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HALLIBURTON
COMPANY
______________________________________________________________________
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
October
16, 2007
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 11, 2007
File
No.
333-128750
Corporate
Governance, page 7
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1.
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Consistent
with the requirements of Item 404(a)(6) of Regulation S-K, provide
further
detail regarding the transactions involving Hunt Oil Company and
Hunt
Consolidated Inc. For example, in light of the standards established
for
the approval or ratification of related party transactions that are
articulated on page 7, discuss whether consideration was given to
alternative sources for the subject matter of the
transaction.
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Response: With
respect to the requirements of Item 404(a)(6) of Regulation S-K, Halliburton
does not believe any additional information regarding the transactions between
Halliburton and Hunt Oil Company and Hunt Consolidated, Inc. is material to
investors. Halliburton is in the business of providing services and
products to major, national, and independent oil and gas companies
worldwide. The Hunt companies, as independent oil and gas companies,
utilize those services. The services were provided in the ordinary
course of business at negotiated prices. An alternative source for
the transaction would not have been considered, at least by Halliburton, as
that
would involve turning down work and having it performed by our
competitors. Also, Mr. Hunt did not stand for re-election to the
board in 2007 so the question with respect to Mr. Hunt will not recur in
connection with future proxy statements.
The
Board of Directors and Standing Committees of the Board of Directors, page
7
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2.
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You
disclose that each of the standing committees is comprised of non-employee
directors who are independent in the “business judgment” of the board of
directors. Given that the company’s securities are listed on the New York
Stock Exchange, clarify whether the independence standard used by
the
board is consistent with the NYSE definition of independence and
the
requirements set forth in Item 407(a)(1) of Regulation S-K. Moreover,
rather than referring readers to Appendix A for the definition of
independence, include such information in the disclosure and clarify
whether the standards articulated in Appendix A are more stringent
than
those called for pursuant to Item 407(a)(1)(i) of Regulation
S-K.
|
Response: Halliburton’s
independence standards for Directors are consistent with the NYSE definition
of
independence and Halliburton will clarify this disclosure in its 2008 proxy
statement. Also, rather than referring to Appendix A for the
definition of independence, Halliburton will include the independence standards
in the body of its 2008 proxy statement.
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3.
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On
page 9 you identify the independent directors of the board. Please
provide
the information required by Item 407(a)(3) of Regulation S-K. For
each
director and nominee for director that is identified as independent,
describe, by specific category or type, any transactions, relationships
or
arrangements not disclosed pursuant to Item 404(a) that were considered
by
the board of directors under the applicable independence definitions
in
determining that the director is
independent.
|
Response: There
were no transactions, relationships or arrangements not disclosed pursuant
to
Item 404(a) of Regulation S-K that were considered by the Board in making its
determination as to the independence of the Directors so
designated. Halliburton will add appropriate language to the footnote
to the table on page 9 in future proxy statements to that effect. Of
course, if there are transactions, relationships or arrangements between
Halliburton and a Director considered by the Board in making its independence
determination that were not otherwise disclosed under “Certain Relationships and
Related Transactions,” the footnote will disclose those transactions,
relationships or arrangements.
Compensation
Discussion and Analysis, page 10
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4.
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Your
disclosure contains defined terms and language that does not facilitate
a
clear understanding of your compensation program. Please define terms,
if
necessary, when first used and use such terms consistently throughout
your
disclosure. Additionally, tailor your discussion to avoid disclosure
that
could apply to any other company. Please note the following examples
of
such disclosure:
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|
·
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references
to the defined terms “Executive Compensation Program,” “Compensation
Philosophy and Strategy,” “Philosophy and Strategy,” “Plan,” “1993 Plan,”
“Annual Performance Pay Plan,” and “Performance Unit
Program”;
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·
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disclosure
regarding the “internal executive compensation resources” with whom the
compensation consultant coordinates regarding
compensation;
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·
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disclosure
in the bullet points at the beginning of page 14 that could apply
to any
company and that does not provide insight into specific factors unique
to
your company; and,
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·
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disclosure
on page 17 that insufficiently explains how the performance unit
program
functions, specific targets established pursuant to the program and
identifying the “individual incentive opportunities ...established based
on market references...”
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Response: The
Staff’s comments on the use of defined terms and language that does not
facilitate a clear understanding of our compensation program are noted, and
we
will address the Staff’s comments in preparing the 2008 proxy
statement.
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5.
