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HALLIBURTON
______________________________________________________________________
1401
McKinney, Suite 2400 (77010-4035) · Post Office Box 42807 · Houston, Texas
77242-2807
Phone
713.759.2600
Sherry
D. Williams
Vice
President and Corporate Secretary
January
18, 2008
Division
of Corporation Finance
Securities
and Exchange Commission
100
F
Street, N.E.
Washington,
D.C. 20549
Re: Halliburton
Company
Definitive
Proxy Statement on Schedule 14A
Filed
April 2, 2007
File
No.
001-03492
Short-term
(Annual)
Incentives, page 16
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1.
|
We
note your response to prior comment 13 and reissue the
comment. You state that because you provide more information
about your segments than your competitors, the disclosure of the
targets
will provide an element of profitability that could compromise your
competitive position. However, it is unclear how you reached
that conclusion. The result that you assert appears to be
linked to the fact that you tend to disclose more information than
your
competitors, and not to the disclosure of the targets. Also,
explain why you believe that the disclosure of the targets will reveal
insight about your profitability that is not already available in
the
public domain. Finally, ensure that all your arguments focus on
the potential competitive harm that will result from the disclosure
of the
targets.
|
We
have
reconsidered our position regarding the disclosure of targets for our short-term
annual incentives. As previously disclosed, our short-term incentives
are based on cash value added, or CVA. In future proxy statements, we
will disclose the CVA target amounts for short-term incentives for the most
recent full years.
Below
is
a modified version of what the “Short-term (Annual) Incentives” section of the
Proxy Statement would look like with disclosure of the CVA targets and other
changes mentioned in our previous responses to Staff comments.
Example
Using 2006 Financial
Data
In
1995,
the Compensation Committee established the Annual Performance Pay
Plan. The Plan serves to:
|
·
|
Reward
Executives and other key members of management for improving financial
results that drive the creation of economic value for stockholders
of the
Company; and
|
|
·
|
Provide
a means to connect individual cash compensation directly to our
performance.
|
The
objective for our business is to generate more earnings than normally expected
by the investors who have provided us capital to grow our
business. We measure achievement of this objective using Cash Value
Added, or CVA. CVA is a financial measurement that theoretically
demonstrates the amount of economic value added to our business. CVA
equals the profit (the “Net Operating Profit after Tax”) that remains after
deducting the cost of all the capital invested to produce that profit (the
“Capital Charge”). Net Operating Profit after Tax equals (i) the sum
of operating income plus interest income plus foreign currency gains and losses
plus other nonoperating income, net, (ii) reduced by our expected tax expense
as
calculated using our planned tax rate as set during the annual planning
process. Capital Charge equals total assets (excluding current and
noncurrent deferred income taxes) less total liabilities (excluding long-term
debt, current maturities of long-term debt, and short-term notes payable)
multiplied by a weighted average cost of capital percentage. CVA is
computed monthly and accumulated through the calendar
year. Adjustments may, at times, be approved by the Board of
Directors in the calculation of the CVA payout, including the treatment of
unusual items which may have impacted the Company’s actual
results. No such adjustments occurred during 2006.
At
the
beginning of each plan year, we establish an incentive award schedule that
equates given levels of CVA performance with varying reward opportunities paid
in cash. The performance targets range from “Threshold” to
“Challenge.” “Threshold” reflects the CVA performance which would be
calculated if we achieved 70% of planned operating
income. “Challenge” reflects the CVA performance which would be
calculated if we achieved 150% of planned operating income. These
targets are based on the Company’s annual operating plan, as approved by our
Board of Directors, and are set at levels that management believes would be
sufficient to meet or exceed shareholder expectations of the Company’s
performance, as well as management’s expectations of the relative performance of
our competitors. Given the cyclical nature of our business, our
performance targets vary from year to year, which can similarly impact the
difficulty in achieving the targets.
In
determining CVA awards, the company has consistently applied the planned tax
rate and the weighted average cost of capital percentage when determining actual
CVA performance. As a result, the CVA performance targets are not
made easier to achieve by improved tax rates or lower actual cost of
capital.
Historically,
the ability to achieve these targets has been difficult. Over the
past nine years the Plan achieved maximum performance levels five times,
achieved target performance once, and fell short of the threshold performance
levels three times.
Individual
incentive award opportunities are established at target and maximum performance
levels as a percentage of base salary at the beginning of the plan
year. The maximum amount any participant can receive under the Plan
is limited to two times the target opportunity level. The level of
achievement of annual CVA performance determines the dollar amount of incentive
compensation payable to participants following completion of the Plan
year.
The
Committee set the 2006 performance goals for the NEOs based on Halliburton
Company consolidated CVA results and set their individual target and maximum
levels of opportunity under the Plan as a percentage of January 1, 2006 annual
base salary as follows: Mr. Lesar 110% at target and 220% at maximum, Messrs.
Cornelison, Gaut and Lane each had target levels of 65% and maximum levels
of
130%. Mr. McCollum’s target and maximum were 50% and 100%,
respectively.
The
CVA
targets for 2006 were $473 million for “Target” and $776 million for
“Maximum.”
We
appreciate the extra time that you
provided for us to submit these responses to the Staff’s
comments. Please contact me at (713) 759-2617 or Robert Hayter at
(713) 759-2616 with any questions.
Very
truly yours,
/s/
Sherry D. Williams
Sherry
D. Williams