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Section 1: DEF 14A (DEF 14A)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )

Filed by the Registrant ☒

Filed by a Party other than the Registrant o

Check the appropriate box:

oPreliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
oDefinitive Additional Materials
oSoliciting Material under §240.14a-12
NABORS INDUSTRIES LTD.
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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No fee required.
 
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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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Form, Schedule or Registration Statement No.:
 
 
 
 
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Date Filed:
 
 
 

   

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Annual General Meeting of Shareholders
Tuesday, June 4, 2019, 10:00 A.M. CDT
The Offices of Nabors Corporate Services, Inc.
515 West Greens Road
Houston, Texas 77067
   

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NOTICE OF 2019 ANNUAL GENERAL MEETING OF SHAREHOLDERS
Tuesday, June 4, 2019, 10:00 A.M. CDT
The Offices of Nabors Corporate Services, Inc., 515 W. Greens Rd., Houston, Texas 77067

April 25, 2019

Dear Fellow Shareholder:

On behalf of the Board of Directors (the “Board”) of Nabors Industries Ltd. (“Nabors,” or the “Company”), we cordially invite you to attend the Company’s 2019 annual general meeting of shareholders to be held on June 4, 2019 at 10:00 A.M. CDT (the “meeting”). You are entitled to vote at the meeting if you were a shareholder of record at the close of business on April 5, 2019. This year, shareholders will consider:

1.the election of seven directors for a one year term (Item 1);
2.the approval and appointment of PricewaterhouseCoopers LLP as the Company’s independent auditor for the year ending December 31, 2019, and authorization for the Audit Committee of the Board to set the independent auditor’s remuneration (Item 2);
3.an advisory “Say on Pay” vote to approve the compensation paid by the Company to its named executive officers as disclosed in the Proxy Statement (Item 3); and
4.such other business as may properly come before the meeting.

The Company’s annual audited financial statements for the year ended December 31, 2018, also will be presented at the meeting.

Further information regarding the meeting and the above proposals is set forth in the Proxy Statement. We are mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about April 25, 2019. Shareholders who have requested a paper copy of the Proxy Statement and the Company’s 2018 Annual Report will receive those documents. The Notice contains instructions on how to access the proxy materials, vote online and obtain a paper copy of the proxy materials.

YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE. We hope you will read the Proxy Statement and 2018 Annual Report and submit your proxy, or use telephone or Internet voting, prior to the meeting. Even if you plan to attend the meeting, please submit a proxy as soon as possible to ensure that your shares are voted at the meeting in accordance with your instructions.

On behalf of the Board and our management team, I extend our appreciation for your continued support.

Sincerely yours,


ANTHONY G. PETRELLO
Chairman, President and Chief Executive Officer

   

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL GENERAL MEETING TO BE HELD ON JUNE 4, 2019:
Our Proxy Statement and our 2018 Annual Report are available at:
www.proxyvote.com

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April 25, 2019

Dear Fellow Shareholder:

For the Board of Directors, management, and employees of Nabors, 2018 was an eventful and productive year. Noteworthy achievements for the year included:

increasing operating revenue by 19.2% and adjusted EBITDA by 39.5%
reducing total debt by approximately $442 million for the year, and net debt by approximately $560 million
increasing average U.S. Drilling daily rig margins at the end of 2018 by over 75% to $11,428, from $6,444 at the end of 2017
maintaining focus on our 2020 Vision by achieving 83% growth in the annualized adjusted EBITDA run rate of our Nabors Drilling Solutions segment for the fourth quarter
continuing safety performance progress toward our Mission Zero goal of no recordable incidents by achieving our best ever total recordable incident rate of 0.66
delivering on our promise of breakeven cash flow generation after dividends for 2018
integrating the operations of Tesco Corporation and Robotic Drilling Systems AS (now Canrig Robotic Technologies AS)
completing an offering of common and preferred shares for net proceeds of approximately $580 million
preserving future liquidity by entering into a new five-year senior unsecured revolving credit facility providing for borrowings of up to $1.267 billion, while retaining $666.25 million on our existing facility expiring in 2020
introducing the new PACE®-M750 rig as a capital-efficient retrofit to the existing PACE®-M550 rig
completing the acquisition of PetroMar Technologies, Inc., a manufacturer of innovative logging-while-drilling tools

We believe these accomplishments and others will enhance our position going forward as one of the world’s premier oil and gas drilling, equipment, and technology companies.

As we have done for the past several years, during 2018 management and members of the Board reached out to large shareholders on important issues, including corporate governance and executive compensation. Following these discussions we took a number of actions, including:

effective February 21, 2019, appointed a new director, Mr. Anthony Chase, to bring greater depth, experience, expertise, knowledge – including with respect to environmental matters – and diversity to the Board
reduced the 2018 compensation of our CEO through his voluntary forfeiture of a TSR Share award having a grant date fair value of approximately $4 million, in exchange for a time-based restricted share award with a grant date fair value of $1,500
amended our CEO’s and CFO’s employment agreements to, among other things, cap the payout of all TSR Share awards at target if the Company’s total shareholder return is negative
reduced our CEO’s base salary for 2019 by 10%
created an Office of Human Capital, with a senior vice president in charge of both Health, Safety, & Environment as well as Human Resources
reduced total Board fees by approximately 20% beginning January 1, 2019
strengthened the organization in accordance with its succession plan

The Board is committed to listening to you, our shareholders. We value your input, and appreciate those shareholders that take time to discuss these important issues and otherwise provide valuable insight.

We encourage you to read this Proxy Statement and the accompanying 2018 Annual Report, and to learn more about Nabors and the steps we have taken to be responsive to shareholder concerns. We, the Board of Directors, thank you for your investment in Nabors, and encourage you to vote your shares with the Board’s recommendations.

Sincerest regards,


JOHN YEARWOOD
Lead Director

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PROXY SUMMARY

This summary highlights information contained in this Proxy Statement. It does not contain all the information that you should consider before voting. We encourage you to read the entire Proxy Statement. For information regarding the Company’s 2018 financial performance, please read our 2018 Annual Report. The annual meeting will take place:

Date:
June 4, 2019
Place:
The Offices of Nabors Corporate Services, Inc.
Time:
10:00 A.M. CDT
 
515 W. Greens Rd.
Houston, Texas 77067

Please vote your shares promptly, as this will save the expense of additional proxy solicitation.
You may submit your vote by Internet, telephone, mail or in person.


Visit the website listed on your proxy card/voting instruction form to vote via the Internet.

Call the telephone number on your proxy card/voting instruction form to vote by telephone.

Sign, date and return your proxy card/voting instruction form to vote by mail.

Vote in person at the annual meeting. Owners with shares held through a bank or broker may vote in person at the meeting if they have a legal proxy from the bank or broker and bring it to the meeting.

ITEMS TO BE CONSIDERED & BOARD RECOMMENDATIONS

ITEM
VOTES REQUIRED
FOR APPROVAL
BOARD’S VOTING
RECOMMENDATION
PAGE
REFERENCE
 
 
 
 
 
Item 1
Elect directors
Plurality of votes cast
FOR
 
 
 
 
 
Item 2
Approve and appoint PricewaterhouseCoopers LLP as our independent auditor for the year ending December 31, 2019 and authorize the Board’s Audit Committee to set the independent auditor’s remuneration
Majority of votes present
FOR
Item 3
Advisory vote to approve the compensation of the company’s named executive officers
Majority of votes present
The vote on this item is nonbinding, but the Board will consider the results of the vote in making future decisions
FOR
This Proxy Statement and our 2018 Annual Report are available electronically on our hosted website at www.proxyvote.com and accessible via the QR code at the right. The Notice and proxy materials are first being made available to our shareholders on or about April 25, 2019.

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DIRECTOR NOMINEES

Upon the recommendation of the Governance and Nominating Committee, our Board of Directors has nominated the following seven director nominees (all of whom are current directors) to be elected at the annual general meeting of shareholders. All the nominees for director are independent under the rules of the NYSE, other than Mr. Petrello, who is our Chief Executive Officer. Detailed information about each director nominee, including their respective backgrounds, skills and experience, can be found under “Corporate Governance—Director Nominees”.

NAME
AGE
DIRECTOR
SINCE
INDEPENDENT
PRIMARY OCCUPATION
Tanya S. Beder
63
2017
Chairman and CEO of SBCC Group Inc.
Anthony R. Chase
64
2019
Chairman and CEO of ChaseSource, L.P.
James R. Crane
65
2012
Chairman and CEO of Crane Capital Group Inc.
John P. Kotts
68
2013
Private investor and entrepreneur
Michael C. Linn
67
2012
President and CEO of MCL Ventures, LLC
Anthony G. Petrello
64
1991
 
Chairman of the Board, President and CEO
John Yearwood
59
2010
Retired President, CEO and COO of Smith International, Inc.

DIRECTOR DASHBOARD


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CORPORATE GOVERNANCE HIGHLIGHTS

The following actions reflect our ongoing, constructive dialogue with shareholders and commitment to transparency and good corporate governance:

CEO forfeiture of TSR Share award having a grant date fair value of approximately $4 million in exchange for time-based restricted shares having a grant date fair value of $1,500
CEO base pay decreased by 10 percent for 2019
Anthony R. Chase appointed to Board of Directors, to bring greater depth, experience, knowledge – including with respect to environmental matters – and diversity to the Board
Direct discussions regarding corporate governance matters with shareholders representing approximately 25 percent of shares
Direct investor relations outreach to active institutional investors representing approximately 35 percent of shares
Reduction in Director compensation
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PROXY STATEMENT

GENERAL

This Proxy Statement and the proxy card/voting instructions are being furnished to all shareholders beginning on or about April 25, 2019, in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Nabors Industries Ltd. for the 2019 annual general meeting of shareholders (the “meeting”).

In this Proxy Statement, “Nabors”, the “Company”, “we”, “us” and “our” refer to Nabors Industries Ltd. Where the context requires, these references also include our consolidated subsidiaries and predecessors. Our principal executive offices are located at Crown House, 4 Par-la-Ville Road, Second Floor, Hamilton, HM 08 Bermuda.

MEETING INFORMATION

We will hold the meeting at the offices of our subsidiary, Nabors Corporate Services, Inc., located at 515 W. Greens Rd., Houston, Texas, 77067, at 10:00 a.m. Central Daylight Time on Tuesday, June 4, 2019, unless adjourned or postponed. Directions to the meeting can be found under the Investor Relations tab of our website at www.nabors.com or by calling our Investor Relations department at 281-775-8038.

WHO CAN VOTE & RECORD DATE

All shareholders of record at the close of business on April 5, 2019 (the “record date”), are entitled to vote, in person or by proxy, on each matter submitted to a vote of shareholders at the meeting. On the record date, 415,951,603 of the Company’s common shares were outstanding, the holders of which are entitled to one vote per common share on all matters. The number of common shares outstanding includes shares held by our subsidiaries, which will be voted consistent with the Board’s recommendation. We currently have no other class of securities entitled to vote at the meeting.

MEETING ATTENDANCE

Only record or beneficial owners of the Company’s common shares may attend the meeting in person. If you are a shareholder of record, you may be asked to present proof of identification, such as a driver’s license or passport. Beneficial owners who hold their shares through a broker, dealer, or other nominee must also present evidence of share ownership, such as a recent brokerage account or bank statement, as well as present a legal proxy from their broker. All attendees must comply with our standing rules, which are available on our website and will be distributed upon entrance to the meeting.

IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF MATERIALS

Pursuant to the Securities and Exchange Commission (the “SEC”) “notice and access” rules, we may furnish proxy materials, including this Proxy Statement and our 2018 Annual Report for the year ended December 31, 2018, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them prior to distribution of the Proxy Statement. Instead, a Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed, which explains how you may access and review the proxy materials and how you may submit your proxy on the Internet. We believe that this makes the proxy distribution process more efficient, less costly, and helps to conserve natural resources. If you would like to receive a paper or electronic copy of our proxy materials, please follow the instructions included in the Notice. Shareholders who requested paper copies of the proxy materials or previously elected to receive proxy materials electronically did not receive the Notice and are receiving the proxy materials in the format requested. Proxy materials will also be provided for distribution through brokers, custodians and other nominees and fiduciaries. We will reimburse these parties for their reasonable out-of-pocket expenses for forwarding the proxy materials.

HOUSEHOLDING

The SEC permits a single set of annual reports and proxy statements or a notice of Internet availability of proxy materials, as applicable, to be sent to any household at which two or more shareholders reside if they appear to be members of the same family. Each shareholder continues to receive a separate proxy card or voting instructions. This

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procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces mailing and printing expenses. A number of brokerage firms have instituted householding. As a result, if a shareholder holds shares through a broker and resides at an address at which two or more shareholders reside, that residence may receive only one annual report and proxy statement or notice, as applicable, unless any shareholder at that address has given the broker contrary instructions. However, if any such shareholder residing at such an address wishes to receive a separate annual report and proxy statement or Notice in the future, or if any such shareholder that elected to continue to receive such materials wishes to receive a single set of materials in the future, that shareholder should contact their broker, call our Corporate Secretary at (441) 292-1510, or send a request to our Corporate Secretary at Crown House Second Floor, 4 Par-la-Ville Road, Hamilton, HM08 Bermuda. The Company will deliver, promptly upon written or oral request to the Corporate Secretary, a separate copy of the annual report and proxy statement or notice, as applicable, to a shareholder at a shared address to which a single copy of the documents was delivered.

