as Chief Executive Officer of the Company. In recognition of past service to the Company, and in order to ensure continuity and stability through the retirement process of the Company’s two senior executives and to facilitate the transition of Mr. Dunlap as Chief Executive Officer of the Company, we entered into agreements with each of Messrs. Hall and Blanchard, pursuant to which (i) Mr. Hall’s employment agreement was terminated and Mr. Hall agreed to serve as Executive Chairman of the Board until May 20, 2011, at which time he would transition to Chairman of the Board, and would assume the role of Senior Advisor to the Company until May 31, 2015, and (ii) Mr. Blanchard agreed to serve as Senior Advisor to the Company upon his retirement until December 31, 2012.

 

In December 2010, the Board of Directors and Compensation Committee met and reviewed the Company’s progress under Mr. Dunlap since April 2010. The Board of Directors and the Compensation Committee concluded that through the combined efforts of Messrs. Dunlap, Hall and Blanchard since April 2010, the transition of Mr. Dunlap as Chief Executive Officer had progressed successfully and more quickly than anticipated, with the Company continuing to successfully and effectively respond to market conditions, as

reflected in the “2010 Company Performance Highlights” above and in following table that tracks our stock performance during 2010 as compared to the S&P 500 and the OSX Index.

 

 

In light of this seamless and successful transition, the Board of Directors and Compensation Committee re-examined the need to continue certain aspects of the arrangements with Messrs. Hall and Blanchard. In addition, the Compensation Committee also examined whether certain revisions to the arrangements would be in the best interest of the Company from a tax and accounting perspective. Accordingly, on December 10, 2010, the Company and Mr. Hall agreed to terminate his Executive Chairman Agreement and Mr. Hall assumed the position of senior advisor, and Mr. Blanchard retired as President and Chief Operating Officer and assumed the position of senior advisor. These actions will support the Company’s position that neither Mr. Hall nor Mr. Blanchard will be a covered employee for purposes of Internal Revenue Code §162(m) as of December 31, 2010. In consideration of Messrs. Hall and Blanchard’s agreement to terminate their current arrangements early, the Company agreed to provide them with compensation intended to ensure that each is in approximately the same financial position as he would have been had his original agreements continued through their original terms. The Compensation Committee also agreed with management’s recommendation to accelerate the vesting of the outstanding stock options and restricted stock held by Messrs. Hall and Blanchard, including the awards made during 2010, to allow the Company to fully recognize the non-cash expense of the awards during 2010. For more detailed information regarding the transition arrangements with Messrs. Hall and Blanchard, see “Post-Employment Compensation — Management Transition Arrangements” and “Potential Payments Upon Termination or Change in Control” below.

Compensation Principles and Processes

 

The Compensation Committee is responsible for designing, implementing, and administering our executive compensation programs, and is guided by the following principles:

 

 

Role of Management in Setting Compensation

 

Our Chief Executive Officer is involved in recommending the compensation of our executive officers, other than himself. Each year, the CEO makes recommendations to the Committee regarding salary adjustments, discretionary bonus awards under the annual incentive program and long-term incentive grants to our other executive officers. In formulating his recommendations, the CEO considers various factors, including his subjective analysis of the individual’s performance and contributions, the performance of his business unit (if applicable to the particular officer), experience level, tenure in position, the average base pay level for similar positions, and the Company’s performance. Although the Committee considers the CEO’s recommendations, the Committee makes all final determinations regarding executive compensation.

 

Role of Compensation Consultant

 

Since May 2007, the Committee has engaged Pearl Meyer & Partners (“PM&P”) as its independent executive compensation consultant to advise the Committee on matters relating to executive compensation and assist it in developing and implementing our executive compensation programs. The Committee also discussed this Compensation Discussion and Analysis with PM&P. During 2010, PM&P did not provide any non-executive consultation services to management, and will not provide such services going forward unless approved in advance by the Committee.

 

Peer Groups, Annual Benchmarking Process and Survey Data

 

The Committee evaluates the Company’s executive compensation practices and financial performance by reference to two different peer groups as described below. The Committee periodically reviews the companies comprising each peer group, and revises each group as it deems appropriate after consultation with PM&P and to reflect consolidation in the industry.

