CJ 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS In 2017, our Compensation Committee developed an executive compensation program for our executive officers designed to achieve these objectives. In doing so, the Compensation Committee focused primarily on the following principles: • Compensation is managed from a total compensation perspective, considering the compensation opportunity for each component and reviewing all components together. • The overall compensation program, total compensation opportunity and each component are compared to that of a scrutinized and established peer group, which includes both competitors and other companies representing our industry and the markets in which we compete for business and people. • The higher an executive’s position is within the Company, the greater the percentage of compensation should be “at risk” and performance based, contingent on our financial performance, stock performance and individual performance. • Balancing stockholder returns and compensation over the long-term requires continuous evaluation of our compensation program to ensure (1) an appropriate balance of short- and long-term incentives, (2) that key performance drivers are appropriately considered, weighted and emphasized, and (3) that executive pay is strongly linked to measures that meaningfully drive stockholder returns. Highlights of Our Compensation Program Policies and Practices Our executive compensation program is composed of base salary, short-term incentives, and long-term incentives, each of which is described in more detail in “—Components of our 2017 Executive Compensation Program” and in “Executive Compensation Tables.” Our executive compensation program and the compensation decisions for 2017 reflects prevailing governance standards and includes many “best practices” features intended to strengthen the alignment of compensation with stockholder interest, support short- and long-term objectives, and promote long-term value creation, which are discussed throughout this CD&A. The following is a summary of some of our executive compensation practices and policies: WHAT WE DO WHAT WE DON’T DO At Risk Pay and Pay-for-Performance. ✓ Excluding the Emergence Grant, 51% of CEO’s 2017 total direct compensation is performance-based and at risk; and approximately 44-50% of other NEO’s 2017 total direct compensation is performance-based and at risk. ✓ Including Emergence Grant, 37% of CEO’s 2017 total direct compensation is performance-based and at risk; and approximately 34-36% of other NEO’s 2017 total direct compensation is performance-based and at risk. ✓ Performance shares introduced with 2017 LTI equity award as part of a phased transition to a heavier weighted performance-based mix of total compensation—25% of 2017 LTI equity award value based on relative achievement against peers under objective TSR metric, with no payout if the Company TSR ranks last amongst peer group. ✓ 100% of annual STI cash bonus awards are at risk, based on Company performance for the fiscal year compared to objective financial and operational performance measures established by the Board. ✕ No guaranteed bonuses or other awards and no uncapped incentives. The Compensation Committee has broad discretion and authority with respect to the payment of cash and equity incentive awards. ✕ No excessive amount or extraordinary perquisites for executives, including lifetime benefits or home loss buyout; no perquisites or other compensatory arrangements for former executives. ✕ No reimbursement of income taxes on executive perquisites or other payments. ✕ No pensions or supplemental executive retirement plan payouts. Stock Ownership Guidelines. ✓ Meaningful stock ownership guidelines for executive officers and non-employee directors. ✕ No hedging or pledging of Company stock. Clawbacks. ✓ The MIP and all awards granted thereunder will be subject to any clawback or recoupment policies that we adopt from time to time, providing for the forfeiture, recovery or reimbursement of awards for wrongful conduct, including but not limited to, an accounting restatement due to our material noncompliance with financial reporting regulations. ✕ No tax gross-ups, including on any potential golden parachute payments (on change in control or otherwise) or related to a secular trust or restricted stock vesting. 30 C&J ENERGY SERVICES, INC. 2018 PROXY STATEMENT