Document

DEF 14A 1 def14a-proxystatementforth.htm DEF 14A Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )


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SM Energy Company
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2021 Proxy Statement



Notice of Annual Meeting of Stockholders May 27, 2021 Denver, Colorado

Dear Fellow SM Energy Stockholder,

On behalf of the Board of Directors, I want to offer our best wishes in this challenging time. During 2020, the COVID-19 pandemic sent shockwaves through global economies, cratered demand for the energy supplies we produce, and resulted in devastating hardship and the loss of human life. It has undoubtedly affected our stakeholders in countless ways, and I want to specifically extend our condolences to the members of our SM Energy family that have experienced grave illness or the loss of loved ones.

We wish you well during the remainder of 2021 and beyond. We take solace in the fortitude exhibited by the citizens of our country, the members of our industry, and our employees, all of whom have persevered in spite of incredible challenges. Indeed, during the past year, we continued to responsibly produce the energy supplies needed to improve people’s lives and contribute to domestic energy security and prosperity, while prioritizing and excelling in safety performance and environmental stewardship. We enter 2021 well positioned to accelerate the delivery of sustainable stockholder value.

Measures We Have Taken to Protect Employees, Contractors, and Our Communities

Our Company’s culture prioritizes safety, health and environmental stewardship. We take this very seriously, and these principles impact every decision that we make. In support of these values, substantially all of our office-based employees worked remotely during 2020, and will continue to do so well into 2021. For those individuals who are unable to perform their jobs remotely, we continually assess procedures to protect and advise such employees regarding best health and safety practices. We have acted, and will continue to act, with the health and safety of our employees, contractors and communities at the forefront of our decision-making.

Executive Compensation Decisions Made in Response to the Pandemic

Beginning in early 2020, as the scope and significance of the pandemic became apparent, our Board responded swiftly. The circumstances surrounding the pandemic were novel and unexpected, but our efforts to align executive compensation with the experience of our stockholders were not. As described in greater detail throughout the following Proxy Statement, our Board and Compensation Committee modified the design of our executive compensation programs, and exercised negative discretion in their decisions, to ensure that our executives’ incentives and pay outcomes were reflective of the economic environment and remained aligned with our stockholders’ experience.

Among the many actions taken, our Compensation Committee reduced the base salaries of all executives following the onset of the pandemic, paid annual cash bonuses below target despite out-performance with respect to our metrics (which were not modified during the year), and reduced long-term incentive plan awards to 50 percent of target value and delayed grants until late in 2020 to mitigate dilution.

Successful Execution of Our Business Strategy Through the Pandemic and Market Downturn

Despite the impacts of the pandemic on our business, we executed our business plan in 2020 and accomplished – and in

many cases exceeded – our pre-pandemic 2020 strategic objectives to generate positive cash flow and fund absolute debt reduction. Among our accomplishments, we reduced the principal balance of our total long-term indebtedness by $492 million.

I would like to thank our employees for their hard work and congratulate them for their success in executing our business strategy despite an incredibly challenging economic environment made even more difficult by remote and other modified working conditions.

Our Commitment to ESG Initiatives and Sustainable Business Practices

We remain committed to the pursuit of superior ESG programs and performance. In 2020, our Board demonstrated this commitment by significantly expanding the ESG-related duties of our existing nominating and governance committee, and re-naming it the Environmental, Social and Governance Committee. Additionally, we disclosed our 2019 Sustainable Accounting Standards Board metrics, participated in the 2020 CDP Climate Change Questionnaire, and achieved top quartile performance in key ESG metrics.

I encourage our stakeholders to review our Corporate Responsibility Report, which describes our culture, and our philosophy and approach to operating our business in a manner responsive to all stakeholders, while creating value and responsibly operating our assets to protect the environment, health and safety of our employees, contractors, and neighbors.

On behalf of the Board of Directors, I would like to recognize and extend our deepest gratitude to Mr. Larry Bickle, Mr. Loren Leiker, and Mr. Javan Ottoson, who are not standing for re-election to the Board of Directors, for their countless contributions to the success of our company. We wish each of them the best in their future endeavors, and thank them for their indelible impact on our strong culture, successful strategic transformation, navigation through the pandemic, and overall positioning of our Company for a bright future.