 

 

In the past, the Committee has requested its consultant conduct an annual executive compensation review to benchmark the Company’s senior executive compensation relative to the Compensation Peer Group with supplemental data from published market surveys. During 2010, PM&P conducted an extensive compensation review, assessing all components of our compensation program. The Committee used this report to evaluate whether the executive compensation levels, including base salary and actual incentive payouts, were within industry norms and the Company’s stated strategy.

 

PM&P supplements data from the Compensation Peer Group with broad-based compensation survey data to develop a comprehensive view of the competitive market data. The Committee believes that this use of survey data is an important element of our compensation evaluation. Compensation survey data includes companies from the broader energy industry that influence the competitive market for executive compensation levels. Further, survey data is drawn from the surveys representing companies that are comparable to the Company in terms of size and scale.

 

The Committee has reviewed and evaluated an executive tally sheet that contained a listing and quantification (as appropriate) of each component of our compensation program for all of our executive officers in 2010, including special executive benefits and perquisites, as well as accumulated values (e.g., stock option holdings) and other contingent compensation such as severance arrangements. The Committee believes that our balance of annual and long-term compensation elements, our mix of long-term incentive vehicles and our stock ownership guidelines that encourage executive ownership result in a compensation program that aligns our executives’ interests with those of our stockholders and does not encourage our

management to take unreasonable risks relating to our business. The various components of our executive compensation program are described in detail in the sections to follow.

 

Components of Executive Compensation

 

The main components of our executive compensation program are base salary, annual bonus and long-term incentives. We also provide our executives with certain post-employment benefits, including a supplemental executive retirement plan, that are described herein. Overall, the Company positions the majority of the executive compensation program to be at-risk with much of the compensation based on measurable performance, with a specific emphasis on the long-term performance of the Company. As an executive’s level of responsibility increases, a greater portion of total compensation is at risk, creating the potential for greater variability in the individual’s compensation level from year to year. The following charts illustrate the target mix of compensation elements for Mr. Dunlap, our Chief Executive Officer, and our other current named executive officers (the charts do not factor in the special cash and equity awards made in connection with the management transition during 2010).

 

 

As reflected above, the Chief Executive Officer’s component mix is more heavily weighted towards long-term performance and reflects the Committee’s view that his role in setting the strategic direction of the Company gives him greater influence on the ultimate performance level achieved. The Committee believes that its current combination of programs provides an appropriate mix of fixed and variable pay, balancing short-term and long-term performance, and encouraging executive retention.

 

In addition, as reflected in the following diagram, in order for an executive to achieve median target pay levels under our program, the Company must achieve above average results (the diagram excludes special cash and equity awards made in connection with the management transition during 2010).

 

 

As shown in the above chart, the total pay percentile ranges from 12th percentile to the 87th percentile dependent upon outcomes from annual incentive (bonus) and the PSU program payouts. This chart was derived from PM&P’s annual executive compensation report. See “Compensation Principles and Processes — Peer Groups, Annual Benchmarking Process and Survey Data” for more information on this report.

 

As shown below, performance payouts have varied significantly, in recent years, based upon actual performance.

 

 

A description of each element of the Company’s compensation program follows.

Base Salary

 

The primary role of the Company’s base salary element is to compensate executives for the experience, education, personal qualities and other qualifications that are key for their specific role within the Company. In establishing base cash compensation for our executives, we have historically targeted the market median and strive to set base salaries at consistent levels for positions with similar responsibilities.

 

In March 2009, the executive team voluntarily elected to reduce their salaries in amounts ranging from 10% to 15% in recognition of the then-current economic climate and to demonstrate to the Company’s workforce the commitment of the executive team to cost control. Effective January 1, 2010, the annual base salaries of senior management of the Company were reinstated to the January 2009 levels, and the Committee concluded that there would be no salary increases for 2010. Upon his appointment as Chief Executive Officer in April 2010, Mr. Dunlap’s annual base salary was fixed in his employment agreement at an initial rate of $825,000, which was the same base salary in effect at the time for Mr. Hall, our former Chief Executive Officer.

 

Effective January 1, 2011, in recognition that base salaries had not been increased since 2009 and that the resulting salaries remained within our targeted range, the Committee agreed to a modest base salary increase for each of the executive officers, amounting to an average 4.4% increase.