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The
disclosure required by Item 402 should be presented for “covered” persons
as defined in Item 402(a)(3) of Regulation S-K, and unless material
to an
understanding of the principal features of the way compensation is
structured overall, additional information should be removed if
potentially confusing. For example, on page 18 you disclose that
the use
of perquisites for “Executives” is “limited in both scope and value;” yet,
it is clear that Senior Executives (as defined in your disclosure)
do
receive perquisites regularly and in material amounts. As noted in
the
comment above, limit the use of defined terms and present your disclosure
clearly and concisely.
|
Response: The
Staff’s comments on limiting the disclosure to “covered” persons as defined in
Item 402(a)(3) of Regulation S-K, unless material to an understanding of the
principal features of the way compensation is structured is noted, and we will
address the Staff’s comments in preparing the 2008 proxy statement.
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6.
|
Please
refer to Item 402(b) and Section II.B.1 of Release 33-8732A. Your
Compensation Discussion and Analysis should provide insight into
how
compensation elements and levels of compensation are actually structured
and determined with regard to each of the named executive officers.
For
example, we refer you to the bullet points listed on page 16 and
Item
402(b)(2)(vii) of Regulation S-K. Provide an analysis of how the
listed
criteria were considered in evaluating each named executive officer
and in
determining the compensation awarded to the officer during the fiscal
year. Moreover, add disclosure on page 19 under the heading “Conclusion”
to link your conclusion to a more in-depth analysis of the compensation
elements and levels of compensation actually awarded to the named
executive officers during the
year.
|
Response: Regarding
the analysis of how the listed criteria were considered in evaluating each
named
executive officer, please see our response to comment #7. The Staff’s
comments regarding the Conclusion are noted, and we will address the Staff’s
comments in preparing the 2008 proxy statement.
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7.
|
You
provide several references throughout the Compensation Discussion
and
Analysis to the discretion that may be exercised by the committee
in
determining compensation types and levels. For example, you disclose
that
allocations to named executive officers under the Supplemental Executive
Retirement Plan are made at the sole discretion of the committee.
Similarly, early retirement and benefits, if approved, are subject
to the
“sole discretion of the compensation committee” and in the discussion of
base salary and long-term incentives, you disclose that the committee
may
exercise its discretion in determining the type or amount of compensation
awarded. Please provide an analysis of the specific factors the committee
considered when exercising its discretion in awarding the type and
amount
of compensation to a named executive officer. Please see Item 402(b)(1)(v)
and Instruction 1 to Item 402(b) of Regulation
S-K.
|
Response: Our
compensation package consists of base salary, short-term incentives, long-term
incentives, retirement benefits and perquisites. Market data
(information provided by an external consultant that represents the elements
and
average compensation of similar positions within our defined comparator group)
is used by the Compensation Committee as the primary reference point for the
target value and actual value of each of the above elements of compensation,
individually and in aggregate for each executive. This approach
confirms that our compensation package for named executive officers (“NEOs”) is
appropriate given our pay philosophy and competitive to market peers given
their
position and scope of responsibility.
The
Compensation Committee then sets the final compensation opportunity for each
NEO
so that their actual total compensation is consistent with our philosophy of
paying at the 50th percentile
or
higher for those years of superior performance and paying below the 50th percentile
when
performance does not meet competitive standards. In doing this, the Compensation
Committee considers (1) how compensation elements serve to motivate and reward
each NEO appropriately and competitively position their pay opportunity in
order
to retain their services and skills, (2) individual performance in reaching
financial and operational objectives, (3) other factors including business
unit
or functional goals, and (4) sustained levels of performance, future potential,
time in position and years of service with the company. These factors
are considered on an unweighted basis to determine final pay decisions and
to
ensure internal equity among positions having similar scope and responsibility
within the organization.
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8.
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We
direct you to Release 33-8732A, Section II.B.1. As noted therein,
the
Compensation Discussion and Analysis should be sufficiently precise
to
identify material differences in compensation policies with respect
to
individual executive officers. Please explain the discrepancies in
type
and amount of compensation awarded to the named executive officers.
For
example, identify the specific achievements or other material factors
considered in the award of the base salary and stock awards granted
to
your Chief Executive
Officer.
|
Response: The
policies used to set compensation for each of the NEOs are the
same. There are no discrepancies in the types of compensation among
the NEOs. The discrepancies that exist in the amounts of compensation
among the NEOs relate to each NEO’s position, his corresponding scope of
responsibility, individual performance, and differences in the competitive
market pay levels for like positions in the peer group.
