CJ 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS strategies that further the best interests of our stockholders. Although deductibility of compensation is preferred when possible, tax deductibility is not a primary objective of our compensation programs, and we believe that achieving our compensation objectives is more important than the benefit of tax deductibility of compensation in certain circumstances. Relation of Compensation Policies and Practices to Risk Management We anticipate that our compensation policies and practices will continue to be tailored to provide rewards for short-term and long-term performance, both on an individual basis and for the organization. In general, optimal financial and operational performance, particularly in a competitive business, requires some degree of risk-taking. However, our Compensation Committee retains a significant amount of discretion with respect to the compensation packages of our Named Executive Officers, which we believe provides an effective preventative measure against management taking actions that could have a material adverse effect on us in the long-run to simply achieve a specific short-term goal. We also believe that the compensation program for our senior management team and general employee population does not unduly incentivize those employees to take unnecessary risks in their day to day activities. We expect our compensation program and arrangements will continue to contain a number of design elements that serve to minimize the incentive for taking unwarranted risk to achieve short-term, unsustainable results. Those elements include a mix of at risk, time and performance-based and long-term focused awards, subjecting awards to forfeiture in the case of certain terminations of employment, and subjecting awards to equity claw-backs under certain scenarios related to violations of our risk management policies and practices. In combination with our risk-management practices, we do not believe that risks arising from our compensation policies and practices for our employees, including our Named Executive Officers, are reasonably likely to have a material adverse effect on our Company. Actions Taken For the 2018 Fiscal Year On an annual basis, the Compensation Committee reviews executive compensation data and analysis on general industry and peer trends and actions, including benchmark positions. The Compensation Committee typically engages an independent, third-party consultant to help ensure, among other objectives, that our executive compensation program is competitive and in line with industry practices and a relevant peer group, incorporates prevailing governance standards, and provides a balanced mix of performance-based compensation and short- and long-term incentives to maintain alignment with short- and long- term objectives. In December 2017, following robust discussion and evaluation of our existing executive compensation program against the data and analysis provided by Pearl Meyer, serving as the Compensation Committee’s independent, third-party compensation consultant, the Compensation Committee modified our NEO’s executive compensation packages for 2018. To ensure an appropriate balance of short- and long-term incentives, the Compensation Committee determined to increase the target values for the 2017 LTI equity awards granted in December 2017 for each of our Named Executive Officers, and to also apply those increased target values for the 2018 LTI equity award anticipated to be granted in December 2018. The target values for the 2018 STI cash bonus awards for each the Named Executive Officers were reduced as disclosed in the table below, and base salaries were held flat for each Named Executive Officer other than for Mr. Bixenman. In order to align Mr. Bixenman’s compensation with his role and responsibilities within the Company, and with other internal positions, the Compensation Committee determined it was appropriate to increase Mr. Bixenman’s 2018 annual base salary to $400,000 from $362,000. 2018 STI Target Value Reductions • The STI award target for Mr. Gawick was reduced from 250% to 120%. • The STI award target for Mr. Hobbs was reduced from 150% to 90%. • The STI award target for Mr. Cashiola was reduced from 100% to 75%. • The STI award target for Ms. Hunter was reduced from 100% to 75%. • The STI award target for Mr. Bixenman was reduced from 100% to 75%. Assuming payout at the target values, and with the exception of Mr. Bixenman due to his increased base salary, each NEO’s total direct compensation opportunity is expected to remain relatively flat in 2018 compared to 2017. We also expect that in 2018 the mix of the 2018 LTI equity awards will again change to include an even greater percentage of performance-based awards. Mr. Cashiola, our former Chief Financial Officer, resigned from the Company effective as of March 20, 2018. His base salary remained flat for 2018 through the date of his termination of employment and he forfeited his 2018 STI and LTI opportunities as part of his severance arrangement (see “Executive Compensation Tables—Potential Payments Upon Termination or Change in Control”—“Waiver and Release Agreement” for additional information regarding Mr. Cashiola’s termination of employment). C&J ENERGY SERVICES, INC. 2018 PROXY STATEMENT 43