 

Annual Incentive Bonus

 

The purpose of the Company’s annual incentive bonus program is to reward executives for achievement of annual operational, financial and safety goals. Although the Committee sets annual incentive target levels that result in median payouts when performance objectives are met, this program provides executives the opportunity to earn significantly higher payments depending on the extent to which these performance objectives are exceeded.

 

Establishment of Plan Parameters for 2010

 

In administering the annual incentive bonus plan, our Compensation Committee annually approves the minimum, target and maximum award opportunities for all of the executives and the annual incentive plan goals at the beginning of the performance cycle. For the 2010 plan year, the Committee approved pre-tax income as the performance measure for the plan. Considering the difficult market conditions and the resulting uncertain demand for our services, and other challenges facing the Company in 2010, the Committee set the pre-tax income target for 2010 at $190.8 million, which the Committee felt was reasonable. Following the end of the performance cycle, our actual operating results for the year may be adjusted for extraordinary events, including, among other things, gains and losses on the sale of businesses and hedging activities.

 

Under the plan, our named executive officers were eligible to receive an annual incentive bonus based on a target percentage of their base salary. They could earn more, or less, than the target amount based on the level of achievement as measured against the pre-tax income goals. The possible bonus payout levels for 2010 for each named executive officer, stated as a percentage of the officer’s base salary, are as follows:

 

 

The pre-tax income goal for the target payouts was equivalent to the Company’s budgeted pre-tax income goal approved by the Board for 2010, with the financial goal associated with minimum payout equivalent to

70% of the target goal, recognizing the aggressive budget set by management and the uncertain market conditions. The goal for maximum payout equivalent to 110% of the target goal.

 

Assuming the particular executive officer qualified for an annual incentive bonus payout, the payout could either be reduced by a maximum of 25% if pre-determined “base” metrics were not met or increased by a maximum of 12.5% for achieving “stretch” targets. The metric applicable to the Company’s executive officers was safety performance, determined by reference to Total Recordable Incident Rate (TRIR) and Lost Time Incident Rate (LTIR). For 2010, the base and stretch TRIR and LTIR thresholds were set to .58/.55 and .17/.15, respectively.

 

Determination of 2010 Results

 

In February 2011, the Committee reviewed the Company’s financial results, as adjusted, for 2010 and confirmed that the Company had reached 111.6% of the pre-tax income target established for 2010, resulting in maximum payout under the program. In addition, the Committee considered management’s report that the goal setting process used to establish the base safety metrics applicable to 2010 was inaccurate, as upward adjustments to historical results following a recordkeeping audit during 2010 rendered these targets meaningless. After considering management’s explanation, the fact that the executives did not receive bonuses for 2009 and the Committee’s overall satisfaction with management’s performance during 2010, the Committee determined that no reduction would be made to the annual incentive bonus payouts. Mr. Dunlap, who became an executive officer in April 2010, received a pro rata portion of his annual bonus.

 

In February 2011, the Committee approved the parameters of the annual incentive program for 2011, providing for minimum, target and maximum annual incentive award levels, as a percentage of salary, based upon the achievement of 88.2%, 100.0% and 115.0% of pretax income goals established at the beginning of the year. As in 2010, the annual cash incentive award payout levels will vary depending on the executive’s position.

 

Long-Term Incentives

 

The purpose of our long-term incentive program is to focus executives on long-term Company goals, growth and creation of stockholder value. Under the long-term incentive (LTI) program, we grant a mix of long-term incentive awards, which currently includes 25% stock options, 25% restricted stock and 50% performance share units (PSUs). Consistent with the Company’s compensation philosophy, the Committee believes stock-based incentive awards are one of the best ways to align the interests of our executives with those of our stockholders. In addition, the terms of the PSUs reflect the Committee’s belief that executive compensation should be tied to Company performance. The PSUs provide our executives the opportunity to earn at or above the 75th percentile of the market if the Company achieves the maximum level of performance relative to its peers as described below.

