Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant  x               

Filed by a Party other than the Registrant  ¨

Check the appropriate box
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Preliminary Proxy Statement
 
 
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
 
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Definitive Proxy Statement
 
 
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Definitive Additional Materials
 
 
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Soliciting Material Pursuant to §240.14a-12
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12147551&doc=12
BAKER HUGHES, a GE company
(Name of registrant as specified in its charter)
 
(Name of person(s) filing proxy statement, if other than the registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
 
x
 
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
 
 
 
 
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Fee paid previously with preliminary materials.
 
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
 
 
 
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BAKER HUGHES, A GE COMPANY

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT

MAY 11, 2018
 
 
 
 
 




EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO VOTE IN ADVANCE OF THE MEETING USING ONE OF THESE VOTING METHODS
 
 
 
 
 
:
Via the Internet at www.proxyvote.com
 
)
Calling toll-free at 1-800-690-6903
 
 
 
 
 
+
Mailing your signed proxy card or voting instructions to the address listed on the envelope
 
 
 




http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12147551&doc=12
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
May 11, 2018
9:00 a.m. Central Daylight Time
2001 Rankin Road
Baker Street Conference Room
Houston, Texas 77073

Agenda

1.
The election of directors;
2.
An advisory vote related to the Company’s executive compensation program;
3.
The approval of the Company’s Employee Stock Purchase Plan;
4.
The ratification of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2018; and
5.
Such other business as may properly come before the meeting and any reconvened meeting after an adjournment thereof.

Record Date

The Board of Directors (the “Board”) of Baker Hughes, a GE company (the "Company," "BHGE," "we," "us" or "our") has fixed March 19, 2018 as the record date for determining the stockholders of the Company entitled to notice of, and to vote at the meeting and any reconvened meeting after an adjournment thereof, and only holders of Common Stock (as defined below) of the Company of record at the close of business on that date will be entitled to notice of, and to vote at the meeting and any reconvened meeting after an adjournment.

Proxy Voting

You are invited to attend the meeting in person. Whether or not you plan to attend in person, we urge you to promptly vote your shares by telephone, by the Internet or, if this proxy statement (“Proxy Statement”) was mailed to you, by completing, signing, dating and returning it as soon as possible in the enclosed postage prepaid envelope in order that your vote may be cast at the Annual Meeting of the Stockholders (the "Annual Meeting"). You may revoke your proxy any time prior to its exercise, and you may attend the meeting and vote in person, even if you have previously returned your proxy.                                        
 
By order of the Board of Directors,
 
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Lee Whitley
 
Associate General Counsel and Corporate Secretary
Houston, Texas
March 23, 2018




PROXY STATEMENT
TABLE OF CONTENTS
Proxy Statement Summary
General Information
Voting Securities
Proposal No. 1 Election of Directors
Corporate Governance
Director Compensation
Stock Ownership
Charitable Contributions
Certain Relationships and Related Transactions
Compensation Discussion and Analysis
Compensation Committee Report
Summary Compensation Table
Grants of Plan-Based Awards
Outstanding Equity Awards at Fiscal Year-End
Option Exercises and Stock Vested
Pension Benefits
Nonqualified Deferred Compensation
Potential Payments Upon Change in Control or Termination
CEO Pay Ratio Disclosure
Compensation Committee Interlocks and Insider Participation
Proposal No. 2 Advisory Vote on Executive Compensation
Proposal No. 3 Approval of the Baker Hughes, a GE company Employee Stock Purchase Plan
Audit Committee Report
Fees Paid to Deloitte & Touche LLP, KPMG LLP and KPMG S.p.A.
Proposal No. 4 Ratification of the Company's Independent Registered Public Accounting Firm
Annual Report
Incorporation by Reference
Stockholder Proposals
Other Matters
Governance Principles
Charter of the Audit Committee of the Board of Directors
Reconciliation of GAAP Measures to Non-GAAP Measures
Employee Stock Purchase Plan





PROXY STATEMENT SUMMARY

This Proxy Statement Summary highlights information contained elsewhere in this Proxy Statement, which is first being sent or made available to stockholders on or about March 23, 2018. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement carefully before voting.
2018 Annual Meeting Information

Date:
May 11, 2018
Time:
9:00 a.m. Central Daylight Time
Place:
2001 Rankin Road
Baker Street Conference Room
Houston, Texas 77073
Matters to be Voted Upon
No.
Proposal
Board Recommendation
1.
The election of directors
FOR
 each nominee
2.
An advisory vote related to the Company’s executive compensation program
FOR
3.
The approval of the Company’s Employee Stock Purchase Plan
FOR
4.
The ratification of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2018
FOR
Combination of GE O&G and BHI
On July 3, 2017, we closed our previously announced business combination (the “Transactions”) to combine the oil and gas business (“GE O&G”) of General Electric Company (“GE”) and Baker Hughes Incorporated ("BHI"), creating a world-leading, fullstream oilfield technology provider that has a unique mix of equipment and service capabilities. The Transactions were executed using a partnership structure, pursuant to which GE O&G and BHI each contributed their operating assets to a newly formed partnership, Baker Hughes, a GE company, LLC (“BHGE LLC”). GE holds an approximate 62.5% controlling interest in this partnership and former BHI stockholders hold an approximate 37.5% interest through the ownership of 100% of our Class A Common Stock. GE holds its voting interest through our Class B Common Stock and its economic interest through a corresponding number of Common Units of BHGE LLC. Former BHI stockholders immediately after the completion of the Transactions also received a special dividend of $17.50 per share paid by the Company to holders of record of the Company’s Class A Common Stock. GE contributed $7.4 billion to BHGE LLC to fund substantially all of the special dividend. The rights (including voting rights) of our Class A Common Stock and Class B Common Stock (each as defined below) are identical; provided that Class B Common Stock has no economic rights.
2017 Business Highlights
$21.9B
COMBINED REVENUE *
$1B
ADJUSTED OPERATING INCOME *
64K+
EMPLOYEES IN
120
COUNTRIES
ANNOUNCED A $3B SHARE BUYBACK AUTHORIZATION
 * Combined revenue and adjusted operating income are non-GAAP measures. A reconciliation of GAAP to non-
     GAAP measures is included in this proxy statement as Annex C.

BHGE 2018 Proxy Statement | 1



                    
We Created a New Company
We merged two great companies in record time and began trading on the NYSE as BHGE
We won our first fullstream deal and signed our largest-ever digital contract
We achieved numerous drilling records for customers and doubled footage drilled with Autotrak to 5,200 miles across the globe
We delivered $119 million in synergies and increased our dividend by 6%
We launched 240+ new products and registered 2,800+ patents

Health, Safety & Environment; Compliance and Sustainability

Health, Safety and the Environment is part of everything we make and everything we do, and our employees are empowered to own exceptional HSE performance to make every day a Perfect HSE Day. A Perfect HSE Day is a day with no incidents, no vehicle accidents and no harm to the environment.

We relentlessly adhere to the highest ethical standards that our stockholders expect of us. Employees and directors are expected to follow "The Spirit & The Letter" of our Code of Conduct, which establishes the duties of our directors, officers, employees and business partners to conduct business legally and ethically.

We drive sustainable benefits in communities where we do business through stakeholder engagement; community service; science, technology, engineering and mathematics education; and charitable contributions.

72 
Combined 2H'17
 
2,700  
Volunteer Hours
 
TOP 50 
Most Community Minded Companies
Perfect HSE Days
 
to support disaster relief efforts in the U.S.
 
Civic 50

Corporate Governance Highlights
ü
Significant Minority Stockholder Protections including lockup, standstill, and Conflicts Committee composed of non-GE directors
ü
Lead Director
ü
Active stockholder engagement
ü
Significant stock ownership guidelines for executives and directors
ü
No pledging or hedging of company stock
ü
Diverse board in terms of gender, experience and skills
ü
Annual election of directors
ü
Mandatory director retirement age of 75 and 15-year term limits


BHGE 2018 Proxy Statement | 2



Executive Compensation Highlights

Our people and their capabilities are critical to our success, and maintaining a strong talent base despite significant change is essential. Additionally, the Transactions created unique challenges to fully engage and retain key leaders and employees. With this backdrop, the Compensation Committees of BHI and BHGE made the following key compensation decisions for 2017:
BHI (Pre-Closing of the Transactions from January - June 2017)

In January 2017, prior to the close of the Transactions, the Compensation Committee of BHI reemphasized pay for performance in the key elements of BHI's compensation programs by:
continuing a performance-based short-term incentive bonus structure for 2017 based on key financial and strategic performance metrics;
increasing performance-based stock for Senior Executives to 50% of the total long-term incentives awarded during the annual January 2017 grant cycle. Were it not for the closing of the Transactions, the payout would have been based upon relative growth and return metrics versus BHI’s peer group during performance periods within 2017 - 2019. Any actual payout would have been delivered at the end of the performance period ending in 2019. The remaining 50% of the January 2017 grant was delivered in the form of service-based Restricted Stock Units ("RSUs") that vest one-third each year; and
providing global broad-based merit increases to base salary following two years without broad-based increases, consistent with practices of other companies in our industry.

BHGE (Post-Closing of the Transactions from July - December 2017)

Immediately following the closing of the Transactions, the BHGE Board established a new Compensation Committee that was tasked with developing a strategy to attract and retain top talent, drive company performance and align with stockholder interests. The Compensation Committee executed on these objectives by:
establishing market-based, target compensation packages for the executive leadership team based on a new Compensation Reference Group;
implementing a new performance-based short-term incentive bonus plan for all eligible employees of BHGE based on key financial and strategic performance metrics for the second half of 2017; and
granting key leadership long-term incentive awards in the form of stock options and RSUs to align a broader group of BHGE employees with stockholders, incentivize leaders to “stay and win” with the new company, and close retention gaps based on the market for key roles

2018 BHGE Compensation Program
In January 2018, the Company continued to reinforce the pay for performance elements of its compensation programs by:
continuing a performance-based short-term incentive bonus structure for 2018 based on key financial and strategic performance metrics; and
establishing performance-based long-term incentive awards for Senior Executives granting 50% of the total long-term incentives during the annual 2018 grant cycle in the form of performance share units. The payout is based upon relative Total Shareholder Return (TSR) and Return on Invested Capital (ROIC) versus the Company's peer group during performance periods within 2018 - 2020. Any actual payout would be delivered at the end of the performance period ending in 2020. The remaining 50% of the January 2018 grant was split evenly in the form of stock options and service-based RSUs that will vest one-third each year.


BHGE 2018 Proxy Statement | 3



GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of BHGE, a Delaware corporation, to be voted at the Annual Meeting scheduled to be held on May 11, 2018 and at any and all reconvened meetings after adjournments thereof.

Information About the Notice of Internet Availability of Proxy Materials

In accordance with rules and regulations of the Securities and Exchange Commission (the “SEC”), we furnish to our stockholders proxy materials, including our 2017 Annual Report on Form 10-K of the Company (the “Annual Report”) to stockholders, on the Internet. On or about March 30, 2018, we will send electronically an annual meeting package personalized with profile and voting information (“Electronic Delivery”) to those stockholders that have previously signed up to receive their proxy materials via the Internet. On or about March 30, 2018, we will begin mailing a Notice of Internet Availability of proxy materials (the “E-Proxy Notice”) to those stockholders that previously have not signed up to receive their proxy materials on the Internet. If you received the E-Proxy Notice by mail, you will not automatically receive a printed copy of the proxy materials or the Annual Report to stockholders. If you received the E-Proxy Notice by mail and would like to receive a printed copy of our proxy materials or Annual Report to stockholders, you should follow the instructions for requesting such materials included in the E-Proxy Notice.

Stockholders may sign up to receive future proxy materials and other stockholder communications electronically instead of by mail. In order to receive the communications electronically, you must have an e-mail account, access to the Internet through an Internet service provider and a web browser that supports secure connections. Visit www.proxyvote.com for additional information regarding electronic delivery enrollment.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on May 11, 2018

This Proxy Statement and the Annual Report and the means to vote by Internet are available on the Internet at www.proxyvote.com.

Stockholder of Record; Shares Registered in Your Name

If on March 19, 2018 (the “record date”), your shares were registered directly in your name with our transfer agent, Computershare Shareowner Services LLC, you are considered a stockholder of record with respect to those shares, and we sent the proxy materials directly to you. You may vote by proxy over the Internet at the following Internet address: www.proxyvote.com, or if you properly request and receive a proxy card by mail or email, over the phone by calling Broadridge Financial Solutions (“Broadridge”) at 1-800-690-6903. Proxies submitted through Broadridge by the Internet or telephone must be received by 11:59 p.m. Eastern time (10:59 p.m. Central time) on May 10, 2018. The giving of a proxy will not affect your right to vote in person if you decide to attend the meeting.

Beneficial Owner; Shares Registered in the Name of the Broker, Bank or Other Agent

If on March 19, 2018, your shares were held in “street name” in an account at a brokerage firm, bank or other nominee holder, then you are considered the beneficial owner of the shares and the proxy materials were forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct the organization on how to vote the shares held in your account. You may direct the vote of these shares by the Internet or telephone by following the instructions on the voting form enclosed with the proxy materials from the bank or brokerage firm. Votes directed by the Internet or telephone through such a program must be received by Broadridge by 11:59 p.m. Eastern time (10:59 p.m. Central time) on May 10, 2018. Directing the voting of your shares will not affect your right to vote in person if you decide to attend the meeting; however, you must first request a legal proxy from your broker either on the Internet or use the voting form that accompanies this Proxy Statement. Requesting a legal proxy prior to the deadlines described above will automatically cancel any voting directions you have previously given by the Internet or by telephone with respect to your shares.


BHGE 2018 Proxy Statement | 4



Voting

Shares for which proxies have been executed will be voted as specified in the proxies. If no specification is made, the shares will be voted FOR the election of nominees listed herein as directors, FOR the advisory vote related to the Company’s executive compensation program, FOR the approval of the Company’s Employee Stock Purchase Plan and FOR the ratification of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2018. If any additional matter should be presented properly at the Annual Meeting, it is intended that the enclosed proxy will be voted in accordance with the discretion of the persons named in the proxy.

Proxies may be revoked at any time prior to the exercise thereof by filing with the Company’s Corporate Secretary, at the Company’s executive offices, a written revocation or a duly executed proxy bearing a later date. The executive offices of the Company are located at 17021 Aldine Westfield Road, Houston, Texas 77073. For a period of at least ten days prior to the Annual Meeting, a complete list of stockholders entitled to vote at the Annual Meeting will be available for inspection during ordinary business hours at the Company’s executive offices by stockholders of record for proper purposes.

Solicitation of Proxies

The Company will bear the cost of any solicitation of proxies, whether by Internet or mail. In addition to solicitation, certain of the directors, officers and regular employees of the Company may, without extra compensation, solicit proxies by telephone, facsimile and personal interview. The Company has retained D.F. King & Co., Inc. to assist in the solicitation of proxies from stockholders of the Company for an anticipated fee of $8,500, plus out-of-pocket expenses.

Attendance

Only stockholders of record or beneficial owners of the Company’s Class A Common Stock and Class B Common Stock (each as defined below) may attend the meeting in person. If you are a stockholder of record, you may be asked to present proof of identification, such as a driver’s license. Beneficial owners must also present evidence of share ownership, such as a recent brokerage account or bank statement. All attendees must comply with our standing rules, which will be distributed upon entrance to the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you also vote by proxy as described in this Proxy Statement so that your vote will be counted if you later decide not to attend the Annual Meeting.

Householding
We will only deliver one Proxy Statement to multiple stockholders sharing an address unless we have received contrary instructions from one or more of the stockholders. We will promptly deliver a separate copy of this Proxy Statement to a stockholder at a shared address to which a single copy of the document was delivered upon oral or written request to: Baker Hughes, a GE company, Attn: Corporate Secretary, 17021 Aldine Westfield Road, Houston, Texas 77073, +1 (713) 439-8600. Stockholders may also address future requests for separate delivery of the Proxy Statement, or for delivery of a single copy where they are currently receiving multiple copies, by contacting us at the address or phone number listed above.

VOTING SECURITIES

The securities of the Company entitled to vote at the Annual Meeting consist of shares of its Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”), and Class B Common Stock, par value $0.0001 per share (“Class B Common Stock,” and together with the Class A Common Stock, the “Common Stock”), of which 419,417,205 shares and 706,984,255 shares, respectively, were issued and outstanding at the close of business on March 19, 2018. Only stockholders that hold shares at the close of business on the record date will be entitled to vote at the meeting. Each share of Common Stock, voting as a single class, entitles the holder thereof to one vote on each matter to be considered at the meeting. GE has informed the Company that it will vote in accordance with the Board’s recommendations and, as a result, we expect each of the proposals to be voted upon at the Annual Meeting to pass. In addition, the Stockholders Agreement, dated as of July 3, 2017, by and between the Company and GE, as amended from time to time (the “Stockholders Agreement”), provides that GE must cause its shares of Common Stock to be present for quorum purposes at any stockholder meeting, vote in favor of all non-GE directors (as defined therein), and not vote in favor of the removal of any non-GE director (as defined therein) other than for cause.