In closing, on behalf of the Board of Directors, I thank each of our stockholders for the trust that you have placed in us. We value your input, and your vote is important to us. We ask for your continued support as we work to position the Company to deliver long-term value to each of you.


Sincerely, William D. Sullivan Chairman of the Board

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To All Stockholders:

The 2021 Annual Meeting of Stockholders of SM Energy Company (the “Annual Meeting”) is to be conducted by live audio webcast on Thursday, May 27, 2021, at 3:30 p.m. Mountain Time. In order to attend the virtual Annual Meeting, stockholders must register at: http://www.viewproxy.com/sm-energy/2021/htype.asp.

The meeting is being convened to:

1.elect seven individuals to our Board of Directors to serve until the next annual meeting of our stockholders and until their respective successors are elected and qualified, or until their earlier resignation or removal;

2.hold an advisory vote to approve the compensation of our named executive officers;

3.ratify the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for 2021;

4.consider and approve the Company’s 2021 Employee Stock Purchase Plan; and

5.transact such other business that may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof.

Our Board of Directors (the “Board”) is using this Proxy Statement to solicit proxies on our behalf for use at the Annual Meeting, and has fixed the close of business on April 1, 2021 as the record date (the “Record Date”) for determining stockholders entitled to receive notice of, to participate in, and to vote at the Annual Meeting and at any adjournment(s) or postponement(s) thereof. We are furnishing our proxy materials, including this Proxy Statement, a proxy card or voting instruction card, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, to the majority of our stockholders via the Internet. Accordingly, on or about April 16, 2021, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed by intermediaries to our stockholders as of the Record Date, containing instructions on how to access the proxy materials via the Internet or request proxy materials in printed form, and how to vote your shares.

You will be able to participate in the Annual Meeting from any location worldwide via live audio webcast, and electronically vote your shares and submit questions online. Given the public health and safety concerns presented by COVID-19, we have adopted this online format to allow us to continue to proceed with the Annual Meeting while mitigating the health and safety risks to participants, expand access to the Annual Meeting, improve communications, and lower the cost to our stockholders, the Company and the environment. To participate in the virtual Annual Meeting, you must first register at http://www.viewproxy.com/sm-energy/2021/htype.asp by 11:59 p.m. (EDT) on May 24, 2021. You will need to enter your name, phone number, and email address, and you will then receive a meeting invitation by email containing your unique access link and password for joining the meeting. We recommend that you log in a few minutes before the Annual Meeting to ensure you are logged in when the meeting starts.

Participation in the Annual Meeting will be restricted to stockholders as of the Record Date who have registered by or before May 24, 2021, and our guests.

Your vote is important. Regardless of whether you plan to participate in the Annual Meeting, we encourage you to vote by using the internet instructions provided in the Notice or the proxy card. If the Proxy Statement and a proxy card are mailed to you, please complete, sign, date, and return the proxy card in the enclosed envelope as soon as possible. Thank you for your support for the recommendations of our Board of Directors.


IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 27, 2021. The Notice of Annual Meeting of Stockholders, the Proxy Statement for the 2021 Annual Meeting of Stockholders, and the Form 10-K for the fiscal year ended December 31, 2020, are available at http://www.viewproxy.com/sm-energy/2021