 

Description of Program

 

As mentioned above, the Company’s LTI program provides for annual grants of stock options, restricted stock and PSUs. These awards vest over a three-year period, with the stock options and restricted stock vesting in equal annual increments during the three-year period. The ultimate value of each of these awards depends upon Company performance. We believe these awards further our compensation philosophies for the following reasons:

 

 

 

Under both performance criteria, the maximum, target and minimum levels are met when our ROIC and stockholder return are in the 80th percentile, 60th percentile and 40th percentile, respectively, as compared to the ROIC and total stockholder return of the Performance Peer Group, as described in the table below:

 

						Percent of
						Date-of-Grant Value
		Percent of				of PSU Received for
		Date-of-Grant Value				Relative Total				Total Percent of
Performance Level		of PSU Received for				Shareholder Return				Date-of-Grant Value
Relative to Performance Peer Group		Relative ROIC Level				Level				of PSU Received
(Below 40th Percentile)			0	%			0	%			0	%
Minimum (40th Percentile)			25	%			25	%			50	%
Target (60th Percentile)			50	%			50	%			100	%
Maximum (80th Percentile or above)			100	%			100	%			200	%

 

Results that fall in-between the “maximum,” “target” and “minimum” levels of both performance criteria will be calculated based on a sliding scale.

 

2010 LTI Awards

 

In December 2009, the Committee established and made grants under the LTI program for 2010. Under the program, each of the executive officers has a target percentage established to determine the award values under the LTI program. After considering PM&P’s most recent market study and in order to remain competitive with the market median and the competitive market for executive talent in the Company’s business areas, the Committee set the target percentages of the executive officers’ 2010 awards based on each officer’s position with the Company as follows (each representing a percentage of the officer’s base salary): CEO − 400%, COO − 275%, CFO −250%, the Senior EVP-225% and other EVPs-175%. These percentages were based on market data and are evaluated each year, but have been consistent over the past two years. In addition, the award mix for executive officers has been consistent since the awards granted for fiscal year 2007, being 25% in stock options, 25% in restricted shares and 50% in PSUs. The grant date value of the stock options and restricted shares are reflected in the “Summary Compensation Table” herein.

 

2011 LTI Awards

 

In December 2010, the Committee established and made grants under the LTI program for 2011, once again using the same combination of PSU’s, restricted stock and stock options for the executive officers.

Mr. Dunlap made a recommendation to the Committee that the award levels remain constant for 2011, taking into consideration many of the same factors used for the prior year’s awards and focusing on the Company’s overall financial and non-financial results and the continuing need to remain competitive in a difficult market. The Committee considered Mr. Dunlap’s recommendations, and also noted the importance of maintaining the long-term benefits provided to our executives to motivate the executives toward future successes and support continuity of key leadership during the current challenging market environment. The Committee set the target percentages of the executive officers for 2011 awards at the same levels as the 2010 awards.

 

Special Option Grants in April 2010

 

In April 2010, the Committee elected to make an additional award of stock options to each of the Company’s executive officers at the time, excluding Mr. Hall and Mr. Blanchard. These grants were made in an effort to motivate the management team and reduce retention concerns in light of the management transition. The number of options awarded to each of the named executive officers is reflected in the “Grants of Plan-Based Awards” table herein, and was determined based on the Chief Executive Officer’s recommendation.

 

Payout of 2008 PSUs

 

The PSUs granted for the performance period beginning in January 2008 vested at the end of 2010, and were paid out to the PSU recipients on March 31, 2011 under the terms of the award. Superior ranked in the 70.9 percentile of relative ROIC and in the 36.4 percentile of relative total stockholder return, both as compared to its peers, resulting in a payout to the named executive officers of $77.25 out of a maximum $200.00 per PSU granted to them for 2008. As permitted under the program, 50% of the cash value of the PSU award was paid in whole shares of our common stock based on the closing price of our common stock on March 31, 2011. The total value of the payout received by each named executive officer is reflected in the “Summary Compensation Table” herein under the column “Non-Equity Incentive Plan Compensation.”