The presence in person or by proxy of the holders of a majority of our Common Stock issued and outstanding and entitled to vote at the Annual Meeting will constitute a quorum to transact business at the Annual Meeting. Assuming a quorum is present at the Annual Meeting, the following voting standards apply:
Proposal
 
Vote Required
 
Broker Non-Votes or Withhold Votes
 
Abstentions
 
 
 
 
 
 
 
Election of Directors
 
The affirmative vote of a plurality of votes cast by the holders of shares present or represented at the Annual Meeting and entitled to vote on the matter.

 
No effect on the outcome of the vote
 
Not applicable
The approval of the advisory vote related to the Company's executive compensation program
 
The affirmative vote of holders of the majority of shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter.
 
No effect on the outcome of the vote
 
Abstentions have the same effect as a vote against
The approval of the Company’s Employee Stock Purchase Plan

 
The affirmative vote of holders of the majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter.

 
No effect on the outcome of the vote

 
Abstentions have the same effect as a vote against
The approval of the ratification of KPMG LLP as the Company's independent registered public accounting firm for fiscal year 2018
 
The affirmative vote of holders of the majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter.

 
Brokers may vote on uninstructed shares
 
Abstentions have the same effect as a vote against

Brokers, banks or other nominees that hold shares of Common Stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion if permitted by the stock exchange or other organization of which they are members. Brokers, banks and other nominees are permitted to vote the beneficial owner’s proxy in their own discretion as to certain “routine” proposals under the rules of the New York Stock Exchange (the “NYSE Rules”) when they have not received instructions from the beneficial owners, such as Proposal 4 (the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year 2018). If a broker, bank or other nominee votes such “uninstructed” shares for or against a “routine” proposal, those shares will be counted towards determining whether or not a quorum is present and are considered entitled to vote on the “routine” proposals. However, where a proposal is not “routine,” a broker, bank or other nominee is not permitted to exercise its voting discretion on that proposal without specific instructions from the beneficial owner. These non-voted shares are referred to as “broker non-votes” when the nominee has voted on other non-routine matters with authorization or voted on routine matters. These shares will be counted towards determining whether or not a quorum is present, but will not be considered entitled to vote on the “non-routine” proposals such as Proposal 1 (the election of directors), Proposal 2 (the advisory vote related to the Company’s executive compensation program) and Proposal 3 (approval of the Company’s Employee Stock Purchase Plan).




BHGE 2018 Proxy Statement | 5



PROPOSAL NO. 1 - ELECTION OF DIRECTORS

In analyzing director nominations, the Governance & Nominating Committee strives to recommend candidates for director positions who will create a collective membership on the Board with varied experience and perspective and who maintain a Board that reflects diversity, including but not limited to gender, ethnicity, background, country of citizenship and experience. The Governance & Nominating Committee strives to recommend candidates who demonstrate leadership and significant experience in a specific area of endeavor, comprehend the role of a public company director, exemplify relevant expertise, experience and a substantive understanding of domestic and international considerations and geopolitics, especially those pertaining to the service and equipment sector of the oil and gas and energy-related industries.

When analyzing whether directors and nominees have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Governance & Nominating Committee and the Board of Directors focus on the information summarized in each of the Directors’ individual biographies set forth in this Proxy Statement.

All directors who are elected at the Annual Meeting will serve for a one-year term expiring at the Annual Meeting expected to be held in May 2019 or until his or her successor is elected and qualified or until his or her earlier death, retirement, resignation or removal. The proxy holders will vote FOR the nine persons listed below under “Company Nominees for Director,” unless contrary instructions are given.

If you sign your proxy card but do not give instructions with respect to the voting of directors, your shares will be voted FOR the nine persons recommended by the Board of Directors. If you wish to give specific instructions with respect to the voting of directors, you must do so with respect to the individual nominee.

Board Highlights

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Board Nominees for Director

The following table sets forth each nominee director’s name, all positions with the Company held by the nominee, the nominee’s principal occupation, age and year in which the nominee first became a director of the Company. Each nominee director has agreed to serve if elected. Each nominee director below was appointed in connection with the consummation of the Transactions on July 3, 2017.

Recommendation of the Board of Directors
 The Board of Directors recommends that you vote "FOR" each nominee.




BHGE 2018 Proxy Statement | 6



Director Nominee Biographies
 
 
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W. Geoffrey Beattie
Mr. Beattie has been serving as a director of the Company since July 2017, and as the Lead Director of the Board since October 2017. He has been the Chief Executive Officer of Generation Capital, a private investment company based in Toronto, Canada, since September 2013. He served previously as Chief Executive Officer of the Woodbridge Company Limited, a privately held investment company and the majority shareholder of Thomson Reuters from March 1998 to December 2012, where he also served as Deputy Chairman from May 2000 to May 2013. Mr. Beattie was previously a partner of the law firm Torys LLP.
He currently serves on the boards of directors of GE, Maple Leaf Foods and Acasta Enterprises Inc. He also serves as the Chairman of Relay Ventures, a Canadian venture capital firm and as a director of DBRS Inc. (Dominion Bond Rating Service). Mr. Beattie is a GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications
Mr. Beattie’s extensive leadership experience, investor experience and broad financial expertise, including in the area of risk management.
Age: 58
Director since: 2017
Committees:
Audit (Member)
Governance & Nominating (Chair)
 
 
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Gregory D. Brenneman
Mr. Brenneman has been serving as a director of the Company since July 2017. He has served as Executive Chairman of CCMP Capital Advisors, LLC since 2016, Chief Executive Officer from 2015 to 2016 and Chairman from 2008 to 2016. He has also served as Chairman and Chief Executive Officer of TurnWorks, Inc., a private equity firm, since 1994. Mr. Brenneman served as Executive Chairman of Quizno’s Corporation from 2008 to 2010 and as its President and Chief Executive Officer from 2007 to 2008. He served on BHI's Board of Directors from 2014 through July 2017 and served on the boards of Automatic Data Processing, Inc., Milacron Holdings Corp and Francesca’s Collections within the last five years.
He currently serves on the board of directors of The Home Depot, Inc. and PQ Corporation. Mr. Brenneman is a Non-GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications 
Mr. Brenneman’s leadership and financial experience in public companies including his service as a director of other public companies.

Age: 56
Director since: 2017
Committees:
Conflicts (Member)
Compensation (Member)
Governance & Nominating (Member)
 
 

BHGE 2018 Proxy Statement | 7



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Clarence P. Cazalot, Jr.
Mr. Cazalot has been serving as a director of the Company since July 2017. He was the Executive Chairman of the Board of Marathon Oil Corporation from August 2013 to December 2013. Mr. Cazalot served as the Chairman of Marathon Oil Corporation from 2011 to 2013 and as President, Chief Executive Officer and a Director of Marathon Oil Corporation from 2002 to August 2013. He served on BHI's Board of Directors from 2002 to July 2017 and within the last five years, he served on the Board of FMC Technologies.
He currently serves as a director of Enbridge, Inc. Mr. Cazalot is a Non-GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications  
Mr. Cazalot’s role as a former chairman of a board, chief executive officer and president of a publicly traded energy company as well as his many years of experience in the global energy business.

Age: 67
Director since: 2017
Committees:
Conflicts (Chair)
Governance & Nominating (Member)
 
 
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Martin S. Craighead
Mr. Craighead has been serving as a director of the Company since July 2017, and he is the Vice Chairman of the Board. He served as Chairman of the Board of BHI from April 2013 to July 2017 and as Director of the Board from 2011 to April 2013. Mr. Craighead served as Chief Executive Officer of BHI from January 2012 to July 2017 and President from 2010 to 2017.
Mr. Craighead currently serves as a director of PQ Corporation. Mr. Craighead is a Non-GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications
Mr. Craighead’s leadership experience, global business experience and extensive background in the oil and gas industry.
Age: 58
Director since: 2017
Committees:
Compensation (Member)
 
 

BHGE 2018 Proxy Statement | 8



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Lynn L. Elsenhans
Ms. Elsenhans has been serving as a director of the Company since July 2017. She was the Executive Chairman of Sunoco, Inc. from January 2009 until May 2012, and Chief Executive Officer and President from August 2008 until March 2012. She also served as Chairman of Sunoco Logistics Partners L.P. from October 2008 until May 2012, and Chief Executive Officer from July 2010 until March 2012. Ms. Elsenhans worked at Royal Dutch Shell for more than 28 years where she held a number of senior roles, including Executive Vice President, Global Manufacturing from 2005 to 2008. She served on BHI's Board of Directors from 2012 to July 2017 and was a director of Flowserve Corporation within the last five years.
Ms. Elsenhans is a member of the Board of Directors of GlaxoSmithKline. She is a Non-GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications
Ms. Elsenhans’ positions as a former chairman and chief executive officer of a publicly traded energy company as well as her many years of leadership experience at a global oil and gas company.
Age: 61
Director since: 2017
Committees:
Audit (Chair)
Conflicts (Member)
Governance & Nominating (Member)
 
 
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Jamie S. Miller
Ms. Miller has been serving as a director of the Company since July 2017. She currently serves as the Senior Vice President and Chief Financial Officer of GE. Ms. Miller previously served as the Senior Vice President, GE and President and Chief Executive Officer, GE Transportation from October 2015 to October 2017 and Senior Vice President, Chief Information Officer for GE from April 2013 to September 2015. Ms. Miller joined GE in April 2008 as Vice President, Controller and Chief Accounting Officer and held this position until April 2013. Prior to joining GE, Ms. Miller served as the Senior Vice President and Controller of WellPoint, Inc. (now Anthem) and was a partner at PricewaterhouseCoopers LLP.
Ms. Miller is a GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications
Ms. Miller’s extensive leadership experience in various businesses and functions across GE and with other firms, her global business experience and her technological, financial and accounting experience.
Age: 49
Director since: 2017
Committees:
Governance & Nominating (Member)
 
 

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James J. Mulva
Mr. Mulva has been serving as a director of the Company since July 2017. He was the Chairman and Chief Executive Officer of ConocoPhillips from October 2004 until his retirement in June 2012. He is the former Chairman of the American Petroleum Institute.
Mr. Mulva currently serves on the boards of GE and General Motors Company and served on the board of Statoil within the last five years. Mr. Mulva is a GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications
Mr. Mulva’s extensive leadership experience, global business experience, significant background in the oil and gas industry, as well as his public and private company board experience.
Age: 71
Director since: 2017
Committees:
Audit (Member)
Compensation (Member)
 
 
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John G. Rice
Mr. Rice has been serving as a director of the Company since July 2017. He will retire as Vice Chairman, GE on March 31, 2018, and was the CEO, GE Global Growth Organization from November 2010 until December 2017. He served in other various leadership positions across GE, including Vice Chairman, GE and President and CEO of GE Technology Infrastructure from 2007 until November 2010, Vice Chairman of GE’s industrial and infrastructure businesses from 2005 until 2007 and President and CEO of GE Energy from 2000 until 2005.
Mr. Rice currently serves as a director of Li and Fung. Mr. Rice is a GE Director nominee pursuant to the terms of the Stockholders Agreement.
Skills & Qualifications
Mr. Rice’s extensive leadership experience in various businesses across GE, his global business experience and his experience with global energy and infrastructure markets from his current and prior roles at GE.
Age: 61
Director since: 2017
Committees:
Compensation (Chair)
 
 
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Lorenzo Simonelli
Mr. Simonelli has been serving as Chairman of the Board of Directors of the Company since October 2017, and as a Director and as Chief Executive Officer of the Company since July 2017. Before joining the Company in July 2017, Mr. Simonelli was the Senior Vice President, GE and President and Chief Executive Officer, GE Oil & Gas from October 2013 to July 2017. Before joining GE Oil & Gas, he was the President and Chief Executive Officer of GE Transportation from July 2008 to October 2013. Mr. Simonelli joined GE in 1994 and held various finance and leadership roles from 1994 to 2008.
Skills & Qualifications 
Mr. Simonelli’s extensive leadership experience in businesses and functions across GE, including as the Chief Executive Officer of GE O&G, in addition to his global experience, financial experience and extensive background in the oil and gas industry.
Age: 44
Director since: 2017
Committees: Not applicable


BHGE 2018 Proxy Statement | 10



Election and Resignation Policy

Under the provisions of the Amended and Restated Certificate of Incorporation, dated July 3, 2017 (the “Certificate of Incorporation”), the Second Amended and Restated Bylaws of the Company, dated July 3, 2017 (the “Bylaws”), and the Stockholders Agreement, the total number of directors constituting the Board will be nine members or such number as may be fixed from time to time by resolution of the Board. At any meeting of stockholders at which directors are to be elected, directors will be elected by the plurality vote of the votes cast by the holders of shares present or represented at the meeting and entitled to vote thereon. As further discussed below under Corporate Governance-Board Membership, GE has the right to designate five directors for nomination by the Board for election and maintain its proportional representation on the Board so long as certain conditions set forth in the Stockholders Agreement are satisfied.
Under the Certificate of Incorporation, the Bylaws and the Stockholders Agreement, each director will serve for a term of one year, ending on the date of the next annual meeting of stockholders following the date of such director’s election or appointment; provided that the term of each director will continue until the election and qualification of his or her successor, subject to his or her earlier death, resignation, disqualification or removal. Any director or the entire Board may be removed from office at any time with or without cause by the affirmative vote of the holders of a majority of the voting power of the issued and outstanding shares of capital stock entitled to vote thereon. In addition, GE has the authority to remove any GE-designated director so long as GE meets certain ownership criteria discussed below under Corporate Governance-Board Membership. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. Such resignation will be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event. As further discussed below under Corporate Governance-Board Membership, any vacancy created by a director that had been designated by GE will be filled by the Board with a director designated by GE, and the Governance & Nominating Committee will have the right to fill any vacancy on the Board with respect to any director who was not designated by GE with a person who is reasonably acceptable to GE and satisfies certain independence criteria.
Any newly created directorship that results from an increase in the number of directors, or any vacancy on the Board that results from the death, resignation, disqualification or removal of any director or from any other cause, will be filled solely by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director, and will not be filled by the stockholders. Any director elected to fill a vacancy will hold office for the remaining term of his or her predecessor and until the election and qualification of his or her successor, subject to his or her earlier death, resignation, disqualification or removal.

CORPORATE GOVERNANCE

The Company’s Board of Directors believes the purpose of corporate governance is to maximize stockholder value in a manner consistent with legal requirements and the highest standards of integrity. The Board has adopted and adheres to corporate governance practices, which the Board and management believe promote this purpose, are sound and represent best practices. The Board periodically reviews these governance practices, Delaware law (the state in which the Company is incorporated), the rules and listing standards of the New York Stock Exchange (“NYSE”) and SEC regulations, as well as best practices suggested by recognized governance authorities. The Board has established the Company’s Governance Principles as the principles of conduct of the Company’s business affairs to benefit its stockholders, which conform to the NYSE corporate governance listing standards and SEC rules. The Corporate Governance Principles are posted under the “Investors-Corporate Governance-Governance Overview” section of the Company’s website at www.bhge.com and are also available upon request to the Company’s Corporate Secretary. In addition, the Stockholders Agreement between GE and the Company sets forth a number of corporate governance requirements with respect to the Company.
Controlled Company Status

Through its ownership of a majority of the Company’s voting stock and the provisions set forth in our Certificate of Incorporation, Bylaws and the Stockholders Agreement (as defined below), GE has the ability to designate and elect a majority of the Company’s directors. As a result of GE’s ownership of a majority of the voting power of Common Stock, the Company is a “controlled company” as defined in NYSE listing rules and, therefore, is not subject to NYSE requirements that would otherwise require the Company to have (i) a majority of independent directors, (ii) a nominating committee composed solely of independent directors, (iii) the compensation of its executive officers determined by a

BHGE 2018 Proxy Statement | 11



majority of the independent directors or a compensation committee composed solely of independent directors, and (iv) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors.