PROXY SOLICITATION

We have retained Georgeson LLC, 1290 Avenue of the Americas, 9th Floor, New York, NY 10104, for a fee of approximately $15,500, plus reimbursement of out-of-pocket costs and expenses, to solicit proxies on behalf of the Board by mail, in person and by telephone. We will pay all expenses associated with this solicitation and the preparation of proxy materials. In addition, certain of our directors, officers, and employees may solicit proxies by telephone, personal contact, or other means of communication. They will not receive any additional compensation for these activities.

VOTING INFORMATION

Quorum. A majority of the common shares outstanding on the record date, represented in person or by proxy, will constitute a quorum to transact business at the meeting. Abstentions, withheld votes, and broker nonvotes will be counted for purposes of establishing a quorum.

Submitting voting instructions for shares held in your name. As an alternative to voting in person at the meeting, you may direct your vote for the meeting by telephone or via the Internet, which saves the Company money, or, for those shareholders who receive a paper proxy card in the mail, by mailing a completed and signed proxy card. A properly submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your instructions. If you submit a signed proxy without indicating your vote, the person voting the proxy will vote your shares according to the Board’s recommendation unless they lack the discretionary authority to do so.

Submitting voting instructions for shares held in street name and broker nonvotes. If you hold your shares through your broker, follow the instructions you receive from your broker. If you want to vote in person, you must obtain a legal proxy from your broker and bring it to the meeting. If you do not submit voting instructions to your broker, your broker may still be permitted to vote your shares. New York Stock Exchange (“NYSE”) member brokers may vote your shares on the approval and appointment of the Company’s independent auditor and authorization for the Audit Committee to set the independent auditor’s remuneration, which is a “discretionary” item. All other items to be voted on at the meeting are “nondiscretionary” items. Absent specific voting instructions from the beneficial owners, NYSE member brokers may not vote on these proposals. If your broker does not have discretion to vote your shares on a matter, your shares will not be voted on that matter, resulting in a “broker nonvote”. Broker nonvotes will be counted for purposes of establishing a quorum, but will not be counted in determining the outcome of “non-discretionary” items. In other words, broker nonvotes will have no effect on the proposal.

Withholding your vote or voting to “abstain”. You may withhold your vote for any nominee for election as a director. Withheld votes will be excluded from the vote. Because directors are elected by a plurality of votes and there are only seven nominees for the seven director positions, withheld votes will have no effect on the election of directors. On the other proposals, you may vote to “abstain”. If you vote to “abstain”, your shares will be counted as present at the meeting, and your abstention will have the effect of a vote against the proposal.

Revoking your proxy. You may revoke your proxy at any time before it is actually voted by (1) delivering a written revocation notice prior to the meeting to the Corporate Secretary in person or by courier at the address on the notice of meeting appearing at the front of this Proxy Statement or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda; (2) submitting a later-dated proxy that we receive no later than the conclusion of voting at the meeting; or (3) actually voting in person at the meeting. Please note that merely attending the meeting will not, by itself, constitute a revocation of a proxy.

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Votes Required / Abstentions and Broker Nonvotes. The following chart provides information on the votes required to elect a director nominee or approve a proposal and the treatment of abstentions and broker nonvotes:

VOTING ITEM
VOTE REQUIRED TO ELECT OR APPROVE
TREATMENT OF ABSTENTIONS AND BROKER NONVOTES
Election of
Directors
Each director must receive a plurality of the votes cast; however, a nominee who does not receive the affirmative vote of a majority of the shares voted in connection with his/her election must tender his conditional resignation from the Board, which the Board will accept unless it determines that it would not be in the Company’s best interests to do so.
No effect
Independent
Auditor
Requires the affirmative vote of the holders of a majority of shares present in person or represented by proxy.
Abstentions have the same effect as a vote against the proposal; brokers may vote undirected shares
Say-on-Pay
Requires the affirmative vote of the holders of a majority of shares present in person or represented by proxy. The vote on this item is nonbinding, but the Board will consider the results of the vote in making future decisions.
Abstentions have the same effect as a vote against the proposal; broker nonvotes will have no effect


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CORPORATE GOVERNANCE

ROLE OF THE BOARD OF DIRECTORS

The Board directs the management of the Company’s business and affairs. The shareholders elect the Board to act on their behalf and to oversee their interests. Unless reserved to the shareholders under applicable law or the Company’s Bye-laws, all corporate authority resides in the Board as the representative of the shareholders.

The Board selects and appoints executive officers to manage the day-to-day operations of the Company, while retaining ultimate oversight responsibilities. Together, the Board and management share an ongoing commitment to the highest standards of corporate governance and ethics. The Board reviews all aspects of our governance policies and practices, including the “Board Guidelines on Significant Corporate Governance Issues” (the “Governance Guidelines”) and the Company’s “Code of Business Conduct”, at least annually and makes changes as necessary. The Governance Guidelines and the Code of Business Conduct along with all committee charters are available on the Company’s website at www.nabors.com.

OVERVIEW OF KEY GOVERNANCE TOPICS

Director Independence

The Governance and Nominating Committee conducts a review at least annually of the independence of each member of the Board and its committees and reports its findings to the full Board. As permitted by the rules of the NYSE, the Board has adopted categorical standards to assist it in making determinations of director independence. These standards incorporate and are consistent with the independence requirements of the NYSE and are set forth in our Governance Guidelines available on our website at www.nabors.com. In addition to these standards, the Board also reviews each of the transactions, relationships and arrangements described under “Certain Relationships and Related-Party Transactions” below, as well as social and other relationships, in determining whether a director is independent.

Upon the recommendation of the Governance and Nominating Committee, the Board has determined that each director of the Board, other than Mr. Petrello, is independent. The Board also has determined that each member of our Audit, Compensation, and Governance and Nominating Committees meets the independence standards established for these committees by the NYSE and the rules and regulations of the SEC.

Director Nominations

The Governance and Nominating Committee recommends director candidates to the full Board. The Governance and Nominating Committee considers the entirety of each candidate’s credentials including, especially, the ability of each candidate to assist the Board in fulfilling its fiduciary duties to the Company and its shareholders. See “Item 1: Election of Directors” below for a more complete discussion of the criteria used to select director nominees.

Shareholder Nominations and Proxy Access Policy

The Governance and Nominating Committee accepts shareholder recommendations of director candidates and evaluates such candidates in the same manner as other candidates. Shareholders who wish to submit a candidate for consideration by the Governance and Nominating Committee for election at our 2020 annual general meeting of shareholders may do so by submitting in writing the candidate’s name, together with the information described in the Board’s “Amended and Restated Policy Regarding Director Candidates Recommended by Shareholders” available at www.nabors.com. In addition, in July 2017, our Board amended the Company’s proxy access policy to permit up to 20 shareholders owning collectively three percent or more of our outstanding common shares for at least three years to nominate and include in our proxy materials nominees representing up to 20% of the Board, as detailed in the policy, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in the policy. Submissions to the Board should be delivered in person or by courier to the address on the notice of meeting appearing at the beginning of this Proxy Statement or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda, no later than the date required for shareholder submissions pursuant to SEC Rule 14a-8, as set forth on page 61 of this proxy statement.

Shareholder Communications with the Board

Shareholders and other interested parties may contact any of the Board’s directors (as a group or individually), committees, or independent directors as a group, by writing to them at Nabors Industries Ltd., c/o Corporate Secretary. Communications should be delivered in person or by courier to the address on the notice of meeting appearing at the beginning of this Proxy Statement or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda. Shareholder communications received in this manner will be handled in accordance with the Board’s “Policy Regarding Shareholder Communications with the Board of Directors” which is available at www.nabors.com. In addition, any concern about the Company’s conduct, or a complaint about the Company’s accounting, internal control

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or auditing matters, may be communicated directly to the Lead Director, to the outside directors as a group, or to the Audit Committee. Such communications will be treated as confidential and can be anonymous, and may be submitted in writing in care of the Corporate Secretary, or reported by phone to the Nabors Hotline, established specifically for reporting policy concerns, at 1-877-NABORS7.

Annual Meeting Attendance Policy

The Company encourages all directors to attend the annual general meeting of the shareholders. Five of the seven incumbent directors then comprising the full Board attended the 2018 annual general meeting of shareholders.

Executive Sessions of Non-Employee Directors

Our non-employee directors, each of whom the Board has determined is independent, meet in executive session at each regular meeting of the Board, and any executive sessions convened by the Lead Director during the year, without the CEO or any other member of management present. The Lead Director presides over these executive sessions.

Board Leadership Structure

Our Governance Guidelines were modified in 2014 to provide for an independent chairman of the Board following the tenure of our current Chairman and CEO, Mr. Petrello, whose employment agreement provides that he will serve in both roles. Until such time, the Board believes that the current combination of the chairmanship with an experienced, independent Lead Director creates an effective Board leadership structure for the Company. The Board believes that, as the individual with primary responsibility for managing the Company’s day-to-day operations and with extensive knowledge and understanding of the Company, Mr. Petrello is best positioned to chair regular Board meetings as the directors discuss key business and strategic issues and to focus the Board’s attention on the issues of greatest importance to the Company and its shareholders. Furthermore, combining the roles of Chairman and CEO in Mr. Petrello creates a clear line of authority that promotes decisive and effective leadership, both within and outside the Company. The Board’s current view is that a combined Chairman and CEO position, together with a predominantly independent board and a proactive, independent Lead Director, promotes a candid discourse and responsible corporate governance.

Mr. Yearwood will continue to serve as our independent Lead Director, a position he has held since 2011. The Lead Director’s primary responsibility is to preside over executive sessions of non-employee directors and to call meetings of the non-employee directors as desirable. Such executive sessions provide non-employee directors an opportunity to independently evaluate management and the Company’s operations. In addition, the Lead Director:

chairs certain portions of Board meetings;
serves as liaison between the Chairman and the non-employee directors;
develops and approves, together with the Chairman, the agenda for Board meetings, adding agenda items where he deems appropriate;
leads the Board’s annual self-evaluation; and
performs other duties delegated by the Board from time to time.

The Board believes that the Company’s corporate governance and leadership structures, including the composition of the Board, its committees and the presence of a strong Lead Director, creates the most effective leadership structure for the Company at this time and provides effective independent oversight of the Board itself and management. Both the Chairman and Lead Director serve on the Board’s Executive Committee, and any director may raise a matter for consideration by the Board. This past year, our Lead Director:

partnered with the Chair of the Compensation Committee and others in extensive communications with significant shareholders regarding governance matters;
traveled to the Company’s office in Bogota, Colombia for its November Board meeting and visited a rig leased to a large customer in that country; and
provided input and guidance on strategy and growth directly to management in operations.

The Board believes that Mr. Yearwood’s extensive management experience in the industry and effective performance in the role of Lead Director qualify him to continue to serve in that capacity.

Board’s Role in Risk Oversight

Our full Board is responsible for risk oversight and has designated the Risk Oversight Committee to provide assistance in fulfilling its oversight responsibilities with respect to the Company’s processes and policies regarding risk assessment and risk management, including the Company’s enterprise risk management, compliance and

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operational control activities. The Risk Oversight Committee currently meets, at a minimum, on a quarterly basis to evaluate the Company’s risk exposure and tolerance. Ms. Beder, who has significant professional experience in risk management, serves as the Chair of the Risk Oversight Committee.

At each meeting, the Risk Oversight Committee receives information from management regarding a variety of matters, including operations, legal, regulatory, finance, internal audit, cybersecurity, information technology, and strategy, as well as any material risks associated with each matter. It also receives an update from the Company’s Enterprise Risk Management Committee (“ERMC”) comprised of almost a dozen top senior managers of the Company from various functions, each of whom supervises day-to-day risk management throughout the Company. The ERMC is not a committee of the Board. The ERMC is tasked with identifying all potential material risks facing the Company and implements mitigation measures. The ERMC members meet formally throughout the year to define and improve the risk mapping process and implementation. In addition, the Risk Oversight Committee receives an update from the chairman of each of the Company’s committees and in turn provides a quarterly risk report to the Board. The Board also has adopted a procedure for employees and shareholders to report concerns about the Company’s conduct, accounting, internal controls and other matters directly to certain members of the Board. In addition, the Board oversees management as management fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risks.

SUSTAINABILITY

Sustainability is an essential part of our corporate culture and an integral part of our strategic plans. Through technological innovation, environmental impact planning, corporate safety initiatives and community relations activities, the Company understands that how we conduct business is of equal importance to our results. Our sustainability report can be found on our website, www.nabors.com.

