2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 102 ANADARKO PETROLEUM CORPORATION ARTHUR J. GALLAGHER & CO. AT&T, INC. BANK OF AMERICA CORPORATION Compensation Discussion and Analysis TrackRecordofGoodGovernancePractices. Throughourcommitmenttogoodgovernance,includingourcontinued stockholderengagementefforts,wehaveimplementedthefollowingpracticesoverthepastseveralyears: WhatWeDo WhatWeDon’tDo Structureourexecutiveofficercompensationsothatmore than85%ofpayisatrisk Noemploymentcontractswithourexecutiveofficers Emphasizelong-termperformanceinourequity-based incentiveawards Notaxgross-upsonperquisitesexceptwithrespectto theCompany’sstandardrelocationprogramavailableto allemployees Requiredouble-triggerforequityaccelerationupona changeofcontrol Noexcisetaxgross-upsinkeyemployee change-of-controlcontractsenteredintobynewly appointedand/ornewlyhiredexecutiveofficers, irrespectiveofanexistingagreement Maintainacompetitivecompensationpackage NopledgingofCompanysecurities Requirestrongstockownershipforexecutiveofficers anddirectors NoshortsalesorderivativetransactionsinCompany stock,includinghedges Provideforclawbackprovisions Nocurrentpaymentofdividendsonunvestedawards andnorepricingofstockoptionsunlessapprovedby stockholders 2017 COMPENSATION FRAMEWORK EMPHASIZES PERFORMANCE-BASED PAY Ourexecutivecompensationprogramsincludedirectandindirectcompensationelements.Webelievethatamajorityofan executiveofficer’stotalcompensationopportunityshouldbeperformance-based;however,wedonothaveaspecifiedformula thatdictatestheoverallweightingofeachelement. Asillustratedinthechartsbelow,79%oftheCEO’sandonaverage76%oftheotherNEOs’currenttargettotalcompensation opportunityisprovidedthroughequity-basedincentiveawardsthataredependentuponlong-termcorporateperformanceand stock-priceappreciation.Anyvalueultimatelyrealizedfortheselong-termequity-basedincentiveawardsisdirectlytiedto Anadarko’sabsoluteandrelativestock-priceperformanceandwillfluctuatein-linewithstockholderreturns. 20% StockOptions 39% Performance Units 12% TargetBonus 20% Restricted StockUnits CEO 9% BaseSalary Percentof totaldirectcompensation:At-Risk 91%, Long-Term79% At-RiskCompensation 38% Performance Units 19% StockOptions 19% Restricted StockUnits 12% TargetBonus OtherNamedExecutiveOfficers 12% BaseSalary Percentof totaldirect compensation:At-Risk 88%, Long-Term 76% At-RiskCompensation Thechartsabovearebasedonthefollowing:currentbasesalaries,asdiscussedonpage39;targetbonusopportunities approvedbytheCommitteein2017,asdiscussedonpage42;andthegrantdatevalueforthe2017annualequityawards,as discussedonpage44. 38 ANADARKOPETROLEUMCORPORATION 2018PROXYSTATEMENT COMPENSATIONDISCUSSIONANDANALYSIS KeyPayandGovernancePractices TheCompensationCommitteecontinuallyevaluatesdevelopingpracticesinexecutivecompensationandgovernanceandconsiders modificationstoourexecutivecompensationprogramthatsupportourbusinessstrategies,provideanappropriatebalanceofriskand rewardforournamedexecutiveofficers,andaligntheircompensationwithlong-termstockholderinterests.Thefollowingchartssumma- rizecertainofourkeypayandgovernancepractices. WhatWeDo Double-triggerchange-in-controlagreements Our2017Long-TermIncentivePlanrequiresthe Boardtoapproveanyacceleratedpayoutsona changeincontrol(i.e.,notsingle-trigger) Performanceshareunits(PSUs)withthree-year performanceperiodbeginningin2017 Minimumvestingrequirementsforequityawards (equityplansspecifyminimumofthreeyearsfor fullvalueawardsgrantedtoemployeesandone yearforstockoptions).Inpractice,PSUscliffvest inthreeyears,stockoptionsvestratablyover yearsthreethroughfive,andRSUscliffvestinfive years Stockownershipguidelinesforexecutiveofficers anddirectors Clawbackpolicyineffectforequityandcash incentiveawards WhatWeDon’tDo Nosingle-triggerchange-in-controlpaymentsin