Director Independence

Under the Stockholders Agreement, until the Trigger Date (as defined below) the Company is required to take advantage of all available “controlled company” exemptions under NYSE Rules. Under NYSE Rules, a “controlled company” is not required to have a majority of independent directors on the Board or to have the Governance & Nominating Committee and the Compensation Committee consist entirely of independent directors. The Company is required to have an Audit Committee composed of at least three directors, all of whom must be independent in accordance with the NYSE Rules, the Stockholders Agreement and the heightened independence standards for service on its Audit Committee.
For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with the Company or GE. The Board has established guidelines to assist it in determining director independence that conform to the independence requirements in the NYSE Rules. In addition to applying these guidelines, the Board considers all relevant facts and circumstances in making an independence determination. In addition, the Stockholders Agreement requires certain directors to also satisfy the definition of “Company Independent Directors” as set forth in the Stockholders Agreement: (i) meets the independence standards under NYSE rules, (ii) is not a director designated by GE, (iii) is not a current or former member of the board of directors of GE or officer or employee of GE or its affiliates, (iv) does not and has not had any other substantial relationship with GE or its affiliates, and (v) is designated by the Governance & Nominating Committee as a “Company Independent Director.” Directors who meet these independence standards are considered to be “independent” as defined in the NYSE Rules.
In addition to other applicable regulatory requirements, under the Stockholders Agreement at least one member of the Audit Committee and at least three members of the Governance & Nominating Committee must be Company Independent Directors. The Board has determined that all the nominees for election at this Annual Meeting other than Messrs. Simonelli, Craighead and Rice and Ms. Miller meet the independence standard under NYSE Rules.
Board Membership
Pursuant to the Stockholders Agreement, GE has the right to designate five directors for nomination by the Board for election and maintain its proportional representation on the Board so long as GE (a) either beneficially owns at least 50% of the voting power of the Common Stock of the Company, or (b) is required to consolidate the financial statements of the Company in accordance with Generally Accepted Accounting Principles ("GAAP") with those of GE during any fiscal year. The date on which both conditions (a) and (b) are no longer true is referred to as the Trigger Date under the Stockholders Agreement. Until the Trigger Date, GE has the right to designate five nominees to the Board at any annual or special meeting of stockholders of the Company at which directors will be elected, and has the authority to nominate, elect and remove such GE-designated directors.
In addition, the Stockholders Agreement provides that following the initial appointment of the Board, non-GE designated directors be designated by the Governance & Nominating Committee. In the event there is a vacancy on the Board with respect to any director who was not designated by GE, the Governance & Nominating Committee must fill such vacancy or designate a person for nomination reasonably acceptable to GE.
The Governance & Nominating Committee is charged with reviewing the composition of the Board and refreshing it as appropriate, pursuant to the Stockholders Agreement. With this in mind, the committee may retain an executive search firm to assist in identifying and evaluating potential nominees.
Board Term Limits and Retirement Age
The Board has a 15-year term limit for all directors, other than the Company's CEO. Additionally, with limited exceptions, directors will not be nominated for election to the Board after his or her 75th birthday.
The Board’s Leadership Structure
Our Governance Principles require the election, by the independent directors, of a Lead Director who leads meetings of the independent directors and regularly meets with the chairman/CEO for a discussion of matters arising from these

BHGE 2018 Proxy Statement | 12



meetings, calls additional meetings of the independent directors or the entire Board as deemed appropriate, serves as a liaison on Board-related issues between the chairman/CEO and the independent directors, and performs such other functions as the Board may direct, including (i) advising the Governance & Nominating Committee on the selection of committee chairs, (ii) approving the agenda, schedule and information sent to the directors for Board meetings, (iii) working with the chairman/CEO to propose an annual schedule of major discussion items for the Board’s approval, (iv) guiding the Board’s governance processes, including the annual board self-evaluation, succession planning and other governance-related matters, (v) leading the annual chairman/CEO evaluation, and (vi) providing leadership to the Board if circumstances arise in which the role of the chairman/CEO may be, or may be perceived to be, in conflict. The Governance & Nominating Committee reviews and recommends to the Board a director to serve as Lead Director. W. Geoffrey Beattie is the current Lead Director. The independent directors hold executive sessions at every regularly scheduled Board and Committee meeting and at such other times as the Lead Director deems appropriate.
The Board has determined that the current structure, with a combined CEO and Chairman of the Board and an independent Lead Director, is in the best interests of the Company and our stockholders. The combined role of CEO and Chairman provides an effective balance between management of the Company and director participation in our board process and allows for management to focus on the execution of our strategic and business plans. As indicated above, our independent Lead Director was elected by the independent Board members and has a clear set of comprehensive duties that provide an effective check on management.
Board Attendance

During the fiscal year ended December 31, 2017, the Board of Directors held four meetings (such meetings all taking place after the consummation of the Transactions on July 3, 2017). Each director attended more than 90% of the total number of meetings of the Company’s Board of Directors and of the respective Committees on which he or she served. It is the Company’s policy to request and encourage all of the Company’s directors and nominees for election as directors to attend the Annual Meeting in person.
Committees of the Board

The Board of Directors has an Audit Committee, a Compensation Committee, a Governance & Nominating Committee and a Conflicts Committee, which is a sub-committee of the Governance & Nominating Committee. At each regularly scheduled Board meeting, the Chair of each Committee reviews with the full Board the items discussed and approved at a Committee meeting.
The charter for each Committee has been posted and is available for public viewing under the “Investors-Corporate Governance-Governance Overview” section of the Company’s website at www.bhge.com and is also available upon request to the Company’s Corporate Secretary. The members of each Committee are identified in the following table:
    
Director
Committee Memberships as of December 31, 2017
Audit
Compensation
Governance
&
Nominating
Conflicts
(Sub-Committee of Governance & Nominating Committee)
W. Geoffrey Beattie
Member
 
Chair
 
Gregory D. Brenneman
 
Member
Member
Member
Clarence P. Cazalot Jr.
 
 
Member
Chair
Martin S. Craighead
 
Member
 
 
Lynn L. Elsenhans
Chair
 
Member
Member
Jamie S. Miller
 
 
Member
 
James J. Mulva
Member
Member
 
 
John G. Rice
 
Chair
 
 
Lorenzo Simonelli
Not applicable

BHGE 2018 Proxy Statement | 13




Audit Committee

The Audit Committee held four meetings during fiscal year 2017 (such meetings all taking place after the consummation of the Transactions on July 3, 2017). The Stockholders Agreement requires that the Audit Committee consist of three directors, including at least one Company Independent Director. The Board of Directors has determined that at least one of the Audit Committee members meet the NYSE standards for independence as well as those contained in the Company’s Governance Principles and that each member of the Audit Committee meets the qualifications to be an “audit committee financial expert” under the SEC rules issued pursuant to the Sarbanes-Oxley Act of 2002 ("SOX"). The Board has designated Lynn Elsenhans as the member of the Audit Committee who serves as the “audit committee financial expert.”
The responsibilities of the Audit Committee include:
assisting the Board of Directors in overseeing matters relating to the accounting and reporting practices of the Company;
reviewing the adequacy of the Company’s disclosure controls and internal controls;
reviewing the quarterly and annual financial statements of the Company;
reviewing the performance of the Company’s internal audit function;
reviewing and pre-approving the current year audit and non-audit services;
overseeing the Company’s compliance programs related to legal and regulatory requirements; and
selecting and hiring the Company’s independent registered public accounting firm.
To promote independence of the audit, the Audit Committee consults separately and jointly with the Company’s independent registered public accounting firm, the internal auditors and management.
In accordance with the NYSE requirements, our Audit Committee is responsible for overseeing risk analysis and risk management procedures. The Audit Committee reviews guidelines and policies on enterprise risk management, including risk assessment and risk management related to the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures. The Company maintains an Enterprise Risk Management (“ERM”) process under which it reviews its business risk framework, including an assessment of external and internal risks and appropriate mitigation activities. The Company’s annual ERM report is provided to the Audit Committee and a comprehensive in-person presentation is made to the entire Board. In addition to the risk oversight exercised by the Audit Committee of the Board of Directors, each of the Compensation Committee and the Governance & Nominating Committee regularly exercises oversight related to risks associated with responsibilities of the respective Committee. The Board of Directors believes that the risk management processes in place for the Company are appropriate.
Compensation Committee

The Compensation Committee held two meetings during fiscal year 2017 (such meetings all taking place after the consummation of the Transactions on July 3, 2017). Under the terms of its charter and the Stockholders Agreement, at least one member of the Committee is a non-GE director and at least two members of the Committee qualify as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code and “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (“Exchange Act”). While the Company is a “controlled company” under applicable NYSE listing requirements, the Compensation Committee is not required to consist solely of independent directors.
The Compensation Committee assists the Board with its overall responsibility relating to organizational strength and executive compensation. Specifically, its responsibilities include:
establishing the Company general compensation philosophy in consultation with senior management;
assisting the Board in developing and evaluating potential candidates for executive positions and developing executive succession plans;

BHGE 2018 Proxy Statement | 14



reviewing and approving the corporate goals and objectives of the compensation of the CEO and other officers;
reviewing the Company’s non-equity incentive compensation, equity incentive compensation and other stock-based plans; and
recommending changes in such plans to the Board; reviewing levels of stock ownership by officers; and evaluating incentive compensation arrangements.
Among other responsibilities, the Compensation Committee is responsible for reviewing incentive compensation arrangements to confirm that incentive pay does not encourage unnecessary risk taking and to review and discuss, at least annually, the relationship between risk management policies and practices, corporate strategy and senior executive compensation and assess whether any such risk is reasonably likely to have a material adverse effect on the Company. The Company’s stock ownership guidelines established by the Board of Directors also serve to mitigate compensation-related risks. During fiscal year 2017, the Compensation Committee determined the Company’s compensation policies and practices for employees were not reasonably likely to have a material adverse effect on the Company. For more information pertaining to the Company’s compensation policies and practices, please read the “Compensation Discussion and Analysis” section of this Proxy Statement.
Governance & Nominating Committee

The Governance & Nominating Committee held two meetings during fiscal year 2017 (such meetings all taking place after the consummation of the Transactions on July 3, 2017). Under the terms of its charter and the Stockholders Agreement, the Committee consists of five directors, including at least three Company Independent Directors.
The responsibilities of the Governance & Nominating Committee include:
identifying qualified individuals to become Board members;
determining the composition of the Board and its committees;
monitoring a process to assess Board effectiveness;
reviewing and implementing the Company’s Governance Principles;
overseeing risks related to the Company’s governance structure and processes and risks arising from related party transactions; and
overseeing the Company’s positions on corporate social responsibilities and public issues of significance which affect investors and other key stakeholders.
Conflicts Committee
The Conflicts Committee is a subcommittee of the Governance & Nominating Committee of the Board. Under the terms of its charter and the Stockholders Agreement, the Committee consists solely of the Company Independent Directors serving on the Governance & Nominating Committee.
The responsibilities of the Conflicts Committee include:
reviewing and approving related party transactions above certain materiality or dollar thresholds;
reviewing and approving certain transactions as contemplated by the Stockholders agreement, including transfers or acquisitions of Company Common Stock by GE or its representatives or affiliates or the negotiation of any disputes between the Company and GE; and
reviewing and approving any material amendment or modification of the Stockholders Agreement, any material waiver of any or all of the Company’s rights under the Stockholders Agreement, or enforcement of the Company’s and BHGE LLC’s rights under the Stockholders Agreement and other agreements with GE in connection with the Transactions.

BHGE 2018 Proxy Statement | 15



Code of Conduct

The Company’s code of conduct, “The Spirit & The Letter” (the “Code of Conduct”), applies to all officers, directors and employees, which includes the code of ethics for the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer and all other persons performing similar functions within the meaning of the securities laws and regulations. The Code of Conduct prohibits individuals from engaging in, or giving the appearance of engaging in any activity involving a conflict, or potential conflict, between personal interests and those of the Company. On an annual basis, each of the Company’s principal officers and all persons performing similar functions on behalf of the Company certify compliance with the Company’s Code of Conduct and the applicable NYSE and SOX provisions. The Audit Committee oversees the administration of the Code of Conduct and responsibility for the corporate compliance effort with the Company. The Company’s Code of Conduct and Code of Ethical Conduct Certification are posted under the “Investors-Corporate Governance-Governance Overview” section of the Company’s website at https://www.bhge.com and are also available upon request to the Company’s Corporate Secretary.
Stockholder Nominations of Directors

Other stockholders may also propose nominees for consideration by the Governance & Nominating Committee by submitting the names and other supporting information required under the Company’s Bylaws to:
Attn: Corporate Secretary
 Baker Hughes, a GE company
17021 Aldine Westfield Road
 Houston, Texas 77073
Recommendations that stockholders desire to make for the 2019 Annual Meeting should be submitted after January 11, 2019 and no later than February 10, 2019. See "Stockholder Proposals" below.
Stockholder Communications with the Board of Directors

To provide the Company's stockholders and other interested parties with a direct and open line of communication to the Company's Board of Directors, stockholders may communicate with any member of the Board, including the Company's Lead Director, the Chair of any committee or with the non-management directors of the Company as a group, by sending such written communication to the Company's Corporate Secretary, c/o Baker Hughes, a GE company, 17021 Aldine Westfield Road, Houston, Texas, 77073. Under the Governance Principles, the lead director makes himself available for consultation and direct communication with the Company’s major stockholders. In addition, pursuant to the Company's policy to request and encourage attendance at the Annual Meeting, such meeting provides an opportunity for stockholders to communicate with members of the Company's Board of Directors in attendance.

DIRECTOR COMPENSATION
Director Fees

Each director, with the exception of Messrs. Simonelli and Rice and Ms. Miller, is paid an annual retainer fee of $100,000, along with the following fees for service on committees of the Board:
Audit Committee Chair - $20,000
Other Committee Chair - $15,000
Audit Committee Members, excluding the Chair - $10,000
Other Committee Members, excluding the Chair - $5,000

The Lead Director, Mr. Beattie, does not receive any additional compensation for his services. Messrs. Simonelli and Rice and Ms. Miller do not receive any compensation for their service on the Board. Mr. Rice has announced his retirement from GE on March 31, 2018. Upon his retirement from GE, Mr. Rice will be entitled to receive the director fees and the director equity awards on the same basis as other non-management directors that are not employed by GE.
 

BHGE 2018 Proxy Statement | 16



Director Equity Awards

On the date of each Annual Meeting beginning with the Annual Meeting in 2018, each director, with the exception of Mr. Simonelli and Ms. Miller, is expected to receive an annual equity award in the form of “RSUs” with a grant date value of $175,000. For the initial period of service from the July 3, 2017 closing date of the Transactions through the date of the Annual Meeting in 2018, each director, with the exception of Messrs. Simonelli and Rice and Ms. Miller, received an RSU award with a grant date value of $149,110, which equals $175,000 as prorated for such period. Each RSU award is scheduled to vest on the first anniversary of the grant date, with vesting accelerating on a change in control of the Company or if the director’s service on the Board terminates due to death, disability or completion of the term for which the director was elected.
Director Deferral Plan

Under the BHGE Non-Employee Director Deferral Plan, non-management directors may elect to receive their annual retainers and committee fees in shares of Common Stock, with the shares delivered either in the year in which the retainers otherwise would have been paid or in a future year. Directors may also elect to defer receipt of the shares covered by their RSU awards, which otherwise are delivered when the awards vest.
Directors receive dividend equivalents on their RSU awards and any deferred retainers and committee fees. These dividend equivalents are paid in cash either currently or, in the case of unvested RSU awards, when the awards vest.
BHI Director Retirement Policy
BHI previously provided benefits under a Director Retirement Policy (the "Retirement Policy"), which remains in effect until all benefits accrued thereunder are paid in accordance with the current terms and conditions of the Retirement Policy. No additional benefits have been accrued under the Retirement Policy since December 31, 2001. Messrs. Fernandes, Nichols and Watson and Ms. Gargalli had accrued benefits under the Retirement Policy.
Director Stock Ownership Requirements

Under the Governance Principles, each non-management director who is not an officer or employee of GE or its affiliates is expected to own at least five times his or her annual retainer in Class A Common Stock while serving as a director of the Company. Such ownership level should be obtained within five years from the date elected or appointed to the Board. The Governance & Nominating Committee reviews director stock ownership on an annual basis.

2017 Director Compensation

The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to each of the Company’s directors during the fiscal year ended 2017.
Name
Fees Earned or Paid in Cash (1)
($)
Stock Awards (2)(3)(13)
($)
All Other Compensation (4)
($)
Total
 ($)
Current BHGE Directors
 
 
 
 
W. Geoffrey Beattie
62,500

149,000


211,500

Gregory D. Brenneman
115,000

323,964

3,849

442,813

Clarence P. Cazalot, Jr.
115,000

323,964

3,849

442,813

Martin S. Craighead (5)




Lynn L. Elsenhans
122,500

323,964

3,849

450,313

Jamie S. Miller




James Mulva
57,500

149,000


206,500

John G. Rice (6)




Lorenzo Simonelli




Former BHGE Directors
 
 
 
 
Jeffrey R. Immelt (7)





BHGE 2018 Proxy Statement | 17



J. Larry Nichols (8)
100,645

323,964

20,935

445,544

Former BHI Directors
 
 
 
 
Larry D. Brady (9) 
10,833

 
550,395

561,228

William H. Easter III
55,000

174,964

3,849

233,813

Anthony G. Fernandes (10)
60,000

174,964

1,064,045

1,299,009

Claire W. Gargalli (11)
52,500

174,964

8,435

235,899

Pierre H. Jungels
55,000

174,964

935

230,899

James A. Lash
62,500

174,964

935

238,399

James W. Stewart
52,500

174,964

935

228,399

Charles L. Watson (12)
52,500

174,964

132,964

360,428

____________
(1)
Messrs. Beattie, Brenneman and Mulva elected to receive a portion of their 2017 BHGE director fees in Class A Common Stock under the BHGE Non-Employee Director Deferral Plan adopted on August 1, 2017.