By Order of the Board of Directors,

Andrew T. Fiske

Deputy General Counsel and Corporate Secretary

Denver, Colorado

April 16, 2021

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TABLE OF CONTENTS



PROXY STATEMENT SUMMARY	1	DIRECTOR COMPENSATION	56
		General	56
CORPORATE GOVERNANCE	6	20 20 Director Compensation	57
Overview	6
Board and Committee Independence	6	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Board Leadership Structure	6	AND MANAGEMENT	58
Corpor at e Responsibility , Stockholder Engagement and our		Common Stock	58
C ommitment to Susta inability	7	Restricted Stock Units and Performance Share Units	59
Board and Committee Meetings	7
Committee Functions	9	REPORT OF THE AUDIT COMMITTEE	60
Risk Oversight	10	Audit Committee Pre-Approval Policy and Procedures	60
Director Nominations and Qualifications	11	20 20 Annual Report	61
Communications with our Board	13
		INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	61
PROPOSAL 1—ELECTION OF DIRECTORS	14
Director Nominee Core Competencies and Composition Highlights	14	PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF
Director Nominees	16	ERNST & YOUNG LLP AS OUR INDEPENDENT
		REGISTERED PUBLIC ACCOUNTING FIRM	61
INFORMATION ABOUT OUR EXECUTIVE OFFICERS	20
		PROPOSAL 4 —APPROVAL OF THE COMPANY'S 2021
COMPENSATION DISCUSSION AND ANALYSIS	22	EMPLOYEE STOCK PURCHASE PLAN	63
Section 1—Responding to the Pandemic and the Feedback of our
S tockholders	22	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	66
Section 2—Our Compensation Philosophy and Objectives	23	Policies and Procedures on Transactions with Related Persons	66
Section 3 —2020 Business Results and Select Executive		Transactions with Related Persons	66
Compensation Decisions	25	Compensation Committee Interlocks and Insider Participation	67
Section 4 —Competitive Positioning—Selection and Purpose of
Our Comparative Peer Group	28	VOTING, ATTENDANCE, AND OTHER MATTERS	67
Section 5 —Primary Elements of Compensation and Select		Who Can Vote	67
Executive Compensation Decisions	29	Quorum	67
Section 6 —Compensation Determination Process	40	How to Vote	67
Section 7 —Other Compensation Matters	42	Differences Between Stockholders of Record and Street Name
Compensation Committee Report	45	Holders	68
		Participating in the Virtual Annual Meeting	68
EXECUTIVE COMPENSATION TABLES	46	Annual Meeting Webcast	68
CEO Pay Ratio	47	Submitting Questions at the Annual Meeting	68
Grants of Plan-Based Awards	48	If the Virtual Annual Meeting Experiences Technical Difficulties	68
Outstanding Equity Awards	49	Voting Requirements; Vote Treatment	69
Stock Vested	50	Stockholders Sharing the Same Address	70
Pension Benefits	50	Revoking a Proxy	70
Non-Qualified Deferred Compensation	51	Payment of Proxy Solicitation Costs	70
Potential Payments Upon Termination or Change of Control	51	Stockholder Proposals for the 2022 Annual Meeting
Equity Compensation Plans	53	of Stockholders	71
		Other Available Information	72
PROPOSAL 2—ADVISORY VOTE ON EXECUTIVE
COMPENSATION	54


PROXY STATEMENT SUMMARY

This Proxy Statement Summary highlights important information presented throughout this 2021 Proxy Statement (this “Proxy Statement”) and is intended to assist you in evaluating the matters to be voted on at the Annual Meeting. This summary does not contain all of the information you should consider, and we encourage you to read this Proxy Statement in its entirety, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Annual Report”), prior to voting. For more information regarding the 2020 financial and operational performance of SM Energy Company, please review our 2020 Annual Report.

Annual Meeting Information


DATE & TIME	PLACE	RECORD DATE	VOTING
Thursday, May 27, 2021 3:30 p.m. Mountain Time	Via the Internet Stockholders must register at http://www.viewproxy.com/sm-energy/2021/htype.asp by 11:59 p.m. (EDT) on May 24, 2021	April 1, 2021	Only stockholders of record at the close of business on the Record Date may vote at the Annual Meeting

Proposals and Voting Recommendations


		Voting Recommendation	Page
Proposal 1:	Election of the seven directors named in this Proxy Statement, each to serve until the next annual meeting of stockholders and until their respective successors are elected and qualified, or until their earlier resignation or removal.	FOR each nominee	14
Proposal 2:	Advisory vote to approve the executive compensation of our named executive officers.	FOR	54
Proposal 3:	Ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for 2021.	FOR	61
Proposal 4:	Approval of the Company’s 2021 Employee Stock Purchase Plan.	FOR	63

How to Vote Your Shares

ONLINE

CALL

MAIL

Vote online prior to or during the
Annual Meeting per the instructions
on your proxy card or voting
instruction card.