For
example, when determining the base salary and stock awards for the CEO, the
Compensation Committee took into consideration competitive market pay levels
for
the CEOs at our comparator group and Mr. Lesar’s accomplishments in the areas of
business development, expansion into strategic markets, management succession,
management of the KBR separation and the achievement of financial and
operational objectives. For further explanation, please see our
response to comment #10.
Executive
Compensation Procedures, page 14
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9.
|
On
page 14 you disclose that your compensation “procedures are guided by
policy, process and practice.” Clarify the procedures, policies and
process referenced and provide further detail and analysis of how
specific
procedures, policies and process resulted in actual compensation
paid to
the named executive
officers.
|
Response: Our
compensation procedures support and provide the infrastructure for actions
taken
by the Compensation Committee annually. This ensures consistency from year
to year and adherence to the responsibilities listed in the Compensation
Committee’s Charter. For example, we have a specific process established
that outlines how the Compensation Committee reviews compensation for the year,
which includes identifying the comparator group companies and engaging an
external consultant to benchmark positions and provide market data. A
further example is our process that outlines the administration of supplemental
retirement awards, including a review of the material factors used in
determining the annual allocation amounts. As detailed in our responses to
comments #7 and #20, these processes serve to set the platform for the final
determination of compensation for the named executive officers. Our policy
on Executive Compensation Administration defines those positions that require
review and approval by the Compensation Committee and those where delegation
to
the CEO is authorized. Our procedures and processes then provide the
framework, documentation, steps taken and responsibilities with respect to
establishing compensation.
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10.
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We
direct you to Instructions 1 and 3 of Item 402(b) of Regulation S-K.
Material information regarding the specific factors considered in
the
evaluation of the chief executive officer by the Management Oversight
Committee is absent from the Compensation Discussion and Analysis.
Referencing the factors on page A-1 of Appendix A, explain how such
standards factored into the compensation awarded to Mr. Lesar. Specify
how
the factors noted on page A-1 specifically applied in the evaluation
of
Mr. Lesar and the compensation he received during the last fiscal
year.
See Item 402(b)(2)(vii) of Regulation
S-K.
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Response: Each
year, Mr. Lesar and the members of the Board of Directors agree upon a set
of
specific objectives based on the categories listed on page A-1 which
are:
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·
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Leadership
and vision;
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·
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Integrity;
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·
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Keeping
the Board informed on matters affecting Halliburton and its operating
units;
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·
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Performance
of the business;
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·
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Development
and implementation of initiatives to provide long-term economic benefit
to
Halliburton;
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·
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Accomplishment
of strategic objectives; and
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·
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Development
of management.
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The
Management Oversight Committee determined that Mr. Lesar met these objectives
through the following achievements in 2006 (with the corresponding specific
category in italics and parentheses):
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·
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Significant
year over year improvement in financial results (performance of the
business)
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·
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Identifying
areas of future growth in the Eastern Hemisphere and developing
relationships with key customers (strategic objectives and development
of initiatives providing long-term economic
benefit)
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·
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Facilitating
the KBR separation including the decision to conduct an Initial Public
Offering of KBR stock, recruitment of a CEO for KBR, staffing its
board of
directors and managing its eventual disposition (development and
implementation of initiatives to provide long-term economic benefit
to
Halliburton)
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·
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Continuing
to develop an executive management succession planning process and
ensuring the development of individual executives as well as focusing
senior management on talent management initiatives (development of
management)
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·
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Assisting
the Chairman of the Nominating and Corporate Governance Committee
in the
identification of qualified, diverse candidates for nomination to
the
Board of Directors (leadership and
vision)
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·
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Finalizing
the strategy for global manufacturing (development and implementation
of initiatives to provide long-term economic benefit to Halliburton
and
accomplishment of strategic
objectives)
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·
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Evaluating
the strategic fit of possible acquisitions and the appropriateness
of
divestitures to enable continued growth and focus on our core business
(leadership and vision and development and implementation of
initiatives to provide long-term economic benefit to
Halliburton)
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·
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Regular
written communications to the members of the Board providing status
reports and notification of issues of immediate concern (integrity and
keeping the Board informed on matters affecting Halliburton and its
operating units)
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The
Compensation Committee considers the evaluation by the Management Oversight
Committee to determine Mr. Lesar’s total compensation, including base salary and
stock awards.
Base
Salary, page 15
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11.
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You
disclose on page 15 that the committee intends to set base salary
at the
median for comparable positions within the comparator group. Please
include a discussion of where you target the other elements of
compensation against peer companies and the percentiles represented
by
actual compensation paid for 2006. In addition, please identify
the named executive officers whose actual compensation falls outside
of
the targeted percentile range and discuss the reasons for any deviations.