(2)
On January 26, 2017, each legacy BHI director (Messrs. Brenneman, Cazalot, Easter, Fernandes, Jungels, Lash, Stewart, and Watson and Mmes. Elsenhans and Gargalli) received an RSU award with a grant date value of $175,000, rounded down to the nearest share. The amounts included in the Stock Awards column represent the aggregate grant date fair value of $63.60 per RSU award computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718 (“ASC Topic 718”). This RSU grant vested in full on the closing of the Transactions on July 3, 2017. For a discussion of valuation assumptions, see “Note 11 - Stock-Based Compensation” of the Notes to Consolidated and Combined Financial Statements included in our Annual Report under Item 8 of the Form 10-K for the year ended December 31, 2017.

(3)
On August 1, 2017, each BHGE director other than Messrs. Simonelli and Rice and Ms. Miller received an RSU award. The value of the award shown for each director reflects the $175,000 grant date value of the RSU award, as prorated for the period of service from July 3, 2017 to the date of the Company’s Annual Meeting in 2018. This value represents the aggregate grant date fair value of $35.68 per share computed in accordance with ASC Topic 718 . The value ultimately realized by the directors if and when the awards vest will depend on the share price on the vesting date. For a discussion of valuation assumptions, see “Note 11 - Stock-Based Compensation” of the Notes to Consolidated and Combined Financial Statements included in our Annual Report under Item 8 of the Form 10-K for the year ended December 31, 2017. The number of shares for the grants was calculated using a price of $35.70 per share, the closing price on the date of grant.

(4)
This column includes dividend equivalents paid during the year ended December 31, 2017 on unvested RSU awards. This column does not include the value of any Transaction related payments in respect of the special dividend of $17.50 paid to all BHI stockholders and upon the vest of legacy BHI RSU awards because that value is already represented in the grant date value of the RSU granted.

(5)
Because Mr. Craighead served as Chief Executive Officer until the closing of the Transactions on July 3, 2017, his compensation as a director is reflected in the Summary Compensation Table.

(6)
Mr. Rice has announced his retirement from GE on March 31, 2018. Upon his retirement from GE, Mr. Rice will be entitled to receive the director fees and the director equity awards on the same basis as other non-management directors that are not employed by GE.

(7)
Mr. Immelt retired from the Board, effective October 2, 2017. As an employee of GE, he did not receive any compensation for his service on the Company's Board.

(8)
Mr. Nichols retired from the Board effective October 2, 2017 and received a $20,000 lump sum payment under the BHI Director Retirement Policy. Mr. Nichols forfeited his August 1, 2017 RSU grant at the time of his retirement.
(9)
Mr. Brady passed away on January 15, 2017. Mr. Brady's estate received a lump sum payment of $550,395 that had accrued under the BHI Director Compensation Deferral Plan.

BHGE 2018 Proxy Statement | 18



(10)
Mr. Fernandes retired from the BHI board on July 3, 2017. He received a lump sum payment in the amount $5,000 under the BHI Director Retirement Policy and $1,055,196 that had accrued under the BHI Director Compensation Deferral Plan.
(11)
Ms. Gargallii retired from the BHI board on July 3, 2017 and will receive a total of thirteen quarterly payments of $7,500 under the BHI Director Retirement Policy, which payments began in October 2017.

(12)
Mr. Watson retired from the BHI board on July 3, 2017 and will receive a total of fifteen quarterly payments of $7,500 under the BHI Director Retirement Policy, which payments began in October 2017. He received a lump sum payment of $121,615 that had accrued under the BHI Director Compensation Deferral Plan.

(13)
The following table shows the aggregate number of stock awards and option awards outstanding for each director as of December 31, 2017.
Name
Aggregate Stock Awards Outstanding as of December 31, 2017
(#)
Aggregate Option Awards Outstanding as of December 31, 2017
(#)
W. Geoffrey Beattie
4,176


Gregory D. Brenneman
4,176


Clarence P. Cazalot, Jr
4,176

9,957

Martin S. Craighead (1)


Lynn L. Elsenhans
4,176

13,117

Jeffrey R. Immelt (2)


Jamie S. Miller


James Mulva
4,176


J. Larry Nichols (3)

9,957

John G. Rice


Lorenzo Simonelli


(1)
Because Mr. Craighead served as Chief Executive Officer until the closing of the Transactions on July 3, 2017, his outstanding stock awards received as a director are reflected in the Outstanding Equity Awards at Fiscal Year-End table.
(2)
Mr. Immelt retired from the Board, effective October 2, 2017. As an employee of GE, he did not receive any equity grants for his service on the Company's Board.
(3)
Mr. Nichols retired from the Board, effective October 2, 2017 and forfeited his August 1, 2017 RSU grant at the time of his retirement.

STOCK OWNERSHIP

Stock Ownership of Certain Beneficial Owners

The following table sets forth information about the holders of the Common Stock known to the Company on March 19, 2018 to own beneficially 5% or more of each class of Common Stock, based on filings by the holders with the SEC. For purposes of this Proxy Statement, beneficial ownership of securities is defined in accordance with the rules of the SEC to mean generally the power to vote or dispose of securities regardless of any economic interest therein.
Name and Address
Title of Class
Shares
Percent of Class
General Electric Company (1)
33-41 Farnsworth Street
Boston, MA 02210
Class B Common Stock
706,984,255
100%
The Vanguard Group (2)
100 Vanguard Blvd.
Malvern, PA 19355

Class A Common Stock
44,219,189
10.32%

BHGE 2018 Proxy Statement | 19



FMR LLC (3)
245 Summer Street
Boston, MA 02210
Class A Common Stock
33,734,929
7.9%
Dodge & Cox (4) 
555 California Street, 40th Floor
San Francisco, CA 94104
Class A Common Stock
32,428,460
7.6%
BlackRock Inc. (5)
55 East 52nd Street
New York, NY 10055
Class A Common Stock
30,915,951
7.2%
Capital World Investors (6)
333 South Hope Street
Los Angeles, CA 90071
Class A Common Stock
29,198,313
6.8%
State Street Corporation (7)
One Lincoln Street
Boston, MA 02111
Class A Common Stock
22,585,944
5.27%
_________

(1)
The number of shares is based on a Form 4 filed with the SEC dated January 2, 2018. According to the filing, General Electric Company directly owns 128,054,898 shares and 578,929,357 shares are owned by General Electric Company's wholly-owned subsidiaries. According to the Schedule 13D filed with the SEC dated July 3, 2017 and assuming the exchange of all Class B Common Stock into Class A Common Stock (for a total of 1,144,816,445 shares of Class A Common Stock on a fully exchanged basis), (i) General Electric Company has sole voting power over 129,889,088.15 shares and sole dispositive power over all such shares, and shared voting power over 587,221,633.85 shares and shared dispositive power over all such shares, (ii) GE Investments, Inc. has shared voting power over 5,634,713.04 shares and shared dispositive power over all such shares, (iii) GE Oil & Gas US Holdings IV, Inc. has shared voting power over 118,759,736.45 shares and shared dispositive power over all such shares, (iv) GE Holdings (US), Inc. has shared voting power over 5,634,713.04 shares and shared dispositive power over all such shares and (v) GE Oil & Gas US Holdings I, Inc. has shared voting power over 462,827,184.36 shares and shared dispositive power over all such shares.
(2)
The number of shares is based on the Schedule 13G dated December 29, 2017 and filed with the SEC by The Vanguard Group. According to the filing, (i) The Vanguard Group has sole power to vote 589,853 shares and shared power to vote 98,902 shares and sole power to dispose of 43,544,909 shares and shared power to dispose of 674,280 shares, (ii) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 463,297 shares or 0.10% of the Class A Common Stock of the Company, and (iii) Vanguard Investments Australia Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 334,598 shares or 0.07% of the Class A Common Stock of the Company.
(3)
The number of shares is based on the Schedule 13G dated February 13, 2018 and filed with the SEC by FMR LLC. According to the filing, (i) FMR LLC has sole power to vote 1,892,095 shares and does not share power to vote any of the shares and (ii) sole power to dispose of 33,734,929 shares and does not share power to dispose of any of the shares.
(4)
The number of shares is based on the Schedule 13G dated February 13, 2018 and filed with the SEC by Dodge & Cox. According to the filing, (i) Dodge & Cox has sole power to vote 30,709,529 shares and does not share power to vote any of the shares and (ii) sole power to dispose of 32,428,460 shares and does not share power to dispose of any of the shares. Dodge & Cox Stock Fund, an investment company registered under the Investment Company Act of 1940, has an interest of 21,431,013 shares, or 5.0%, of the Company's Class A Common Stock.
(5)
The number of shares is based on the Schedule 13G dated January 24, 2018 and filed with the SEC by BlackRock, Inc. According to the filing, (i) BlackRock, Inc. has sole power to vote 27,011,156 shares and does not share power to vote any of the shares and (ii) sole power to dispose of 30,915,951 shares and does not share power to dispose of any of the shares.
(6)
The number of shares is based on the Schedule 13G dated February 8, 2018 and filed with the SEC by Capital World Investors. According to the filing, (i) Capital World Investors has sole power to vote 29,198,313 shares and does not share power to vote any of the shares and (ii) sole power to dispose of 29,198,313 shares and does not share power to dispose of any of the shares. Capital World Investors divisions of CRMC and Capital International Limited collectively provide investment management services under the name Capital World Investors.Capital World Investors is deemed to be the beneficial owner of 29,198,313 shares or 6.8% of the Company's Class A Common Stock.
(7)
The number of shares is based on the Schedule 13G dated February 14, 2018 and filed with the SEC by State Street Corporation. According to the filing, (i) State Street Corporation has sole power to vote 0 shares and shares power to vote 22,585,944 of the shares and (ii) sole power to dispose of 0 shares and shares power to dispose of 22,585,944 shares. State Street Corporation is a parent holding company that beneficially owns 5.27% the Company's Class A Common Stock through various direct and indirect subsidiaries.


BHGE 2018 Proxy Statement | 20



Stock Ownership of Section 16(a) Directors and Executive Officers

Set forth below is certain information with respect to beneficial ownership of the Common Stock as of March 19, 2018 by each director, the persons named in the Summary Compensation Table and the Section 16(a) directors and executive officers as a group. The table includes transactions effected prior to the close of business on March 19, 2018.
Shares Beneficially Owned
Name
Shares Owned as of
March 19, 2018
 
Shares Subject to Options and RSUs Which Are or Will Become Exercisable or Vested Prior to May 18, 2018

Total Beneficial Ownership as of March 19, 2018
% of Class (1)
W. Geoffrey Beattie
7,900

 
4,176

12,076


Gregory D. Brenneman
97,666

 
4,176

101,842


Clarence P. Cazalot, Jr.
39,198

 
13,776

52,974


Martin S. Craighead
502,455

 
600,599

1,103,054


Lynn L. Elsenhans
24,640

 
17,293

41,933


Jamie S. Miller

 



James J. Mulva
1,204

 
4,176

5,380


John G. Rice
5,000

 

5,000


Lorenzo Simonelli
9,139

 

9,139


Brian Worrell
2,801

 

2,801


Belgacem Chariag
220,147

 
174,194

394,341


Derek Mathieson
83,080

 
85,807

168,887


William D. Marsh
29,006

 
47,890

76,896


Kimberly Ross
84,001

(2) 

84,001


Arthur L. Soucy
43,785

(3) 
150,325

194,110

 
Richard L. Williams
42,989

(4) 
53,217

96,206


All directors and executive officers as a group (19 persons) (5)
1,025,736

 
975,411

2,001,147


__________

(1)
No percent of class is shown for holdings of less than 1%.
(2)
Ms. Ross' ownership is reported as of July 3, 2017, the date she separated from BHI as Chief Financial Officer.
(3)
Mr. Soucy's ownership is reported as of July 3, 2017, the date he separated from BHI as President, Products & Technology.
(4)
Mr. Williams' ownership is reported as of January 25, 2016, the date of his last BHI Form 4 filing.
(5)
The totals in this row include the NEOs, current directors and all Section 16 officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires executive officers, directors and persons who beneficially own more than 10% of the Common Stock to file initial reports of ownership and reports of changes in ownership with the SEC and the NYSE. SEC regulations require executive officers, directors, and greater than 10% beneficial owners to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of those forms furnished to the Company and written representations from the executive officers and directors, with the exception of a filing for Mr. Matthias Heilmann that was inadvertently filed late, the Company believes its executive officers and directors complied with all applicable Section 16(a) filing requirements during the fiscal year ended December 31, 2017.
Prohibition of Pledging and Hedging under the Securities Trading and Disclosure Policy

The Company’s Governance Principles prohibit our directors and executive officers from entering into any derivative transaction in Company stock (including short sales, forwards, equity swaps, options or collars or other instruments

BHGE 2018 Proxy Statement | 21



that are based on the Company’s stock price). In addition, directors and executive officers are prohibited from pledging shares of Company stock as collateral or security for indebtedness.

CHARITABLE CONTRIBUTIONS

During the fiscal year ended December 31, 2017, the Company did not make any contributions to any charitable organization in which any director served as an executive officer that exceeded the greater of $1 million or 2% of the charitable organization's consolidated gross revenues.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Board expects its directors, as well as officers and employees, to act ethically at all times and to acknowledge their adherence to the policies comprising the Company’s Code of Conduct. The Company will not make any personal loans or extensions of credit to directors or executive officers. No independent director may provide personal services for compensation to the Company or GE, other than in connection with serving as a director. The Board will not permit any waiver of any ethics policy for any director or executive officer.
If an actual or potential conflict of interest arises for a director, the director will promptly inform the chairman/CEO and the lead director. The Governance & Nominating Committee will resolve any such conflicts, subject to the specific rules governing Related Party Transactions, as defined and further described below. If a significant conflict exists and cannot be resolved, the director should resign. All directors will recuse themselves from any discussion or decision affecting their personal, business or professional interests. The Governance & Nominating Committee will resolve any conflict of interest question involving the CEO or an executive officer reporting directly to the CEO, and the CEO will resolve any conflict of interest issue involving any other officer of the Company.
In addition, pursuant to the Stockholders Agreement, any transaction between the Company, on the one hand, and GE or its affiliates (other than the Company), on the other hand (each, a “Related Party Transaction”), is required to be on arm’s-length terms and in the best interest of the Company. The Conflicts Committee must provide prior written approval of any amendment to, or modifications or terminations of, or material waivers, consents or elections under, any Related Party Transaction. The Conflicts Committee must also provide prior written approval of any material amendments or modifications or terminations of any of the documents entered into in connection with the Transactions (defined as the “Transaction Documents” in the Stockholders Agreement) or material waivers, consents (other than any consents of the managing member of BHGE LLC contemplated by its LLC agreement where neither GE nor any of its affiliates is a counterparty to or beneficiary of the matter in question, and such matter would not otherwise require the prior written approval of the Conflicts Committee) or elections of the Company’s or BHGE LLC’s rights under any of the Transaction Documents.
All Related Party Transactions that are not contemplated by the Transaction Documents will be governed by the Related Party Transactions Policy. Pursuant to the Related Party Transactions Policy, Related Party Transactions that involve payments in excess of $25 million (individually or in the aggregate with all substantially related payments) or that are otherwise material (with materiality determined in a manner consistent with the Company’s SEC disclosure requirements) are subject to the prior written approval of the Conflicts Committee. Related Party Transactions below the $25 million threshold may be approved by Company management; provided that the proposed transaction is on an arm’s-length basis, in the best interests of the Company, and follows the Related Party Transaction Policy in letter and spirit. Such transactions must be reported to the Conflicts Committee on a quarterly basis.
GE-Related Transactions
In connection with the Transactions on July 3, 2017, we entered into various agreements with GE and its affiliates that govern our relationship with GE following the Transactions including an Intercompany Services Agreement pursuant to which GE and its affiliates and the Company have and will continue to provide certain services to each other. GE has and will continue to provide certain administrative services, GE proprietary technology and use of certain GE trademarks in consideration for a payment of $55 million per year. GE may also provide us with certain additional administrative services under the Intercompany Services Agreement, not included as consideration for the $55 million per year payment, and the fees for such services are based on actual usage of such services and historical GE intercompany pricing. In addition, we will provide GE and its affiliates with confidential access to certain of our proprietary technology and related developments and enhancements thereto related to GE's operations, products or service

BHGE 2018 Proxy Statement | 22



offerings. We recognized a cost of $28 million for the year ended December 31, 2017 for services provided by GE and its affiliates subsequent to the close of the Transactions.

Prior to the Transactions, GE and its affiliates provided a variety of services and funding to us. The cost of these services was either (a) recognized through our allocated portion of GE's corporate overhead; or (b) billed directly to us. Costs of $103 million, $210 million and $180 million for the year ended December 31, 2017, 2016 and 2015, respectively, were recorded in our consolidated and combined statement of income (loss) in respect of services provided by GE and its affiliates prior to the close of the Transactions.

We sold $639 million, $374 million and $329 million of products and services to GE and its affiliates during the year ended December 31, 2017, 2016 and 2015, respectively. Purchases from GE and its affiliates were $1,512 million, $978 million and $1,225 million during the year ended December 31, 2017, 2016 and 2015, respectively.

Employee Benefits

Certain of our employees are covered under various GE sponsored employee benefit plans, including GE's retirement plans (pension, retiree health and life insurance, and savings benefit plans) and active health and life insurance benefit plans.