CODE OF BUSINESS CONDUCT

The Company has adopted a Code of Business Conduct in accordance with NYSE requirements. All of our employees, including our executive officers, senior management and non-employee directors are required to abide by our Code of Business Conduct, as well as related policies and procedures, to ensure that our business is conducted in a consistently legal and ethical manner. We also expect venders and suppliers to act consistently with the Code of Business Conduct. The Code of Business Conduct is posted on our website at www.nabors.com. We intend to disclose on our website any material amendments to the Code of Business Conduct, or waivers from any provision of the Code of Business Conduct that apply to our CEO and CFO.

SHAREHOLDER ENGAGEMENT

In making decisions regarding corporate governance issues, the Board considers shareholder opinions and input, which it obtains in several ways. One way is through advisory votes on executive officer compensation, as well as shareholder and other proposals at our annual general meetings. In addition, as part of our shareholder outreach effort, we contacted 20 of our largest institutional shareholders, representing approximately 60-65 percent of our outstanding common shares, in an attempt to obtain their views on the Company’s corporate governance program. Of those, only five shareholders, representing approximately 25 percent of our shares, ultimately agreed to hold discussions with our Lead Director and the Chairman of our Compensation Committee. In early 2019, members of our Board and management also met in person with a team from Glass Lewis & Co. LLC, at their invitation, to discuss governance issues, including executive compensation. We believe that dialogue with shareholders and proxy advisory firms affords our directors deeper insight into shareholder concerns than is provided just by a vote on individual topics, and enables a more effective response to issues of most importance to shareholders. We will continue our shareholder outreach, and hope to have higher shareholder response in the future. In addition, during 2018 our investor relations team engaged in dialogue on a regular basis with approximately 100 other shareholders collectively holding approximately 35 percent of our outstanding shares.

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MEETINGS OF THE BOARD AND COMMITTEES

The Board met four times during 2018.

The Board has six committees, each of which report their activities to the Board: (1) the Audit Committee, (2) the Compensation Committee, (3) the Executive Committee, (4) the Governance and Nominating Committee, (5) the Risk Oversight Committee and (6) the Technology and Safety Committee. Appointments to and chairmanships of the committees are recommended by the Governance and Nominating Committee and approved by the Board. Directors are expected to attend all meetings of the Board and committees on which they serve.

Each of our incumbent directors attended over 75 percent of all meetings of the Board and committees on which he or she served during 2018.

The following chart shows the current membership and chairmanship of each Board committee, and the number of meetings held by each committee during 2018.

 
AUDIT
COMPENSATION
EXECUTIVE
GOVERNANCE
AND
NOMINATING
RISK
OVERSIGHT
TECHNOLOGY
AND
SAFETY
Tanya S. Beder
 
 
(1)
Chair
James R. Crane
 
 
 
Chair
Anthony R. Chase
 
 
 
(2)
(2)
 
John P. Kotts
Chair
 
 
•  
 
Michael C. Linn
 
Chair
 
•  
 
 
Anthony G. Petrello
 
 
Chair
 
 
 
Dag Skattum(3)
 
 
 
(3)
(3)
 
John Yearwood
 
Chair
(1)
Number of Meetings
4
4
0
4
4
4
(1)From November 6, 2018 to February 21, 2019.
(2)Since Mr. Chase’s appointment to the Board on February 21, 2019.
(3)Mr. Skattum formally resigned from the Board and all committees effective August 31, 2018.

In addition, during 2018 the Board held one strategy session; the Audit Committee held one telephonic informational session; the Risk Oversight and Technology and Safety Committees held a combined informational meeting; the Compensation Committee took action twice by written consent; the Governance and Nominating Committee took action once by written consent; and the Executive Committee took action on four occasions by written consent.

BOARD PRACTICES AND COMMITMENT

The Board typically meets four times a year at a location outside the United States. A typical Board meeting requires at least one, and most times two, overnight stays. The Board targets at least one meeting each year to be held at a key Nabors market location outside the United States. Last year, this meeting took place in Colombia. This practice allows the Board members to have direct contact with both field level and local management, and facilitates a greater understanding of the challenges and opportunities in these markets. The Board also may use these occasions to meet with key customers and vendors, and to receive direct feedback on the Company’s performance and opportunities.

Board meetings, including committee meetings, typically consume collectively about 15 hours of actual meeting time for each trip. Travel times range from 8 hours to as many as 34 hours depending on location.

As a policy, Board member participation is virtually always in person and not telephonic. Key management personnel are invited on a rotational basis to make presentations to the Board at almost every meeting. This practice ensures informed contact by the Board members with one another as well as with management.

Given that Board meetings must be held outside the U.S., our standard practice is for each director to attend all committee meetings, whether or not a member of that committee. This practice promotes extraordinary depth of knowledge with respect to Company matters and ensures the Company benefits from the directors’ collective knowledge, skill and experience.

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Board members also hold meetings with shareholders, either in person or by telephone. This allows the Board to have direct communication and to discuss all issues that are of importance to the shareholders. This year two Board members also met in person with a team from Glass Lewis, LLC, at their invitation, to discuss governance issues. Members of the Board also meet regularly with management and employees of the Company to discuss strategy and other matters.

The Company believes these Board practices are among the best in class for corporate governance.

Key Committee Responsibilities

The following table shows the key responsibilities of each Board Committee.

   

AUDIT COMMITTEE
   
 
Oversees the integrity of our consolidated financial statements, system of internal controls, internal audit, financial risk management, and compliance with legal and regulatory requirements.
Selects, determines the compensation of, evaluates and, when appropriate, replaces the independent auditor, and preapproves audit and permitted nonaudit services.
Determines the qualifications and independence of our independent auditor and evaluates the performance of our internal auditors and independent auditor.
After review, recommends to the Board the acceptance and inclusion of the annual audited consolidated financial statements in our annual report on Form 10-K.
Conducts information sessions in connection with the Company’s quarterly earnings releases and other matters.
   
 
All members of the Audit Committee were determined to have met the independence, financial literacy and experience requirements of the NYSE and SEC rules and regulations. The Board has also determined that Messrs. Kotts and Yearwood and Ms. Beder are “audit committee financial experts” as defined under SEC rules.
   
 
The Audit Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.
   

   

COMPENSATION COMMITTEE
 
 
 
Reviews and approves the compensation of our executive officers and other senior leaders.
Oversees the administration of our equity-based compensation plans for officers and employees.
Reviews and discusses with management the Compensation Discussion and Analysis and recommends to the Board the inclusion of the CD&A in the proxy statement.
 
 
 
All members of the Compensation Committee were determined to have met the independence standards of the NYSE.
 
 
 
The Compensation Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.
 
 
 
Recent Compensation Committee Highlights/Accomplishments:
 
Reviewed our peer group but did not recommend any changes
 
In late 2018 approved a transaction pursuant to which our CEO agreed to reduce his total compensation for 2018 by forfeiting his 2018 TSR Share award having a grant date fair value of approximately $4 million in exchange for time-based restricted shares with a grant date fair value of $1,500
 
Amended the employment agreements of our CEO and CFO to, among other things, cap the payout of TSR Share awards, including those granted prior to the amendment, if TSR for the applicable performance period is negative.
   

   

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EXECUTIVE COMMITTEE
   
 
As necessary between meetings of the Board, exercises all power and authority of the Board overseeing the management of the business and affairs of the Company
   

   

GOVERNANCE AND NOMINATING COMMITTEE
 
 
 
Identifies and recommends candidates for election to the Board.
Establishes procedures for the committee’s oversight of the evaluation of the Board.
Recommends director compensation.
Reviews corporate governance policies annually.
Reviews and approves any related-party transactions involving directors and executive officers.
 
 
 
All members of the Governance and Nominating Committee during 2018 were determined to have met the independence standards of the NYSE. In addition, Mr. Chase, who joined the committee in February 2019, was determined to have met the independence standards of the NYSE.
 
 
 
The Governance and Nominating Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.
 
 
 
Recent Governance and Nominating Committee Highlights/Accomplishments:
 
 
 
 
Recommended the adoption of new Director Share Ownership Guidelines, as well as a cap on annual director fees of $550,000
 
Following interviews of potential Board candidates, recommended appointment of Anthony R. Chase as a new independent director, bringing greater depth, experience, knowledge – including with respect to environmental matters – and diversity to the Board.
   

   

RISK OVERSIGHT COMMITTEE
 
 
 
Monitors management’s identification and evaluation of major strategic, operational, regulatory, information and external risks inherent in the Company’s business.
Reviews the integrity of the Company’s systems of operational controls, regarding legal and regulatory compliance.
Reviews the Company’s processes for managing and mitigating operational and enterprise risk.
 
 
 
The Risk Oversight Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.
 
 
 
Recent Risk Oversight Committee Highlights/Accomplishments:
 
 
 
 
Reviewed the annual risk assessment conducted by the Company’s Enterprise Risk Management Committee
 
Certain members attended an informational session in December along with certain members of the Technology and Safety Committee.
   

   

TECHNOLOGY AND SAFETY COMMITTEE
 
 
 
Reviews the Company’s strategic technology positions, including intellectual property, patents, and trademarks.
Monitors the Company’s compliance with health, safety and environmental standards.
Reviews the Company’s safety performance and strategic technology position.
Reviews the integrity of information technology systems, including the potential for cybersecurity threats.
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TECHNOLOGY AND SAFETY COMMITTEE
 
 
 
The Technology and Safety Committee Charter Committee operates under a written charter adopted by the Board, and which is available on the Corporate Governance page of Nabors’ website at www.nabors.com.
 
 
 
Recent Technology and Safety Committee Highlights/Accomplishments:
 
 
 
 
Certain members attended an informational session in December along with certain members of the Risk Oversight Committee
 
Oversaw improvements in total recordable incident rates (per 200,000 man hours) from 1.01 in 2013 to .66 in 2018
 
Consistent with our core value of innovation, the Committee supports programs encouraging employees to receive recognition and compensation for inventions and innovative ideas. As a result, the Company had a significant increase in new patent filings and issuances over the last several years, as indicated below.
   


ITEM 1: ELECTION OF DIRECTORS

Each of the nominees for director who is elected at the meeting will serve a one-year term, expiring at the next annual general meeting of shareholders or until such later time as such director’s successor is duly elected and qualified. At the meeting, proxies cannot be voted for a greater number of individuals than seven. The directors standing for election have been nominated by the Board, upon the recommendation of the Governance and Nominating Committee. Each of the nominees has agreed to serve as a director if elected, and we do not anticipate that any will be unable or unwilling to stand for election. If that were to occur, your proxy will be voted for another person nominated by the Board.

CRITERIA

Ensuring effective and ethical oversight of the Company and its operations, and the implementation of its strategic goals, is the Board’s top priority. To accomplish this the Board, through the Governance and Nominating Committee, seeks a diverse group of director nominees that have demonstrated exceptional skills, qualifications, attributes, and experience. In identifying and recommending director nominees, the Governance and Nominating Committee places primary emphasis on the following criteria:

Reputation, integrity and independence (for non-employee directors);
Judgment and diversity of viewpoints, backgrounds and experience, including gender, race, ethnicity, age, and geography;
Business or other relevant experience;
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The extent to which the interplay of the nominee’s expertise, skills, knowledge, and experience with that of the other members of the Board will result in an effective Board that is responsive to the Company’s needs; and
For director nominees who are current directors, history of attendance at Board and committee meetings, as well as preparation for, participation in and contributions to the effectiveness of those meetings.

These criteria include those set forth in our Board Guidelines on Significant Corporate Governance Issues, which are available on our website at www.nabors.com and to any shareholder who requests them in writing. Requests should be addressed to the Corporate Secretary and delivered in person or by courier to the address on notice of meeting appearing at the beginning of this Proxy Statement, or by mail to P.O. Box HM3349, Hamilton, HMPX Bermuda.

The Governance and Nominating Committee believes that each nominee should be evaluated on his or her individual merits, taking into account the needs of the Company at any given time as well as the overall composition of the Board. There are certain criteria that are expected of all director nominees. For example, all nominees are expected to have high integrity and a reputation of success in his or her field. In addition, all nominees are expected to have the time and ability to fulfill his or her responsibilities to the Company and its shareholders, if elected. Other than these basic criteria, however, the Board does not set universal minimum qualifications that all nominees must meet in order to be recommended. Rather, using the broad criteria set out above, the Board identifies specific skills and qualifications that may be beneficial at any given time – including those that are determined to be necessary for committees of the Board to fulfill their respective mandates – which the Governance and Nominating Committee in turn utilizes to determine whether a given director nominee is qualified to serve on our Board. Members of the Governance and Nominating Committee then discuss and evaluate possible candidates in detail and suggest individuals to explore in greater depth. Accordingly, while we believe that each director meets the broad criteria for inclusion as a director nominee, he or she undoubtedly does so in a way specific to that director. The Board, together with the Governance and Nominating Committee, believes this approach helps to ensure a diversity of viewpoints and experience that enables the Board, and the Company, to maintain the highest levels of corporate governance and oversight. The Governance and Nominating Committee has discretion to engage outside consultants to help identify candidates and also considers suggestions from shareholders, as described in our Governance Guidelines.

