2018 Guide to Effective Proxies

2.17.5 Elements of pay tables | 385 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES COMPENSATION DISCUSSION AND ANALYSIS How We Determine the Amount for Each Type of Pay Base pay, annual cash incentives, and long-term incentives accomplish different objectives. The table below illustrates a summary of the primary objectives associated with each component of pay listed in the order of most significant to the NEO’s total compensation. The table is followed by specific details regarding each pay component. At Risk • Incents the accomplishment of long-term sustainable business goals • Aligns interests of executives to our stockholders • Promotes ownership in the Company • Provides attraction and retention Long-term incentive: Performance-based RSUs 3 Long-term incentive: Time-based RSUs 3 Long-term incentive: Stock options Up to 10 • Incents the accomplishment of annual business goals • Aligns interests of executives to our stockholders • Provides attraction and retention Short-term incentive: Annual cash incentive 1 Fixed Base pay (cash) • Compensates for carrying out the duties of the job • Recognizes individual experiences, skills, and sustained performance • Provides attraction and retention 1 Type of Pay & Form Performance Period (years) Objectives Base Pay Base pay compensates the NEOs for carrying out the duties of their jobs and serves as the foundation of our pay program. Most other major components of pay are set based on a relationship to base pay, including long-term and annual incentives, as well as retirement benefits. Base pay for the NEOs, including the CEO, is set considering the market median, with potential individual variation from the median due to experience, skills, and sustained performance of the individual as part of our pay-for-performance philosophy. Performance is measured in two ways: through the “Right Results” obtained in the “Right Way.” Right Results considers the NEOs’ success in attaining their annual goals, operational and/or functional area strategies, and personal development plans. Right Way reflects the NEOs’ behavior as exhibited through our organizational, operational, and people leadership competencies. Annual Cash Incentives As previously mentioned in the “Our Commitment to Pay for Performance” section, we pay annual cash incentives to encourage and reward our NEOs for making decisions that improve our annual operating performance through our AIP. The objectives of our AIP are to: • Offer sufficient incentive compensation to motivate management to put forth extra effort, take prudent risks, and make effective decisions to maximize stockholder value; The Williams Companies, Inc. – 2018 Proxy Statement 40 Total of 04 pages in section WILLIAMS COMPANIES, INC.