See Item 402(b)(2)(xiv) of Regulation
S-K.
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Response: For
2006, the Compensation Committee targeted total compensation between the
50th and
75th percentile
levels with equity compensation elements (options and restricted stock) targeted
at the 75th percentile level and all other elements (base, bonus and performance
units) targeted at the 50th percentile. Target total compensation for all
NEOs ranged between the 50th percentile
and the
75th percentile
pay levels of peer positions, with the exception of Mr. McCollum, whose total
compensation has been targeted between the pay level of peer group
Controllers and peer group CFOs to reflect that his scope of responsibility
at
Halliburton is broader than a typical Controller. Mr. McCollum's pay is
determined with reference to external market comparisons as well as relative
to
other executive officers due to the difficulty in finding an appropriate
benchmark match for his position.
At
the
time the proxy statement is prepared in March of each year, we would not be
able to provide relative market percentiles represented by actual
compensation because current market data for peer companies would not
be available. Generally, in years when the company achieves financial
results substantially above or below expectations, which can occur for example
due to industry-wide factors such as changes in demand for services, actual
compensation may fall outside the initial targets established by the
Compensation Committee. However, in many instances, financial results
of our peer companies are similarly affected as a result of industry-wide
factors, and their actual compensation would similarly fall outside the targeted
percentiles. When actual data does become available, we monitor
the results for alignment with our compensation philosophy.
Short-term
(Annual) Incentives. page 16
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12.
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Clarify
your disclosure of the formula used to determine the short-term annual
incentives awarded. We remind you that your disclosure should be
clear and
concise. Avoid overly technical terms. Consider providing a hypothetical
example to show how the variables noted in the formula work in
practice.
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Response: Seeking
to clarify the computation of our CVA formula, going forward, we propose the
following to modify and replace the first paragraph under “Short-term (Annual)
Incentives.” We would also note that the revised language allows the
reader to relate the CVA calculation to specific line item captions on the
face
of our published financial statements.
“In
1995,
the Compensation Committee established the Annual Performance Pay
Plan. The Plan serves to:
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·
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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
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·
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Provide
a means to connect individual cash compensation directly to our
performance.
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The
objective for our business is to generate more earnings than normally expected
by the investors who have provided debt and equity capital to us 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.”
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13.
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You
have not disclosed the quantitative targets established for the overall
incentive plan pool and on an individual basis, and how the variable
components in any such formula applied to determine the specific
awards
made to the respective officers. Similarly, in discussing long-term
incentives, you have not disclosed the operating performance goals
and
value creation targets established and used in determining the level
of
long-term incentives awarded to the named executive
officers. We refer you to Items 402(b)(1)(v) and
402(b)(2)(v)-(vi) of Regulation S-K. Disclose the quantitative and
qualitative factors considered in determining amounts awarded under
the
plans based on reference to specific targets established for each
of the named executive officers. To the extent you believe that disclosure
of these quantitative and qualitative factors is not required because
it
would result in competitive harm such that the information could
be
excluded under Instruction 4 to Item 402(b), please provide on a
supplemental basis a detailed explanation supporting your conclusion.
Please also note that to the extent disclosure of the quantitative
or
qualitative performance-related factors would cause competitive harm,
you
are required to discuss how difficult it will be for you to achieve
the
target levels or other factors. Provide disclosure that contains
appropriate insight into the factors considered by the compensation
committee in setting performance-related objectives. Please see
Instruction 4 to Item
402(b).
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Response: We
believe that disclosure of the quantitative targets considered in determining
the amounts awarded under our short- and long-term incentive plans would cause
us competitive harm. This conclusion is based chiefly on two
considerations: 1) As our segment reporting provides substantially
more detail than that of our competitors, disclosure of quantitative targets
provides an element of profitability that would risk compromise of confidential
financial information; and 2) As we do not provide earnings guidance, disclosure
of our targets could be misinterpreted as providing guidance and thus serve
to
mislead shareholders. Qualitatively, we propose modifying the second
paragraph under “Short-term (Annual) Incentives,” as follows, to more clearly
describe the process and address the difficulty of target level
achievement.
“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 expected relative
performance of our competitors. Given the cyclical nature of our core
business, our performance targets vary accordingly 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 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.”
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14.