DIRECTOR NOMINEE SNAPSHOT


 
Beder
Chase
Crane
Kotts
Linn
Petrello
Yearwood
Skills & Experience
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Board of Directors
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Governance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oilfield Services Industry
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Drilling
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oil and Gas
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CEO / Business Head
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Finance / Capital Allocation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Literacy / Accounting
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment Banking
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manufacturing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Technology
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Logistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Academia/Education
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health, Safety and Environment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Board Tenure
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Years
 
2
 
 
<1
 
 
7
 
 
6
 
 
7
 
 
28
 
 
9
 
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Being on a board of directors brings a broad scope of responsibilities, as directors must understand general operational activities as well as corporate governance, including issues surrounding strategic direction and exposures to risk. As a result, the Governance and Nominating Committee believes that the skills and experience listed above benefit the Board in overseeing the Company’s governance as well as its vision and long-term strategy, as follows:

Board of Directors – Prior public-company board experience is helpful in that the nominee will have an understanding of (i) his or her role – there is no time for on-the-job training; (ii) how to deal with the myriad complex issues that can arise and need attention; and (iii) the time commitment involved
Corporate Governance – Experience in dealing with evolving and dynamic corporate governance matters helps to ensure proper corporate policies are in place and enforced, and that the Board and management are appropriately and fully fulfilling their responsibilities
Oilfield Services/Drilling/Oil & Gas – An in-depth knowledge of these industries is important for maintaining our place as a leading provider of drilling and drilling-related services and equipment
CEO/Business Head – Background and experience as a CEO provides an understanding of what it takes to manage employees and run a company
International – Essential for a company like Nabors, with operations and offices in over 25 countries worldwide
Finance/Capital Allocation – Helps to ensure the availability and correct allocation of financial resources to maximize returns
Investment Banking – A background and understanding in this area is useful in pursuing strategic acquisitions
Financial Literacy/Accounting – An understanding of financial reporting and accounting principles is necessary to satisfy stock market listing requirements and, more importantly, in fulfilling accounting oversight responsibilities
Manufacturing – Experience and knowledge of manufacturing processes is important for us as, unlike some of our competitors, we develop and manufacture much of the equipment we use
Technology – A broad understanding of technology and technical systems helps ensure the sensible investing in, and development of, technology
Logistics – Without the proper flow of equipment, supplies, and personnel, we cannot support and satisfy global customer demands
Academia/Education – An academic background can bring new ways of thinking and problem solving to corporate issues
Health, Safety and Environment – Essential to achieving Nabors’ Mission Zero company-wide effort to eliminate injuries and incidents, and ensuring environmentally sound operations

Please see the biographic information under “—Director Nominees” beginning on page 16 for insight as to how each director satisfies the skills and experience indicated above.

While the proper skillset and professional expertise are important, the Governance and Nominating Committee also believes that the Board also should reflect racial, gender, cultural and geographical diversity, as appropriate, in light of the entire Board’s current composition and range of diversity. To that end, Mr. Anthony Chase has been newly appointed to the Board and nominated to stand for election this year. Ms. Tanya S. Beder was nominated and voted onto the Board in 2017. Equally as important as race or gender, however, is the considerable experience, expertise and insight these and the other nominees brings to the Board, as identified in their respective professional biographies set forth under “—Director Nominees” below. The members of the Governance and Nominating Committee recommended the re-nomination of all continuing director nominees, including Mr. Chase. The full Board has agreed with the recommendations of the Governance and Nominating Committee and nominated each of Ms. Beder and Messrs. Chase, Crane, Kotts, Linn, Petrello and Yearwood for re-election.

Over the past several years, the Governance and Nominating Committee has nominated qualified new independent directors to provide fresh perspectives to the Board. The average tenure of the independent director nominees is a mere five years, with two new directors added within the last two years. The Committee believes that Board tenure and directors with many years of service provide the Board with a deep knowledge of the Company, while newer directors lend fresh perspectives.

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The members of the Governance and Nominating Committee, as well as the full Board, believe that the combination of the various qualifications, attributes, skills, and experience of the director nominees will contribute to an effective and well-functioning Board and that, individually and as a whole, the director nominees possess the necessary qualifications and expertise to provide effective oversight of the Company and its business.

In the biographical descriptions that follow, except as otherwise noted, the companies for which directors have worked are not a parent, subsidiary or otherwise affiliated with the Company.

DIRECTOR NOMINEES


TANYA S. BEDER
   
Director since: 2017
Age: 63
   
Committees: Audit, Risk Oversight, and Technology and Safety
   
Other Public Company Boards: 1
Ms. Beder currently serves as the Chairman and CEO of SBCC Group, Inc. (“SBCC”), which she founded in January 1987. SBCC is an independent advisory firm operating globally, whose projects include assisting corporate management, institutional investors, large financial firms and other clients in solving complex financial problems under crisis and providing strategic advice to seize opportunities. Ms. Beder has served since 2011 on the board of the American Century mutual fund complex in Mountain View, California, where she chairs the Risk Committee and is a member of the Portfolio Committee and the Audit & Compliance Committee. Previously, Ms. Beder served as a member of the CYS Investments, Inc. (NYSE: CYS) board of directors from May 2012 to September 2018, where she chaired the Nominating and Governance Committee and was a member of the Audit and Compliance Committee. She also served as the Chief Executive Officer of Tribeca Global Management LLC, a $2.6 billion dollar fund with operations in Singapore, London, and New York; Managing Director of Caxton Associates LLC, a $10 billion asset management firm with operations in New York and London; and President of Capital Market Risk Advisors, Inc. in New York, which she co-founded. Ms. Beder also spent time in various positions with The First Boston Corporation (now Credit Suisse) where she was a part of the first team of derivatives traders and structurers for currency and interest rate swaps, caps, collars, floors, futures, and options, and was on the mergers and acquisitions team in New York and London. In January 2013, she was appointed to the President’s Circle of the National Academies in Washington, DC, after serving six years at the National Academy of Sciences on the Board of Mathematics and their Applications. Ms. Beder also serves on the Mathematical Finance Advisory Board of New York University and is a Board Member Emeritus of the International Association of Quantitative Finance, where she previously served as Chairman. She is an appointed Fellow of the International Center for Finance at Yale University and teaches a course on finance and fintech at Stanford University. From 2004 – 2017 she served on the Advisory Board of the Columbia University Financial Engineering Program, from 2014 – 2017 she served on the Board of The Institute for Pure and Applied Mathematics at UCLA, and from 2010-2014 she served as a Director of the Pilgrim Asia Macro Fund in Singapore. Ms. Beder holds a B.A. in mathematics and philosophy from Yale University, and an MBA from Harvard Business School.
   
Ms. Beder brings to the Board extensive asset management experience, vast knowledge of operational and risk management, and experience serving on both public and private boards of directors. The Board also benefits greatly from Ms. Beder’s audit committee experience and financial expertise.
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ANTHONY R. CHASE
   
Director Since: 2019
Age: 64

   
Committees: Governance and Nominating, Risk Oversight
   
Other Public Company Boards: 2
Mr. Chase is the Chairman and Chief Executive Officer of ChaseSource, L.P., a Houston-based staffing and real estate development firm. He served as the Chairman and Chief Executive Officer of ChaseCom, L.P., a global customer relationship management and staffing services company, until its sale in 2007 to AT&T. Mr. Chase has served as a director of both Anadarko Petroleum Corporation and Paragon Offshore plc since 2014. Until his election at Anadarko, he was also a director of Western Gas Holdings, LLC, a subsidiary of Anadarko and the general partner of Western Gas Partners, LP (NYSE: WES), a publicly traded midstream master limited partnership, where he had served since 2008. From 1999 to August 2010, Mr. Chase served as a director of Cornell Companies. From July 2004 to July 2008, he served as a director of the Federal Reserve Bank of Dallas, and also served as its deputy chairman from 2006 until his departure in July 2008. Mr. Chase also is a tenured Professor of Law at the University of Houston, where he began teaching in 1990 and was awarded tenure in 1995. He has published numerous environmental law and other law review articles during his tenure. Mr. Chase is also on the board of directors of the Greater Houston Partnership, and served as its chairman during 2012. He is also on the board of directors of the Houston Endowment and the Texas Medical Center, and serves on the board of trustees for St. John’s School and KIPP Schools. Mr. Chase holds B.A, M.B.A. and J.D. degrees from Harvard University.
   
Mr. Chase brings experience and expertise in oil and gas, environmental law, real estate, and management and provision of human resources, as well as experience as an executive and as a board member of both public and private companies.

JAMES R. CRANE
   
Director since: 2012
Age: 65
   
Committees: Executive, Technology and Safety, and Compensation
   
Other Public Company Boards: 2
Chairman and CEO of Crane Capital Group Inc., an investment management company, since 2006. Crane Capital Group has invested in transportation, power distribution, real estate and asset management. Its holdings include Crane Worldwide Logistics, a premier global provider of customized transportation and logistics services with 130 offices in 35 countries, and Crane Freight & Cartage. Mr. Crane purchased the Floridian National Gold Club in March 2010 and quickly turned it into one of the nation’s premier golf clubs. Mr. Crane led an investor group that in November 2011 purchased the Houston Astros. In January 2017, Crane acquired and serves as Chairman of the board of Davaco, a leader in high-volume remodels and technology deployments in global brands. In March 2017, Mr. Crane opened two restaurants – Osso & Kristalla and Potente – in Houston, Texas. In June 2017, he started Crane Safety, a commercial safety supply company. In August 2017 he started Modiant, a software company. In June 2018 he became the principal owner of Apurture Cellars, a winery in Sonoma County, California. Mr. Crane was Founder, Chairman and Chief Executive Officer of Eagle Global Logistics, Inc., a NASDAQ-listed global transportation, supply chain management and information services company, from 1984 until its sale in August 2007. He holds a B.S. in Industrial Safety from Central Missouri State University and serves on the boards of directors of Cargojet, Inc. and Western Gas Holdings, LLC, a subsidiary of Anadarko Petroleum Corporation and the general partner of Western Gas Partners.
   
Mr. Crane’s experience in marketing, logistics, global operations and creating shareholder value provide a valuable resource to the Board. The Board also benefits from Mr. Crane’s proven leadership abilities and experience.
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JOHN P. KOTTS

   
Director since 2013
Age: 68
   
Committees: Audit, Compensation and Risk Oversight
   
Other Public Company Boards: None
Mr. Kotts is a private investor and entrepreneur. Through his management company, J.P. Kotts & Co., Inc., Mr. Kotts also operates a private investment fund focused on the trading of U.S. and international securities and other financial instruments. He also invests in real estate and private equities. Mr. Kotts is currently the owner and CEO of Vesco/Cardinal, an oil tool rental and service company, as well as several manufacturing companies. Mr. Kotts previously held various financial, banking and investment banking positions in companies specializing in leveraged buyouts, venture capital and turnaround transactions. From 1990 to 1998, he owned and operated Cardinal Services, Inc., a leading supplier of liftboat rentals and other production-related services, including mechanical wireline services and plug and abandonment services, to oil companies operating in the Gulf of Mexico. Mr. Kotts previously served on the board of directors for C&J Energy Services Ltd. from March 2015 to September 2015. He holds a B.A. in Philosophy and an M.B.A in Finance from Hofstra University and completed additional post-graduate work at McGill University in Montréal, New York University and Harvard Business School.
   
Mr. Kotts’ industry background and knowledge, business acumen and financial expertise were the primary factors considered by the Board in deciding to appoint him as a director and nominate him for election to the Board. Mr. Kotts brings to the Board entrepreneurial drive and management skills.

MICHAEL C. LINN
   
Director since 2012
Age: 67
   
Committees: Governance and Nominating, and Compensation
   
Other Public Company Boards: 2
President and CEO of MCL Ventures, LLC, an oil, gas and real estate investment firm, since 2012. Mr. Linn is the former Chairman, CEO, President and Director of LINN Energy, LLC, which he founded. Since 2015 he has served as a director for the general partner of Black Stone Minerals, L.P. He has served as a Senior Advisor for Quantum Energy Partners, LLC since 2012, and previously served as a director for Western Refining Logistics GP. Mr. Linn is on the Board of Managers of Cavallo Mineral Partners, LLC, and has served as a director of Jagged Peak Energy Inc. since January 2017. He serves as a member of the National Petroleum Council’s Board of Directors and as Chairman of the Education Committee of the IPAA. He previously served on the board of directors of C&J Energy Services Ltd., as Non-Executive Director and Chairman of the Safety, Health, Environment, Security and Ethics Committee for Centrica plc, as Chairman and director of the Natural Gas Council, as Chairman of the Independent Petroleum Association of America, as director of the Natural Gas Supply Association, as Chairman and President of each of the Independent Oil and Gas Associations of New York, Pennsylvania and West Virginia, and as Texas Representative for the Legal and Regulatory Affairs Committee of the Interstate Oil and Gas Compact Commission. Mr. Linn holds a B.A. in Political Science from Villanova University and a J.D. from the University of Baltimore School of Law.
   
