CJ 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS COMPENSATION DISCUSSION AND ANALYSIS Introduction This Compensation Discussion and Analysis (“CD&A”) provides information about the objectives, principles, policies and practices of C&J’s executive compensation program; how the Compensation Committee sets executive compensation and certain decisions made by the Compensation Committee with respect to 2017 executive compensation; the components of our 2017 executive compensation program, including the nature, type, size and purpose of those components; and the exceptional circumstances and other factors that the Compensation Committee considered in making decisions and designing our 2017 executive compensation program. For purposes of this Proxy Statement, C&J’s 2017 executive compensation program is presented for the following executives who, for the year ended December 31, 2017, were the Company’s principal executive officer, principal financial officer, and three other most highly-compensated executive officers (collectively referred to as the “Named Executive Officers” or “NEOs”): • Donald Gawick, President and Chief Executive Officer • E. Michael Hobbs, Chief Operating Officer • Mark Cashiola, Chief Financial Officer • Danielle Hunter, Executive Vice President, General Counsel, Chief Risk and Compliance Officer, and Corporate Secretary • Patrick Bixenman, Chief Administrative Officer and President—Research and Technology Mr. Cashiola resigned from the Company effective as of March 20, 2018. Michael Galvan, C&J’s Senior Vice President and Chief Accounting Officer, assumed the additional role of Chief Financial Officer on an interim basis until a replacement is appointed. Biographical information about the Named Executive Officers and our other executive officers, including Mr. Galvan, is included elsewhere in this Proxy Statement under “Our Executive Management Team.” This CD&A is intended to provide context and place in perspective the information reported in “Executive Compensation Tables,” as well as in “CEO Pay Ratio Disclosures” and “Director Compensation.” This CD&A focuses on compensation earned by the Named Executive Officers for 2017, as the last completed fiscal year, in accordance with Item 402 of Regulation S-K. This CD&A also describes compensation actions taken after the end of the year and decisions made for the 2018 fiscal year (see “—Actions Taken for the 2018 Fiscal Year”) to the extent we believe such information enhances the understanding of our executive compensation program and the compensation disclosures included in this Proxy Statement. 2017 Overview—Key Considerations and Actions As highlighted throughout this CD&A, 2017 was both an unusual and transitional year for our Company. Four of the five members of the Compensation Committee and five of the seven members of the Board were new C&J directors, appointed upon our emergence from the Chapter 11 Proceeding. With respect to our executive compensation program, the Compensation Committee had to weigh and address a number of unique concerns in determining 2017 compensation, including: (1) retaining and motivating our people, particularly given the lack of employee stock ownership as a result of the Chapter 11 Proceeding and austerity measures implemented during the industry downturn and (2) establishing the link between pay and performance, complicated by the lack of precedent for performance-based cash bonuses or performance-based equity awards, in addition to the impact of the Chapter 11 Proceeding and dynamic market conditions. On January 6, 2017, the Company successfully emerged from the Chapter 11 Proceeding positioned for sustainable growth as the market began to recover. We endured through the many challenges of a financial restructuring and continued to strengthen our business in the midst of the severe industry downturn due to the efforts and dedication of our people. Among other cost-cutting measures taken in response to the difficult environment, in March 2016, we reduced the base salaries of all of our people across the organization, including a 10% salary reduction for the Named Executive Officers. Due to the terms of the NEOs’ employment agreements, the reduction in base salary was voluntarily made by each Named Executive Officer. During 2017, as our performance improved and outlook strengthened, we began to reinstate base salaries and make other adjustments to our compensation and benefits programs as necessary to remain competitive and determined by management to be appropriate and sustainable. The Named Executive Officers voluntarily elected not to have their salaries reinstated until after the salaries of the rest of the organization had been fully restored. As a result, the base salaries for the Named Executive Officers remained at the reduced levels into the third quarter of 2017. Although a quarterly bonus program was implemented during the Chapter 11 Proceeding to incentivize and retain certain key people critical to supporting the business and our organization during that time, no annual cash bonus awards were paid for 2015 or 2016, and no equity awards were granted for 2016. The employer match component of the Company’s 401(k) plan was eliminated for 2016 and the first half of 2017, and other benefits and perquisites were significantly reduced or eliminated during 2015 and 2016. Even so, and despite volatile business conditions, through the diligence of our people, our performance was solid and we maintained high service quality and safety standards during a difficult time for C&J and the industry as a whole. C&J ENERGY SERVICES, INC. 2018 PROXY STATEMENT 27