Related Party Balances
In connection with the Transactions, as of July 3, 2017, we were required to repay any cash in excess of $100 million, net of any third-party debt in GE O&G, to GE. Due to the restricted nature of the majority of this excess cash, we continue to hold this cash on behalf of GE until such cash is unrestricted and available for repayment to GE. The restriction arises as the majority of the cash cannot be released, transferred or otherwise converted into a non-restricted market currency due to the lack of market liquidity, capital controls or similar monetary or exchange limitations by a Government entity of the jurisdiction in which such cash is situated. Accordingly, on July 3, 2017, we executed a promissory note with GE.  There is no maturity date on the promissory note, but we remain obligated to repay GE such excess cash together with any income or loss we may incur on it, therefore, this obligation is reflected as short-term borrowings. As of December 31, 2017, of the amount due to GE of $1,124 million, $997 million was held in the form of cash and $127 million was held in the form of investment securities. A corresponding liability is reported in short-term borrowings in the consolidated and combined statements of financial position.

Receivables Monetization

We monetized a portion of our current receivables through programs established for GE and various GE subsidiaries. During the three months ended December 31, 2017, we ceased to participate in the GE receivables monetization program.

Under the receivable monetization program, we factored U.S. and non-U.S. receivables to GE Capital on a recourse and nonrecourse basis pursuant to various factoring and services agreements, purchased directly by Working Capital Solutions (WCS), an operating unit of GE Capital or sold to external investors through WCS agent arranger or buy/sell structures. Under the factoring programs, GE Capital performed a risk analysis and allocated a nonrecourse credit limit for each customer. If the portfolio exceeded this credit limit, then the receivable was factored with recourse. The evaluation of whether recourse transactions qualify for accounting derecognition is based, in part, upon the legal jurisdiction of the sales, as such, the majority of recourse transactions outside the U.S. qualify for sale treatment. The Company has $116 million and $198 million at December 31, 2017 and December 31, 2016, respectively, of accounts payable to GE that relate to cash collected on current receivables under this monetization program. In addition, prior to the Transactions, we participated in the GE Accounts Receivable (GEAR) program, in which we transferred our receivables into a securitization structure administered by GE Capital through the GE Receivables and Sale Contribution Agreement.

The outstanding balances of receivables that were transferred to GE under WCS administered programs and are accounted for as sales were $225 million and $2,168 million as of December 31, 2017 and 2016, respectively.

Under the programs, we retain the responsibility for servicing the receivables and remitting collections to the owner and the lenders for a fee equal to the prevailing market rate for such services. We have outsourced our servicing responsibilities to GE Capital for a market-based fee and accordingly, no servicing asset or liability has been recorded

BHGE 2018 Proxy Statement | 23



on the consolidated and combined statements of financial position as of December 31, 2017 and December 31, 2016. Under the programs, we incurred interest expense and finance charges of $59 million, $91 million and $93 million for the year ended December 31, 2017, 2016 and 2015, respectively, which is reflected in the consolidated and combined statements of income (loss).
Trade Payables Accelerated Payment Program

Our North American operations participate in accounts payable programs with GE Capital. Invoices are settled with vendors per our payment terms to obtain cash discounts. GE Capital provides funding for invoices eligible for a cash discount. Our liability associated with the funded participation in the accounts payable programs, which is presented as accounts payable within the consolidated and combined statements of financial position, was $293 million and $104 million as of December 31, 2017 and December 31, 2016, respectively.
Parent’s Net Investment

At December 31, 2016, the remainder of GE's total investment, in excess of our debt from GE, is reflected as equity under the caption "Parent's net investment" in our consolidated and combined statements of financial position. At December 31, 2017, GE's equity ownership is reflected in noncontrolling interest in our consolidated and combined statements of financial position.
Other
The Company has $575 million and $228 million of accounts payable at December 31, 2017 and 2016, respectively, for services provided by GE in the ordinary course of business. The Company has $801 million and $392 million of current receivables at December 31, 2017 and 2016, respectively, for services provided to GE in the ordinary course of business.

Prior to the Transactions, GE provided guarantees, letters of credit, and other support arrangements on our behalf. We provide guarantees to GE Capital on behalf of some customers who have entered into financing arrangements with GE Capital.
Prior to the Transactions, a certain number of our employees were granted GE stock options and RSUs under GE's 2007 Long-Term Incentive Plan. Our consolidated and combined financial statements include compensation expense related to these awards for the portion of an employee's vesting period that accrued during employment with us.

Income Taxes
At closing, BHGE, GE and BHGE LLC entered into a Tax Matters Agreement. The Tax Matters Agreement governs the administration and allocation between the parties of tax liabilities and benefits arising prior to, as a result of, and subsequent to the Transactions, including certain restructuring transactions in connection therewith, and the respective rights, responsibilities and obligations of GE and BHGE, with respect to various other tax matters. GE is responsible for certain taxes related to the Transactions, including restructuring transactions undertaken by GE and Baker Hughes and their respective subsidiaries. GE has assumed approximately $33 million of tax obligations of Baker Hughes related to the Transactions, including restructuring transactions.
Following the closing of the Transactions, BHGE or BHGE LLC (or their respective subsidiaries) may be included in group tax returns with GE. To the extent included in such group tax returns, (i) GE will be required to pay BHGE or BHGE LLC to the extent such separate tax returns include net operating losses that are used to reduce taxes payable by GE with respect to the applicable group tax return, and (ii) BHGE or BHGE LLC will be required to make tax sharing payments to GE in an amount intended to approximate the amount that such entity would have paid if it had not been included in such group tax returns and had filed separate tax returns.
The Tax Matters Agreement also provides for the sharing of certain tax benefits (i) arising from the Transactions, including restructuring transactions, and (ii) resulting from allocations of tax items by BHGE LLC. GE is entitled to 100% of these tax benefits to the extent that GE has borne certain taxes related to the Transactions, including restructuring transactions which are currently estimated to be $33 million. Thereafter, these tax benefits will be shared by GE and BHGE in accordance with their economic ownership of BHGE LLC, which are currently approximately 62.5% and approximately 37.5%, respectively. The sharing of tax benefits generally is expected to result in cash payments by BHGE LLC to its members. Any such cash payments may be subject to adjustment based on certain subsequent events, including tax audits or other determinations as to the availability of the tax benefits with respect to which such cash payments were previously made.

BHGE 2018 Proxy Statement | 24



COMPENSATION DISCUSSION AND ANALYSIS

 
COMPENSATION COMMITTEE REPORT

The Compensation Committee held two meetings during fiscal year 2017 (such meetings all taking place after the consummation of the Transactions on July 3, 2017). The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon such review, the related discussions and such other matters deemed relevant and appropriate by the Compensation Committee, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement to be delivered to stockholders.
John G. Rice, Chair
Gregory D. Brenneman
Martin S. Craighead
James J. Mulva
 


Understanding the Impact of the BHI and GE O&G Transactions on Executive Compensation Program Design and Administration

Introduction

This Compensation Discussion and Analysis ("CD&A") outlines compensation earned during 2017 by our principal executive officer (“PEO”), our principal financial officer (“PFO”), and other named executive officers (together with our PEO and PFO, the “NEOs”). The NEOs include both executive officers who were serving at the end of fiscal year 2017, and former executive officers who terminated employment on July 3, 2017, including our former PEO, our former PFO and two executives who would have been among the three most highly compensated executive officers (other than our PEO and PFO) had they still been serving as an executive officer at the end of the fiscal year. Since BHGE was formed on July 3, 2017 (upon the business combination of BHI and GE O&G), this CD&A describes compensation prior to the Transactions for BHI and following the Transactions for BHGE.

To determine the most highly compensated executive officers under the rules of the SEC, we were required to consider the full fiscal year compensation for executive officers who were previously employed by BHI and only post-Transactions compensation for executive officers who were previously employed by GE O&G. Going forward, these disclosures and tables will reflect twelve full months of compensation for all executive officers, and the Summary Compensation Table will reflect the most highly compensated executives.

For 2H 2017 (July 3, 2017 to December 31, 2017), the Company’s active “NEOs”, were the following five executives:
Lorenzo Simonelli - Chairman, Chief Executive Officer and President (PEO); former CEO of GE O&G
Brian Worrell - Chief Financial Officer (PFO); former CFO of GE O&G
Belgacem Chariag - former Chief Global Operations Officer; departed the Company on January 31, 2018
Derek Mathieson - Chief Marketing & Technology Officer
William D. Marsh - Chief Legal Officer

The NEOs also include four former BHI executive officers who terminated employment on July 3, 2017 (the "BHI NEOs"):
Martin S. Craighead - former Chairman & Chief Executive Officer (former PEO)
Kimberly A. Ross - former Senior Vice President and Chief Financial Officer (former PFO)
Arthur L. Soucy - former President, Products and Technology
Richard L. Williams - former Senior Adviser to the Executive Leadership Team

BHGE 2018 Proxy Statement | 25



2017 Business Context and Performance Overview

2017 was a transformational year for BHI and GE O&G. On July 3, 2017, we closed the Transactions to combine GE O&G and BHI, forming BHGE. The newly created company is a world-leading fullstream provider of integrated oilfield products, services and digital solutions. We set out to be the best partner to oil and gas customers by offering high technology solutions across the value chain, aimed at increasing productivity. By forming BHGE, we positioned the Company to deliver more value for our stockholders.

Discussions on BHGE results throughout this CD&A section are on a combined business basis which is a non-GAAP measure. A reconciliation of GAAP to non-GAAP measures is included in this Proxy Statement as Annex C.

During 2017, the market for our services remained depressed due to continued reduction in capital spending by many of our customers driven by the challenging macro oil and gas market. Despite market headwinds, we made meaningful progress against our financial priorities as referenced below, and we feel these results set us up well to deliver for our stockholders in 2018.

Financial Priority
 
Key Accomplishments
Grow Market Share
ü
For the two consecutive quarters since forming BHGE in July 2017, we delivered revenue growth that outpaced the rig count, demonstrating our progress around market share growth.
ü
Our total year 2017 orders on a combined business basis were $22 billion, up 4% year-over-year, while our 2017 revenue on a combined business basis was $21.9 billion, down 5% versus 2016.
Increase Margins
ü
Our total year 2017 adjusted operating income was $1 billion, up 69% year-over-year.
ü

We ended 2017 with $119 million of synergies executed, ahead of our goals, and are on track to deliver $1.6 billion in synergies by 2020.
Generate Free Cash Flow
ü
Since closing the Transactions, we delivered free cash flow of $(0.8) billion, which included a one-time impact from ending receivables monetization of $(1.2) billion and transaction/restructuring cash payments of $(0.5) billion.


In the second half of 2017, we achieved significant progress on key facets of our business as we implemented our new strategy. Our stronger performance in the second half of 2017 demonstrates that we not only executed on new operational objectives we set following the creation of BHGE, we exceeded them. The highlights are as follows:

Signed the first fullstream deal with Twinza Oil Limited to support an offshore project in Papua New Guinea;
Signed an agreement for an integrated project in the North Sea with Siccar Point Energy, where we will provide a suite of well services for the appraisal well in addition to providing the production and installation of subsea production equipment;
Awarded the largest turbomachinery order with PetroChina for turbine generators in the Halfaya oilfield in Iraq;
Signed the largest ever digital contract with a key international customer;
Delivered $119MM of synergies in 3Q and 4Q combined;
Invested over $600MM combined throughout 2017 in research and development to support our focus on technology;
Introduced more than 240 new products and registered more than 2,800 patents, including the LM9000 aero gas turbine, the TerrAdapt™ bit, and the first installation of IntelliStream™;
Launched our "Perfect HSE Day" metric, which highlights a 24-hour period without a recordable injury or illness, significant environmental spill/release, or significant motor vehicle accident across the company and delivered 72 combined Perfect HSE days from July 3, 2017 through the end of 2017;
Announced a $3 billion share buyback authorization, 6% increase in our quarterly dividend, and a $3.95 billion debt offering at attractive pricing, replacing more expensive legacy debt; and

BHGE 2018 Proxy Statement | 26



Launched new growth pillars to outline our 2018 strategy: market leading product companies; integrated service modules; and fullstream. We outlined bold targets to achieve these pillars: 50% reduction in the cost of doing business, 50% improvement in productivity, and 50% improvement in industrial yield.

Despite these accomplishments and progress towards our long-term, strategic objectives, our stock price underperformed as compared to our peers in the limited time-frame of six months following the creation of BHGE through the end of 2017. Our 2018 long-term incentive performance plan will be tied to the Company’s performance against our peers' total shareholder return.


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BHGE 2018 Proxy Statement | 27



Compensation Decisions

Our people and their capabilities are critical to our success, and maintaining a strong talent base despite significant change is essential. Additionally, the Transactions created unique challenges to fully engage and retain key leaders and employees. With this backdrop, the Compensation Committees of BHI and BHGE made the following key compensation decisions for 2017:
BHI (January - June 2017)

In January 2017, prior to the close of the Transactions, the Compensation Committee of BHI reemphasized pay for performance in the key elements of BHI's compensation programs by:

continuing a performance-based short-term incentive bonus structure for 2017 based on key financial and strategic performance metrics;
increasing performance-based stock for Senior Executives to 50% of the total long-term incentives awarded during the annual January 2017 grant cycle. Were it not for the closing of the Transactions, the payout would have been based upon relative growth and return metrics versus BHI’s peer group during performance periods within 2017 - 2019. Any actual payout would have been delivered at the end of the performance period ending in 2019. The remaining 50% of the January 2017 grant was delivered in the form of service-based RSUs that vest one-third each year; and
providing global broad-based merit increases to base salary following two years without broad-based increases, consistent with practices of other companies in our industry.

BHGE (July - December 2017)

Immediately following the closing of the Transactions, the BHGE Board established a new Compensation Committee that was tasked with developing a strategy to attract and retain top talent, drive company performance and align with stockholder interests. The Compensation Committee executed on these objectives by:

establishing market-based, target compensation packages for the Senior Executives based on a new Compensation Reference Group;
implementing a new performance-based short-term incentive bonus plan for all eligible employees of BHGE based on key financial and strategic performance metrics for the second half of 2017; and
granting key leadership long-term incentive awards in the form of stock options and RSUs to align a broader group of BHGE employees with stockholders, incentivizing leaders to “stay and win” with the new company, and closing retention gaps based on the market for key roles.

2018 BHGE Compensation Program
In January 2018, the Company continued to reinforce the pay for performance elements of its compensation programs by:
continuing a performance-based short-term incentive bonus structure for 2018 based on key financial and strategic performance metrics; and
establishing performance-based long-term incentive awards for Senior Executives granting 50% of the total long-term incentives during the annual 2018 grant cycle in the form of performance share units. The payout is based upon relative Total Shareholder Return (TSR) and Return on Invested Capital (ROIC) versus the Company's peer group during performance periods within 2018 - 2020. Any actual payout would be delivered at the end of the performance period ending in 2020. The remaining 50% of the January 2018 grant was split evenly in the form of stock options and service-based RSUs that will vest one-third each year.


BHGE 2018 Proxy Statement | 28



Compensation Strategy

The purpose of our compensation program is to motivate and retain exceptional individual and organizational performance that is in the long-term best interests of our stockholders. We use traditional compensation elements of base salary, annual short-term incentives, long-term incentives, and employee benefits to deliver attractive and competitive compensation. We benchmark both compensation and Company performance in evaluating the appropriateness of pay. Our executive pay decisions are made by a Compensation Committee of our Board of Directors and reviewed with the full Board of Directors. We target the market median for base salary and short-term incentive compensation, while providing the opportunity for executives to earn upper quartile incentive pay based on Company performance.

Our compensation programs are designed specifically for (1) our most senior executive officers, including our PEO, our PFO, and our three other most highly compensated executive officers (collectively, either the “Senior Executives” or “NEOs”) and (2) employees who are designated as executives of the Company, including the Senior Executives (“Executives”), and (3) a broad base of Company employees.

Compensation Objectives

To reward both short- and long-term performance and to further our compensation objectives, our executive compensation program is designed to:
Attract And Retain Knowledgeable, Experienced, And High Performing Senior Executives
 
Reward The Creation Of Long-Term Stockholder Value
Provide a competitive total rewards package, inclusive of base salary, incentives, and benefits. Regularly benchmark our pay programs against the competitive market, comparing both fixed and variable, at-risk compensation that is tied to short- and long-term performance.
 
Incentive programs include financial performance measures that are fundamental to long-term stockholder value creation. Administer plans to include three-year performance cycles on long-term incentive plan awards, three-year vesting schedules on equity incentives, and competitive total benefit programs.
 
 
 
Address The Complexities Of Managing A Cyclical Business
 
Pay for Performance
Short-term incentive programs provide for formulaic and non-formulaic short-term performance goals and reward managers for the achievement of those goals. The long-term incentive plan utilizes a combination of share growth and full-value awards, balancing retention and appreciation through the business cycles.
 
Provide a significant percentage of total compensation that is variable and at-risk. Annual and long-term incentive compensation comprises, on average, more than two-thirds of each of our Senior Executive's total direct compensation.
 