Mr. Linn’s broad understanding of the energy landscape and insight into the needs of our customers, together with his extensive industry knowledge and relationships, provide valuable resources to the Board. The Board also benefits from Mr. Linn’s proven leadership from his experience as a chief executive officer.
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ANTHONY G.
PETRELLO
   
Director since 1991
Age: 64
   
Committees: Executive
   
Other Public Company Boards: None
Chairman of the Board of Nabors and its subsidiary, Nabors Industries, Inc., since 2012 and director of each since 1991; Deputy Chairman of Nabors 2003-2012; President and CEO of Nabors and Nabors Industries, Inc. since 2011; President and Chief Operating Officer of Nabors and Nabors Industries, Inc. from 1991-2011. Mr. Petrello holds a J.D. degree from Harvard Law School and B.S. and M.S. degrees in Mathematics from Yale University. Mr. Petrello also serves as a director of Hilcorp Energy Company. In 2018, Mr. Petrello was the recipient of the Offshore Energy Center Pinnacle Award, recognizing outstanding individuals who have taken today’s leading-edge tools and technologies and applied them to real world challenges.
   
Mr. Petrello brings to the Board a unique operational perspective and thorough knowledge of the Company’s operational activities worldwide. He serves as an integral link between the Company and the Board, enabling the Board to better perform its oversight role.

JOHN YEARWOOD

   
Director since 2010
Age: 59
   
Committees: Audit, Governance and
Nominating, Executive, and Technology and Safety
   
Other Public Company Boards: None
Mr. Yearwood currently serves on the board of directors of Sheridan Production Partners, Barra Energia, Foro Energy LLC, and Coil Tubing Partners LLC. He previously served on the boards of Sabine Oil & Gas, LLC, until August 2016, Premium Oilfield Services, LLC until April 2017, and Dixie Electric LLC until November 2018. Until August 2010, he served as the Chief Executive Officer, President and Chief Operating Officer of Smith International, Inc. (“Smith”). He was first elected to Smith’s board of directors in 2006 and remained on the board until he successfully negotiated and completed the sale of Smith to Schlumberger Limited in August 2010. Before joining Smith, Mr. Yearwood spent 27 years with Schlumberger Limited in numerous operations management and staff positions throughout Latin America, Europe, North Africa and North America, including as President and in financial director positions. He also previously served as Financial Director of WesternGeco, a 70:30 joint venture between Schlumberger and Baker Hughes from 2000 to 2004. Mr. Yearwood received a B.S. Honors Degree in Geology and the Environment from Oxford Brookes University in England.
   
Mr. Yearwood brings significant executive management experience in the oilfield services industry to the Board. His extensive industry knowledge, combined with his keen insight into strategic development initiatives, operations and our competitive environment, have provided the basis for the extraordinary leadership and critical independent oversight Mr. Yearwood demonstrates as Lead Director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES FOR
DIRECTOR WITH A TERM ENDING AT THE 2020 ANNUAL GENERAL MEETING.
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OTHER EXECUTIVE OFFICERS


WILLIAM J. RESTREPO
   
Age: 59
CFO of Nabors since March 2014. In this role, Mr. Restrepo has global oversight for finance and accounting, including the treasury, tax, risk management, internal audit and supply chain groups. He also works closely on Nabors’ corporate development and investor relations initiatives. Mr. Restrepo formerly served as Chief Financial Officer at Pacific Drilling S.A. from February 2011 to February 2014. He also previously served as Chief Financial Officer at Seitel from 2005 to 2009 and Smith from 2009 to 2010 until its merger with Schlumberger Limited. Prior to that, from 1985 to 2005, Mr. Restrepo served in various senior financial and operational positions for Schlumberger Limited, including operational responsibility for all product lines in the Continental Europe and Arabian Gulf markets, as well as senior financial executive roles in Corporate Treasury and worldwide controller positions with international posts in Europe, South America and Asia. Mr. Restrepo currently serves on the board of SANAD (Nabors’ joint venture with Saudi Aramco) and has previously served on the boards of directors of C&J Energy Services Ltd. from 2015 to 2017, Probe Technology Services from 2008 to 2016, and Platinum Energy Solutions, Inc. from 2012 to 2013. Mr. Restrepo holds a B.A. in Economics and an M.B.A, both from Cornell University, as well as a B.S. in Civil Engineering from the University of Miami.

MARK D. ANDREWS
   
Age: 46
Corporate Secretary of Nabors since September 2007. Prior to joining Nabors, Mr. Andrews served in various treasury and financial management positions with General Electric Company, a diversified technology and financial services company, beginning in December 2000. Mr. Andrews was employed by the public accounting firm of PricewaterhouseCoopers LLP from September 1996 to November 2000 in a number of capacities, including Tax Manager, within the firm’s Mining and Resource Practice. Mr. Andrews holds a B.B.A. degree from Wilfrid Laurier University and is also a Chartered Professional Accountant, Chartered Secretary and a CFA charterholder.

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NON-EMPLOYEE DIRECTOR COMPENSATION

We believe it is essential to attract outstanding non-employee directors and align their economic interest in the Company with other shareholders. We accomplish this through a combination of annual cash retainers and equity incentive awards. Director compensation and benefits are set by the full Board, upon the recommendation of the Governance and Nominating Committee in consultation with the Compensation Committee and with market analysis provided by Pearl Meyer & Partners LLC (“Pearl Meyer”), the compensation consultancy firm retained by both committees. Both the Governance and Nominating Committee and the Compensation Committee consist entirely of independent directors, and are authorized to delegate authority to one or more subcommittees. We believe that director compensation should be reasonable in light of what is customary for companies of similar size, scope and complexity and should reflect the time, effort and expertise required of directors to adequately perform their responsibilities. The amount of compensation paid or awarded to non-employee directors takes into account the fact that, given the nature of the business and the location of our operations, our directors are required to travel a substantial distance to attend meetings outside of the U.S. These travel obligations often result in the directors dedicating a number of days to attending meetings. Directors do not receive additional amounts for attendance at these Board and committee meetings.

In 2018, in connection with the amendment of the Company’s 2016 Stock Plan, the Board approved and the shareholders ratified a new director compensation policy that limits each non-employee director’s individual compensation to a maximum of $550,000 per calendar year (the “Non-Employee Director Compensation Limitation”). Under the Non-Employee Director Compensation Limitation, the Board has the authority to make decisions with respect to director compensation within the $550,000 limit; in other words, such compensation may consist of cash, equity or other amounts, but cannot in any event exceed $550,000 per non-employee director per calendar year. If the Board wishes to approve or provide compensation that exceeds the limitation, it must first seek shareholder approval.

The amount of director compensation was not increased in connection with the adoption and ratification of the Non-Employee Director Compensation Limitation. In fact, our non-employee director compensation was reduced in early 2019. The annual cash retainer remains at $100,000, but the annual retainer for the chairman of each committee, other than the chairman of the Audit Committee, was reduced from $50,000 to $30,000. The retainer for the chairman of the Audit Committee was reduced from $100,000 to $60,000. The retainer paid to members of the Audit Committee was reduced by $5,000, to $15,000 annually, with the annual retainer paid to members of the other committees remaining at $10,000.

All cash retainers are paid on a pro rata basis at the end of each quarter. Any director may elect to receive immediately vested stock options, in lieu of any cash compensation, valued at the amount of the payment using the Black-Scholes valuation model. During 2018, in lieu of cash compensation Mr. Kotts elected to receive immediately vested options at the end of each quarter, and Mr. Skattum – who has since retired from the Board – elected to receive immediately vested options at the end of the first and second quarters.

In addition to the cash compensation described above, non-employee directors also receive an annual equity incentive award. Annual grants of restricted share awards to non-employee directors are made shortly after the annual general meeting of shareholders. This ensures that the awards are granted only to shareholder-elected members for the current year and not to directors who are retiring or otherwise not continuing as directors. In addition, directors who retire from the Board and who meet other criteria may under certain circumstances maintain previously issued equity awards outstanding upon approval by the Governance and Nominating Committee.

Beginning in 2018, following shareholder approval of the amendment to the Company’s 2016 Stock Plan, we began issuing restricted shares to our non-employee Board members with a vesting period of one year from the grant date. In early 2019, the Board agreed to reduce the yearly stock grant from $300,000 to $250,000, with the number of shares granted based on the “fair market value” equal to our share price on the date of grant.

In 2018 the Board also approved and adopted new Director Share Ownership Guidelines. Under the guidelines, each director is required to own Company shares with a value of at least five times the director’s annual cash retainer (exclusive of any portion of the retainer received as a member or chair of any Board committee). Share value for purposes of the guidelines is determined as of the date of grant for vested or unvested restricted share awards or, in the case of open market purchases, the date of acquisition. Each director has three years from the date of his or her first election to the Board by the shareholders to meet the ownership requirements of the guidelines. Each director is currently in compliance with the guidelines or is on schedule to be within the requisite three-year period.

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The following table sets forth information concerning total director compensation in 2018 for each non-employee director.

2018 DIRECTOR COMPENSATION TABLE

NAME(1)
FEES
EARNED
OR
PAID IN
CASH ($)
STOCK
AWARDS
($)(2)(3)
OPTION
AWARDS
($)(4)
NON-EQUITY
INCENTIVE PLAN
COMPENSATION
($)
CHANGE IN
PENSION
VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS ($)
ALL OTHER
COMPENSATION
($)
TOTAL ($)
Tanya S. Beder
 
158,804
 
 
300,000
 
 
0
 
 
0
 
 
0
 
 
0
 
 
458,804
 
Anthony R. Chase(5)
 
N/A
 
 
N/A
 
 
N/A
 
 
N/A
 
 
N/A
 
 
N/A
 
 
N/A
 
James R. Crane
 
160,000
 
 
300,000
 
 
0
 
 
0
 
 
0
 
 
0
 
 
460,000
 
John P. Kotts
 
0
 
 
300,000
 
 
220,000
 
 
0
 
 
0
 
 
0
 
 
520,000
 
Michael C. Linn
 
160,000
 
 
300,000
 
 
0
 
 
0
 
 
0
 
 
0
 
 
460,000
 
Dag Skattum(6)
 
22,935
 
 
300,000
 
 
80,000
 
 
0
 
 
0
 
 
0
 
 
402,935
 
John Yearwood
 
231,522
 
 
300,000
 
 
0
 
 
0
 
 
0
 
 
0
 
 
531,522
 
(1)Mr. Petrello, who was an employee of the Company throughout 2018, is not included in this table. His compensation is reflected in the Summary Compensation Table under “—Executive Compensation Tables” below.
(2)The amounts shown in the “Stock Awards” column reflect the grant-date fair value of restricted share awards, in accordance with FASB ASC Topic 718. Dividends on stock awards are not shown in the table because those amounts are factored into the grant date fair value. On June 5, 2018, upon re-election each non-employee director then on the Board received an award of 41,096 restricted shares as part of his or her annual compensation. The number of restricted shares was determined by dividing the approved award dollar amount of $300,000 by the “Fair Market Value” on the date of grant, which was $7.30.
(3)As of December 31, 2018, the aggregate numbers of outstanding unvested restricted share awards held by non-employee directors were: Ms. Beder—62,039 shares; Mr. Crane—73,680 shares; Mr. Kotts—73,680 shares; Mr. Linn—73,680 shares; and Mr. Yearwood—73,680 shares.
(4)The amounts shown in the “Option Awards” column reflect the grant-date fair value of stock option awards, as calculated in accordance with FASB ASC Topic 718. The only stock option awards granted to non-employee directors during 2018 were to Messrs. Kotts and Skattum, each of whom received options in lieu of certain of their quarterly cash retainers. As of December 31, 2018, the aggregate numbers of stock options outstanding were: Ms. Beder—2,982; Mr. Crane—58,463; Mr. Kotts—350,688; and Mr. Skattum—169,487, all of which are fully vested.
(5)Mr. Chase was not a director during 2018.
(6)Mr. Skattum retired from the Board on August 31, 2018. Accordingly, fees earned by Mr. Skattum consist of a pro-rata amount of annual retainer fee and committee membership fees in 2018 prior to his retirement. The restricted stock awards granted to Mr. Skattum in 2018 were forfeited upon his retirement from the Board.

SHARE OWNERSHIP

Share Ownership of Directors and Executive Officers

We encourage our directors and executive officers to own our common shares in order to align their interests with those of other shareholders. Ownership of the Company’s common shares ties a portion of their net worth to the Company’s share price and provides a continuing incentive for them to work toward superior long-term stock performance.

As of April 5, 2019, Nabors had 415,951,603 common shares outstanding and entitled to vote, including shares held by subsidiaries of Nabors. For purposes of the following table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) pursuant to which a

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person or group of persons is deemed to have “beneficial ownership” of any common shares that such person has the right to acquire within 60 days. The following table sets forth the beneficial ownership of common shares, as of April 5, 2019, by each of our current directors and executive officers, both individually and as a group. Except as otherwise indicated below, each person has sole voting and investment power for the common shares shown below.