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You
state on page 16 that the compensation committee establishes the
incentive
rewards schedule and varying levels of CVA performance at the beginning
of
each plan year. We remind you that the Compensation Discussion and
Analysis should address actions regarding executive compensation
that were
taken after the end of your last fiscal year. Please see Instruction
2 to
Item 402(b) of Regulation S-K. Please identify the targets established
for
2007. As noted in our prior comment, if you believe that disclosure
of
these targets is not required because it would result in competitive
harm
such that the information could be excluded under Instruction 4 to
Item
402(b) of Regulation S-K, please provide on a supplemental basis
a
detailed explanation supporting your
conclusion.
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Response: Instruction
2 to Item 402(b) of Regulation S-K applies to actions regarding executive
compensation after the last fiscal year’s end “that could affect a fair
understanding of the named executive officer’s compensation for the last fiscal
year.” The Compensation Committee has not taken any action after year-end
2006 that affects compensation for 2006, which is the “last fiscal year”
referenced in Instruction 2. Instruction 2 also specifically states that
the CD&A “should be of the information in the tables and otherwise disclosed
pursuant to this Item.” Such tables and disclosure in our 2007 proxy only
address 2006 compensation, not 2007 compensation. As such, we believe
actions relating to 2006 compensation have been properly addressed in our 2007
proxy statement, and we will discuss actions relating to 2007 compensation
in
CD&A in our 2008 proxy statement.
Long-Term
Incentives, page 16
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15.
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On
page 17 you disclose that the size of long-term incentive awards
to senior
executives is based on a variety of factors, including your subjective
assessment of organizational roles and internal job relationships.
Please
provide an explanation and analysis of how the factors contributed
to the
determination of long-term incentives awarded to each named executive
officer.
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Response: In
determining the size of long-term incentive awards, the Compensation Committee
first considers market data references to the long-term incentive value for
comparable positions and then may adjust the awards upwards or downwards based
on the Compensation Committee’s view of internal equity among
NEOs. This can result in positions of similar magnitude and pay
receiving awards of varying size. The 2006 long-term incentive
awards for each named executive officer were based primarily on market
data. Internal job relationships were considered but no adjustments
were deemed necessary.
Summary
Compensation Table, page 21
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16.
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Pursuant
to Instruction 1 to Item 402(c)(v) and (vi) of Regulation S-K, please
include a footnote disclosing all assumptions made by reference to
a
discussion of such assumptions in your financial statements, footnotes
to
the financial statements or discussion in the Management’s Discussion and
Analysis. Specifically reference the location of the
discussion of assumptions within the Form
10-K.
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Response: The
discussion of assumptions is in Note 1 to the consolidated financial statements
in our Form 10-K. In the future, the footnote will identify the
location of the discussion of assumptions in the Form 10-K with
particularity.
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17.
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Item
402(e) of Regulation S-K provides for a narrative discussion as necessary
to an understanding of the quantitative data presented in the tables.
We
note the absence of any discussion of amounts presented in the column
titled “non-stock incentive plan compensation.” Moreover, it is unclear
from your disclosure whether the amounts listed in the non-stock
incentive
plan compensation column relate to the Annual Performance Pay Plan
or the
cash incentives provided under the 1993 Plan referenced on page 17.
Consider adding narrative
disclosure.
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Response: In
the future, we will add a footnote that describes the elements in the “non-stock
incentive plan compensation” column. The two elements are described
in our response to comment #19.
Grants
of Plan-Based Awards in Fiscal 2006, page 21
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18.
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We
refer you to Item 402(e) of Regulation S-K. Please provide narrative
disclosure that explains the quantitative data presented in the various
columns to the table. Provide information regarding the vesting schedules
of stock awards granted and dividend eligibility. Additionally, given
disclosure in the proxy that you make awards pursuant to equity incentive
plans, clarify the note following the table. It is not apparent why
the
“Estimated Future Payouts Under Equity Incentive Plans” columns should be
omitted. The narrative should address this omission and provide disclosure
regarding the amounts granted as shown in columns (i) and (j) of
the
table.
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Response: Our
restricted stock and stock option awards are granted under the 1993 Stock and
Incentive Plan. The awards listed in the Grants of Plan Based Awards are
provided under the 1993 Plan. The Threshold, Target and Maximum
columns under the heading “Estimated Future Payouts Under Non-Equity Incentive
Plan Awards” indicate the potential payout for each NEO under the Performance
Unit Program if the Threshold, Target or Maximum levels are
achieved. This program measures company consolidated Return on
Capital Employed as compared to our internal goals as well as relative to our
competitors during three-year cycles. The potential payouts are
performance driven and completely at risk.
