2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 460 EXECUTIVE COMPENSATION The Oil Industry Peer Group companies most similar to Chevron in size, complexity, geographic reach, business lines, and location of operations are BP, ExxonMobil, Royal Dutch Shell, and Total. These companies are key competitors for stockholder investments within the larger global energy sector. We also compete for stockholder investment and employee talent with smaller U.S. companies, including the larger independent exploration and production companies and the larger independent refining and marketing companies. The Non–Oil Industry Peer Group includes capital-intensive, global, large-scale, and high-complexity company comparators. The median market cap (as of 12/31/2017) of the Non–Oil Industry Peer Group was $142 billion (vs. $238 billion for Chevron) and the median sales for 2017 were $53 billion (vs. $127 billion for Chevron). 0 50 100 150 200 250 300 350 400 2017 LTIP and Oil Industry Peer Group Market Capitaliza�on ($ Billions) ExxonMobil Chevron BP Occidental Valero Anadarko Andeavor MarathonOil Shell Total ConocoPhillips Phillips66 MarathonPetroleum Devon Hess 0 50 100 150 200 250 300 350 400 2017 Non – Oil Industry Peer Group Market Capitaliza�on ($ Billions) J& J AT&T Verizon PepsiCo GE 3M Caterpillar LockheedMar�n Northrop Grumman HP Inc. Chevron Intel Pfizer Boeing DowDupont Merck IBM Honeywell DukeEnergy Ford AEP Int'lPaper Components of Executive Compensation The material components of our executive compensation program and their purposes and key characteristics are as follows: • Base salary • Annual incentive plan (Chevron Incentive Plan) • Long-Term Incentive Plan, including performance shares, stock options, and restricted stock units • Benefits, including retirement plans, savings plans, and other perquisites Base Salary Base salary is a fixed, competitive component of pay based on responsibilities, skills, and experience. Base salaries are reviewed periodically in light of market practices and changes in responsibilities. How Base Salaries Are Determined Base salaries are determined through market surveys of positions of comparable level, scope, complexity, and responsibility. There is no predetermined target or range within the Oil Industry Peer Group or the Non–Oil Industry Peer Group as an objective for Mr. Watson’s base salary. Instead, the MCC takes into account the data provided by the MCC’s independent consultant, the relative size, scope, and complexity of our business, Mr. Watson’s performance, and the aggregate amount of Mr. Watson’s compensation package. For the other NEOs, each executive officer is assigned a base salary grade. The MCC annually reviews the base salary grade ranges and may approve changes in the ranges based on business conditions and comparative peer group data provided by the MCC’s independent consultant. Within each salary grade range, the MCC makes base salary determinations for each NEO taking into account qualitative considerations, such as individual performance, experience, skills, competitive positioning, retention objectives, and leadership responsibilities. The independent Directors of the Board approve the compensation of the CEO and ratify the compensation of the other NEOs. Chevron Corporation—2018 Proxy Statement 37 EXECUTIVE COMPENSATION Compensation Discussion and Analysis in Detail 2017 Named Executive Officers Chevron’s Named Executive Officers, or NEOs John S. Watson, Chairman and Chief Executive Officer* Patricia E. Yarrington, Vice President and Chief Financial Officer Michael K. Wirth, Vice Chairman and Executive Vice President, Midstream & Development* James W. Johnson, Executive Vice President, Upstream Joseph C. Geagea, Executive Vice President, Technology, Projects and Services *Following Mr. Watson’s retirement, Mr. Wirth assumed the positions of Chairman and Chief Executive Officer effective February 1, 2018. Use of Peer Groups We are always competing for the best talent with our direct industry peers and with the broader market. Accordingly, the MCC regularly reviews the market data, pay practices, and compensation ranges among both oil industry peers and non-oil industry peers to ensure that we continue to offer a reasonable and competitive executive pay program. Our core peer group is reviewed regularly by the MCC and updated as appropriate. Throughout this Compensation Discussion and Analysis, we refer to three distinct peer groups, as described below. We source peer company data from compensation consultant surveys and public disclosures. Peer Group Description Oil Industry Peer Group (13 companies) Companies with substantial U.S. or global operations that closely approximate the size, scope, and complexity of our business or segments of our business. This is the primary peer group used to understand how each NEO’s total compensation compares with the total compensation for reasonably similar industry-specific positions. Non–Oil Industry Peer Group (21 companies) Companies that are of significant financial and operational size and that have, among other features, global operations, significant assets and capital requirements, long-term project investment cycles, extensive technology portfolios, an emphasis on engineering and technical skills, and extensive distribution channels. This is the secondary peer group used to periodically compare our overall compensation practices (and those of the oil and energy industry, generally) against a broader mix of non-oil companies that are similar to Chevron in size, complexity, and scope of operations. Alcoa Inc. split into two small companies in 2016 and was removed from t peer group due to lack of comparability. LTIP Performance Share Peer Group (4 companies and 1 stock index) Companies used to compare our TSR for the purpose of determining performance share payout: • For LTIP grants issued prior to 2017: BP, ExxonMobil, Royal Dutch Shell, and Total • Effective with 2017 LTIP grant: BP, ExxonMobil, Royal Dutch Shell, Total, and S&P 500 Total Return Index The inclusion of the S&P 500 Total Return Index broadens the performance benchmark beyond industry peers and requires Chevron to outperform both industry peers and a market-based index in order to receive maximum payout. The MCC believes this further aligns executive pay with long- term stockholder interests. 36 Chevron Corporation—2018 Proxy Statement CHEVRON CORPORATION