 
 
Reinforce Adherence To High Ethical, Environmental, Health And Safety Standards
 
Align Executive And Stockholder Interests
The strategic blueprint bonus component may include specific business goal targets related to HSE. The short-term incentive programs allow for reduction or elimination of bonus payouts if the HSE standards are not upheld.
 
Stock ownership guidelines motivate alignment between long-term stockholder value creation and management decisions. The ultimate value of our annual equity grants is driven by stock price performance.



BHGE 2018 Proxy Statement | 29



Pay for Performance

We are committed to a pay for performance philosophy and have designed our compensation programs to deliver compensation that is aligned with Company performance and stockholder interests. Since we are a newly formed company, we do not have the historical reference points to display pay for performance alignment in a traditional manner such as realized compensation versus TSR or peers. In the future when we have full year data, we intend to represent this alignment of compensation with shareholder returns relative to peers. However, our short-term incentives are tied to stretch financial targets and strategic goals and our long-term incentives are tied to stock growth and above market returns.

The charts below show the target mix of compensation elements for our Senior Executives. This allocation provides a significant percentage of our target total direct compensation for Senior Executives in the form of variable compensation through our annual short-term incentive bonuses and long-term incentive compensation. Actual total direct compensation varies based on the extent of achievement of, among other things, safety, operational and financial performance goals and stock performance.

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12147551&doc=17
 
Compensation Governance
The Compensation Committee is focused on creating a best in class compensation program that aligns executive and stockholder interests. The following table highlights the governance and compensation best practices that we employ and the poor practices that we avoid.

 
WHAT WE DO
 
 
WHAT WE DON'T DO
ü
Pay for performance. Majority of pay is at-risk and aligned with achievement of pre-determined goals and company performance
 
ý
No hedging or pledging of company stock
 
ý
No backdating or repricing of stock option awards
ü
Significant stock ownership guidelines that further enhance the link between the interest of our stockholders and our executives
 
ý
No excessive perquisites
 
ý
No dividend equivalents paid on unearned RSU
ü
Clawback provisions. This compensation recovery allows our Board to recoup performance-based cash awards in specified instances
 
ý
No automatic base salary increases
 
ý
No single trigger stock acceleration
ü
Annual Risk Assessment
 
ý
No excise tax gross-ups for future agreements
ü
Benchmark Compensation and Performance
 
 
 
ü
Annual "Say on Pay" vote
 
 
 

BHGE 2018 Proxy Statement | 30



Key Inputs into Our Executive Compensation Programs

In designing our executive compensation programs, we consider input from our stockholders, our independent compensation consultant, and other compensation consultants, as well as market practices.

Consideration of Stockholder Feedback and Advisory Say on Pay Voting Results

In accordance with our stockholders’ preference, we submit our executive compensation program to an advisory vote annually. In 2017, BHI’s compensation program received the support of 88.5% of the total votes cast at our annual meeting. While the Say on Pay vote is advisory and not binding on the Company, the Compensation Committee strongly values the opinions of our stockholders as expressed in the Say on Pay outcome.

Engagement with our stockholders is very important to us. We invest significant time and resources in investor outreach and ongoing dialogue with stockholders to communicate the value of the combination between BHI and GE O&G and the strengths of the portfolio. In 2017, prior to the closing of the Transactions, members of the executive management team contacted a significant number of institutional stockholders to discuss the Transactions, the BHGE governance structure and key executive compensation practices. The meetings included discussions on change in control practices and the need to provide compensatory retention and reward incentives given the unique challenges faced by BHI during the pending merger with GE O&G. During that engagement, we reiterated the intention of BHGE to continue to use a pay for performance model.

The Company considered the feedback that was provided during these engagement calls and BHGE continued many favorable performance-based compensation practices. We discontinued the following BHI practices:
single trigger stock acceleration;
bonus payments triggered by a change in control; and
gross-ups for excise taxes will sunset after 3 years for executives who were previously grandfathered under the BHI plans.

Compensation Consultant and Conflict of Interest Analysis
 
Prior to July 3, 2017, the BHI Compensation Committee retained Frederic W. Cook & Co., Inc. ("FW Cook") as its independent compensation consultant. FW Cook advised the BHI Compensation Committee on matters related to the Senior Executives' compensation and general compensation programs, including industry best practices. In accordance with the requirements of Item 407(e)(3)(iv) of Regulation S-K, the BHI Compensation Committee considered the relationships FW Cook had with the Company, the members of the BHI Compensation Committee and BHI’s executive officers, as well as the policies that FW Cook had in place to maintain its independence and objectivity, and determined that no conflicts of interest arose from the work performed by FW Cook during the first half of 2017.

During the second half of 2017, BHGE management sought the views of a number of external consultants including FW Cook and Willis Towers Watson about market intelligence on compensation trends related to senior executive compensation. In March 2018, the BHGE Compensation Committee formally selected FW Cook as its independent compensation consultant.

Benchmarking

The high level of competition for executive talent magnifies the need to ensure that our executive compensation programs are appropriately positioned against peer companies. To appropriately benchmark compensation and measure performance, both BHI and BHGE developed and utilized two primary benchmarking sources: (1) a Compensation “Reference Group” and (2) a Performance “Peer Group.” BHI did not have any changes in these sources from the information disclosed in last year's Proxy Statement.

Compensation “Reference Group”

In July 2017, the BHGE Compensation Committee conducted a review to determine which companies to include in the Compensation Reference Group. The Reference Group for BHGE is similar to the previous reference group for BHI and is comprised of 30 companies including industry peers and companies in the broader energy and general industry sectors with similar business characteristics, size, margins, competition for talent, and other key compensable factors. In selecting the Reference Group, the Compensation Committee narrowed the broad universe of public companies down to a smaller group by considering companies within a size range against which the Company competes for talent as well as similar

BHGE 2018 Proxy Statement | 31



business characteristics. The list was narrowed further considering factors, such as global scale, engineering, technology, and industrial applications, multiple divisions, logistical complexity, business services, size (and other financial measures), and asset/people intensity.

The Compensation Committee considers executive compensation at these companies as just one among several factors in setting pay. We target compensation at the 50th percentile of an appropriate peer group with the potential upside of the 75th percentile based on performance. The Committee uses the comparative data as a reference point in exercising judgment about compensation types and amounts. The use of Reference Group proxy data and published survey data in both the general industry and the energy industry (collectively, the “Survey Data”) satisfies the need for both statistical validity and industry factors. The Reference Group data is used to assess the competitive market value for executive jobs, assess pay practices, validate targets for pay plans, test the compensation strategy, observe trends, and provide a general competitive backdrop for decision making.
 
 
Compensation Reference Group
 
 
30 companies - Blend of General Industry, Capital Intensive, and Global Oil & Gas Peers
 
 
ž 3M Company
ž Fluor Corporation
ž Phillips 66
 
 
ž AECOM
ž General Dynamics Corporation
ž Raytheon Company
 
 
ž Caterpillar Inc.
ž Halliburton Company
ž Schlumberger Limited
 
 
ž ConocoPhillips
ž Honeywell International Inc.
ž Tesoro Corporation
Compensation
ð
ž Cummins Inc.
ž International Paper Company
ž The Boeing Company
 
 
ž Deere & Company
ž Johnson Controls International plcž
ž The Dow Chemical Company
 
 
ž Devon Energy Corporation
ž Marathon Petroleum Corporation
ž United Parcel Service, Inc.
 
 
ž E. I. du Pont de Nemours and Co.
ž National Oilwell Varco, Inc.
ž United Technologies Corporation
 
 
ž Eaton Corporation plc
ž Occidental Petroleum Corporation
ž Valero Energy Corporation
 
 
ž FedEx Corporation
ž PACCAR Inc
ž Weatherford International Ltd.
 
 
Used to identify and compare executive pay practices such as pay mix, levels and magnitude, competitiveness, prevalence of long-term incentive vehicles, pay-for-performance plans, etc.
Performance “Peer Group"

In October 2017, the BHGE Compensation Committee evaluated alternatives to determine how to best assess company performance and associated compensation. While the BHI Performance Peer Group was comprised solely of the four oilfield service companies, the BHGE Performance Peer Group is broader, based on the companies in the OSX index plus TechnipFMC to align with the wider portfolio of BHGE. Because of the technical nature of the industry, cyclical nature of the markets, high labor needs and capital requirements, these oilfield service companies provide the best competitive comparison for benchmarking performance over the long-term to determine payouts in awards such as performance share units.
 
 
Peer Group
 
 
16 companies based on the OSX index plus TechnipFMC
 
 
ž Bristow Group, Inc
ž Nabors Industries Ltd.
ž TechnipFMC

 
ž Core Lab NV
ž National Oilwell Varco, Inc.
ž Teekay Tankers CL A
Performance
ð
ž Diamond Offshore Drilling, Inc.
ž Oceaneering International, Inc.
ž Transocean Ltd.
 
 
ž Golar LNG Ltd.
ž Oil States International Inc.
ž Weatherford International Ltd.
 
 
ž Halliburton Company
ž Rowan Companies, plc
 
 
 
ž Helmerich & Payne, Inc.
ž Schlumberger Limited
 
 
 
Used to compare performance in order to determine long-term incentive plan results.

BHGE 2018 Proxy Statement | 32



Components of the Executive Compensation Program

The Compensation Committee reviews, on an annual basis, each compensation element for the PEO and each of the Senior Executives. The Compensation Committee is responsible for reviewing and approving the Company's goals and objectives relative to the PEO's compensation, evaluating the PEO's performance in light of such goals and objectives, and determining the PEO's compensation level based on this evaluation and other relevant information. When reviewing compensation for the Senior Executives, the Compensation Committee balances the Senior Executive's scope of responsibilities and experience against competitive compensation levels.

In addition, each year the PEO presents to the Compensation Committee his evaluation of each of the other Senior Executives, which includes a review of each Senior Executive's contributions and performance over the past year, strengths, development needs, and succession potential. The PEO makes no recommendations to the Compensation Committee regarding his own compensation. Following this presentation and a review of the Survey Data, the Compensation Committee makes its own assessments and approves compensation for each Senior Executive.

Base Salaries

Generally, the Compensation Committee targets the market median of the Reference Group for the base salaries of our Senior Executives. Typically, when considering an adjustment to a Senior Executive's base salary, the Compensation Committee reviews the Survey Data and evaluates the Senior Executive's position relative to the market, his/her level of responsibility, and experience as well as overall performance. The Compensation Committee also considers the Senior Executive's success in achieving business objectives, promoting our culture pillars and keys to success, improving health and safety, demonstrating leadership, and achieving specific individual performance goals.

In determining base salaries, the Compensation Committee also considers the Company's continuing achievement of its short and long-term goals including:

Financial performance of the Company
Effective execution of the strategy approved by our Board of Directors
Leadership capability

Upon the formation of BHGE in July 2017, the BHGE Compensation Committee reviewed and approved the compensation packages of each BHGE NEO. The full Board also reviewed and approved these packages. The base salary for the BHGE NEOs, as well as the former BHI Senior Executives, for 2017 were as follows:

Senior Executives
BHI 2017
Salary Increase
BHI 2017
Annual Salary (1)
(Post Increase)
BHGE 2017
Annual Salary (2)
Lorenzo Simonelli
N/A
N/A
$1,400,000
Brian Worrell
N/A
N/A
$850,000
Belgacem Chariag
3
%
$772,500
$780,000
Derek Mathieson
3
%
$659,200
$690,000
William D. Marsh
3
%
$592,250
$625,000
 
 
 
 
Martin S. Craighead
3
%
$1,287,500
N/A
Kimberly A. Ross
3
%
$824,000
N/A
Arthur L. Soucy
3
%
$669,500
N/A
Richard L. Williams
3
%
$618,000
N/A
_________
(1) The BHI 2017 salary increases were effective April 2017.
(2) The BHGE 2017 salaries were effective July 2017.
        
        


BHGE 2018 Proxy Statement | 33



Short-Term Incentive Compensation

The short-term incentive compensation programs are designed to provide Senior Executives with the opportunity to earn cash bonuses based on the achievement of specific Company-wide, business unit, functional, and individual performance goals. The short-term incentive compensation opportunity is determined using two factors: achievement of pre-determined financial goals and achievement of strategic priorities. Greater weight is placed on the formula-based, financial component of the short-term incentives, which is consistent with the Company's goal of providing a meaningful link between compensation and Company performance.

2017 Short-Term Incentive Targets for Senior Executives

At BHI, the short-term incentive target for each Senior Executive was reviewed by the Compensation Committee each year and set based on the market median of the Survey Data, the individual contribution level, the potential of each individual executive, as well as a view toward internal equity. At BHGE, all Senior Executives, except the PEO, have a common short-term incentive target of 100% to reinforce rewards for shared enterprise goals. For 2017, the incentive target percentages for Messrs. Mathieson and Marsh increased due to each individual's appointment as a BHGE Executive.
Senior Executives
BHI STI
Target % of Base Salary (Jan - June)
BHGE STI
Target % of Base Salary (July - Dec)
Lorenzo Simonelli
N/A

150
%
Brian Worrell
N/A

100
%
Belgacem Chariag
100
%
100
%
Derek Mathieson
80
%
100
%
William D. Marsh
75
%
100
%
 
 
 
Martin S. Craighead
120
%
N/A

Kimberly A. Ross
100
%
N/A

Arthur L. Soucy
75
%
N/A

Richard L. Williams
60
%
N/A


2017 Overview

Due to the Transactions, the performance period for the short-term incentive was divided into two performance periods rather than the normal annual performance period. The BHI performance period was from January 1 - July 3 (1H) and the BHGE performance period was from July 4 - December 31 (2H).
1H 2017 for BHI

In February 2017, the BHI Compensation Committee approved annual financial and strategic goals for the 2017 short-term incentive program. The Transactions closed on July 3, 2017 before those goals could be completed, and the change in control provisions within the BHI Annual Incentive Plan (“BHI AIP”) provided that the goals be deemed met at target for all BHI bonus eligible employees globally. Accordingly, a bonus was paid at target for all BHI AIP participants, as prorated (in accordance with the BHI AIP) based on the number of full or partial months in 2017 that preceded the closing of the Transactions.


BHGE 2018 Proxy Statement | 34



The table below summarizes the metrics and goals that were set for the 2017 BHI short-term incentive program.

 
 BHI 2017
Threshold (25%)
Target (100%)
Over Achievement (200%)
Financial Metrics (60% weight)
EBIT Margin
3.5%
5%
6.5%
Revenue Growth
2%
2.8%
3.6%
Working Capital
-2.7%
-3.9%
-5.1%
Strategic Goals (40% Weight)
Safety
Full Support of the pending merger with GE O&G
Operations and Compliance
Technology and Innovation
Leadership

Final 1H BHI 2017 Short-term Incentive Payout

The following payments were made to the legacy BHI NEOs for the first half of 2017 at Target in accordance with the change in control provisions of the BHI AIP.

Senior Executives
BHI AIP
Bonus Payout
(January - July 2017)
Martin S. Craighead
$892,163
Kimberly A. Ross
$475,821
Belgacem Chariag
$446,082
Derek Mathieson
$304,525
William D. Marsh
$256,497
Arthur L. Soucy
$289,953
Richard L. Williams
$214,119

2H 2017 for BHGE

Following the formation of BHGE in July 2017, the BHGE Compensation Committee, with approval from the full Board, established a bonus design with financial and strategic goals for the second half of 2017 under the BHGE Executive Officer Short-Term Incentive Compensation Plan and the broad-based plan. Internally, the bonus is referred to as the "Fullstream Incentive Plan".
 
Key BHGE design features are as follows:
Formulaic, financial metrics weighted 70% of the bonus that may payout up to 150% of target; and
Strategic goals weighted 30% of the bonus that may payout up to 200% of target


BHGE 2018 Proxy Statement | 35



Bonus Based on BHGE Financial Metrics

For 2H 2017, the BHGE bonus included four financial metrics that were equally weighted: (1) Adjusted Revenue, (2) Adjusted EBIT, (3) Adjusted Free Cash Flow, and (4) Synergies. The BHGE Compensation Committee approved three performance levels with respect to the achievement of the financial metrics: (1) Threshold, (2) Target, and (3) Maximum.

The table below represents each of the targets and the associated achievement.

 
BHGE 2H 2017
Threshold (50%)
Target (100%)
Over Achievement (150%)
 
Results
Financial Metrics (70% weight)
Adjusted Revenue ($B)
$11.4B
$12.0B
$12.7B
 
$11.2B
Adjusted EBIT ($B)
$0.9B
$1.2B
$1.6B
 
$544MM
Adjusted Free Cash Flow ($B)
$1.0B
$1.4B
$1.7B
 
$962MM
Synergies ($MM EBIT)
$75MM
$105MM
$135MM
 
$119MM
* Adjusted revenue, adjusted EBIT and adjusted free cash flow are non-GAAP measures. A reconciliation of GAAP to non-GAAP measures is included in this Proxy Statement in Annex C.

For 2H 2017, the threshold level performance for three of the four metrics was missed and therefore no payout was earned on those three metrics. We exceeded the target for the synergy realization metric. The overall achievement of the financial metrics was 30.5% of Target.