The
restricted stock grants, as awarded in 2006 for the NEOs, are subject to a
graded vesting schedule of 10% over 10 years. This vesting schedule serves
to motivate our NEOs to remain with Halliburton. All restricted shares are
priced at Fair Market Value on the date of grant. At this time, the restricted
shares are eligible for dividend payments under the terms of the restricted
stock award agreements. Stock option awards vest over a three-year graded
vesting period whereby 33 1/3% of the grant vests each year. All options
are priced at the Fair Market Value on the date of grant.
The
“Estimated Future Payouts Under Equity Incentive Plan” columns are omitted
because awards under the Performance Unit Program are expected to be paid in
cash. We will clarify the footnote in our 2008 proxy
statement.
The
stock
and option awards shown in columns (i) and (j) represent the individual awards
for each NEO made in 2006. All annual awards were made in December
2006 with the exception of an award to Mr. Lane of 20,000 restricted shares
on
May 16, 2006 for performance recognition purposes.
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19.
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Please
explain in the Compensation Discussion and Analysis why amounts presented
under the column, “non-stock incentive plan compensation” in the summary
compensation table are greater than the amounts in the Maximum-Estimated
Future Payouts Under Non-Equity Incentive Plan Awards, in the grants
of
plan-based awards table.
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Response: The
amounts presented in the column, “Non-Stock Incentive Plan Compensation” in the
“Summary Compensation Table” represent the amounts earned by the NEOs in
2006. This includes the 2006 Annual Performance Pay Plan and the
2004-2006 Cycle of the Performance Unit Program. For example, Mr. Lesar’s total
amount of $6,640,000 represents the payment received for the 2004-2006 Cycle
of
the Performance Unit Program in the amount of $3,780,000, and his payment under
the 2006 Annual Performance Pay Plan in the amount of
$2,860,000.
The
amounts presented in the “Maximum” sub column under the “Estimated Future
Payments Under Non-Equity Incentive Plan Awards” column represent the NEOs’
potential payments in the 2006-2008 Cycle Performance Unit
Program. For example, Mr. Lesar has a maximum payout potential of
$5,000,000 if the maximum goals of the 2006-2008 Cycle Performance Unit Program
are met or exceeded.
Non-Qualified
Deferred Compensation, page 25
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20.
|
We
refer you to Instruction 3 to Item 402(i) of Regulation S-K. Please
provide a narrative of the material terms of each plan following
the
table. We refer you to disclosure on page 17 which notes that the
compensation committee makes allocations under the SERP’ in a given year
in its “sole discretion.” Disclose, by reference to the allocations made
during fiscal 2006 to the named executive officers, the material
factors
or guidelines considered in the making of an allocation and the amount
allocated. Moreover, as noted in Instruction 2 to Item 402(b), provide
context to the compensation awarded during the current year, such
as
discussing the frequency of allocations made to the named executive
officers in prior years and the average amount
allocated.
|
Response: The
material terms of each plan are provided in the CD&A primarily on pages
17-19, however such terms will be repeated below each table in future
disclosures for ease of reference. Allocations under the SERP are
made only once a year. The material factors and guidelines considered
in making an allocation include:
|
·
|
Retirement
benefits provided from other company programs, both qualified and
nonqualified
|
|
·
|
Incumbent
compensation
|
|
·
|
Length
of service
|
|
·
|
Years
of service to normal retirement.
|
The
objective of the SERP is to provide a competitive level of pay replacement
for
key executives upon retirement. The current pay replacement target is
75% of final base salary at age 65 with 25 years of service. The
calculation takes into account the executive’s base pay, years of service, age,
employer portion of qualified plan savings, the age 65 value of any defined
benefit plan, the existing SERP balance, the existing Benefit Restoration
balance and any other retirement plans. Several assumptions are made
annually which include pay increase percentage, qualified and nonqualified
plan
contributions, qualified and nonqualified plan investment earnings and an
annuity rate.
Such
factors are reviewed and approved annually by the Compensation Committee in
advance of calculating any awards. Messrs. Lesar, Cornelison and Lane
have participated in the Plan for over 5 consecutive years (the number required
for vesting purposes for allocations made in 2005 and thereafter) and are fully
vested in their respective account balances. Messrs. Gaut and
McCollum, both of whom have participated since 2003, will be fully vested in
their entire account balances in 2008.
