DEF: Valero Energy Sets 2026 Annual Meeting, Details Executive Pay & Governance

Valero Energy Corporation announces its 2026 Annual Meeting of Stockholders, outlining proposals for director elections, executive compensation, and auditor ratification, alongside a review of 2025 performance and governance updates.

Summary

• The 2026 Annual Meeting of Stockholders is scheduled for Thursday, May 7, 2026, at 11 a.m. Central Time, in a virtual format.
• Stockholders will vote on the election of directors, an advisory resolution to approve 2025 executive compensation, and the ratification of KPMG LLP as the independent auditor for 2026.
• Valero achieved net income attributable to stockholders of $7.57 per share (diluted) in 2025 and returned $4.0 billion in cash to stockholders.
• The company increased its dividend to $1.13 per share in January 2025, and again to $1.20 per share in January 2026.
• Operational highlights for 2025 included highest-ever refinery mechanical availability, refining throughput, and ethanol production, along with best-ever company-wide environmental performance.
• Key leadership transitions included R. Lane Riggs becoming Chairman (December 31, 2024), H. Paulett Eberhart becoming Lead Director (February 26, 2025), and Homer S. Bhullar becoming CFO (January 1, 2026).
• Changes to the 2025 executive compensation program included the expiration of the Energy Transition Modifier (ETM) and the removal of the negative Total Shareholder Return (TSR) cap, focusing solely on relative TSR performance.
• Valero has invested $6.0 billion in its low-carbon fuels businesses as of December 31, 2025, and achieved its 2025 global refinery Scope 1 and 2 GHG emissions reductions/displacements target early.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance report, highlighting significant financial and operational achievements, proactive governance changes, and early attainment of environmental targets, despite some shareholder dissent on executive compensation structure.

Positives

• Achieved net income attributable to Valero stockholders of $7.57 per share (diluted) in 2025.
• Returned $4.0 billion in cash to stockholders in 2025.
• Increased Valero's dividend to $1.13 per share in January 2025, and again to $1.20 per share in January 2026.
• Achieved highest-ever refinery mechanical availability, refining throughput, and ethanol production in 2025.
• Achieved best-ever refinery total recordable incident rate (TRIR) for employees and combined employees/contractors.
• Achieved second best-ever Tier 1 API Process Safety performance in the refining segment.
• Achieved best-ever company-wide environmental performance and second best-ever refinery environmental performance in 2025.
• Successfully completed SAP financial systems upgrade on time and on budget.
• Achieved the 2025 global refinery Scope 1 and 2 GHG emissions reductions/displacements target early.
• Strong performance share payouts for tranches ending December 31, 2025: 150% of target for 2025 grants, 200% of target for 2024 grants, and 175% of target for 2023 grants.
• CEO R. Lane Riggs's holdings of Valero Common Stock under the guideline was 32.58x his base salary as of December 31, 2025, demonstrating strong alignment with stockholder interests.

Negatives

• The 2025 say-on-pay proposal received 74.78% approval (including abstentions), which was a deviation from the higher approval levels in recent years (94.90% in 2024 and 94.16% in 2023), primarily influenced by a negative recommendation from one leading U.S. proxy advisory firm.
• Adverse conditions and uncertainties regarding expected returns on many low-carbon fuels growth investments have reduced their anticipated competitiveness relative to refining or other growth investments.

Risks

• Legislative or political changes or developments.
• Market dynamics.
• Cyberattacks.
• Weather events.
• Current or contemplated legal, political, or regulatory developments that are adverse to or restrict refining and marketing operations.
• Imposition of taxes or penalties on profits, windfalls, or margins.
• Requirements for certain disclosures.
• Global geopolitical and other conflicts and tensions.
• Impact of inflation on margins and costs.
• Tariffs, duties, sanctions, and other trade restrictions.
• Adverse effects of the aforementioned factors on the business plan, strategy, operations, and financial performance.
• Volatility of the commodity-based industry, which exposes the company to short-term stock price swings that can skew TSR measurements.
• Risks and opportunities from conventional and generative AI.
• Potential for material restatement of financial results, which could trigger executive compensation clawback provisions.

Future Outlook

The company expects to continue periodically evaluating the appropriateness of its leadership structure and assessing the risks and opportunities from conventional and generative AI. Valero is on track to achieve its 2035 global refinery Scope 1 and 2 GHG emissions reductions/displacements target.

Management Comments

• "We believe that our Policies and Procedures reflect our business strategy and are reasonable at the time made or used, as our business or applicable methodologies, standards, or regulations develop and evolve, we may revise or cease reporting or using certain Policies and Procedures if we determine that they are no longer appropriate, or we are otherwise required to do so."
• "The Board has determined and continues to believe that Mr. Riggs' qualifications and proven leadership make him well suited to serve as Chairman and that his service as both CEO and Chairman helps drive and enhance Valero's performance and the Board's effectiveness."
• "The Committee allowed the ETM to expire after (i) its purpose was fulfilled and we achieved our 2025 GHG emissions reductions/displacements target early; and (ii) the landscape for low-carbon fuels growth projects changed."
• "The Committee concluded that looking solely to relative TSR performance within our performance shares is consistent with our strategy and business outcomes and promotes our NEOs' continued focus on achieving peer-leading stockholder returns not only in an above mid-cycle margin environment, but also when uncontrollable external events result in down or below mid-cycle margins and returns."
• "Based on the widespread support we heard during stockholder engagements, our overall strong 2025 say-on-pay results, and the increased volatility to the already cyclical nature of our commodity-based industry noted above, the Committee determined that, for our performance shares, focusing solely on relative TSR performance targeted above the peer median, but without the negative TSR cap and without the ETM, continues to be the most appropriate design for our particular business and strategy."