eitherthe2017Long-TermIncentivePlanorour changeincontrolagreements Noguaranteedincentiveawardsforseniorexecu- tives Noemploymentagreementwithanyofournamed executiveofficers Nopledgingofcommonstockbyexecutiveofficers anddirectorswithoutpriorapproval Nohedgingofcommonstockbyexecutiveofficers anddirectors Noexcessiveperquisitesorrelatedtaxgross-ups Nonewexcisetaxgross-upsuponchangeincon- trol Nostockoptionrepricing,stockoptioncashbuy- outs,orliberalsharerecyclinginequityplans 2017StockholderVotesandStockholderOutreach Whenmakingdeterminationsregardingcorporategovernanceandexecutivecompensation,ourBoardofDirectorspayscloseattention totheviewsofourstockholders,includingthe96%and94%approvalratesreceivedin2017byour“sayonpay”proposalandour2017 Long-TermIncentivePlan,respectively.Inaddition,membersofourmanagementteamengagedwithourlargeststockholderstodiscuss corporategovernanceandexecutivecompensationmattersduringtheyear. Basedinpartonthefeedbackwereceivedfromstockholders,theCompensationCommitteechangedtheperformancemeasureforthe performanceshareunits(PSUs)grantedunderourequityplans.In2017wemovedtoathree-yearperformanceperiodforourPSU grants.PayoutsofPSUswillbebasedonaveragegrowthinadjustedEBITDACpershareoverathree-yearmeasurementperiod.The Committeebelievesthattheperformancemeasureisresponsivetostockholderpreferenceforalong-termperformanceperiod.The CommitteealsobelievesthatgrowthinadjustedEBITDACpershareisakeydriveroflong-termstockpriceappreciation,therebyfurther aligningtheinterestsofourexecutiveswiththoseofourstockholders. 2018PROXYSTATEMENT 19 CompensationDiscussionandAnalysis b. Compensation Risk Management Features OurCompensationandBenefitsCommitteebelievesthatthedesignandgovernanceofourexecutivecompensationprogram encourageexecutiveperformanceconsistentwiththehigheststandardsofriskmanagement. i. Pay Practices Highlightedbelowarethekeyfeaturesofourexecutivecompensationprogram,includingthepaypracticeswehave implementedtodriveResponsibleGrowth,encourageexecutiveretention,andalignexecutiveandstockholderinterests.We alsoidentifycertainpaypracticeswehavenotimplementedbecausewebelievetheydonotserveourriskmanagementgoals orstockholders’long-terminterests. What We Do ✓ Payforperformanceandallocateindividualawardsbasedonactualresultsandhowresultswere achieved ✓ Usebalanced,risk-adjustedperformancemeasures ✓ Reviewfeedbackfromindependentcontrolfunctionsinperformanceevaluationsandcompensation decisions ✓ Provideappropriatemixoffixedandvariablepaytorewardcompany,lineofbusiness,andindividual performance ✓ Deferamajorityofvariablepayasequity-basedawards ✓ Applyclawbackfeaturestoallexecutiveofficervariablepay ✓ Requirestockownershipandretentionofasignificantportionofequity-basedawards ✓ Engagewithstockholdersongovernanceandcompensation ✓ Prohibithedgingandspeculativetradingofcompanysecurities ✓ Grantequity-basedawardsonapre-establisheddatetoavoidanyappearanceofcoordinationwiththe releaseofmaterialnon-publicinformation What We Don’t Do ✘ Changeincontrolagreementsforexecutiveofficers ✘ Severanceagreementsforexecutiveofficers ✘ Multi-yearguaranteedincentiveawardsforexecutiveofficers ✘ Severancebenefitstoourexecutiveofficersexceedingtwotimesbasesalaryandbonuswithout stockholderapprovalperourpolicy ✘ Accrualofadditionalretirementbenefitsunderanysupplementalexecutiveretirementplans ✘ Excisetaxgross-upsuponchangeincontrol ✘ Discounting,reloading,orre-pricingstockoptionswithoutstockholderapproval ✘ Single-triggervestingofequity-basedawardsuponchangeincontrol ✘ AdjustPRSUresultsfortheimpactoflegacylitigation,fines,andpenalties Additionally,itisnotourpolicytoprovidefortheacceleratedvestingofequityawardsuponanemployee’svoluntaryresignation toentergovernmentservice.Wedonotanticipatechangingourapproach. The“CompensationGovernanceandRiskManagement”discussionbeginningonpage28containsmoreinformationaboutour CompensationGovernancePolicyandourcompensationriskmanagementpractices.ThatsectiondescribesourChiefRisk Officer’sreviewandcertificationofourincentivecompensationprogramsandourCorporateGeneralAuditor’srisk-basedreview ofourincentiveplans.WealsodescribetheextenttowhichourCEOparticipatesindeterminingexecutiveofficer compensation,andtheroleofFarient,theCommittee’s independentcompensationconsultant. 