Vote by phone by calling the
applicable phone number on your
proxy card or voting instruction
card.

If you have received a printed
version of these proxy materials,
vote by signing, dating, and
returning your proxy card by mail.

We strongly encourage you to vote. For more information about voting your shares, see “Voting, Attendance, and Other Matters” contained in this Proxy Statement.

Responding to the Pandemic

The safety of our employees and contractors and the communities where we live and work remains our first priority as we continue to conduct our business during the COVID-19 global pandemic (the “Pandemic”). While the execution of our drilling and completion operations requires certain individuals to be physically present at field and other locations, substantially all of our office-based employees have continued working remotely in order to limit physical interactions and mitigate the spread of COVID-19, and will continue to do so well into 2021. For individuals who are unable to perform their jobs remotely, we maintain and continually assess procedures designed to protect our work force and limit the spread of COVID-19, including physical distancing and enhanced

sanitization measures. We continue to communicate with and advise all of our employees regarding best practices for maintaining a healthy and safe work and home environment. We believe that we meet and often exceed CDC and OSHA guidelines regarding safe work-place matters. Since these measures were initially implemented in the first quarter of 2020, we have continued to efficiently operate our business. Our pre-existing control environment and internal controls continue to be effective, and we address new risks related to the Pandemic as they arise in our business.

Business Strategy Execution

Long-Term Principal Debt Reduction of $492 Million

↓18%

(Full Year 2020)

NET CASH PROVIDED

BY OPERATING ACTIVITIES

EXCEEDED

NET CASH USED IN

INVESTING ACTIVITIES BY

$235.5 Million

(Full Year 2020)

TOP QUARTILE ESG PERFORMANCE

(Safety and Spill Metrics

compared to reporting AXPC members)

Our long-term strategy for sustainable operations included key objectives in 2020 to generate positive cash flow and fund absolute debt reduction, while prioritizing environmental, social and governance (“ESG”) initiatives in our business. We successfully executed our 2020 strategy in the following ways:

•Generated net cash provided by operating activities of $790.9 million, which was in excess of net cash used in investing activities of $555.6 million.

•Reduced the principal balance of total outstanding long-term debt by $492 million, or 18 percent, to $2.3 billion at year-end 2020, down from $2.8 billion at year-end 2019. This decrease was primarily driven by the successful execution of offers to exchange certain of our outstanding senior unsecured notes for newly issued second lien secured notes, applying excess cash flow toward open market repurchases of senior notes at a discount, and reducing the Company’s revolving line of credit.

•Expanded our capital project inventory of top tier assets through successful exploration and development activity during the year.

We accomplished these strategic objectives despite new operational protocols and remote and other modified work conditions, and significant macroeconomic challenges that resulted in unprecedented declines in commodity prices, especially for oil. Despite the challenges of the past year, we find ourselves entering 2021 well-positioned to continue executing our long-term strategy and generating value for our stakeholders.

During 2020, we further prioritized ESG initiatives by, among other things, expanding our disclosures and integrating enhanced environmental and social programs throughout the organization. We updated our Corporate Responsibility Report, disclosed our 2019 Sustainability Accounting Standards Board metrics for oil and gas exploration and production companies (the “SASB Metrics”), and participated in the 2020 CDP Climate Change Questionnaire (the “CDP Questionnaire”), which incorporates all Task Force on Climate Related Financial Disclosures (TCFD), all of which are disclosed on our website (information on our website is not incorporated by reference into this Proxy Statement and should not be considered part of this document). During 2020, we achieved top quartile performance in safety and spill metrics (compared to the trailing three-year average of reporting American Exploration Production Council (“AXPC”) members), and outperformed our internal target for greenhouse gas emission intensity. In addition, we completed our planned triennial independent environmental, health and safety compliance audit with excellent results, and implemented systems for tracking relevant ESG metrics in order to further improve our operations and enhance reporting.