Bonus Based on BHGE Strategic Goals

While the financial metrics reward Senior Executives for the achievement of specific formulaic measures, the Compensation Committee approved “Strategic Blueprint” goals for the Senior Executives to reward them based upon the Committee's assessment of the achievement of specific performance goals that are critical to the execution of the Company's strategy, but may or may not be formulaic in nature.

The maximum funds available for the payment of bonuses related to the Strategic Blueprint goals may not exceed 2 times the respective targets for all participants. In determining the bonus amounts, the achievement of (or failure to achieve) the financial performance goals is not a factor that is considered by the Compensation Committee.

The Compensation Committee assesses the PEO's performance relative to the established performance goals for the period and determines if a payout will be made to the PEO. The same process is conducted for the other Senior Executives taking into account the recommendations of the PEO. The Committee carefully considers all of the factors influencing the results and the Senior Executive's performance impacting those results.


BHGE 2018 Proxy Statement | 36



The Compensation Committee considered the achievement for the Strategic Blueprint goals below for 2H 2017:
Performance Component
2H 2017 Performance Expectation
Achievements
Assessment of Performance for 2H 2017
Safety & compliance

Improvement over baseline Health, Safety and Environment (HSE) metrics

Strong compliance culture and processes
Implemented the perfect HSE day program across BHGE. Achieved 72 Perfect days since July 3, quarterly pace improved by 40%.

Integrated compliance teams, processes and culture and initiated open reporting across BHGE.
Exceeded Objectives
Execution

On time delivery improvements and supply chain excellence

Drive free cash flow generation, working capital improvement and capital expenditure synergies

Product management excellence, invest in key new product introduction (NPI) and product cost-out execution
Drove overall inventory improvement in the 4th quarter 2017. Cost of quality in line with expectations.

Generated $(0.8)B of free cash flow in 2H’17. Free cash flow would have been $1B excluding the impact from ending monetization and restructuring cash outflow. Drove overall inventory reduction.

Launched Nova LT within Turbomachinery segment, TerrAdapt within OFS segment, and various other critical product launches across the portfolio.
Met Objectives
Technology & innovation

Deliver on fullstream potential and win key projects. Execute plan revenue synergies by 2020

Finalize Digital commercial offering and win key deals. Strengthen partner ecosystem

Develop innovative business models
Signed key fullstream deals of Twinza Oil Limited and Zohr in Egypt, both of which involve multiple product lines of BHGE.

Signed largest ever digital deal with a key international customer for $0.3B of orders.

Developed multiple business models for launch in 2018.
Exceeded Objectives
Leadership

Integrate best of both cultures and develop & retain domain leaders

Simplify organization, reduce spans & layers and drive digital competence
Cultural integration on track, culture included in performance development plans for 2018, multiple cultural sessions held across the sites.

Drove organizational efficiency through actions to reduce layers and increase span.
Met Objectives
Shareholder Returns

Strong shareholder return

Optimize capital structure

Realize synergies and develop pipeline
BHGE stock down since close.

Launched and executed capital allocation strategy, bought back $501MM shares in 4Q’17.

Exceeded planned synergies for 2017.
Did not Meet Objectives

When determining the funding pool for the Strategic Blueprint bonus, the Compensation Committee considered the achievement of the performance goals above as well as the additional accomplishments of the Senior Executives. Despite the continued downturn in the market and the challenges related to the integration, Senior Executives reorganized the Company following the closing of the Transactions and launched our vision and strategy pillars for BHGE.

Based on these considerations, the Compensation Committee determined that Senior Executives exceeded the 2H 2017 strategic goals and approved a funding pool of 120% of target. This also funded the pool for individual goal achievement for all bonus eligible employees at 120% of target. The maximum overall and individual payout is 200% of target.


BHGE 2018 Proxy Statement | 37



Final 2H BHGE 2017 Short-term Incentive Payout

The BHGE Compensation Committee awarded the following payments to the BHGE NEOs based upon the established financial and strategic metrics for the second half of 2017 described above.

 
BHGE Bonus Payout (July - December 2017)
Senior Executives
Financial Goals Payout
(30.5% of Target; 70% Weight)
Strategic Goals Payout
(120% of Target; 30% Weight)
Total
(57% of Target)
Lorenzo Simonelli
$226,017
$381,107
$607,124
Brian Worrell
$91,484
$192,861
$284,345
Belgacem Chariag
$69,806
$94,164
$163,970
Derek Mathieson
$61,751
$104,124
$165,875
William D. Marsh
$55,934
$94,315
$150,249

Long-Term Incentive Compensation

The long-term incentive program allows Senior Executives to earn compensation based on sustained multi-year financial and/or superior stock price performance. Consistent with our at-risk pay philosophy, long-term incentives comprise the largest portion of a Senior Executive's compensation package.

A primary objective of the long-term incentive plan is to align the interests of Senior Executives with those of our stockholders. The Compensation Committee determines the total grant date value of long-term incentives to be granted to the Senior Executives as well as the form of long-term incentive compensation vehicles to be utilized. The awards granted to Senior Executives by the Compensation Committee vary each year and are based on factors such as the demand for talent, cost considerations, the performance of the Company, the Senior Executive's performance, competitive compensation information including the Survey Data, total compensation package, as well as other factors the Compensation Committee deems critical to achieving the Company’s business objectives.

Restricted Stock Unit Awards

RSUs provide Senior Executives the opportunity for capital accumulation and a more predictable long-term incentive value than is provided by stock options or performance units. Additionally, RSUs are intended to aid in the retention of Senior Executives through the use of a vesting schedule (generally one-third increments annually after the grant date).

Stock Options

Stock options provide Senior Executives with the opportunity to purchase our stock at a price that is fixed on the grant date regardless of future market price. Stock options are generally awarded once a year in January and generally vest and become exercisable in one-third increments annually after the grant dates. We set the exercise price for each stock option equal to the closing market price of a share of our stock on the NYSE on the grant date. Additional information on these grants, including the number of shares subject to each grant, is also shown in the Grants of Plan-Based Awards Table.

Performance Share Units

PSUs are designed to motivate the Senior Executives to achieve certain specific Company long-term performance goals during a three-year period. Performance units (settled in stock) are awards of a conditional number of shares granted based on a set target value. The final number of shares our Senior Executives may receive under the program depends on how well we perform against the specified peer group with respect to specified performance goals established by the Compensation Committee.

1H 2017 for BHI

In January 2017, the BHI Compensation Committee approved long-term incentive award grants to BHI Senior Executives that were comprised of 50% performance-based RSUs with three-year cliff vesting and 50% service-based RSUs with three-year ratable vesting. These awards were based on the Company’s ranking on revenue growth and return on capital versus peers for the 2017 - 2019 performance period. Based on the change in control provision in the award agreements, upon the closing of the Transactions, these awards converted to time-based RSUs that will cliff vest on the three-year anniversary

BHGE 2018 Proxy Statement | 38



of the grant date or vest in full if the Senior Executive is involuntarily terminated within 12 months follow the closing of the Transactions on July 3, 2017.

2H 2017 for BHGE

In July 2017, the BHGE Compensation Committee approved long-term incentive award grants to key BHGE Senior Executives. These awards included "Founders Grants" consisting of a mix of stock options and RSUs for key executives. The PEO award was 50% RSUs and 50% Stock Options and the NEO awards were 75% RSUs and 25% Stock Options. Additionally, legacy GE Oil & Gas executives received RSUs referred to as "Mirror Grants" to compensate for annual GE stock awards that had not yet been made in 2017. These awards will vest ratably over three years. BHGE did not grant performance units in 2017 due to the mid-year completion of the Transactions.

The “Founders Grants” serve three primary purposes:

align new BHGE leadership with stockholders;
increase retention of legacy BHI executives based on gaps due to stock awards that vested on the closing of the Transactions; and
address market differences for legacy GE O&G executives in elevated public roles. The chart below sets forth the grant date target values of the long-term incentive awards granted to Senior Executives in 2017.
Senior Executives
Target Grant Value of BHI 2017 Long-Term Incentive Annual Grant
Target Grant Value of BHGE 2017 Long-Term Incentive "Mirror Grant"
Target Grant Value of Special “Founder’s Grant”
Lorenzo Simonelli

$1,984,500
$9,000,000
Brian Worrell

$1,036,700
$3,500,000
Belgacem Chariag
$3,276,700

$3,500,000
Derek Mathieson
$2,625,700

$2,425,000
William D. Marsh
$1,897,400

$1,900,000
 
 
 
 
Martin S. Craighead
$10,527,000


Kimberly A. Ross
$3,937,300


Arthur L. Soucy
$2,457,500


Richard L. Williams
$2,519,200



2018 BHGE

In January 2018, the Compensation Committee approved performance-based awards for Senior Executives with 50% of the total long-term incentives granted during the annual January 2018 grant cycle in the form of performance share units. The payout is based upon relative Total Shareholder Return ("TSR") and Return on Invested Capital ("ROIC") versus the Company's Performance Peer Group during performance periods within 2018 - 2020. Any actual payout will be delivered at the end of the performance period ending in 2020.

The following chart summarizes the 2018 LTI vehicle mix.

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12147551&doc=13

BHGE 2018 Proxy Statement | 39




Certain Tax Implications of Short-Term Incentives and Long-Term Incentives

For compensation arrangements made prior to November 2, 2017, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally places a limit of $1,000,000 on the amount of compensation that may be deducted by the Company in any year with respect to the PEO and the other NEOs other than the PFO unless the compensation is performance-based compensation and is an existing binding contract as described in Section 162(m) of the Code and the related regulations.

We generally intend that certain compensation paid to Senior Executives should qualify for deductibility as performance-based compensation under Section 162(m), including certain options and certain other long-term performance-based stock or cash awards granted.  We believe there are circumstances where the Company's interests are best served by maintaining flexibility in the manner in which compensation is provided, even if it might be considered non-deductible compensation under the Code.

Note that while our plans were originally designed to comply with the performance-based exception that previously existed under Section 162(m), the Company is considering the extent to which 162(m) applies to our current structure.


Employee Benefits

BHI and GE O&G benefits remained in place for corresponding legacy executives throughout 2017. Each legacy benefit plan offers a variety of health and welfare and retirement programs to all eligible employees. The Senior Executives are generally eligible for the same broad-based benefit programs on the same basis as the rest of our employees who work in the United States. Programs that provide different levels of benefits for Senior Executives are noted in the descriptions below, including long-term disability, life insurance, the BHI Supplemental Retirement Plan (the "SRP"), the GE Supplementary Pension Plan, the Executive Severance Plan, and financial counseling. We routinely benchmark our benefits programs against the competitive market and make modifications as we deem appropriate. Outlined below is a summary of legacy benefits provided to executives of BHI and GE O&G respectively. A new set of streamlined executive benefits are currently under consideration and will be phased in as appropriate.

BHI Executive Benefits

Legacy BHI executives are eligible for BHI executive benefits, including Messrs. Chariag, Mathieson, and Marsh. Former BHI NEOs were also eligible for these benefits.

Disability

The BHI long-term disability program provides continuation of a percentage of the employee’s base pay up to age 65 if the employee has a qualifying disability lasting longer than 26 weeks. Disability coverage options include Company paid core coverage equal to 50% income replacement or optional buy-up coverage equal to 60% income replacement. Senior Executives receive the buy-up option at no cost.

Life Insurance and Accidental Death and Dismemberment

The BHI life insurance and accidental death and dismemberment programs provide financial protection for employees or their beneficiaries in the event of death. The Company provides life insurance and accidental death and dismemberment coverage at two times pay for Senior Executives. Senior Executives may purchase additional life insurance and accidental death and dismemberment coverage from one to six times pay. All employees have the option of purchasing supplemental life insurance, spouse and child life insurance as well as voluntary accidental death and dismemberment insurance. Various limits apply to each program.
    
Retirement Plans

The BHI Supplemental Retirement Plan (“SRP”) is a nonqualified defined contribution retirement plan intended to supplement the retirement benefits of a select group of management and provides for a basic contribution of 5% of the participant’s elective deferral under the SRP and 5% of the sum of the participant’s base compensation and bonus for the calendar year (whether or not deferred) that exceeds the dollar limit under Section 401(A)(17) of the Code ($270,000 in 2017); the applicable

BHGE 2018 Proxy Statement | 40



age-based contribution that would have been made under the BHI Thrift Plan but for the participant’s elective deferral under the SRP or the dollar limit under Section 401(A)(17) of the Code; and the applicable age-based contribution that would have been made under the BHI Pension Plan but for the participant’s elective deferral under the SRP or the dollar limit under Section 401(A)(17) of the Code; plus deemed interest credits based upon the rate of earnings on selected notional investment funds.

The amounts of the BHI Thrift Plan and BHI SRP contributions and accruals for 2017 for legacy BHI NEOs are included in the Summary Compensation Table (under the All Other Compensation column). The changes in values of the BHI Pension Plan actuarial present values of the accumulated benefits of legacy BHI NEOs are set forth in the Summary Compensation Table (under the Change in Pension Value column).

BHI Change in Control Agreements

BHI had entered into change in control agreements (“Change in Control Agreements”) with the Senior Executives, as well as certain other Executives. The Change in Control Agreements are described in the Payments Upon a Change in Control section. The BHI Change in Control Agreements that applied to covered Executives who continued with BHGE were terminated in connection with the closing of the Transactions.

As part of the “Stay and Win” packages, BHI NEOs who continued with BHGE waived eligibility for future CIC benefits under the Change in Control Agreements. The "Stay and Win" packages are described below in the Payments Upon Termination section.
 
Legacy GE Oil & Gas Executive Benefits

Messrs. Simonelli and Worrell are eligible for the following GE O&G executive benefits.

Life Insurance

GE provides taxable payments to cover premiums for universal life insurance policies for legacy GE O&G NEOs. These policies include: (1) Executive Life, which provides universal life insurance policies for the NEOs totaling $3 million in coverage at the time of enrollment and increased 4% annually thereafter; and (2) Leadership Life, which provides universal life insurance policies for the named executives with coverage of 2X their annual pay (salary + most recent bonus).
Retirement Plans

GE provides retirement benefits to the legacy GE O&G NEOs under the same GE Pension Plan and GE Supplementary Pension Plan in which other eligible GE employees participate. A portion of the benefits accrued under these plans is allocated to BHGE based on the NEOs’ service with BHGE since July 2017 in relation to the NEOs’ combined service with GE (i.e., prior to July 2017) and BHGE. The Pension Plan is a funded, tax-qualified plan. The Supplementary Pension Plan, which increases retirement benefits above amounts available under the Pension Plan, is an unfunded, unsecured obligation of GE O&G and is not qualified for tax purposes.

The GE Pension Plan is a broad-based retirement program that is closed to new participants. Eligible employees vest in the plan after five years of qualifying service. The plan also requires employee contributions, which vest immediately.

The GE Supplementary Pension Plan is an unfunded and non-tax-qualified retirement program that is offered to eligible employees in the executive band and above, including the NEOs, that provides retirement benefits above amounts available under the other GE pension programs. This plan has been closed to new participants since 2011.

BHGE Executive Benefits

Harmonized BHGE benefits are being reviewed and benchmarked against the competitive market and will be implemented as internal systems and processes allow.

BHGE 2018 Proxy Statement | 41




Executive Severance Plan

The Executive Severance Plan provides assistance to Executives, including Senior Executives, while they seek other employment following involuntary separation from service. Under the Plan, Executives are eligible for severance of 9 to 12 months of base salary, based on their positions in the Company, and outplacement services for 12 months. Our NEOs also have additional severance benefits through individual agreements or "Stay and Win" agreements, which are described in the Payments Upon Change in Control or Termination section.

Financial Counseling

In addition to Company-wide benefits, both BHI and GE O&G provide Senior Executives elective Company-paid professional financial planning and tax preparation services through a third party. We believe this service improves their understanding of the compensation and benefits programs offered by the Company and serves to maximize the retention and engagement value of our programs. It also allows them to more fully concentrate on our business success and comply with plan requirements. We do not reimburse executives for taxes paid on income attributable to this benefit.

Indemnification Agreements
 
We entered into an indemnification agreement with each of our directors and Senior Executives. These agreements provide that we will indemnify such persons against certain liabilities that may arise by reason of their status or service as directors or officers, to advance their expenses incurred as a result of a proceeding as to which they may be indemnified and to cover such persons under any directors' and officers' liability insurance policy we choose, in our discretion, to maintain. These indemnification agreements are intended to provide indemnification rights to the fullest extent permitted in the State of Delaware and are in addition to any other rights the indemnitee may have under the Company's Certificate of Incorporation, Second Amended and Restated Bylaws and applicable law. We believe these indemnification agreements enhance our ability to attract and retain knowledgeable and experienced Senior Executives and directors.

Stay and Win Award Agreements

As disclosed in Form 8-K filings in 2017, prior to the Transactions, legacy BHI executives Belgacem Chariag, Derek Mathieson, and William D. Marsh accepted "Stay and Win" awards to continue with BHGE which included a waiver by the executive of all rights and claims for any termination payments provided under existing BHI change in control agreements or plans. These awards included a special equity "Founders Grant," a cash retention award, and certain benefits if involuntarily terminated within three years of the Transactions, including:

full vesting of Founders Equity Grant RSUs and any outstanding RSUs granted by BHI;
cash severance payment equal to 18 months of base salary plus any unpaid portion of the cash retention award;
prorated target bonus; and
continuation of excise tax gross-up for these executives that will expire at the end of the transition period.