42 BankofAmericaCorporation2018ProxyStatement ProxyStatementSummary Executive Compensation Highlights Over the last few years, we have made several key enhancements to our compensation programs to continue to improve the link between compensation and the Company’s business and talent strategies as well as the long- term interests of our stockholders: Replaced the three peer groups used to assess market-based compensation and benefits practices with a single peer group of 20 companies. Eliminated our historical practice of targeting Executive Officer pay at the 62nd percentile of the market. Changed the long-term incentive pay mix from 50% performance shares and 50% restricted stock units to 75% performance shares and 25% restricted stock units. Changed long-term incentive performance measures from 75%Return on Invested Capital ( ROIC ) and 25%Relative Total StockholderReturn ( TSR ) to 100%ROIC with aRelative TSR payoutmodifier. Changed to formula-based short-term awards, with the ability to adjust final award payouts to align with performance. Started reportingROIC performance attainment for long-term awards for recently completed performance periods. Pay and Performance at a Glance* 2017 Short Term Award Metric Metric Weight Attainment Payout% 2017 Earnings per Share ( EPS ) 70% 94% 84% 2017 Free Cash Flow ( FCF ) 30% 103% 106% Weighted Average Payout 90% * See performance adjustments beginning on page 61 Long Term Award – Performance Share Component 2015-2017 Performance Period Metric Metric Weight Attainment Payout% 3-Year Return on Invested Capital ( ROIC ) 75% 7.75% 104% 3-Year Relative Total Stockholder Return ( TSR ) 25% Level 3 100% Weighted Average Payout 103% What We Do ✔ MultiplePerformanceMetricsandTimeHorizons: Use multiple performance metrics and multi-year vesting timeframestodiscourageunnecessaryshort-termrisktaking. ✔ Stock Ownership and Holding Period Requirements: NEOs must comply with stock ownership guidelines and hold 25%ofpost-2015stockdistributionsuntilretirement. ✔ Dividend Equivalents: Paid at the end of performance periodonearnedperformancesharesonly. ✔ Annual Compensation-Related Risk Review: Performed annually to confirm that our programs do not encourage excessive risk taking and are not reasonably likely to have a materialadverseeffectontheCompany. ✔ Clawback Policy: The Company has a policy on the recovery of previously paid executive compensation for any fraudulentorillegalconduct. ✔ Severance Policy: Limits payments to 2.99 times salary andtargetbonus. What We Don’t Do ✘ No “Single Trigger” Change in Control Provisions: No acceleratedvestingofequityawardsuponchangeincontrol. ✘ No Tax Gross-Ups: No excise tax gross-up payments except inextenuatingcircumstances. ✘ No Credit for Unvested Shares when determining stock ownershipguidelinecompliance. ✘ NoRepricingorBuy-Out ofunderwaterstockoptions. ✘ No Hedging or Short Sales of AT&T stock by executive officers. ✘ No Supplemental Executive Retirement Benefits for officerspromoted/hiredafter2008. ✘ No Guaranteed Bonuses: The Company does not guaranteebonuspayments. ✘ No Excessive Dilution: Our annual equity grants represent 1% of the total outstanding Common Stock each year. As of July 31, 2017, our total dilution was 1.0% of outstanding CommonStock. | 4 | www.att.com