To
determine the annual benefit, external actuaries calculate the total lump sum
retirement benefit needed at age 65 from all company retirement sources to
produce an annual retirement benefit of 75% of final base
pay. Company retirement sources include any company qualified benefit
plans and company contributions to nonqualified benefit plans. If the
combination of these two sources does not yield a total retirement balance
that
will meet the 75% objective, then contributions must be made annually through
the SERP to bring the total benefit up to the targeted level. For
example, assume $7.9 million is needed at age 65 to produce an annual retirement
benefit equal to 75% of final base pay. The participant has $2.1
million in his qualified benefit plans at retirement and $3.0 million in his
nonqualified retirement plans at retirement. Since the total of these
two sources does not equal $7.9 million, a shortfall of $2.8 million
results. This is the amount needed to achieve the 75% pay replacement
objective. Such shortfall must be accumulated through annual
contributions to the SERP which will total $2.8 million at age 65.
The
frequency of allocations is annual for each NEO and the average annual amount
allocated over the history of participation in the Plan is as
follows: Lesar: $222,385; Cornelison: $138,400;
Gaut: $125,000; Lane: $86,143; and
McCollum: $76,500.
Pension
Benefits Table, page 25
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21.
|
Provide
the disclosure required by Item 402(h)(3) of Regulation S-K. For
example,
we note reference to the Halliburton Retirement Plan. Provide a summary
of
the plan and provide context to the disclosure presented. Explain
why Mr.
Cornelison appears to be the only participant in the plan of the
named
executive officers.
|
Response: The
Dresser Consolidated Salaried Retirement Plan was established in 1986 for the
purpose of providing participants with a monthly defined benefit upon
retirement. The Plan was subsequently frozen on May 31,
1995. Mr. Cornelison began employment with Dresser Industries on
March 14, 1994, which qualified him to participate in the Plan. Such
participation ended when the Plan was frozen. Mr. Cornelison is the
only NEO to participate in the Dresser Consolidated Salaried Retirement Plan
because none of the other NEOs were actively employed with Dresser Industries
prior to or on May 31, 1995.
Dresser
Industries and Halliburton merged on September 29, 1998, and Halliburton
subsequently merged the Dresser Consolidated Salaried Retirement Plan into
the
Halliburton Retirement Plan on December 31, 2001. Therefore, the
Pension Benefits Table refers only to Mr. Cornelison’s participation in the
Halliburton Retirement Plan. None of the other NEOs were eligible to
participate in the Halliburton Retirement Plan as participation was limited
to
those salaried employees who were age 55 or older as of December 31,
1996. None of the other NEOs met such criteria.
Employment
Contracts and Change-in-Control Arrangements, page 26
|
22.
|
We
direct you to Item 402(j)(1) of Regulation S-K. Please define key
terms of
the employment agreements disclosed. For example, concisely define
within
the proxy (as opposed to a cross-reference), terms such as “cause,”
“without cause,” and “voluntary
termination.”
|
Response: The
Staff’s comments regarding key terms and their definition within the proxy are
noted, and we will address the Staff’s comments in preparing the 2008 proxy
statement.
Post-Termination
Payments, page 27
|
23.
|
Provide
clear disclosure in this section. For example, specify when and how
executives become eligible for early retirement. Moreover, provide context
to the footnotes to each table by explaining material distinctions
in the
manner in which retirement awards could vest or when lapses of forfeiture
restrictions would be approved. Disclose the material factors considered
by the compensation committee in “approving” early retirement. Finally,
consistent with Item 402(j)(4) of Regulation S-K include a description
of
any material conditions or obligations applicable to the receipt
of
payments or benefits.
|
Response: The
NEOs become eligible for early retirement by either attaining age 50 or by
attaining 70 points via a combination of age + years of
service. Eligibility for early retirement does not guarantee
retention of stock awards (lapse of forfeiture restrictions on restricted stock
and ability to exercise outstanding options for the remainder of the stated
term). Early retirement eligibility is a condition that must be met before
consideration will be given to retention of stock awards upon separation from
employment. For example, if an executive is early retirement eligible
but is leaving the Company not to “retire” but to go to work for a competitor,
then their stock awards would not be considered for retention. If an
executive is eligible for early retirement and is truly retiring or is going
to
work for a company that is not a competitor, then retention of their stock
awards will be considered and, given other factors, such as length of service
to
the Company and contributions made during their employment, will likely be
approved.
Eligibility
for early retirement is not a requirement with respect to the vesting of
retirement awards made under the SERP. If a participant has five
consecutive years of Plan participation in the SERP, then their entire account
balance is fully vested.