Corporate Governance Best Practices

Our engaged, independent and diverse Board of Directors (the “Board”) is focused on adherence to our core values and the integration of our strategic objectives with our corporate responsibilities. We continue to separate the roles of our Chairman of the Board and our Chief Executive Officer, and our non-classified Board remains focused on the oversight of our operations, including ESG, financial, risk management and cybersecurity

matters, and the health and safety of our employees, contractors and the communities where we live and work. During 2020, we increased the ESG-related responsibilities of our Board’s nominating and governance committee, and renamed it the Environmental, Social and Governance Committee (the “ESG Committee”).

Our non-management director nominees are all independent and tenured to provide an effective balance of fresh perspectives and experience to our Board.


DIRECTOR INDEPENDENCE	DIRECTOR TENURE	DIRECTOR DIVERSITY
Six of seven director nominees are independent.	Our director nominees provide an effective balance of fresh perspectives and experience.	Our Board is committed to maintaining an appropriately diverse and broadly inclusive membership, with four of seven director nominees gender or ethnically diverse.


			* As of December 31, 2020; a full year of credit is given for the year in which the respective directors are appointed.			Including two female and two Hispanic nominees.

Executive Compensation Philosophy and Decision-Making


Executive Compensation
Philosophy						Decision-Making
Our executive compensation program is designed to align executive pay with the Company's financial, operational and ESG performance, and to incentivize the creation of positive stockholder returns throughout industry cycles. We seek to provide competitive total compensation opportunities in order to retain talented leaders, link realized compensation to short-term and long-term performance, and design financially efficient programs that discourage excessive risk taking. The primary elements of our executive compensation program generally include a fixed base salary targeted at the median of our comparative peer group, an annual cash incentive opportunity linked to achievement of individual and corporate performance, and a long-term compensation opportunity generally allocated between restricted stock units (“RSUs”) vesting ratably over a three-year period and performance share units (“PSUs”) or performance-based cash awards tied to Company performance against our peer group or other established corporate goals over a three-year period.						Despite the successful execution of our business plan during 2020, the impacts of the Pandemic and the destruction of demand for oil and natural gas resulted in unprecedented negative impacts to commodity prices and equity valuations for companies in our industry. In an effort to align executive compensation with our stockholders' experience, our Compensation Committee exercised negative discretion with respect to 2020 executive compensation in the following ways: •reduced base salaries of all executives: ◦reduced the base salary of our then-President and Chief Executive Officer, Mr. Ottoson, by 20 percent, which reduction was similarly applied to the base salary of Mr. Vogel upon his appointment to the role of Chief Executive Officer; ◦reduced the base salaries of our Executive Vice Presidents, Messrs. Pursell, Vogel (prior to his promotion to CEO) and Copeland by 15 percent; ◦reduced the base salaries of our Senior Vice Presidents and Vice Presidents by 10 percent (including two NEOs); •suspended 2020 base salary increases for all employees; •mitigated dilution by delaying the grant of 2020 long term incentive plan (“LTIP”) awards due to our low share price caused by market uncertainty and overreaction; •reduced 2020 LTIP grant values to all participants, including our NEOs, to 50 percent of target value; •paid executive annual cash bonuses below target to reflect market conditions and stockholder experience, despite our strong operational and financial performance against pre-Pandemic targets; and •responded to input from our stockholders by incorporating new free cash flow and leverage ratio reduction metrics into our LTIP program, and implementing new and enhanced ESG-related performance metrics into our short term inventive plan (“STIP”) and LTIP programs.

Stockholder Engagement

Our Board remains committed to maintaining open engagement with our stockholders and other stakeholders concerning our business strategy, governance practices, executive compensation program, commitment to ESG initiatives, response to the Pandemic and other matters of importance. As part of this commitment, our Board and management team continually engage with stockholders to solicit input, answer questions and ensure that our Board has the information required to understand and address matters of importance. During 2020, our Board and management team continued this outreach commitment and engaged in meaningful discourse with our stockholders. For more information about our efforts to engage with and receive feedback from our stockholders, please see “Corporate Responsibility, Stockholder Engagement and our Commitment to Sustainability” contained in this Proxy Statement.