 
COMMON SHARES BENEFICIALLY OWNED
BENEFICIAL OWNER(1)
NUMBER OF SHARES
   
PERCENT OF TOTAL
OUTSTANDING(2)
Tanya Beder
 
75,492
 
 
*
 
Anthony R. Chase(3)
 
8,851
 
 
*
 
James R. Crane(3)
 
234,897
 
 
*
 
John P. Kotts(3)
 
765,761
 
 
*
 
Michael C. Linn
 
176,434
 
 
*
 
Anthony G. Petrello(3)(4)
 
13,000,483
 
 
3.12
%
John Yearwood
 
397,434
 
 
*
 
Mark D. Andrews(3)
 
59,939
 
 
*
 
William J. Restrepo
 
2,039,155
 
 
*
 
All directors and executive officers as a group(3)
 
16,758,446
 
 
4.02
%

* Less than 1%

(1)The address of each of the directors and named executive officers listed above is in care of the Company at Crown House, 4 Par-la-Ville Rd., Second Floor, Hamilton, HM 08 Bermuda.
(2)Based on the Company’s total common shares outstanding as of April 5, 2019, the record date for this year’s meeting.
(3)We have included in the table common shares underlying stock options that have vested or are scheduled to vest within 60 days of April 5, 2019. For purposes of computing the percentage of shares held by the persons named above, such option shares are not deemed to be outstanding for purposes of computing the ownership of any person other than the relevant option holder. The number of common shares underlying fully vested stock options, or those vesting within 60 days of April 5, 2019, included in the table are as follows: Mr. Crane – 58,463; Mr. Kotts – 381,327; Mr. Petrello – 751,726; and all directors/executive officers as a group – 1,203,349. Restricted share awards are considered outstanding shares and therefore are included in the table above regardless of vesting schedule.
(4)The shares listed for Mr. Petrello include 461,236 shares owned by a charitable foundation over which Mr. Petrello has shared voting and dispositive power. Mr. Petrello disclaims beneficial ownership of those shares.
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Share Ownership of Certain Beneficial Owners

The following table contains information regarding each person known to us to beneficially own more than 5% of our outstanding common shares as of April 5, 2019, based on Schedule 13G filings made by such persons with the SEC.

BENEFICIAL OWNER
NAME AND ADDRESS
NUMBER OF SHARES
PERCENT OF TOTAL
OUTSTANDING SHARES(1)
BlackRock, Inc.(2)
55 East 52nd Street
New York, NY 10055
 
45,382,662
 
 
10.91
%
Dimensional Fund Advisors LP(3)
Building One
6300 Bee Cave Road
Austin, TX 78746
 
29,443,173
 
 
7.08
%
FMR LLC(4)
245 Summer Street
Boston, MA 02210
 
24,849,207
 
 
5.97
%
The Vanguard Group(5)
100 Vanguard Blvd.
Malvern, PA 19355
 
36,624,395
 
 
8.80
%
(1)Based upon the Company’s total common shares outstanding as of April 5, 2019.
(2)Based on a Schedule 13G/A filed on January 11, 2019, BlackRock, Inc. and certain of its affiliates have sole voting power with respect to 43,649,961 shares and sole dispositive power with respect to 45,382,662 shares as of December 31, 2018.
(3)Based on a Schedule 13G/A filed on February 8, 2019, Dimensional Fund Advisors LP and certain of its affiliates have sole voting power with respect to 28,908,703 shares and sole dispositive power with respect to 29,443,173 shares as of December 31, 2018. Dimensional Fund Advisors LP serves as investment adviser, sub-adviser and/or manager to certain investment companies, comingled funds, group trusts and separate accounts that own all of the reported shares. According to its Schedule 13G/A, Dimensional Fund Advisors LP disclaims beneficial ownership of such shares.
(4)Based on a Schedule 13G filed on February 13, 2019, FMR LLC and certain of its affiliates have sole voting power with respect to 244,613 shares and sole dispositive power with respect to 24,849,207 shares as of December 31, 2018.
(5)Based on a Schedule 13G/A filed on February 11, 2019, The Vanguard Group and certain of its affiliates have sole voting power with respect to 154,903 shares, shared voting power with respect to 37,305 shares, sole dispositive power with respect to 36,460,764 shares and shared dispositive power with respect to 163,649 shares as of December 31, 2018.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

All of our directors and executive officers are required to file reports of share ownership and reports of changes in ownership with the SEC pursuant to Section 16(a) of the Exchange Act. To our knowledge, and based solely on our review of the copies of Forms 3, 4 and 5 and amendments thereto furnished to us during 2018, and written representations from our directors and executive officers, we believe that all Section 16(a) filing requirements were met for such directors and executive officers in 2018 in a timely manner, with the exception of the Form 4 filed in connection with the retirement of Mr. Skattum from the Board of Directors, reporting one transaction, which was filed late.

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CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

The Board has adopted a written policy regarding the review, approval and ratification of “related-party transactions”. A “related person” is defined under applicable SEC rules and includes our directors, executive officers, beneficial owners of 5% or more of our common shares and each of their immediate family members. Under the written policy, our Governance and Nominating Committee, which is comprised entirely of independent directors, is responsible for reviewing and approving in advance all transactions involving any related party of the Company. In making its determination, the Committee must consider the fairness of the transaction to the Company and the potential impact of the transaction on the director’s independence.

Mr. Crane, an independent director of our Board, is the Chairman and CEO of Crane Capital Group Inc. (“CCG”), an investment management company that indirectly owns a majority interest in several operating companies, some of which have provided services to the Company in the ordinary course of business, including transportation and international logistics. In 2018, the Company’s payments to the CCG companies totaled $16.4 million excluding pass through charges, which the Governance and Nominating Committee determined is immaterial to both CCG and the Company. In its determination, the Governance and Nominating Committee considered that:

(1)The Company’s aggregate payment for services to the CCG companies constituted approximately one percent of the consolidated revenue of the CCG companies;
(2)Mr. Crane was not and is not involved in the commercial decisions of either the Company or CCG related to the provision of services to the Company; and
(3)All commercial transactions between the Company and CCG were and are conducted at arm’s length and in the ordinary course of business.

The Governance and Nominating Committee and the Board considered the totality of the information and concluded that Mr. Crane met both the objective and subjective standards of director independence established by the NYSE, as well as the Board’s Governance Guidelines. The Governance and Nominating Committee and the Board also approved ongoing ordinary-course business transactions between the Company and the CCG companies.

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AUDIT COMMITTEE

The Audit Committee operates under a written charter adopted by the Board, which is available on the Company’s website at www.nabors.com. The Audit Committee is responsible for (i) oversight of the quality and integrity of the Company’s consolidated financial statements, the Company’s system of internal controls over financial reporting, and financial risk management, (ii) the qualifications and independence of the Company’s independent registered public accounting firm (independent auditor), (iii) the performance of the Company’s internal auditors and independent auditor and (iv) the Company’s compliance with legal and regulatory requirements with respect to the foregoing. Subject to approval by the shareholders, the Audit Committee has the sole authority and responsibility to select, determine the compensation of, oversee, evaluate and, when appropriate, replace the Company’s independent auditor.

The Audit Committee serves in an oversight capacity and is not part of the Company’s managerial or operational decision-making process. Management is responsible for the financial reporting process, including the Company’s system of internal controls for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States, and for the assessment of and the report on the Company’s internal control over financial reporting included in the Annual Report. The Company’s independent auditor is responsible for auditing those financial statements and expressing an opinion as to (i) their conformity with such accounting principles and (ii) the effectiveness of the Company’s internal controls over financial reporting. PricewaterhouseCoopers LLP was the Company’s independent auditor in 2018. The Audit Committee’s responsibility is to oversee the financial reporting process and to review and discuss management’s report on the Company’s internal controls over financial reporting. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management, the internal auditors and the independent auditor.

During 2018, the Audit Committee, among other things:

Reviewed and discussed the Company’s quarterly earnings releases, quarterly reports on Form 10-Q, and the annual report on Form 10-K, including the consolidated financial statements and the report on internal controls;
Reviewed and discussed the Company’s policies and procedures for financial risk assessment and financial risk management and the major financial risk exposures of the company and its business units, as appropriate;
Reviewed and discussed the annual plan and the scope of work of the internal auditors for 2018 and summaries of the significant reports to management by the internal auditors;
Provided input to the Compensation Committee regarding performance of key finance, internal control and risk management personnel;
Reviewed and discussed with management their reports on the Company’s policies regarding applicable legal and regulatory requirements;
Reviewed, updated and approved the Audit Committee’s charter; and
Met with the independent auditor and the internal auditors in executive sessions and was involved in the selection of the independent auditor’s lead engagement partner.

The Audit Committee reviewed and discussed with management, the internal auditors and the independent auditor the audited consolidated financial statements for the year end December 31, 2018, the critical accounting policies that are set forth in the Company’s annual report on Form 10-K for the year then ended, management’s annual report on the Company’s internal controls over financial reporting, and PricewaterhouseCoopers LLP’s opinion on the effectiveness of the internal controls over financial reporting.

The Audit Committee discussed with the independent auditor matters that independent registered public accounting firms must discuss with Audit Committees under generally accepted auditing standards and standards of the Public Company Accounting Oversight Board (“PCAOB”), including, among other things, matters related to the conduct of the audit of the Company’s consolidated financial statements and the matters required to be discussed by PCAOB Accounting Standards No. 1301 (Communications with Audit Committees). This review included a discussion with management and the independent auditor of the quality (not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the disclosures in the Company’s consolidated financial statements, including the disclosures related to critical accounting policies.

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The independent auditor also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the PCAOB and represented that it is independent from the Company. The Audit Committee discussed with the independent auditor its independence from the Company, and considered whether services it provided to the Company beyond those rendered in connection with its audit of the Company’s annual consolidated financial statements included in its annual report on Form 10-K, reviews of the Company’s interim condensed consolidated financial statements included in its quarterly reports on form 10-Q, and its opinion on the effectiveness of the Company’s internal controls over financial reporting were compatible with maintaining its independence.

The Audit Committee also reviewed and preapproved, among other things, the audit, audit-related, tax and other services performed by, and related fees of, the independent auditor. The Audit Committee received regular updates on the amount of fees and scope of audit, audit-related, tax and other services provided.

Based on the Audit Committee review and these meetings, discussions and reports discussed above, and subject to the limitations on its role and responsibilities referred to above and in the Audit Committee charter, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements for the year ended December 31, 2018, be included in the Company’s annual report on Form 10-K. The Audit Committee also selected PricewaterhouseCoopers LLP as the Company’s independent auditor for the year ending December 31, 2019, which it believes is in the best interest of the Company and/or shareholders, and is presenting that selection to shareholders for approval at the meeting.

Respectfully submitted,

THE AUDIT COMMITTEE
John P. Kotts, Chairman
Tanya S. Beder
John Yearwood

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ITEM 2: APPROVAL AND APPOINTMENT OF INDEPENDENT AUDITOR AND AUTHORIZATION FOR THE AUDIT COMMITTEE TO SET THE INDEPENDENT AUDITOR’S REMUNERATION

PricewaterhouseCoopers LLP served as independent auditors for the Company for the year ended December 31, 2018. PricewaterhouseCoopers LLP or its predecessor has been our independent auditor since May 1987.

Under Bermuda law, our shareholders have the responsibility to approve the appointment of the independent auditor of the Company to hold office until the close of the next annual general meeting and to authorize the Audit Committee of the Board to set the independent auditor’s remuneration. At the meeting, the shareholders will be asked to approve the appointment of PricewaterhouseCoopers LLP as our independent auditor for the year ending December 31, 2019, and to authorize the Audit Committee to set the independent auditor’s remuneration. The selection of PricewaterhouseCoopers LLP as our independent auditor for the year ending 2019 was approved by the Audit Committee in February 2019.

Representatives of PricewaterhouseCoopers LLP will be present at the meeting with the opportunity to make a statement if they desire to do so and to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2, THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITOR OF THE COMPANY AND AUTHORIZATION OF THE AUDIT COMMITTEE TO SET THE INDEPENDENT AUDITOR’S
REMUNERATION

AUDIT COMMITTEE PREAPPROVAL POLICY

The Audit Committee has established a pre-approval policy for all audit and permitted nonaudit services (including the fees and terms thereof) to be performed for the Company by the independent auditor. The Chairman of the Audit Committee may preapprove permissible proposed nonaudit services that arise between committee meetings, provided that the decision to preapprove the service is reported to the full Audit Committee at the next regularly scheduled meeting. During 2018, all audit and nonaudit services performed by the independent auditor were subject to the pre-approval policy.

INDEPENDENT AUDITOR FEES

The following table summarizes the aggregate fees for professional services rendered by PricewaterhouseCoopers LLP. The Audit Committee preapproved all fees for 2018 and 2017 services.