Industry Context

StockSavvy.ai notes that Valero's strong operational performance and early achievement of GHG targets position it favorably within the highly competitive and volatile refining and low-carbon fuels sectors. The strategic shift in executive compensation away from the Energy Transition Modifier and negative TSR cap, in response to changing low-carbon fuels investment conditions and industry volatility, reflects a pragmatic approach to incentivizing management in a commodity-based market. The company's continued investment in low-carbon fuels, despite "adverse conditions," indicates a long-term commitment to energy transition while balancing traditional refining profitability.

Comparison to Industry Standards

• Valero's executive pay program emphasizes variable incentive pay, with 90% of the CEO's 2025 Target Total Pay at risk, aligning with competitive practices to drive performance.
• The company's TSR performance relative to its Compensation Comparator Peer Group (including Chevron Corporation, ConocoPhillips, Exxon Mobil Corporation, Marathon Petroleum Corporation, and Phillips 66) was at the 86th percentile over the three years ending in 2024, while relative pay was at the 64th percentile, demonstrating strong pay-for-performance alignment.
• Valero's global refinery Scope 1 GHG emissions on an intensity basis (per barrel) for 2019-2024 demonstrates lower emissions relative to peers, indicating strong environmental performance.
• The company's Stock Ownership and Retention Guidelines require more ownership for the CEO and President (e.g., 7.5x base salary for CEO) than median practices among S&P 500 companies and its peers, fostering long-term alignment.
• Refining Cash Operating Expense Management performance of $136/EDC in 2025 significantly outperformed the target of $164/EDC, measured against the industry-standard Solomon Associates survey, reflecting excellent cost management compared to industry benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• The company received a stockholder proposal (2026 ARO Proposal) requesting disclosure of the estimated magnitude of off-balance sheet asset retirement obligations (AROs), which was substantively similar to a 2023 proposal.
• Valero submitted a no-action letter to the SEC Staff to exclude the 2026 ARO Proposal, arguing it was incongruous with GAAP accounting conclusions and potentially misleading, and received no-action relief.

Related Party Transactions

• Mr. Riggs has an Aircraft Time Sharing Agreement to reimburse Valero for certain personal travel within U.S. Federal Aviation Administration (FAA) regulations. These transactions have not exceeded $120,000 since the beginning of the last fiscal year and are reviewed at least annually by the Nominating and Corporate Governance Committee.

Stakeholder Impact

• Shareholders: Directly impacted by dividend increases, cash returns, and the advisory vote on executive compensation. The company's focus on relative TSR and disciplined capital allocation aims to drive peer-leading stockholder returns.
• Employees: Demonstrated commitment by offering continued employment to all employees in good standing at the Benicia refinery following its idling/closure. Benefit from robust compliance and cybersecurity training programs.
• Customers: Benefit from the company's objective to maintain its position as one of the industry's lowest-cost providers of essential liquid fuels.
• Communities: Positively impacted by the company's emphasis on health, safety, and environmental stewardship, and corporate citizenship efforts, including record fundraising for charities.

Next Steps

• Stockholders are to vote on the election of directors, the advisory resolution to approve 2025 executive compensation, and the ratification of KPMG LLP as the independent auditor for 2026 at the Annual Meeting on May 7, 2026.
• The company expects to continue assessing the risks and opportunities from conventional and generative AI.
• Valero is on track to achieve its 2035 global refinery Scope 1 and 2 GHG emissions reductions/displacements target.
• The Board expects to continue periodically evaluating the appropriateness of its leadership structure.
• Ongoing stockholder, stakeholder, and proxy advisory firm engagement on compensation program design will continue and be considered in future decisions.

Key Dates

Recommendation

The filing details strong 2025 financial and operational performance, including significant cash returns to stockholders and dividend increases. The company is also making progress on low-carbon initiatives and has robust governance. However, the information is largely retrospective or related to routine annual meeting proposals. While positive, it does not present new, immediate catalysts for a 'buy' recommendation, nor does it indicate significant deterioration warranting a 'sell.' A 'hold' recommendation reflects the solid, ongoing performance and governance without new, compelling forward-looking drivers for immediate action.

Keywords

Valero Energy, VLO, SEC filing, DEF 14A, proxy statement, executive compensation, corporate governance, director election, independent auditor, financial performance, GHG emissions, low-carbon fuels, refining, energy industry, risk management, sustainability, shareholder meeting