Commitment to Our Core Values: Our Culture


Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. Our vision to sustainably create value for all of our stakeholders includes near-term operational and financial goals of generating positive cash flow, while strengthening our balance sheet through absolute debt reduction and improved leverage metrics. Our culture includes approaching our business with integrity and ethical behavior, prioritizing safety, health, and environmental stewardship, promoting the success of others and the team, understanding and communicating the reasons for our actions and how every employee contributes, operating in a highly collaborative manner that is open to new ideas and technologies, supporting the development of all team members, and supporting the communities where we live and work.

Our Corporate Responsibility Report describes our philosophy and approach to operating our business in a manner responsive to all of our stakeholders, while creating value and responsibly operating our assets to protect the environment and the health and safety of our employees, contractors and neighbors. Additionally, our publication of 2019 SASB Metrics provides disclosure of metrics and a description of practices relevant to ESG stewardship for our industry. Publication of the CDP Questionnaire discloses, among other topics, the risks and opportunities relevant to our business for long-term sustainable operations in consideration of climate change. Information included on our website, including the Corporate Responsibility Report, SASB Metrics and CDP Questionnaire, is not incorporated by reference into this Proxy Statement and should not be considered part of this document.

We operate only in the United States. We have established procedures and controls designed to support our objective of remaining, at all times, in material compliance with federal, state, and local laws and governmental regulations. We strive at all times to comply with all applicable employment laws that prohibit unlawful discrimination, regulate wages and compensation, and ensure a safe workplace. On a quarterly basis, executives and other key employees are required to certify compliance with all such matters, or to report any circumstances of perceived non-compliance. On an annual basis, we retain a third party to analyze our workforce demographics and conduct discrimination and pay equity testing. No discriminatory practices have been identified and no evidence of discrimination or material pay inequity has been found. On an annual basis, every employee is required to acknowledge understanding of, and compliance with, our Code of Business Conduct and Conflict of Interest Policy (the “Code of Conduct”), which sets forth the Company’s expectations regarding business conduct and ethical standards, and this process is overseen by our Audit Committee. The Company maintains an ethics and compliance hotline that allows any person to anonymously report any perceived violations of our Code of Conduct, ethical standards, or other compliance-related matters, and our General Counsel investigates and reports to our Board and senior management concerning all such matters.


CORPORATE GOVERNANCE

Overview

Our Board believes that sound corporate governance principles foster the ethical behavior and integrity owed to all of our stakeholders. The framework for our corporate governance principles is established by the charters for the committees of our Board, our Corporate Governance Guidelines, our Financial Code of Ethics (the “Financial Code”) and our Code of Conduct, each of which have been adopted and are regularly reviewed by our Board for appropriate modifications based on evolving corporate governance developments. A complete copy of these documents is available on our website at www.sm-energy.com or in print, free of charge, to any stockholder who requests it by contacting our Corporate Secretary.

The Financial Code establishes ethical standards and principles relating to certain financial compliance and disclosure matters and applies to our principal executive officer, principal financial officer, principal accounting officer and controller, as well as persons performing similar functions and other officers and employees identified by our Chief Financial Officer. The Financial Code requires that any exception or waiver thereto be made only by the Audit Committee of our Board (the “Audit Committee”) as required by law, SEC rules and regulations, and New York Stock Exchange (“NYSE”) rules, and that it be disclosed on our website at www.sm-energy.com within two business days after such exception or waiver. To date, the Audit Committee has not granted any exception or waiver of the Financial Code.

Board and Committee Independence

With the exception of Mr. Vogel, our current CEO, and Mr. Ottoson, our former CEO who retired in November of 2020 and who is not a director nominee for election at the Annual Meeting, our Board is comprised entirely of independent directors who meet the SEC and NYSE independence standards, each of whom has been determined by the Board to not have any material relationship with us other than as a director and stockholder. In reviewing and making its determination as to the independence of its members, our Board considered nominee disclosures concerning past employment, remuneration, and any other relationship with us, as well as the independence tests set forth in Section 303A.02 of the Corporate Governance Standards of the NYSE’s Listed Company Manual. The Audit Committee, the Compensation Committee of our Board (the “Compensation Committee”), and the ESG Committee are each comprised solely of independent directors under the applicable requirements of the NYSE and SEC.