 

 

Perquisites

 

We seek to maintain a cost conscious culture in connection with the benefits provided to executives. Further, our modest approach to providing perquisites supports our philosophy of tying the vast majority of our executives’ compensation to performance. The Company does provide each of our executive officers an automobile (either through an allowance or use of Company owned vehicles), including fuel and maintenance costs, and also reimburses them for all deductibles, co-pays and other out of pocket expenses associated with our health insurance programs through a program called Exec-U-Care. In addition, during 2010, Messrs. Hall and Blanchard were allowed to use our corporate aircraft for personal travel. We believe that such an accommodation for our Chairman and former Chief Executive Officer and to our Chief Operating Officer is warranted because it promotes our access to these executives and mitigates safety concerns associated with public travel. Each of Messrs. Hall and Blanchard, however, reimbursed the Company for their personal travel on the corporate aircraft in an amount equal to the cost of a first class, nonrefundable ticket to his destination. They also reimbursed the Company for any incidental expenses incurred during their personal travel, such as baggage handling fees at the airport and meals for the pilots. In addition, we have contractually agreed to permit Mr. Hall continued use of the corporate aircraft during his tenure as Chairman of the Board, and the use of Company facilities while he remains Chairman of the Board or senior advisor. We also maintained two

corporate apartments that were used by Mr. Bernard when he traveled on business during the first few months of 2010, and provided reimbursement for a hunting lease for one of our named executive officers, but these arrangements have been discontinued. The attributed costs of the personal benefits described above for the named executive officers for the fiscal year ended December 31, 2010, are included in the “Summary Compensation Table” herein.

 

Post-Employment Compensation and Arrangements

 

In addition to the annual compensation received by the executive officers during 2009 and benefits under the Company’s 401(k) plan, which we provide to all qualified employees, we also provide certain post-employment benefits to our executive officers, including a supplemental executive retirement plan, a non-qualified deferred compensation plan, and certain severance and change of control benefits pursuant to employment agreements that we have entered into with each of our executive officers.

 

Supplemental Executive Retirement Plan (the SERP).  In December 2008, we implemented a supplemental retirement benefit for our executive officers. Prior to adoption of the SERP, the Committee worked with an independent consultant specializing in supplemental retirement programs to provide information and advice on the prevalence of these programs and alternative methods of structuring the program. After evaluating the Company’s executive retirement program as compared to the Compensation Peer Group and finding that a majority of the Company’s peers sponsor a nonqualified employer-paid retirement plan, the Committee concluded that the Company’s lack of supplemental retirement benefits limited its ability to attract top executives and encourage long-term retention. The SERP provides retirement benefits to the Company’s executive officers and certain other designated key employees. The value of aggregate projected retirement benefits upon retirement at age 65 is targeted to be near the median for the Company’s peers that have a nonqualified employer-paid retirement plan, creating an important retention tool for the Company. The SERP is an unfunded, non-qualified defined contribution retirement plan, and all contributions under the SERP will be in the form of credits to a notional account maintained for each participant.

 

Annual Contributions.  Under the SERP, the Company will generally make annual contributions to a retirement account of a percentage of the participant’s base salary and bonus actually received in the prior year, based on the participant’s age and years of service. Several of the Company’s top executives have dedicated a substantial portion of their careers to the Company during periods in which supplemental retirement benefits were not provided by the Company or may have limited time to earn any meaningful supplemental retirement income due to their age. In an effort to address this deficiency in their retirement income as compared to newly hired and younger executives, the SERP provides that current executives who had combined age and years of service of at least 55 as of December 31, 2008, will receive higher annual contributions under the SERP. For 2010, the participants in the plan received contributions ranging from 5% to 35% of salary, as there were no bonuses paid during 2010. For a complete description of the 2010 contributions for each named executive officer, see the table entitled “Nonqualified Deferred Compensation for Fiscal Year 2010” herein.

 

Additional Retirement Benefit for Mr. Blanchard.  In December 2010, in connection with his retirement from the Company, the Compensation Committee elected to award Mr. Blanchard an additional credit under the SERP of $4,675,500. The aggregate value of Mr. Blanchard’s SERP account, including the additional credit, will be paid in accordance with Mr. Blanchard’s previous distribution election under the SERP, subject to any further delays required by Section 409A of the Internal Revenue Code. The aggregate value of Mr. Blanchard’s benefits under the SERP, together with the retirement benefits due Mr. Blanchard under the Company’s 401(k) plan, is projected to provide an income replacement of approximately 40% of his final five-year average base salary plus annual cash bonus.