The “Stay and Win” awards were offered as an inducement to certain legacy BHI executives by replacing benefits they would have been entitled to under their legacy BHI change in control agreements. While the award letter provides for a continuation of the excise tax gross-up that were included in the legacy BHI change in control agreements, it should be noted that these are the only agreements at BHGE that provide for an excise tax gross-up and that upon their expiration in three years, no employees of the Company will have agreements providing for excise tax gross-ups.

The Founders Grants were made following the closing of the Transactions and consist of equity awards with respect to shares of BHGE Common Stock (with RSUs comprising 75% of the grant and stock options comprising 25% of the grant). The awards vest one-third on each of the first three anniversaries of the grant date. The cash retention awards vest and become payable in three equal installments in January of 2018, 2019 and 2020.

Stay and Win Award
Belgacem Chariag
Derek Mathieson
William D. Marsh
Founders Grant FMV
$3,500,000
$2,425,000
$1,900,000
Cash Retention Award
$2,250,000
$2,100,000
$1,500,000

 

BHGE 2018 Proxy Statement | 42



Stock Ownership Guidelines
 
The BHGE Board of Directors adopted stock ownership guidelines for our Senior Executives to ensure that they have a meaningful economic stake in the Company. The guidelines are designed to satisfy an individual Senior Executive's need for portfolio diversification, while maintaining management stock ownership at levels intended to be high enough to assure our stockholders of management's commitment to value creation. Senior Executives are required to hold the number of shares valued at a multiple of their base salary, in the amounts listed below:
Chairman, President and Chief Executive Officer
6X Base Salary
Chief Financial Officer
3X Base Salary
Other executive officers reporting to the CEO
2X Base Salary
   
A Senior Executive has five years to comply with the ownership requirement starting from the date of appointment to a position noted above. If a Senior Executive is promoted to a position with a higher ownership salary multiple, the Senior Executive has five years from the date of the change in position to reach the higher expected stock ownership level but he or she still must meet the prior expected stock ownership level within the original five years of the date first appointed to such prior position. Senior Executives who have not met the applicable stock ownership level within the time required are required to hold 75% of the net shares acquired from future exercises or vestings through the Company's equity compensation programs until the ownership levels are met. The Compensation Committee annually reviews each Senior Executive's compensation and stock ownership levels to determine whether they are appropriate.

Clawbacks

The Board may seek reimbursement from an executive officer if it determines that the officer engaged in conduct that was detrimental to the company and resulted in a material inaccuracy in either our financial statements or in performance metrics that affected the officer’s compensation. If the Board determines that the officer engaged in fraudulent misconduct, it must seek such reimbursement.

In cases of detrimental misconduct by an executive officer, the Board may also take a range of other actions to remedy the misconduct, prevent its recurrence, and discipline the individual as appropriate, including terminating the individual’s employment. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.



BHGE 2018 Proxy Statement | 43




SUMMARY COMPENSATION TABLE


The following table sets forth the compensation earned by the PEO and other NEOs for services rendered to the Company for the fiscal years ended December 31, 2017, 2016, and 2015.
Name and
Principal Position (1)
Year
Salary(2)
($)
Stock
Awards (3)
($)
Option
Awards (4)
($)
Non-Equity
Incentive Plan Compensation (5)
 ($)
Change in Pension Value and Nonqualified Deferred Compensation Earnings (6)
($)
All Other Compensation (7)
($)
Total
($)
Lorenzo Simonelli
President & Chief Executive Officer
2017
700,000

6,480,880

4,499,991

607,124

204,895

156,076

12,648,966

 
 
 
 
 
 
 
 
Brian Worrell
Chief Financial Officer
2017
425,000

3,659,679

874,992

284,345

126,479

421,310

5,791,805

 
 
 
 
 
 
 
 
Belgacem Chariag
Former Chief Global Operations Officer

2017
768,173

5,900,218

874,992

610,052

208,517

462,635

8,824,587

2016
718,750

4,978,724


958,751

24,302

215,347

6,895,874

 
2015
700,000

2,978,780


784,394

10,083

266,524

4,739,781

 
 
 
 
 
 
 
 
 
Derek Mathieson
Chief Marketing & Technology Officer
2017
666,769

4,443,393

606,241

470,400

16,051

307,571

6,510,425

2016
636,308

2,386,968


752,013

9,785

156,275

3,941,349

 
2015
640,000

2,240,011


699,819

8,443

184,277

3,772,550

 
 
 
 
 
 
 
 
 
William D. Marsh
Chief Legal Officer
2017
601,394

3,321,663

474,993

406,746

62,067

194,215

5,061,078

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Martin S. Craighead
Former BHI Chairman & CEO
2017
737,740

10,675,981


892,163

77,683

21,346,607

33,730,174

2016
1,233,173

9,569,977


2,185,916

42,293

429,923

13,461,282

2015
1,250,000

9,569,978


2,144,063

15,279

552,415

13,531,735

 
 
 
 
 
 
 
 
Kimberly A. Ross
Former BHI CFO
2017
438,554

3,937,307


475,821


6,827,956

11,679,638

2016
800,000

3,579,393


1,181,920

9,997

235,535

5,806,845

2015
800,000

3,579,380


832,000

8,439

150,856

5,370,675

 
 
 
 
 
 
 
 
 
Arthur L. Soucy
Former President, Products &Technology
2017
356,325

2,457,495


289,953

269,061

8,341,611

11,714,445

2016
622,211

4,234,043


622,570

56,698

295,816

5,831,338

2015
605,000

2,234,113


809,689

11,932

475,730

4,136,464

 
 
 
 
 
 
 
 
 
Richard L. Williams
Former Senior Adviser
2017
328,915

2,519,172


214,119


7,952,010

11,014,216

 
 
 
 
 
 
 
 
____________

(1)
Messrs. Simonelli and Worrell began employment with the Company on July 3, 2017. Messrs. Craighead, Soucy and Williams and Ms. Ross separated employment with BHI on July 3, 2017. Mr. Chariag separated employment with the Company on January 31, 2018.

(2)
The amounts reflected in the "Salary" column reflect the salary paid to Messrs. Simonelli and Worrell from July 3, 2017 through December 31, 2017 and the full-year 2017 BHI and BHGE salary paid to the other NEOs. The amount for Mr. Craighead also includes fees earned as a BHGE director from July 2, 2017 through December 31, 2017 totaling $52,500.


BHGE 2018 Proxy Statement | 44



(3)
The amount reflected in the "Stock Awards" column is the aggregate grant date fair value of stock awards in the form of PSUs and RSUs granted in the years shown. Generally, the aggregate grant date fair value is the amount that the Company expects to expense for accounting purposes over the award's vesting schedule and does not correspond to the actual value that the named executive will realize from the award. The amount for Mr. Craighead also includes a BHGE RSU granted as a BHGE Director. See the "Grants of Plan Based Awards Table" for additional information.

(4)
The amount reflected in the "Option Awards" column is the aggregate grant date fair value of the awards made to the NEOs, computed in accordance with FASB ASC Topic 718. The fair value of each grant is established on the date of grant using the Black-Scholes option-pricing model. The value ultimately realized by the executive upon the actual vesting of the exercise of the stock options may or may not be equal to the FASB ASC Topic 718 determined value. For a discussion of valuation assumptions, see “Note 11 - Stock-Based Compensation” of the Notes to Consolidated Financial Statements included in our Annual Report under Item 8 of the Form 10-K for the year ended December 31, 2017.

(5)
The amount reflected in the "Non-Equity Incentive Plan Compensation" is the payment earned under our annual bonus program. The amount reflected includes the BHGE annual bonus paid to Messrs. Simonelli and Worrell for the performance period from July 3, 2017 through December 31, 2017 and full-year BHI and BHGE annual bonus payments for the other NEOs. This includes payments made at the closing of the Transactions to BHI NEOs per the Change in Control provision of the BHI AIP.

(6)
This amount reflects the change in the present values of the NEOs’ accumulated benefits under applicable pension plans and above-market earnings on nonqualified deferred compensation. The amount for each of Messrs. Simonelli and Worrell reflects the portion of the change in the present value of his accumulated benefit under the GE Pension Plan and the GE Supplementary Pension Plan that is allocable to his service with BHGE since July 2017 (i.e., it does not reflect the change in such value that is allocable to his service with GE prior to July 2017). Neither Mr. Simonelli nor Mr. Worrell had any BHGE related compensation deferrals. The other NEOs are participants in the BHI Pension Plan, SRP, or International Retirement Plan ("IRP") accounts, and the values represent changes under those plans since January 2017. The breakdown is shown in the following table.
Name
Change in Pension Value
$
Above-market Earnings
$
Simonelli
204,895


Worrell
126,479


Chariag
15,728

192,789

Mathieson
16,034

17

Marsh
16,705

45,362

 
 
 
Craighead
17,027

60,656

Ross
(22,428
)
5,207

Soucy
7,945

261,115

Williams
(174,647
)
10,412


(7)
We provide NEOs with other benefits that we believe are reasonable, competitive, and consistent with our overall executive compensation program. The costs of these benefits for 2017, minus any reimbursements by the NEOs, are show in the table below.
Name
Life Insurance Premiums
Company Contributions to Retirement & Savings Plans
Financial & Tax Planning
Relocation Benefits
Relocation Tax Benefits
Dividend Equivalents
Change in Control Severance Payments
Other
Total
Simonelli
18,369


6,553

131,154


N/A

N/A


156,076

Worrell
10,078



166,139

245,093

N/A

N/A


421,310

Chariag
6,230

272,591

7,815

N/A

N/A

169,481

N/A

6,518

462,635

Mathieson
5,784

197,347


N/A

N/A

102,974

N/A

1,466

307,571

Marsh
5,520

147,527


N/A

N/A

35,172

N/A

5,996

194,215

 
 
 
 
 
 
 
 
 
 
Craighead
4,817

498,919

7,815

N/A

N/A

480,445

20,353,030

1,581

21,346,607

Ross
3,752

210,480

3,000

N/A

N/A

169,033

6,439,891

1,800

6,827,956

Soucy
3,398

154,824

7,815

N/A

N/A

156,626

8,017,330

1,618

8,341,611

Williams
3,279

138,672

7,815

N/A

N/A

115,302

7,685,497

1,445

7,952,010


Life Insurance Premiums: Described under Employee Benefits in this Proxy Statement.

Company Contributions to Retirement & Savings Plans: For legacy GE Oil & Gas executives, the values are zero because their 401k contributions were fully matched by GE before the close of the Transactions and transition to BHGE. Otherwise, values would represent employee matching and base contributions under the GE Retirement Saving Plan. For legacy BHI executives,

BHGE 2018 Proxy Statement | 45



the values represent employer matching and employer base contributions that the Company contributed to the BHI Thrift Plan that is available to all US employees and Company contributions to SRP accounts available to US executives.

Financial and Tax Planning: Expenses for the use of advisors for financial, estate, and tax preparation and planning and investment analysis and advice.

Relocation Benefits: With respect to Messrs. Simonelli and Worrell, this column reflects benefits provided to them in connection with their non-permanent assignments to London, at the Company's request and while employed by BHGE. These benefits, which are consistent with those we provide to employees working on non-permanent assignments outside their home countries consisted of cost-of-living adjustments, housing, transportation, utilities, and other destination services.

Relocation Tax Benefits: With respect to Messrs. Simonelli and Worrell, this column reflects the cost of Company-provided tax equalization benefits provided to them in connection with their non-permanent assignments for BHGE related compensation. The amounts reflect the net cost after considering hypothetical taxes that are withheld from their compensation. These benefits are consistent with those we provide to employees working on non-permanent assignments outside their home countries.

Dividend Equivalents: This column reflects payments for dividend equivalents that accrued as quarterly dividends are declared and that are paid when the RSUs vest. This column does not include the value of any Transaction-related payments in respect of the special dividend of $17.50 paid to all BHI stockholders and upon the vesting of legacy BHI RSU awards because that value is already represented in the grant date value of the RSUs granted.

Change in Control Severance Payments: This column reflects cash and in-kind benefits that were provided to legacy BHI executives upon termination following the Transactions. It does not include values for accelerated vesting of equity awards, as those grant date values have already been reported. See the "Potential Payments Upon Change in Control or Termination" for more detail.

Other: This column reflects other benefits provided, none of which individually exceeded the greater of $25,000 or 10% of the total amount of benefits described in this section. These benefits included an annual physical examination for Messrs. Chariag, Mathieson, Marsh and the BHI NEOs, travel for Mr. Marsh's spouse and a leased vehicle for Mr. Chariag.




BHGE 2018 Proxy Statement | 46



GRANTS OF PLAN-BASED AWARDS

This table discloses the number of RSUs, performance stock units, and stock options granted during 2017 and the grant date fair value of these awards. It also sets forth potential future payouts under the Company's non-equity incentive plans.
 
 
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)
Estimated Future Payouts Under Performance Based RSUs (#) (2)
RSUs (3)
(#)
Stock Options(4)
(#)
Stock Option Exercise Price
($/Sh)
Grant Date Fair Value of Awards
($)
Name
Grant Date
Award Type
Threshold
($)
Target
($)
Maximum
($)
Threshold
($)
Target
($)
Maximum
($)
Lorenzo Simonelli
N/A
BHGE STI
$370,521
$1,058,630
$1,746,740
 
 
 
 
 
 
 
8/1/2017
Founders Grant
 
 
 
 
 
 
 
374,687

$35.70
$4,499,991
 
8/1/2017
Founders Grant
 
 
 
 
 
 
126,050

 
 
$4,497,464
 
8/1/2017
Mirror Grant
 
 
 
 
 
 
55,589

 
 
$1,983,416
Brian Worrell
N/A
BHGE STI
$149,973
$428,493
$707,013
 
 
 
 
 
 
 
7/31/2017
Founders Grant
 
 
 
 
 
 
 
70,507

$36.89
$874,992
 
7/31/2017
Founders Grant
 
 
 
 
 
 
71,157

 
 
$2,623,559
 
7/31/2017
Mirror Grant
 
 
 
 
 
 
28,102

 
 
$1,036,121
Belgacem Chariag
N/A
BHI STI
$66,912
$446,082
$981,380
 
 
 
 
 
 
 
1/25/2017
BHI Annual Grant
 
 
 

26,138

52,276

 
 
 
$1,638,330
1/25/2017
BHI Annual Grant
 
 

 
 
 
26,138

 
 
$1,638,330
 
N/A
BHGE STI
$114,436
$326,959
$539,482
 
 
 
 
 
 
 
7/31/2017
Founders Grant
 
 
 
 
 
 
 
70,507

$36.89
$874,992
 
7/31/2017
Founders Grant
 
 
 
 
 
 
71,157

 
 
$2,623,559
Derek Mathieson
N/A
BHI STI
$45,679
$304,525
$669,955
 
 
 
 
 
 
 
1/25/2017
BHI Annual Grant
 
 
 

20,945

41,890

 
 
 
$1,312,833
1/25/2017
BHI Annual Grant
 
 
 
 
 
 
20,945

 
 
$1,312,833
 
N/A
BHGE STI
$101,232
$289,233
$477,234
 
 
 
 
 
 
 
7/31/2017
Founders Grant
 
 
 
 
 
 
 
48,851

$36.89
$606,241
7/31/2017
Founders Grant
 
 
 
 
 
 
49,301

 
 
$1,817,728
William D. Marsh
N/A
BHI STI
$38,475
$256,497
$564,293
 
 
 
 
 
 
 
1/25/2017
BHI Annual Grant
 
 
 

15,136

30,272

 
 
 
$948,724
 
1/25/2017
BHI Annual Grant
 
 
 
 
 
 
15,136

 
 
$948,724
N/A
BHGE STI
$91,695
$261,986
$432,277
 
 
 
 
 
 
 
 
7/31/2017
Founders Grant
 
 
 
 
 
 
 
38,275

$36.89
$474,993
 
7/31/2017
Founders Grant
 
 
 
 
 
 
38,628

 
 
$1,424,214
 
 
 
 
 
 
 
 
 
 
 
 
 
Martin S. Craighead
N/A
BHI STI
$133,824
$892,163
$1,962,759
 
 
 
 
 
 
 
1/25/2017
BHI Annual Grant
 
 
 

83,974

167,948

 
 
 
$5,263,490
 
1/25/2017
BHI Annual Grant
 
 
 
 
 
 
83,974

 
 
$5,263,490
 
8/1/2017
BHGE BOD Grant
 
 
 
 
 
 
4,176

 
 
$149,000
Kimberly A. Ross
N/A
BHI STI
$71,373
$475,821
$1,046,806
 
 
 
 
 
 
 
 
1/25/2017
BHI Annual Grant
 
 
 

31,408

62,816

 
 
 
$1,968,653
 
1/25/2017
BHI Annual Grant
 
 
 
 
</