Board Leadership Structure

Our Corporate Governance Guidelines require our Board to annually determine whether to keep the roles of Chief Executive Officer (sometimes referred to herein as “CEO”) and Chairman of the Board separate, or whether to permit one person to serve in both capacities. Our ESG Committee annually evaluates our leadership structure and makes a recommendation to our Board. While recognizing that different board leadership structures may be appropriate at different times and under different circumstances, based on the recommendation of the ESG Committee, our Board has, since 2007, determined that it is in the best interests of our stockholders to separate the roles of CEO and Chairman of the Board.

Under this structure, the Chairman of the Board is responsible for providing leadership to the Board, facilitating communications among the directors, setting the Board meeting agenda in consultation with our CEO, presiding at meetings and executive sessions of our Board meetings, and serving as a liaison between our management and directors, while allowing our CEO to focus on leading the Company.

Our Board is not classified, and all directors are elected annually by our stockholders. A number of our independent directors have served in senior management roles with other companies in the oil and gas industry or are currently serving or have served as directors of other public companies. The specific experiences, qualifications, attributes, and skills of each independent director, which enable him or her to effectively serve on his or her respective Board committees, are described in each director’s biographical information. We believe that the independent and experienced directors that make up our Board, the specific experiences and skills that they

possess, and the overall leadership of the Board by the Chairman, are beneficial to our stockholders and other stakeholders.

Corporate Responsibility, Stockholder Engagement and our Commitment to Sustainability

At SM Energy, we recognize that our stakeholders trust us to conduct business in a manner that is consistent with our reputation of operating in a responsible and ethical manner that will serve to protect our employees, contractors and neighbors, and the lands on which we operate, while supporting the communities where we live and work. We recognize that operating in this industry is a privilege and we take that responsibility seriously. We manage our business in a way that seeks to minimize risk to our communities and promotes social, environmental, human and economic benefits, while continuously striving to be a good steward of natural resources.

Our Board is committed to maintaining an open dialogue with our stakeholders to receive ongoing feedback on our business strategy, governance practices, executive compensation program, environmental and social initiatives, response to the Pandemic, and other matters of importance. Representatives of our Board and management regularly engage with stockholders through conference attendance, telephone calls and one-on-one meetings. As we have executed our strategic transformation over the past several years, our Board has actively sought to align our ESG and compensation practices with our changing business and the expectations of our stakeholders. Investor feedback through conversations and proxy voting has been an important reference point for discussion and decision-making on those topics.

Throughout 2020 and into 2021, much of the feedback we received from discussions with our stockholders and other stakeholders, and from discussions held throughout the year with a broader group of investors, indicated the desire for additional ESG reporting. In response, we updated our Corporate Responsibility Report, which describes our philosophy and approach to operating our business in a manner responsive to all of our stakeholders, while seeking to create stockholder value and responsibly operate our assets to protect the environment and the health and safety of our employees and contractors. Additionally we published our SASB Metrics in order to expand our disclosures and provide enhanced descriptions of our practices related to ESG matters, and disclosed our responses to the CDP Questionnaire in order to, among other things, highlight the risks and opportunities relevant to our business for long-term sustainable operations as it relates to climate change. Furthermore, we completed our planned triennial independent environmental, health and safety compliance audit, and implemented systems to track broader ESG metrics to further improve our operations and enhance reporting. Our SASB Metrics, CDP Questionnaire responses and updated Corporate Responsibility Report are available on our website at www.sm-energy.com. Information on our website is not incorporated by reference into this Proxy Statement and should not be considered part of this document.

All feedback from engagement with our stockholders and other stakeholders is shared with and discussed by our full Board. In addition to the ESG initiatives discussed above, we have made a variety of other changes that are important to our stakeholders, including modifications to our executive compensation program, increasing disclosure relating to our Board’s risk oversight processes, and increasing the ESG-related responsibilities of our Board’s nominating and governance committee, and renaming it the Environmental, Social and Governance Committee. We would like to take this opportunity to thank our stockholders and other stakeholders for sharing their valuable feedback and recognizing our successful efforts to implement this feedback into our business strategy, governance practices, executive compensation programs, and sustainability focus.