 

Nonqualified Deferred Compensation Plan.  In 2004 the Committee approved a nonqualified deferred compensation program. The purpose of the program is to provide an income deferral opportunity for executive officers and certain senior managers of the Company in order to help attract and retain these key employees. Participants in the program may make an advance election each year to defer up to a maximum of 75% of base salary, 100% of their annual bonus and 100% of the cash payment received upon payout of the PSUs.

Participants may choose from a variety of investment choices to invest their deferrals over the deferral period. The plan provides that, upon approval by the Board, the Company could match up to 100% of their deferrals; however, the Company has never elected to grant a match. For a complete description of each named executive officer’s contributions, earnings and aggregate account balance, see the table entitled “Nonqualified Deferred Compensation for Fiscal Year 2010” herein.

 

Severance and Change of Control Benefits.  We believe that severance protections, particularly in the context of a change of control transaction, can play a valuable role in attracting and retaining key executive officers by providing protections commonly provided in the market. In addition, we believe these benefits also serve the Company’s interest by promoting a continuity of management in the context of an actual or threatened change of control transaction. Although we consider these protections an important part of an executive’s compensation and consistent with competitive practices, the existence of these arrangements does not impact our decisions regarding other components of our executive compensation program.

 

As described in more detail under “Potential Payments Upon Termination or Change in Control” below, we have entered into employment agreements with each of our named executive officers (except Messrs. Hall and Blanchard, whose agreements terminated in 2010, and Mr. Holleman, whose agreement terminated in 2011), pursuant to which they are each entitled to severance benefits in the event of a termination of employment by the Company under certain conditions. The Company has determined that it is appropriate to provide these executives with severance benefits under these circumstances in light of their positions with the Company and as part of their overall compensation package. The severance benefits for these executives are generally designed to approximate the benefits each would have received had he remained employed by the Company through the remainder of the term covered by his employment agreement.

 

The Company also believes that the occurrence, or potential occurrence, of a change of control transaction will create uncertainty regarding the continued employment of our executive officers. This uncertainty results from the fact that many change of control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage our executive officers to remain employed with the Company during an important time when their prospects for continued employment following the transaction are often uncertain, we provide our executive officers with enhanced severance benefits if their employment is terminated by the Company without cause or, in certain cases, by the executive in connection with a change of control. Because we believe that a termination by the executive for good reason may be conceptually the same as a termination by the Company without cause, and because we believe that in the context of a change of control, potential acquirors would otherwise have an incentive to constructively terminate the executive’s employment to avoid paying severance, we believe it is appropriate to provide severance benefits in these circumstances. The payment of cash severance benefits is only triggered by an actual or constructive termination of employment. Under the respective award agreements, the stock options, restricted stock and performance share units will automatically vest upon a change of control of the Company.

 

The terms of the employment agreements and the benefits provided thereby are discussed more fully in the section entitled “Potential Payments Upon Termination or Change in Control” herein.

 

Management Transition Arrangements.  As noted above under “Executive Compensation — 2010 Management Transition,” during 2010, the Company entered into certain agreements with each of Messrs. Hall and Blanchard in connection with their termination of employment as executive officers of the Company, and the assumption by each of the role of senior advisor. The details of these agreements are more fully described in the section entitled “Potential Payments Upon Termination or Change in Control” herein, but the following discussion sets forth the Committee’s purpose in approving the more significant elements of the arrangements.

 

As part of these arrangements, in April 2010, Mr. Hall received grants of 117,693 shares of restricted stock and 577,478 options to purchase shares of the Company’s common stock, and in May 2010, Mr. Blanchard received 297,030 options to purchase shares of the Company’s common stock, all of which were scheduled to vest in three equal annual installments. The level of the grants to each of Messrs. Hall and Blanchard were to approximate awards each would have received over the next three years, and the purpose of

these equity grants was to ensure that each of Messrs. Hall and Blanchard remained financially linked to the Company during the management transition to perform special projects or other management duties.

 

In addition to the equity awards noted above, in April 2010, Mr. Hall received a lump sum payment of $7,992,000 in consideration of the termination of the Company’s obligations under Mr. Hall’s previous employment agreement and his affirmation of his continuing obligations under the restrictive covenants set forth therein.