For
purposes of the Performance Unit Program Cycles prior to 2006-2008, separation
due to early retirement allowed for earned opportunities to be paid following
the end of the applicable performance period on a pro-rata basis depending
on
the length of time employed during the performance period. For cycles
beginning in 2006, pro-rated participation is not guaranteed and is subject
to
the approval of the Compensation Committee.
There
are
no material conditions or obligations applicable to the receipt of benefits
or
payments under the terms of the applicable plans.
|
24.
|
We
refer you to Items 402(b)(1)(v) and 402(j)(3) of Regulation S-K.
Please
provide further analysis of how the appropriate payment and benefit
levels
are determined under the various circumstances that trigger payments
or
provision of benefits under the employment
agreements.
|
Response: Should
an executive’s employment agreement be triggered for any reason other than
voluntary termination, death, retirement (either at age 65 or voluntarily prior
to age 65), permanent disability, or termination by Halliburton for cause,
the
appropriate payment and benefit levels are determined based solely on the terms
of the applicable plan documents or Company policies with the exception of
the
following:
|
·
|
Severance
pay: For all NEOs, except Mr. Lesar, the severance payment is calculated
as their annual base salary as of the date of the NEO’s separation
multiplied by 2. For example, Mr. McCollum’s base annual salary
is $395,000, as shown in the “Summary Compensation Table,” and when
multiplied by 2 would equal $790,000 as shown in the “Post-Termination
Table.” Mr. Lesar’s severance multiple is 5 times base salary
at the time of termination. A severance payment is only
triggered in cases of termination without cause and upon the occurrence
of
a change in control. To receive such severance pay, the
executive is required to sign a separation agreement releasing the
Company
from all future claims. Severance paid under the terms of the
Employment Agreement fully satisfies any and all other claims for
severance under any Company plans or
policies.
|
|
·
|
Short-term
Incentives: Participation is continued for the full year of
separation and at the existing participation level at separation,
however
any payments are made at the time all other participants receive
payment
and only if company performance yields a payment under the terms
of the
plan. These payments usually occur no later than the end of
February in the year following the Plan Year. This payment, if
applicable, will only be paid to the NEO in the event they separate
under
early or normal retirement, terminate without cause or a change in
control
of the company occurs.
|
|
·
|
Restricted
Shares: Forfeiture restrictions on restricted shares under the
1993 Plan are automatically lapsed and early retirement is not a
condition
for receipt of such shares under the terms of the employment
agreements.
|
The
severance payments, short-term incentives, and lapsing of stock restrictions
are
conditioned on a release agreement being executed by the NEO. Failure
to do so will result in no payments made to the NEO.
The
following benefits are provided pursuant to the terms of the respective plans
or
Company policies and are applicable should the NEO normal retire, early retire
with retention approval, terminate without cause or a change in control of
the
company occurs.
|
·
|
Stock
Options: Should the NEO resign, early retire without approval,
terminate for cause or terminate without cause, they must exercise
their
outstanding, vested options within 30 days after their separation
or the
options will be forfeited. Should the NEO normal retire, early
retire with approval or a change in control event occurs, the NEO
will be
granted retention of their option awards. The unvested awards
will continue to vest per the vesting schedule outlined in their
stock
option agreement and any vested options will not expire until 10
years
from the grant award date.
|
|
·
|
Performance
Units: The NEO will participate on a pro-rated basis for any
Performance Unit Program cycles that have not been completed at the
time
of the NEO’s separation. These payments, if earned, are paid
out upon normal retirement, early retirement with approval and or
in the
event of a change in control. NEOs receive payments at the same
time as other participants, which is usually no later then March
following
the close of the cycle.
|
|
·
|
Health
Benefits: The $12,000 amount shown is to assist with retiree
medical costs. The NEO must have been age 40 or older as of
December 31, 2004 and at their retirement are at least age 55 with
10
years of service or their age and service years are equal to 70 points,
to
be eligible for this credit. The credit is only applicable if
the NEO chooses Halliburton retiree medical coverage. Should
the NEO choose not to take coverage with Halliburton after their
separation, they would not receive any cash in lieu of the
credit. Note that this is not a cash payment, but a credit
applied to the monthly retiree medical costs and only valid until
the
participant turns 65.
|
We
acknowledge that Halliburton Company
is responsible for the adequacy and accuracy of the disclosure in the filing;
that Staff comments or changes to disclosure in response to comments do not
foreclose the Commission from taking any action with respect to the filing;
and
Halliburton Company may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws
of
the United States.
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