Board and Committee Meetings

Our Board met sixteen times during 2020, which was significantly more than the number of meetings held during 2019, and directly resulted from the need to address the impact of the Pandemic on the Company and our industry, and as required to manage our CEO succession process. Our non-management directors routinely meet in executive session immediately after regularly scheduled meetings of the Board or as otherwise deemed necessary, and met eight times during 2020. No director attended less than 75 percent of meetings of the Board and the committees upon which such director served, and the majority of our directors participated in 100 percent of our Board meetings and 100 percent of the meetings of the committees on which he or she serves. It is our policy that each director is expected to attend each annual meeting of stockholders, and each director then serving on our Board did attend the 2020 Virtual Annual Meeting of Stockholders. The following table identifies the

members of each committee as of March 1, 2021, as well as the number of meetings held in 2020, and our directors’ other public company board service:

Committee Members

Other

Boards(2)

Name of Director(1)

Carla J. Bailo

n(6)

Larry W. Bickle

(5)

Stephen R. Brand

Loren M. Leiker(3)

(6)

Javan D. Ottoson

Ramiro G. Peru

Julio M. Quintana

Rose M. Robeson

William D. Sullivan(4)

Herbert S. Vogel

Meetings Held in 2020

A Audit Committee

E Executive Committee

u Chair

C Compensation Committee

G Environmental, Social and Governance Committee

n Member

____________________________

(1) All directors are independent, except Mr. Ottoson, our former CEO, and Mr. Vogel, our current CEO. Mr. Ottoson is not standing for reelection at the Annual Meeting.

(2) Number of other public company boards on which such director serves.

(3) Mr. Leiker is not standing for reelection to the Board and has informed the Company of his decision to retire from the Board solely for family medical reasons, effective immediately following the Annual Meeting.

(4) If reelected, Mr. Sullivan is expected to continue to serve as Chairman of our Board of Directors following the Annual Meeting.

(5) Mr. Bickle served as a member of the Compensation Committee for the portion of 2020 from the beginning of the year until the Company’s Annual Meeting of Stockholders on May 27, 2020. Mr. Bickle is not standing for reelection at the Annual Meeting.

(6) Mr. Leiker served as a member of the ESG Committee of the Board for the portion of 2020 from the beginning of the year until October 26, 2020, at which time Mr. Leiker ceased to be a member of the ESG Committee and Ms. Bailo joined the ESG Committee.

Committee Functions


AUDIT COMMITTEE
Members:						Roles and Responsibilities:
Rose M. Robeson (chair) Carla J. Bailo Larry W. Bickle Loren M. Leiker Ramiro G. Peru Meetings Held in 2020: 6 The Board has determined that each member of the Audit Committee is independent under the standards of independence established by SEC rules and regulations and the NYSE listing standards. The Board has determined that all members of the Audit Committee are financially literate, and that Ms. Bailo, Mr. Bickle, Mr. Peru and Ms. Robeson are “audit committee financial experts” as defined by the SEC.						The Audit Committee assists our Board in fulfilling its responsibilities for oversight of our financial reporting and internal control processes. Furthermore, the Audit Committee fulfills the following roles and responsibilities: •sole responsibility for the engagement and discharge of our independent registered public accounting firm; •reviews our quarterly and annual financial results; •reviews the audit plan and the results of the audit with our independent auditors •reviews the independence of our auditors and approves the audit fees to be paid; •assesses the scope and adequacy of our system of internal accounting controls; and •reviews our financial risk management policies. The Audit Committee also has oversight responsibility for our internal audit function, Financial Risk Management Committee, cybersecurity risk and business continuity functions, and any related party transactions. Pursuant to the Audit Committee charter, members are prohibited from serving on more than three audit committees of public companies (one of which is ours), and no Audit Committee member currently serves on more than three such committees. For more information see the “Report of the Audit Committee” contained in this Proxy Statement.


COMPENSATION COMMITTEE
Members:						Roles and Responsibilities:
Stephen R. Brand (chair) Ramiro G. Peru Julio M. Quintana

SEC Form DEF 14A filed by SM Energy Company