 

Finally, with respect to Mr. Blanchard’s pending termination, in May 2010, the Board of Directors and the Committee also reviewed the forms and amount of compensation provided to Mr. Blanchard during his career with the Company. Mr. Blanchard served as the Company’s President since November 2004, as its Chief Operating Officer since June 2002 and as one of the key members of the Company and its predecessor since their inception. During this time, Mr. Blanchard was instrumental in leading the Company through tremendous growth and strong financial performance through all industry cycles. The Company went public in December 1995. During 1996, the Company had approximately 165 employees and generated revenues of $23.6 million. Since that time, the Company has grown to more than 4,800 employees in more than 150 locations in 20 countries, with revenues of approximately $1.45 billion in 2009. In light of the contributions that Mr. Blanchard made to the success of the Company during his tenure, the Board, at the recommendation of the Compensation Committee, determined that Mr. Blanchard should be adequately compensated for his efforts and approved a discretionary bonus award of $1,900,000 to Mr. Blanchard in anticipation of the termination of his employment agreement and his affirmation of his continuing obligations under the restrictive covenants set forth therein. In addition, the Committee approved an additional credit to the SERP on his behalf as noted above under “Supplemental Executive Retirement Plan (the SERP)” and the vesting of his outstanding equity (except the 2010 grant) in December 2010.

 

Executive Compensation Policies and Processes

 

Timing of Long-Term Incentive Awards

 

Beginning in December 2006, the Committee determined that it would make all LTI awards at its meeting held in December of each year. This practice is reflected in the Committee’s annual calendar, which details the timing of compensation events and associated Committee actions.

 

Policy Regarding Section 162(m) of the Internal Revenue Code

 

Section 162(m) of the Internal Revenue Code generally limits our ability to take a federal income tax deduction for compensation paid to our Chief Executive Officer and other named executive officers in excess of $1 million, except for qualified performance-based compensation. The stock options and PSUs we grant are designed to qualify as performance-based so they are not subject to this deduction limitation. While the Committee will seek to utilize deductible forms of compensation to the extent practicable, it believes it is important to preserve flexibility in administering compensation programs. Accordingly, the Company has not adopted a policy that all compensation must qualify as deductible under Section 162(m).

 

Stock Ownership Guidelines

 

With the creation of the current LTI program, the Company has encouraged stock ownership through equity awards to our executives. We believe it is important that the interests of our executives and directors be aligned with the long-term interests of our stockholders. Effective January 1, 2007, the Committee adopted stock ownership guidelines applicable to our executive officers. Under the guidelines, each executive officer is

required to own shares of stock equal in value to a designated multiple of his or her base salary based on the executive’s position:

 

 

The required share amount is determined as of the date the officer becomes subject to the guidelines, and is calculated by dividing such officer’s applicable base salary multiple by the 365-day average closing price of our common stock as reported on the New York Stock Exchange, and then rounding to the nearest 100 shares. The target ownership level does not change with changes in base salary or common stock price, but will change in the event the officer’s position level changes. Our executive officers are required to achieve their required ownership levels within five years from the date they become subject to the guidelines. The Committee will administer the guidelines and will periodically review each participant’s compliance (or progress towards compliance) and may impose additional requirements the Committee determines are necessary or appropriate to achieve the purposes of this program. As of the date of this proxy statement, all of our named executive officers had reached or exceeded their required ownership levels, with the exception of Mr. Dunlap, who became subject to the guidelines in April 2010. See “Stock Ownership of Management” for the number of shares of our common stock beneficially owned by our named executive officers as of March 31, 2011.

 

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

 

The Compensation Committee of our Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

 

Submitted by the Compensation Committee on
March 28, 2011:

 

Harold J. Bouillion
James M. Funk
Justin L. Sullivan

 

EXECUTIVE OFFICER COMPENSATION

 

The following table summarizes the compensation of our “named executive officers” for the fiscal year ended December 31, 2010.

 

2010 Summary Compensation Table

 

 

 

 

 

 

 

 

The following table presents additional information regarding stock and option awards, as well as non-equity incentive plan awards granted to our named executive officers during the year ended December 31, 2010.

 

Grants of Plan-Based Awards
During Fiscal Year 2010

 

 

 

 

 

The following table sets forth the outstanding equity awards held by our named executive officers as of December 31, 2010.

 

Outstanding Equity Awards at 2010 Fiscal Year-End