 
2018
2017
Audit Fees
$
6,964,484
 
$
5,223,860
 
Audit-Related Fees
 
2,500
 
 
128,300
 
Tax Fees
 
1,285,269
 
 
1,159,249
 
All Other Fees
 
2,700
 
 
0
 
Total
$
8,254,953
 
$
6,511,409
 

Audit Fees for the years ended December 31, 2018 and 2017, respectively, include fees for professional services rendered for the audits of the consolidated financial statements of the Company and the audits of the Company’s internal control over financial, in each case as required by Section 404 of the Sarbanes-Oxley Act of 2002 and applicable SEC rules, statutory audits, consents and accounting consultation attendant to the audit.

Audit-Related Fees for the years ended December 31, 2018 and 2017, respectively, include consultations concerning financial accounting and reporting standards.

Tax Fees for the years ended December 31, 2018 and 2017, respectively, include services related to tax compliance, including the preparation of tax returns and claims for refund, and tax planning and tax advice.

All Other Fees for the years ended December 31, 2018 and 2017 respectively, include nonrecurring advisory services with respect to corporate process improvements, as well as market data research.

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COMPENSATION DISCUSSION AND ANALYSIS

This compensation discussion and analysis (“CD&A”) is intended to help you understand the executive compensation practices and decisions we made in 2018 relating to the named executive officers listed below (the “executive officers”). This CD&A supplements and should be read in conjunction with the compensation tables and related narratives of this Proxy Statement.

EXECUTIVE SUMMARY

NAMED EXECUTIVE OFFICERS

Anthony G. Petrello, Chairman of the Board, President and Chief Executive Officer
William J. Restrepo, Chief Financial Officer
Mark D. Andrews, Corporate Secretary

Our executive compensation program consists of three main components that reflect our compensation philosophy:

1.Annual base salary;
2.A capped performance-based cash award under our Incentive Plan (as defined below) (“annual performance bonus”);
3.For our CEO and CFO, capped long-term performance-based equity incentive awards, consisting of performance shares that are subject to annual performance goals (“Performance Shares”) and capped long-term performance shares subject to achievement of Total Shareholder Return relative to our peers over a three-year period (“TSR Shares”); and
4.For our Corporate Secretary, time-based restricted share awards.

The purpose of this program is to enable us to remain competitive within our industry while ensuring that our executive officers are appropriately incentivized to deliver shareholder value, both over the medium and the long term.

OUR 2018 SAY-ON-PAY AND SHAREHOLDER OUTREACH

At our 2018 Annual Meeting, 40.7% of votes cast were in favor of our 2018 executive compensation program. The Board was disappointed in this result and is concerned with the low level of support that our executive compensation program received from our shareholders. In late 2018, members of the Board – including our Lead Director and the Chairman of the Compensation Committee – reached out to shareholders to discuss a variety of corporate governance topics and to hear investors’ specific views on our executive compensation programs. In connection with these engagement efforts, 20 of our largest institutional shareholders were contacted representing approximately 60-65 percent of our outstanding shares, only five of which – holding approximately 25% of our outstanding shares – responded and agreed to hold further discussions. The feedback from these shareholders included suggestions to:

Cap the vesting of TSR Shares in situations where the Company’s total shareholder return, or TSR, over the relevant performance period is negative;
Take into account any potential loss in shareholder value measured over the year in question; and
Simplify the compensation structure so that investors can better understand what elements of compensation are included in our programs and how those elements relate to Company performance.

The Compensation Committee gives serious consideration to the views and opinions of our shareholders, and took steps to address shareholder concerns that are specific to compensation issues. For example, in December 2018 the Compensation Committee approached our CEO to discuss how better to align his compensation with recent shareholder returns. After collaborative discussions, the Compensation Committee approved a transaction in which our CEO voluntarily forfeited an award of TSR Shares granted in 2018, having a grant date fair value of approximately $4 million, in exchange for an award of restricted shares with a grant date fair value of only $1,500 that vests equally on the first three anniversaries of the date of grant. Our CEO also agreed to a 10 percent reduction in his 2019 base salary. In addition, the Compensation Committee amended the employment agreements for our CEO and CFO to, among other things, cap the potential payout of TSR Share awards (previously issued but unvested as well as future awards) at target if the Company’s absolute TSR for the applicable performance period is negative.

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In early 2019, two independent members of our Board along with members of management held a productive, in-person meeting with a team from the proxy advisory firm of Glass Lewis & Co. LLC, at their invitation, to explain the recently implemented changes to our CEO’s compensation as well as general governance matters. The participants found the meeting very helpful, and plan on having continued dialogue with Glass Lewis and, hopefully, other proxy advisors regarding matters important to institutional investors.

The Board hopes that shareholders will view positively the following Compensation Committee considerations and responses in connection with this feedback:

SHAREHOLDER CONCERN
COMPANY CONSIDERATIONS AND RESPONSES
Vesting of TSR Shares Should be Capped When Nabors’ TSR is Negative
Effective December 31, 2018, all TSR Share awards, including previously granted but unvested awards, are now capped at target if TSR for the applicable performance period is negative.
Consider Shareholder Losses When Making Compensation Decisions for Given Year
In December 2018, the Compensation Committee approved a transaction in which our CEO voluntarily forfeited an award of TSR Shares granted in January 2018, having a grant date fair value of approximately $4 million, in exchange for an award of restricted shares with a grant date fair value of $1,500 that vests equally on the first three anniversaries of the date of grant.
Simplify the Compensation Structure
The Compensation Committee and the Company have enhanced and clarified the disclosure of the compensation program contained in this proxy statement in order to provide shareholders and other stakeholders a greater understanding of the elements of executive compensation and to make clear that the vast majority of executive compensation – whether short- or long-term – is performance based.

The Compensation Committee hopes that shareholders will consider these highlights, as well as the other positive attributes of our compensation program, when casting their say-on-pay votes at the 2018 annual general meeting of shareholders.

2018 PERFORMANCE HIGHLIGHTS

Despite a very challenging industry environment during 2018, the Company was able to accomplish several important business objectives that improved our financial and operating position, including:

Increasing operating revenue by 19.2% and adjusted EBITDA by 39.5%
Reducing total debt by approximately $442 million for the year, and net debt by approximately $560 million(1)
Increasing average U.S. Drilling daily rig margins at the end of 2018 by over 75% to $11,428, from $6,444 at the end of 2017
Achieving 83% growth in the annualized adjusted EBITDA run rate of our Nabors Drilling Solutions segment
Continuing progress toward our Mission Zero safety performance goal of no reportable incidents, by achieving our best ever total recordable incident rate of 0.66
Delivering breakeven cash flow generation after dividends for 2018
Integrating the operations of Tesco Corporation and Robotic Drilling Systems AS (now Canrig Robotic Technologies AS)
Completing an offering of common and preferred shares for net proceeds of approximately $580 million
Preserving future liquidity by entering into a new five-year senior unsecured revolving credit facility providing for borrowings of up to $1.267 billion, while retaining $666.25 million on our existing facility expiring in 2020
Introducing the new PACE®-M750 rig as a capital-efficient retrofit to the existing PACE®-M550 rig
Completing the acquisition of PetroMar Technologies, Inc., a manufacturer of innovative logging-while-drilling tools that provide a rich set of downhole measurements
(1)“Net debt” is calculated as total debt minus the sum of cash and cash equivalents and short-term investments. Net debt is a non-GAAP measure and should not be used in isolation or as a substitute for amounts reported in accordance with GAAP. Please refer to Annex A to this Proxy Statement for a reconciliation of this non-GAAP measure to total debt, which is a GAAP measure.
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CEO “REPORTED” VS. “REALIZED” COMPENSATION

Any discussion of our executive compensation program would be incomplete without first understanding the structure, design and long-term impact of the equity-based compensation program for our CEO. In that regard, certain of our shareholders have expressed a desire to better understand how our CEO’s compensation, as reported in our proxy statements, compares to the value actually received by him in subsequent years. The Compensation Committee and the Company have enhanced and clarified the disclosure of the compensation program contained in this proxy statement in order to provide shareholders and other stakeholders a greater understanding of the elements of executive compensation and to make clear that the vast majority of executive compensation – whether short- or long-term – is performance based.

For 2018, it is important to note that because our CEO voluntarily forfeited the TSR Share award granted to him in January 2018, he will never realize value from that award even though it is required to be included in the 2018 Summary Compensation Table. Adjusted for the forfeiture of the 2018 TSR Shares and the grant of time-based restricted shares valued at $1,500, the compensation for our CEO in the 2018 Summary Compensation Table would appear as follows:

YEAR
SALARY
($)
BONUS
($)
STOCK
AWARDS
($)
OPTION
AWARDS
($)
NON-EQUITY
INCENTIVE
PLAN
COMPENSATION
($)
CHANGE IN
PENSION
VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS ($)
ALL OTHER
COMPENSATION
($)
ADJUSTED
TOTAL COM-
PENSATION
($)
TOTAL
REPORTED
COMPENSATION
($)
DIFFERENCE
($)
DIFFERENCE
(%)
2018
1,750,000
0
5,870,147
0
1,659,604
109,931
1,304,924
10,694,606
14,742,873
(4,048,267)
(27.5%)

It also is important to understand that virtually all annual cash bonus and equity compensation is performance based. The Compensation Committee believes this better aligns executive compensation with shareholder returns. What’s more, the value of the equity actually realized (as opposed to reported) by our CEO during the three years included in this proxy statement is for awards granted in prior years. However, only the equity awards granted in 2013, 2014, 2015, and (with respect to TSR Shares) 2016 had fully vested as of the date of this report.

A CLOSER LOOK AT TSR SHARES AND PERFORMANCE SHARES

Virtually all equity awards granted to our CEO are performance-based shares falling into only one of two categories – TSR Shares and Performance Shares. The value that ultimately will be realized for these awards is conditioned upon CEO and Company performance. The target grant date value shown for the TSR Shares and Performance Shares granted to our CEO each year is not necessarily the actual compensation received by our CEO in respect of those awards. In addition, Performance Shares granted after the satisfaction of the applicable performance goals will then vest ratably over three years following the grant date, subject to our CEO’s continued employment with us (and subject to certain exceptions in connection with involuntary employment terminations). In effect, the Performance Shares serve as a “Golden Handcuff” which yields vesting only after three years even though the performance goals have been met and the shares have been earned. As per the tables below, the value actually realized by our CEO for the TSR Share awards that he received in 2013, 2014, 2015, and 2016 (the most recent years for which all such awards have vested), and for the Performance Share awards that he received in 2013, 2014, and 2015 (the most recent years for which all such awards have vested in full), was significantly lower than the value originally granted.

TSR SHARES
Key Features:
   
 
These are performance-based contingent shares, with the value shown in the Summary Compensation Table based on the probable outcome of the percentage of vesting of such shares using a Monte Carlo multiple probability simulation model
   
 
Vesting based on the Company’s TSR performance relative to the peer group measured over a three-year period
   
 
Minimum performance criteria must be met in order for any TSR Shares to vest
   
 
Number of shares that may vest at end of performance period are now capped at target if Nabors’ TSR performance is negative
   
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YEAR
REPORTED
REPORTED GRANT DATE
VALUE
PERCENTAGE OF SHARES
THAT VESTED AT END OF
PERFORMANCE PERIOD
REALIZED VALUE OF SHARES
THAT VESTED AT THE
END OF THE PERFORMANCE PERIOD(1)
% CHANGE FROM
REPORTED
VALUE
2016
$3,353,662
25%
$328,877
90% decrease
in value
2015
$3,787,224
40%
$1,203,745
68% decrease
in value
2014
$3,356,826
60%
$2,895,473
14% decrease
in value
2013
$3,686,961
50%
$1,217,533
67% decrease
in value
(1)Values shown do not take into account shares tendered back to the Company to cover tax withholdings.
PERFORMANCE SHARES
Key Features:
   
 
Number of restricted shares granted based upon the achievement of certain pre-determined financial or operational performance goals measured over the one-year performance period prior to the year such shares are granted (i.e., the 2015 Performance Share grant was based on achievement of performance goals during 2014)
   
 
Once granted, vesting of Performance Shares remains subject to a 3-year vesting period following the grant date, with shares vesting in equal increments even though all performance goals were met
   
 
Minimum performance threshold applies before any Performance Shares can be granted
   
 
Subject to a maximum award amount
   
YEAR
REPORTED
REPORTED GRANT DATE
VALUE
AGGREGATE VALUE REALIZED
ON VESTING(1)
% CHANGE FROM
REPORTED
VALUE
2015
$5,201,428
$4,297,337(2)
17% decrease
in value
2014
$6,460,000
$4,312,719(3)
33% decrease
in value
2013
$15,000,000
$13,330,317(4)
11% decrease
in value
(1)Values shown do not take into account shares tendered back to the Company to cover tax withholdings.
(2)Amount includes: 153,888 shares that immediately vested on February 20, 2015 at $13.52 per share; 76,943 shares that vested on February 20, 2016, at $6.88 per share; 76,945 shares that vested on February 20, 2017, at $15.31 per share; and 76,945 shares that vested on February 20, 2018 at $6.62 per share.
(3)Amount includes: 120,771 shares that vested on February 21, 2015, at $13.52 per share; 120,769 shares that vested on February 21, 2016, at 6.88 per share; and 120,771 shares that vested on February 21, 2017 at $15.31 per share.
(4)Amount includes: 302,481 shares that vested on March 7, 2014, at $23.09 per share; 302,480 shares that vested on March 7, 2015, at 12.69 per share; and 302,480 shares that vested on March 7, 2016 at 8.29 per share.

