2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 110 CALIFORNIA RESOURCES CORPORATION CHIPOTLE MEXICAN GRILL, INC. Proxy Statement Summary (continued) 2013 Managementdiscussionswith anumberof largeshareholders regardingcompensation issues, anumberofwhomsupportedour performance-basedapproach. 2014 Boardandmanagementdiscussions followingoutreach toapproximately 2/3rdsofoutstandingshares; in response, eliminatedSOSARs forofficers in2015and moved toperformancesharesvestingon performance relative topeergroup. 2015 Boardandmanagement discussionswithholders totalingapproximatelyhalf ofoutstandingshares; in response, revisedperformance shareawards for2016 to incentivize restorationofstockprice. 2016 Boardandmanagement outreach toholders totaling approximately60%of outstandingshares; in response, revisedperformanceshare awards for2017 toaddacomparable restaurantsalesgoal. 2017 Boardandmanagementdiscussionswith holders totalingover halfofoutstandingshares. 2018 May2014 Beganphase-outofclassifiedBoard. May2014 23.4%Say-on-payapproval May2015 Eliminatedprovisions requiring supermajorityvote for shareholders toapprove certainactions. Feb2015 Grantofperformanceshares,with substantial reduction ingrantdate valueofawards toofficers. Feb2016 Grantofperformanceshares withaggressivestockprice performancegoals. Feb2017 Grantofperformanceshareswith aggressivestockpriceperformance goals,additionofcomparable restaurantsalesgoal,and reduced grantdatevalueofawards toofficers. Nov2017 AnnouncedplannedCEOsuccussion. Feb2018 Announcedappointment ofBrianNiccolasCEO. May2016 • Completedphase-outofclassified Board. • Implemented rightofshareholders tocallspecialmeetings. Dec2016 • Streamlinedmanagementby eliminatingco-CEOstructure. • Appointed fournew independent directors, including twodesignated shareholderappointees. Sept2015 Implementedmajorityvoting for electionofdirectors. May2015 95.4%Say-on-payapproval May2016 71.8%Say-on-payapproval May2017 93.3%Say-on-payapproval May2017 Boardsuccessionand refreshment continued,withdeparturesof four primarily longer-tenuredBoardmembers. =Compensation =Governance TIMELINEOFSHAREHOLDERENGAGEMENT,GOVERNANCEENHANCEMENTSANDCOMPENSATIONHIGHLIGHTS May2013 73.2%Say-on-payapproval Jan2018 GrantofExecutiveChairmanaward ofSOSARswithsubstantialpricing premium,andentered into retention agreementswithofficers. Sep2016 Implementedmarket-standard proxyaccessbylaw. ii NOTICEOFANNUALMEETINGOFSHAREHOLDERSAND 2018PROXYSTATEMENT 2018 PROXY STATEMENT CompensationDiscussionandAnalysis CALIFORNIA RESOURCES CORPORATION 33 Historical Perspective – Drivers of Strategic Priorities CRC was spun off from Occidental Petroleum Corporation on November 30, 2014. Occidental burdened CRC with a substantial debt load of $6.3 billion and implemented the Spin-off just as a severe and extended downturn in commodity prices began. Our highly leveraged balance sheet, resulting from decisions made by Occidental prior to the Spin-off, has been a significant factor disproportionately affecting our stock price performance in a negative manner compared to our industry peers during the recent downturn. For perspective, CRC’s equity market capitalization decreased almost 70%, from $2.8 billion at the Spin-off to $0.8 billion at December 31, 2017. To address stockholder concerns regarding CRC’s leverage, our management team focused on the difficult task of reducing our debt in the low commodity price environment. Since the second quarter following the Spin-off, when our debt level reached its peak, management has significantly reduced our debt without unduly increasing our interest costs or significantly diluting our equity. As a result of these priorities, CRC has had very limited capital available to invest and production has declined compared to CRC’s peers who had greater access to capital because of their lower leverage. The charts below outline the swift, decisive actions management has taken through the commodity downturn that have positioned CRC for growth as commodity prices recover, as well as the different mechanisms our management team employed to reduce CRC’s outstanding debt. During this period our management team worked constructively with our bank lenders to negotiate seven amendments to our credit facility, including two amendments in 2017. History of Proactive Decisions 0 5 10 15 20 25 30 $0 $20 $40 $60 $80 $100 $120 06/30/14 12/31/14 06/30/15 12/31/15 06/30/16 12/31/16 06/30/17 12/31/17 CRCDrillingRigCount BrentCrudeOilPrice ($/Bbl)* OilPrice CRCRigCount 1. Cut rig count/beganhedging 4.Deleveraging Transactions 2. Cut2015CapitalBudget 5. Increasing activity, investwithinCash Flow 3. BankAmendments 6. JV Transactions 2 1 5 3 6 3 3 3 3 3 4 4 4 4 6 3 Under OXY SPIN-OFF Total of 03 pages in section 2.6 Timelines While checklists document your company’s current position on key issues (i.e. provide a “snapshot”), companies often make changes to key practices over time, even over several years. Each change may be incremental, but taken in whole they can be dramatic. To gain maximum “credit” for the changes they have made, some companies “remind” readers of past as well as more recent actions. Many companies traditionally detail this information in lengthy narrative or bullet-point format. A timeline (i.e. the “moving picture”) can highlight key events visually and succinctly and make this information easier to digest and thus more impactful.