Because of the timing difference between the grant date and the vesting date of equity awards, the compensation reported for our CEO over each of the last three years is significantly different, and in aggregate is significantly greater over the three-year period, than the compensation actually realized by him over the same time period. Reported pay refers to the value reported in the compensation tables required under Item 402 of Regulation S-K, which we calculate based on applicable SEC rules and guidance. Realized pay refers to the value of compensation actually received by the executive during the year, and includes the following:

base salary, cash awards under the Non-Equity Incentive Plan, and special cash bonuses (no such special cash bonuses have been awarded in the last three years);
the value of share awards that actually vested during the year;
the value, if any, realized upon the exercise of stock options during the year; and
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the value of all perquisites and other personal benefits, to the extent they were includible in the named executive officer’s gross income or otherwise resulted in imputed income for tax purposes.

The table below reflects the realized pay of our CEO for the years 2018, 2017 and 2016 compared to the total compensation reported below under “Executive Compensation Tables—2018 Summary Compensation Table” for the corresponding years.

YEAR
SALARY($)
BONUS($)
STOCK
AWARDS($)
EXERCISED
OPTION
AWARDS($)
NON-EQUITY
INCENTIVE
PLAN
COMPENSATION($)
CHANGE IN
PENSION
VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS($)
ALL OTHER
COMPENSATION($)
TOTAL
REALIZED
PAY($)
TOTAL
REPORTED
PAY($)
% DIFFERENCE
2018
1,750,000
 
0
 
 
6,520,875(1
)
 
0
 
 
1,659,604
 
 
109,931
 
 
1,304,924
 
 
11,345,334
 
 
14,742,873
 
 
(23
%)
2017
1,750,000
 
0
 
 
11,173,242(2
)
 
0
 
 
1,464,516
 
 
79,669
 
 
1,430,806
 
 
15,898,233
 
 
14,122,711
 
 
13
%
2016
1,575,000
 
0
 
 
6,977,321(3
)
 
0
 
 
1,492,982
 
 
169,740
 
 
1,325,938
 
 
11,540,981
 
 
15,372,429
 
 
(25
%)
(1)This is the value of the shares that vested during the year, and includes the following: 174,709 TSR Shares from the 2015 TSR Share grant that vested on February 23, 2018, at $6.89 per share; 76,945 Performance Shares from the 2015 Performance Share grant that vested on February 20, 2018, at $6.62 per share; 174,534 restricted shares from the 2015 Special Equity grant that vested on April 24, 2018, at $7.72 per share; 361,197 Performance Shares from the 2016 Performance Share grant that vested on June 7, 2018, at $7.25 per share; and 127,141 Performance Shares from the 2017 Performance Share grant that vested on February 17, 2018, at $6.62 per share.
(2)This is the value of the shares that vested during the year, and includes the following: 189,123 TSR Shares from the 2014 TSR Share grant that vested on February 17, 2017, at $15.31 per share; 120,771 Performance Shares from the 2014 Performance Share grant that vested on February 21, 2017, at 15.31 per share; 76,945 Performance Shares from the 2015 Performance Share grant that vested on February 20, 2017, at $15.31 per share; 174,534 restricted shares from the 2015 Special Equity grant that vested on April 24, 2017, at $11.79 per share; and 361,197 Performance Shares from the 2016 Performance Share grant that vested on June 7, 2017, at $8.84 per share.
(3)This is the value of the shares that vested during the year, and includes the following: 176,967 TSR Shares from the 2013 TSR Share grant that vested on February 21, 2016, at $6.88 per share; 302,480 Performance Shares from the 2013 Performance Share grant that vested on March 7, 2018 at $8.29 per share; 120,769 Performance Shares from the 2014 Performance Share grant that vested on February 21, 2016, at $6.88 per share; 76,943 Performance Shares from the 2015 Performance Share grant that vested on February 20, 2016, at $6.88 per share; and 174,536 restricted shares from the 2015 Special Equity grant that vested on April 24, 2016, at $10.84 per share.

The chart below provides a comparison of our CEO’s reported compensation to his realized compensation for each year(1):


(1)Comparison excludes reported and realized compensation from the following categories in the applicable Summary Compensation Table for the applicable years: (a) Change in Pension Value and Nonqualified Deferred Compensation Earnings, and (b) All Other Compensation.
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COMPENSATION PRINCIPLES AND PRACTICES

In 2018, we continued to adhere to compensation practices that strengthens the alignment between the compensation of our executive officers, Company performance and shareholder returns:

WHAT WE DO
 
 
WHAT WE DON’T DO

Independent Compensation Committee – We have oversight by a Compensation Committee comprised of only independent non-employee directors
 
 

No excessive perquisites without a compelling business rationale

Independent Compensation Consultant – Our Compensation Committee engages an independent compensation consultant
 
 

No repricing of underwater stock options without shareholder approval

Pay for performance – The vast majority of executive compensation is tied to performance with specific, measurable financial and operational objectives
 
 

No excise tax gross-ups in connection with a change-of-control, and it is our policy not to include any such tax gross-ups in any future executive officer agreements

Capped TSR Shares –TSR Share award payouts are capped at target if Nabors’ absolute TSR is negative during the relevant performance period
 
 

No discretionary bonuses except in the case of extraordinary specific developments that materially enhance the value of the Company

Capped Severance – Severance payments are limited in our executive agreements to 2.99x the sum of average base salary and bonus for 3 years prior to termination
 
 

Target individual elements of compensation or total compensation to a certain percentile within a peer group

Annual Say-on-Pay Vote – We conduct an annual say-on-pay advisory vote
 
 

Employ peer group analysis in determining the compensation of our employees other than the CEO and CFO

Market Referencing – Review executive compensation disclosures of peer group companies, or published compensation survey sources, and review market information and survey data to understand how our aggregate executive compensation compares to competitive norms
 
 
 

Share Ownership Policy – Our executive Share Ownership Policy aligns the interests of the CEO and CFO with those of the shareholders
 
 
 
 

Shareholder Feedback – We regularly reach out to shareholders to discuss a variety of corporate governance topics and to hear investors’ specific views on our executive compensation programs
 
 
 
 

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KEY COMPONENTS OF EXECUTIVE COMPENSATION

An appropriate mix of key compensation components, which are discussed in more detail below, enables us to remain competitive within our industry while ensuring that our executive officers are appropriately incentivized to deliver shareholder value.

COMPENSATION
ELEMENT
LINK TO COMPENSATION
PHILOSOPHY
KEY DESIGN FEATURES
Base Salary
•    Enables the Company to attract and
     retain top talent
   
•    Rewards the skill and expertise that
     our executive officers contribute to
     the Company on a day-to-day basis
•   CEO base salary aligned with
     median market levels based on
     Peer Group (as defined later in this
     CD&A)
   
•   Determined based on a variety of
     considerations, including
     contractual obligations,
     performance, experience level,
     additional responsibilities, internal
     equity, and retention risk
Annual Cash Incentive (the “Incentive Plan”)
•   Focuses executive officers on
     achieving specific performance
     measures and to reward successful
     outcomes
   
•   Competitive opportunity aids with
     attraction and retention of top talent
   
•   Aligns executives with shareholders
     by placing a significant portion of
     annual compensation at risk
     for achievement of key near-term
     strategic and financial performance
     goals that are critical
     to long-term growth
Mr. Petrello & Mr. Restrepo
   
•   For 2018, again based 100% on
     adjusted EBITDA(1):
   
     •     Threshold:   $560 Million
   
     •     Target:      $800 Million
   
     •     Maximum:   $960 Million
   
•   No award will be earned unless
     threshold level performance is
     achieved.
   
Mr. Andrews’ annual cash incentive bonus is determined based on quantitative goals established by the Committee at the beginning of each annual performance period.
Performance Shares
•   Aligns executives with shareholders
     by tying a significant portion of
     compensation to achievement of
     strategic objectives critical
     to long-term growth
   
•   Reinforces alignment by awarding
     compensation in the form of equity
   
•   Reinforces retention by vesting
     earned awards over a three year
     period
•   Shares earned based on
     achievement of applicable
     performance goals during the
     prior year
   
•   Only granted to the extent the
     applicable performance criteria
     established for the
     1-year performance period have
     been achieved
   
•   Once earned and granted, awards
     vest over an additional three year
     term subject to continued
     employment with the Company
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COMPENSATION
ELEMENT
LINK TO COMPENSATION
PHILOSOPHY
KEY DESIGN FEATURES
TSR Shares
•   Aligns executives with shareholders
     by tying a significant portion of
     compensation to achievement of
     strong relative total shareholder
     return performance over a
     multi-year period
   
•   Reinforces shareholder alignment by
     awarding compensation in the form
     of equity
•   Shares earned based upon TSR
     performance relative to our peers
     over the three years following
     the grant date
   
•   No shares are earned if relative
     performance is below the peer
     group 25th percentile
   
•   Capped at target if absolute TSR is
     negative
Time-based Restricted Shares (Mr. Andrews only)
•   Supports leadership retention goals
   
•   Reinforces alignment with
     shareholders by awarding
     compensation in the form of equity
•   Annual equity grant determined by
     multiplying annual cash incentive
     bonus award by a multiple
     determined for Mr. Andrews based
     upon his position and attainment of
     performance metrics determined at
     the beginning of the annual
     performance period
   
•   Awards vest ratably over 4 years
(1)Throughout this Proxy Statement, the term “adjusted EBITDA” is computed by subtracting the sum of direct costs, general and administrative expenses and research and engineering expenses from operating revenues. Adjusted EBITDA is a non-GAAP measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of our operating segments and the consolidated company based on several criteria, including adjusted EBITDA, because we believe that this financial measure, along with adjusted operating income, accurately reflect our ongoing profitability and performance. Please refer to Annex A to this Proxy Statement for a reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a GAAP measure.

During 2018, the Compensation Committee engaged Pearl Meyer to review our CEO’s target total direct compensation in comparison to Peer Group CEOs. Upon careful review, the Compensation Committee recommended to the independent members of the Board that no action be taken to terminate our CEO’s employment agreement at the end its term in 2018. As a result, the employment agreement extended automatically for another year. The Compensation Committee and the CEO did, however, amend the employment agreement to: (i) reduce the CEO’s 2019 base salary by 10%, from $1.75 million to $1.575 million; (ii) cap the potential payout of his TSR Share awards (previously issued but unvested as well as future awards) if the Company’s absolute TSR is negative; and (iii) provide that any TSR Shares that remain unvested at the time of a change in control (as defined in the agreement) shall fully vest at maximum levels upon such change in control.

HOW WE DETERMINE ANNUAL BASE SALARY

Base salary is a fixed element of an executive’s annual cash compensation. The Compensation Committee determines an appropriate level of base salary for our CEO and CFO by taking into account a series of competitive and other factors and conducting a compensation comparison against a pre-selected peer group (the “Peer Group”), which is discussed later in this CD&A. The Compensation Committee makes this initial determination of base salary upon the executive’s initial appointment and periodically reviews its determination, as it deems appropriate, taking into account various factors, including the Company’s performance, market data, industry conditions and shareholder feedback.

The Compensation Committee may also take into account certain competitive factors, which sometimes include:

Compensation levels of similarly-situated executives of other drilling contractors and in the oilfield services sector at companies in our Peer Group;
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Necessary levels of compensation to attract and retain highly talented executives from outside the industry; and
A newly hired executive’s salary at his or her most recent place of employment.

►   2018 ANNUAL BASE SALARY

Our CEO’s and CFO’s initial annual base salaries are reflected in each of their respective employment agreements as $1.70 million and $650,000, respectively. In 2014, Mr. Petrello received a 3% increase in his annual base salary to $1.75 million. There have been no recent increases or other adjustments in annual base salary for either our CEO or CFO, except for a (i) 10 percent agreed reduction applicable in 2015 and 2016, which was reversed in 2017, and (ii) a 10 percent reduction in base salary for our CEO again for 2019. Mr. Andrews does not have an employment agreement. Mr. Andrews’ annual base salary for 2018 was $220,000, which was unchanged from 2017.

HOW WE DETERMINE ANNUAL PERFORMANCE BONUS

At the beginning of each year, the Compensation Committee approves objective performance measures for the Company as a whole and establishes corresponding performance goals for each participant under the Incentive Plan, including our named executive officers. In structuring the performance measures and goals, the Compensation Committee sets targets for achieving those goals: