UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.         )

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CALIFORNIA RESOURCES CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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California resources corporation 2020 proxy report and notice of annual meeting

Letter to Shareholders from the Chairman of the Board

Dear Shareholders,

California Resources Corporation (“CRC”) celebrated its fifth anniversary in late 2019, and the Board of Directors (the “Board”) applauds the progress CRC has made in developing a stronger company through improved governance, consistent performance and a culture built on its entrepreneurial spirit.  Our experienced management team has instilled the Company’s core values of Character, Responsibility and Commitment to drive performance.  The Board plays an active role in fostering CRC’s governance policies, aligning compensation with performance and promoting the robustness of CRC’s strategy amidst volatility in commodity markets.  The value-driven approach of CRC’s executive leadership continues to enable us to capture value through our broad portfolio of assets and create effective capital allocation through the commodity cycle.

As we reflect on the accomplishments of our first five years as an independent company, the Board remains committed to leading governance policies.  When CRC was spun off from its former parent in 2014, our governance reflected that of a new public company in a cyclical sector.  Certain criteria were put in place at the outset, like separation of Chairman and CEO roles, an independent lead director and a majority of the Board being independent, while other key governance items were allowed to mature with the Company.  During my tenure and consistent with feedback from our shareholders, we have enhanced our governance profile, including moving away from a classified Board to an annual election of directors, introducing a majority voting standard for directors and instituting a more rigorous overboarding policy.

When we have had an opportunity for Board refreshment as a result of a director’s departure, we have thoughtfully sought replacements to broaden the Board’s knowledge and expertise as we continue to attract and maintain the most effective mix of Board talent. We regularly engage in a review process to evaluate desired skill sets that strengthen governance, promote diversity of thought and align with the evolving demands of our business.  Today, we believe our Board’s experience in the energy industry, as well as in financial services, accounting, real estate, human resources and organizational disciplines, is well-suited for the many challenges that face CRC beyond challenges typically faced in the energy sector.  Every year, we aim to improve shareholder outreach to obtain feedback on our governance and compensation practices.  The Board has utilized this feedback from shareholders to align a greater portion of executive compensation to shareholder returns, focus annual incentives on key measurable quantitative metrics and provide more detailed disclosure on the annual incentive payouts.  We continue to focus management’s compensation on the actions that we feel will create long-term value, including further balance sheet strengthening, using a VCI metric for disciplined capital allocation, healthy EBITDAX generation, delivering excellent health, safety and environmental (HSE) performance and advancing sustainability projects that align with the State of California.

Although we’ve enhanced our governance and shareholder outreach in many ways, we have not been successful in obtaining shareholder approval on all the governance items that we have recommended to shareholders for adoption.  For the past two years, we have recommended replacing our super majority voting provisions with majority vote requirements.  Following two years of these shareholder proposals failing to garner the support of anywhere near the 75% of the outstanding shares required for approval, we have removed the proposals from the ballot this year.  This decision was made by the Board after garnering

shareholder feedback on this and other governance issues.  We expect to revisit this proposal again in the relatively near term, particularly if we see shifts in our shareholder base to more institutional ownership that we believe would increase the likelihood of our obtaining the approval of the requisite 75% of the outstanding shares.

We proudly operate critical energy infrastructure in California, the world’s fifth largest economy, under the most comprehensive and stringent oil and gas regulations.  Hence our executive compensation metrics reflect the importance of this responsibility to address Californians’ energy needs and challenges in a manner that aims to meet community expectations.  One of our most important achievements in 2019 was our health and safety record: CRC had zero recordable employee workplace injuries. On a combined basis, including contractors, we had an impressive injury and illness incidence rate (IIR) of 0.34 per 200,000 hours worked, which is better than safety statistics in the insurance and finance sectors according to the latest data available from the U.S. Bureau of Labor Statistics.  For comparison, the average IIR for all employers in the U.S. in 2018 was 3.1, an injury rate nine times higher than what CRC’s workforce achieved.

Management has also been effectively progressing towards the Board’s four 2030 Sustainability Goals, which include specific quantitative targets for water recycling, reduction of methane emissions, integrating renewable power in our operations and carbon capture and sequestration.  These goals align directly with those of the State of California and are measured against a 2013 baseline, the year before CRC launched.  CRC has surpassed its methane target with a 60-percent reduction in methane emissions since 2013 and is almost halfway to its water target of a 30-percent increase in its water recycling volume.  In 2019, CRC designed two 2-MW solar projects, and initiated solar projects that would provide up to an additional 40 MW at multiple CRC fields.  CRC commenced a front-end engineering and design study on carbon capture at Elk Hills, one of nine such projects in the U.S. that received financial support from the U.S. Department of Energy in 2019.  We were also quite pleased to receive validation of our sustainability efforts by receiving an A- from CDP (formerly known as the Carbon Disclosure Project) for our 2019 climate disclosure, scoring at CDP’s Leadership Level. CRC received the highest ranking among all U.S. oil and gas companies, tying for first with one other U.S.-based E&P company. This recognition highlights CRC’s differentiated value as a California E&P and the company’s ongoing commitment to provide sustainable, safe and reliable energy solutions for Californians.  

We are focused on fostering diversity across the organization, including in the composition of our Board and management, as well as in recruiting and developing a workforce that reflects the diversity of the communities where we operate.  We believe that CRC’s culture has progressed significantly in the past five years, from that of its former multi-national parent, to an engaged and entrepreneurial culture grounded in the company’s core values and focused on delivering local solutions to meet the needs of Californians.  CRC’s strong culture of service empowers employees to champion the communities they live and work in and supports them in leading our community outreach.  CRC’s work with community groups focuses on supporting diverse members of the community including working families of all ethnic groups, with an emphasis on veterans and women, as well as public health and safety and fostering science, technology, engineering and mathematics (STEM) education and workforce development.  The Board frequently receives company-wide employee feedback that aids in providing insight into the company’s culture, managerial effectiveness and diversity.  Our employees embrace the entrepreneurial “One CRC” mindset that promotes innovative thinking, increased collaboration and accountability and a focus on process improvements in everything we do. We are proud of our track record in pursuing opportunities to improve the lives of Californians and managing the risks of the business with a keen focus on Environmental, Social and Governance attributes that align well with the State of California, our employees and our investors.  The Board will carry this active oversight forward in 2020 and beyond as we guide management as they continue to strengthen the balance sheet, capture the full value of our robust portfolio and promote effective capital allocation.  

The Board and I are pleased with the tremendous progress CRC has made over the past five years as we’ve worked to become a stronger independent company.  As we enter a new decade, we are focused on delivering value for shareholders by strengthening our balance sheet, effectively allocating human and financial capital and continuously improving our already strong operational and HSE performance.

Regards,

William E. Albrecht

Chairman of the Board

California Resources Corporation

PLEASE NOTE:  This letter and the Proxy Statement contain forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects.  For a discussion of these risks and uncertainties, please refer to the “Risk Factors” and “Forward-Looking Statements” described in our Annual Report on Form 10-K.  Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will” or “would” and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements.  Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation to correct or update any forward-looking statement, except as required by applicable law.

We have included in this letter and the Proxy Statement certain voluntary disclosures regarding our Sustainability Goals, Sustainability Reports and related matters because we believe these matters are of interest to our investors; however, we do not believe these disclosures are “material” as that concept is defined by or construed in accordance with the securities laws or any other laws of the U.S. or any other jurisdiction, or as that concept is used in the context of financial statements and financial reporting.  These disclosures speak only as of the date on which they are made, and we undertake no obligation to correct or update such disclosures, whether as a result of new information, future events or otherwise, except as required by applicable law.

Notice of the 2020 Annual Meeting of Stockholders

Purposes of the 2020 annual meeting of stockholders:

Information relevant to these matters is set forth in the accompanying proxy statement.

The close of business on March 9, 2020 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.

We intend to hold the annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our annual meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.

Beginning on March 24, 2020, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.

By Order of the Board of Directors,

Michael L. Preston

Senior Executive Vice President, Chief Administrative Officer and General Counsel
Corporate Secretary

IMPORTANT VOTING INFORMATION

If you owned shares of our common stock at the close of business on March 9, 2020, you are entitled to one vote per share upon each matter presented at our 2020 annual meeting of stockholders to be held on May 6, 2020. In order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 9, 2020 to attend the 2020 annual meeting, they will need to obtain a proxy from the broker, bank or other nominee that holds their shares authorizing them to vote in person at the annual meeting.

If you hold shares in “street name,” unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the Internet, your broker is only permitted to vote on your behalf on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020, and may not vote on the election of directors and other matters to be considered at the annual meeting. For your vote to be counted, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the annual meeting.

YOUR VOTE IS IMPORTANT

Your vote is important. Our Board of Directors strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.

QUESTIONS

If you have any questions about the proxy voting process, and you own shares that are registered in your own name, please contact AST Shareholder Services at (866) 659-2647 or (718) 921-8124. If you have any questions about the proxy voting process, and your shares are held in “street name,” please contact the broker, bank or other nominee where you hold your shares. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. You also may contact our Investor Relations Department by phone at (818) 661-6010 or by e-mail at IR@crc.com.

ATTENDING THE ANNUAL MEETING IN PERSON

Only stockholders of record or their legal proxy holders as of March 9, 2020 or our invited guests may attend the annual meeting in person. If you plan to attend the annual meeting in person, you must present a valid form of government-issued photo identification, such as a driver’s license or passport. In addition to such personal identification, you will need an admission ticket or proof of ownership of CRC stock as of the record date to enter the annual meeting. If your shares are registered in your name, you will find an admission ticket attached to the notice regarding the Internet availability of proxy materials or the proxy card sent to you. If your shares are held in street name with a broker, bank or other nominee, you will need to bring a copy of your brokerage statement or other documentation reflecting your stock ownership as of the record date for the meeting, and will need to obtain a proxy from your broker, bank or other nominee if you wish to vote in person at the annual meeting.

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF

PROXY MATERIALS FOR THE STOCKHOLDER MEETING

TO BE HELD ON MAY 6, 2020

The Notice of the 2020 Annual Meeting of Stockholders, the Proxy Statement for the 2020 Annual Meeting of Stockholders and the 2019 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2019) of California Resources Corporation are available at http://www.astproxyportal.com/ast/20758/.

TABLE OF CONTENTS 

CALIFORNIA RESOURCES CORPORATION    i

Proxy Statement Summary 

Proxy Statement Summary

This summary highlights information contained in the proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.  California Resources Corporation, together with its subsidiaries, is referred to herein as “we,” “our,” “us,” the “Company” or “CRC.”  The 2020 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”

2020 Annual Meeting of Stockholders

We intend to hold the Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our Annual Meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.

Agenda and the Board’s Recommendation on Voting Matters

The following table summarizes the items that will be brought for a vote of our stockholders at the annual meeting, along with the recommendation of our Board of Directors as to how stockholders should vote on each item.

Voting: Stockholders as of the record date are entitled to vote. Each share of common stock entitles its holder to one vote for each director nominee and one vote for each of the proposals to be voted on.

CALIFORNIA RESOURCES CORPORATION    1

Proxy Statement Summary 

Directors

The Board of Directors is comprised of nine independent directors, including our Chairman, plus our President and Chief Executive Officer (“CEO”). The following table provides summary information about each director and whether the Board of Directors considers each director to be independent under the New York Stock Exchange’s (“NYSE”) independence standards. We have adopted majority voting with respect to the uncontested election of directors to the Board of Directors. See “Required Vote and Method of Counting–Majority Voting for Directors” below.

* Mr. Korell is not standing for reelection, and his term will expire at the 2020 Annual Meeting.

Corporate Governance Highlights

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Proxy Statement Summary 

Business Performance Highlights

In 2019, our management team delivered significant accomplishments against our strategic priorities which the Compensation Committee considered as part of its review of management’s performance for compensation purposes.

CALIFORNIA RESOURCES CORPORATION    3

Proxy Statement Summary 

Compensation Program Highlights

CRC’s stock price performance in 2019 continued to be very volatile, ending the year at depressed levels, driven in large part by the highly leveraged balance sheet our management team inherited from Occidental Petroleum Corporation (“Occidental”) at our Spin-off from Occidental (the “Spin-off”), and the performance continued to impact the realizable compensation for our named executive officers. For 2019, our Compensation Committee continued the alignment of the long-term compensation to stockholder returns by granting entirely share-based long-term incentive awards.

CALIFORNIA RESOURCES CORPORATION    4

Proxy Statement Summary 

2019 Compensation Actions

In the first quarter of 2019, based on feedback received from stockholder outreach, the Compensation Committee took the following actions:

Compensation Program Practices

Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is well designed, incorporating best practices, and is governed by an engaged Compensation Committee. Our annual incentive awards and long-term incentive plans are performance-based and are intended to align with the long-term best interests of stockholders and retain our highly experienced, high-performing management team.

The Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways:

WHAT WE DO We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. We are stockholder-aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majority of the outstanding long-term incentive awards for our named executive officers are stock-based.  We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. We have stock ownership requirements. We maintain stock ownership guidelines which require our named executive officers and directors to have meaningful stock ownership in the Company. We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.

CALIFORNIA RESOURCES CORPORATION    5

Proxy Statement Summary 

WHAT WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do no allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for executives. We do no encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives or inappropriate risk for the Company.

WHAT WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for executives. We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company.

CALIFORNIA RESOURCES CORPORATION    6

Board of Directors and Corporate Governance 

Board of Directors and Corporate Governance

Our Board of Directors

Our Board of Directors has nominated nine directors for election at the 2020 Annual Meeting. All of our nominees currently serve as CRC directors.  Each nominee has agreed to serve another term, if elected.

After serving on our Board since our Spin-off, Mr. Korell will not be standing for reelection to the Board of Directors this year.  This decision is not due to any disagreement with the Company on any matters relating to the Company’s operations, policies or practices.  As a result, Mr. Korell’s term will expire at the 2020 Annual Meeting, at which time the size of the Board of Directors will be reduced from ten to nine directors.

Our Board exhibits an effective mix of diversity, perspective, skills and experience.

INDEPENDENCE 10% 90% independent non-independent GENDER 20% 80% male female AGE 10% 40% 50% 50s 60s 70s

Independence 10% non-independent 90% independent Gender 20% female 80% male AGE 10% 50s 50% 60s 40% 70s

Set forth below is a chart that summarizes the core competencies of our Board, and biographical information regarding each of our directors as well as the specific experience, qualifications, attributes and skills that led to the conclusion that such individual should serve as director. There are no family relationships between any of our directors and executive officers. In addition, there are no arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person was selected as a director or an executive officer.

Director Skills and Qualifications

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Board of Directors and Corporate Governance 

Mr. Albrecht has served on the Board of Directors of CRC since 2014. He was appointed as Chairman of the Board in 2016. He served as Executive Chairman of the Board of Directors from 2014 to 2016. Mr. Albrecht served as Vice President of Occidental from 2008 to 2014 and as President, Oxy Oil & Gas, Americas from 2012 to 2014. Mr. Albrecht also served as President—Oxy Oil & Gas, USA from 2008 to 2012. During his tenure with Occidental, Mr. Albrecht had managerial oversight over its upstream assets. Mr. Albrecht has more than 40 years of experience in the domestic oil and gas industry, having previously served as an executive officer for domestic energy producer EOG Resources, and as a petroleum engineer for Tenneco Oil Company. Since 2015, Mr. Albrecht has served on the board of directors of Valaris plc (formerly the Rowan Companies, plc), an international offshore drilling contractor providing jackups and drill ships for the offshore drilling industry. Mr. Albrecht is a member of its Compensation Committee and Nominating, Governance and Sustainability Committee, and is its Lead Independent Director. Since 2016, Mr. Albrecht has served on the board of directors of Halliburton Co. and is a member of its Compensation Committee and Health, Safety and Environment Committee. Since February 2020, Mr. Albrecht has served on the board of directors of Laredo Petroleum, Inc. and is a member of its Compensation Committee and its Nominating and Corporate Governance Committee.  Mr. Albrecht holds a Master of Science degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy. Mr. Albrecht is a National Association of Corporate Directors (“NACD”) Board Leadership Fellow, and has completed NACD’s comprehensive program of study for directors and corporate governance professionals.

Skills and Qualifications

Mr. Albrecht brings extensive managerial and operational experience in the upstream domestic and international energy business to the Board of Directors. He also has a deep knowledge of our assets that gives the Board a valuable perspective on the specific strengths and challenges associated with our operations. Mr. Albrecht brings broad experience in proactively engaging with regulatory agencies, communities, and other stakeholders that makes him a valuable member of our Board of Directors.

CALIFORNIA RESOURCES CORPORATION    8

Board of Directors and Corporate Governance 

•   Chairman of the Audit Committee

•   Member of the Compensation Committee

Mr. Gannon has served on the Board of Directors of CRC since 2014. Since 2013, Mr. Gannon has acted as an independent consultant and private investor. From 2003 to 2013, Mr. Gannon served in various roles at Grant Thornton LLP, an independent audit, tax and advisory firm, including as National Leader of Merger and Acquisition Development from 2011 to 2013, Central Region Managing Partner from 2010 to 2011, Office Managing Partner in Houston, Texas from 2007 to 2011 and Office Managing Partner in Kansas City, Missouri from 2004 to 2007. From 1971 to 2002, Mr. Gannon worked at Arthur Andersen LLP, including as an Audit Partner for 21 years. Mr. Gannon is also a Director, Chairman of the Audit Committee and Member of the Conflicts Committee of the general partner of CrossAmerica Partners LP, a publicly-traded master limited partnership engaged in motor fuels distribution. He served as a member of the board of directors and as audit committee chairman for Vantage Energy Acquisition Company from April 2017 until its liquidation in April 2019. Mr. Gannon is a former chairman of the Board of Directors of American Red Cross chapters in the Tulsa, Oklahoma and San Antonio, Texas areas. He received a Bachelor of Science degree in Accounting from Loyola Marymount University and is a Certified Public Accountant in Texas (active) and California (inactive).

Skills and Qualifications

Mr. Gannon’s more than four decades in financial accounting practice and his private investment experience give him deep insight into financial analysis and management. His experience is especially valuable to the Board because of the extent to which his clients were involved in oil and gas upstream exploration and production. His financial acumen enables Mr. Gannon to guide the Board in its fiscal and strategic oversight of CRC.

•   Member of the Nominating and Governance Committee

•   Member of the Sustainability Committee

Mr. Korell has served on the Board of Directors of CRC and as Lead Independent Director since 2014. From 2002 through 2014, Mr. Korell served as the Chairman of the Board of Southwestern Energy Company, an independent energy company engaged in natural gas and oil exploration, development and production. From

CALIFORNIA RESOURCES CORPORATION    9

Board of Directors and Corporate Governance 

2009 to 2010, he served as Southwestern’s Executive Chairman and, from 1999 to 2009, as its Chief Executive Officer. From 1997 to 2009, Mr. Korell served in various other roles at Southwestern, including President and Executive Vice President and Chief Operating Officer. Prior to his tenure at Southwestern, Mr. Korell was Senior Vice President—Operations of American Exploration Company, Executive Vice President of McCormick Resources, held various technical and managerial positions during his 17 years with Tenneco Oil Company, including Vice President of Production, and held various positions with Mobil Corporation. He is a member of the Society of Petroleum Engineers and, through 2010, served as a Board Member for the Independent Petroleum Association of America and the American Exploration & Production Council and as a Board Member and Executive Committee Member for America’s Natural Gas Alliance. He also serves on the Board of Governors at the Colorado School of Mines and is a Trustee Emeritus at the Baylor College of Medicine. Mr. Korell holds a degree in Chemical and Petroleum Refining Engineering from the Colorado School of Mines.

Skills and Qualifications

Mr. Korell’s experience over five decades in the oil and gas industry gives him a broad understanding of the upstream oil and gas business as well as the midstream and public utility businesses. Mr. Korell’s leadership during a time of dramatic expansion for his company provides valuable insights into strategic and operational, corporate and governance matters. In addition, Mr. Korell provides a deep understanding of our assets due to his involvement with a number of them early in his career that lend specific knowledge and understanding to Board discussions.

•   Member of the Audit Committee

•   Chairman of the Compensation Committee

Mr. McMahon has served on the Board of Directors of CRC since 2017. Since 2015 he has been a Senior Advisor to the G100 Network, a Leadership Advisory Consortium focused on CEO and Board Development. From 1983 to 2015, Mr. McMahon served in various positions for Bank of America Merrill Lynch including, most recently, as Executive Vice Chairman (the firm's first following the merger of Merrill Lynch and Bank of America). His other roles included service as Vice Chairman and Co-Head of Global Corporate Finance of Merrill Lynch and over 25 years running Investment Banking for the firm's Western Region. During his career Mr. McMahon advised on more than 400 transactions. Mr. McMahon is a director of Parsons Corporation, a digitally enabled solutions provider and a global leader in many diversified markets with a focus on security, defense and infrastructure, and is a member of its Audit and Compensation committees. Mr. McMahon also serves as a trustee of Claremont McKenna College. Mr. McMahon received a Master of Business Administration degree from the University of Chicago Booth School of Business and a Bachelor of Arts degree in Economics from Claremont McKenna College.

Skills and Qualifications

Mr. McMahon's over three decades of investment banking experience provides the Board with deep insight into financial structuring matters and fashioning innovative strategic solutions. His senior managerial roles, including as Executive Vice Chairman of one of the nation's largest banks and as Senior Advisor to the G100 Network, also give him valuable perspectives on maintaining ties between boards and management.

CALIFORNIA RESOURCES CORPORATION    10

Board of Directors and Corporate Governance 

•   Chairman of the Sustainability Committee

•   Member of the Audit Committee

Mr. Moncrief has served on the Board of Directors of CRC since 2014. Mr. Moncrief has been a principal in Moncrief Oil International, Inc., an oil and gas exploration and production company with headquarters in Fort Worth, Texas, since founding the company in 1970. He currently serves as its Chief Executive Officer. Moncrief Oil participates in U.S. and international oil and gas exploration and production. Mr. Moncrief also serves on the boards of trustees for the Amon Carter Museum and the University of Texas Development Board. He holds a Bachelor of Science degree in Petroleum Engineering and is a Distinguished Graduate of the School of Engineering of the University of Texas.

Skills and Qualifications

Mr. Moncrief’s extensive experience as the head of a large private upstream oil and gas exploration company allows him to bring an in-depth understanding of key industry issues to the Board of Directors. His leadership experience at Moncrief Oil provides him with strategic and management insights from which CRC benefits. Mr. Moncrief offers entrepreneurial expertise forged over years in the business of oil and gas exploration.

•   Member of the Compensation Committee

•   Member of the Nominating and Governance Committee

Mr. Poladian has served on the Board of Directors of CRC since 2014. From 2006 to 2016, Mr. Poladian served as Executive Vice President and Chief Operating Officer of Lowe Enterprises, Inc., a diversified national real estate company active in commercial, residential and hospitality property investment, management and development. Mr. Poladian previously served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer for Lowe from 2003 to 2006. Mr. Poladian was with Arthur Andersen LLP from 1974 to 2002, most recently as a Partner, and is a Certified Public Accountant (inactive). He is a past member of the Young Presidents Organization, the Chief Executive Organization, the California Society of CPAs and the American Institute of CPAs. Mr. Poladian is a director emeritus of the YMCA of Metropolitan Los Angeles, a member of the Board of Councilors of the USC Sol Price School of Policy, a member of the Board of Advisors of the Ronald Reagan UCLA Medical Center, and a former Trustee of Loyola Marymount

CALIFORNIA RESOURCES CORPORATION    11

Board of Directors and Corporate Governance 

University. He serves as a director and on the Audit Committees of funds managed by Western Asset Management Funds. He is also a member of the Board of Trustees of Public Storage where he is the Chair of the Audit Committee and a member of the Nominating and Corporate Governance Committee. Mr. Poladian also serves as a director of Occidental Petroleum Corporation where he is a member of the Corporate Governance and Nominating Committee and Chair of the Audit Committee. He previously served as a director of California Pizza Kitchen.

Skills and Qualifications

Mr. Poladian’s service in a senior management position at one of the world’s largest accounting firms, combined with his experience as Chief Operating Officer and Chief Financial Officer of a diversified real estate company, gives Mr. Poladian deep knowledge of key business issues, including personnel and asset utilization. He also provides insight into all aspects of fiscal management. Through his work on the boards of various entities, Mr. Poladian has garnered valuable insight into our business and corporate governance generally.

•   Member of the Sustainability Committee

Ms. Powers was appointed to the Board of Directors in 2017. Ms. Powers retired from Occidental Petroleum Corporation in January 2017 after more than 30 years of service at Occidental. Prior to her retirement, Ms. Powers served since 2009 as Executive Vice President of Worldwide Exploration for Occidental Oil and Gas Corporation and as Vice President of parent Occidental Petroleum Corporation. From 2006 to 2009, Ms. Powers served as Vice President of Worldwide Exploration. Prior to 2006, Ms. Powers served as Director of Worldwide Geoscience, Vice President of Exploration in Colombia and Chief Exploration Geologist for Worldwide Exploration. Ms. Powers serves as a director of EQT Corporation. Ms. Powers holds a Bachelor of Science degree in Geology with high honors from Texas A&M University.

Skills and Qualifications

Ms. Powers brings over 36 years of experience in the oil and gas industry to CRC’s Board. Her expertise as a senior geoscientist working in hydrocarbon provinces around the world and, in particular, her knowledge of California’s geology greatly benefits CRC’s Board. The Board also benefits from her perspective gained from many years of executive management in the industry.

CALIFORNIA RESOURCES CORPORATION    12

Board of Directors and Corporate Governance 

•   Member of the Audit Committee

•   Member of the Compensation Committee

The Board of Directors appointed Ms. Siegel as a director effective as of August 21, 2018. Ms. Siegel is the President of LAS Advisory Services, a firm providing advice to organizations on issues related to talent management, succession planning, organizational capability and culture. From 2003 to 2012, Ms. Siegel served as Senior Vice President of Human Resources and Internal Communications of Tyco International Ltd., a diversified manufacturing and service company. Ms. Siegel had responsibility for rebuilding the leadership team, executing a strategy to restore the confidence of the company's employees and building an HR function with deep expertise in global human resource practices. From 1994 to 2002, she held various positions with Honeywell International Inc., including Vice President of Human Resources — Specialty Materials and was a principal at Strategic Compensation Associates. Ms. Siegel is currently Program Chair of the G100 Talent Consortium. Ms. Siegel is a director and compensation committee chair of the board of directors of CenturyLink, Inc., a broadband, telecommunications and data hosting company, and FactSet Research Systems Inc., a multinational financial data and software company. She is also a director of private company Scoop Technologies. From 2015 to 2019, she served as a director and compensation committee chair of Volt Information Sciences, a provider of global infrastructure solutions in technology, information services and staffing acquisition. Ms. Siegel has an MBA and a Master’s degree in City and Regional Planning, both from Harvard University, and a Bachelor’s degree from the University of Michigan.

Skills and Qualifications

Ms. Siegel brings to our Board substantial experience as a human resources executive with large global

enterprises as well as substantial public company board experience. Her background provides the

Board with unique insight into various issues including talent management, succession planning, executive compensation and culture.

•   Chairman of the Nominating and Governance Committee

Mr. Sinnott was appointed to the Board of Directors of CRC in 2014. Mr. Sinnott is Co-Chairman of Kayne Anderson Capital Advisors, L.P., an investment management firm. From 2010 until 2016, he served there as President, Chief Executive Officer and Chief Investment Officer. He also served as a Managing Director there

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Board of Directors and Corporate Governance 

from 1992 to 1996 and as its Senior Managing Director from 1996 until assuming the role of Chief Executive Officer in 2010. He is also President of Kayne Anderson Investment Management, Inc., the general partner of Kayne Anderson Capital Advisors, L.P. Mr. Sinnott served as a director of Kayne Anderson Energy Development Company from 2006 through 2013. He was Vice President and Senior Securities Officer of the Investment Banking Division of Citibank from 1986 to 1992 and previously held positions with United Energy Resources, a pipeline company, and Bank of America in its oil and gas finance department. Since 1998, Mr. Sinnott has served on the board of PAA GP Holdings LLC and its predecessor entities and currently serves as chairman of its compensation committee. Mr. Sinnott received a Bachelor of Arts degree from the University of Virginia and a Masters of Business Administration from Harvard University.

Skills and Qualifications

As the Co-Chairman of a California-based investment company investing in energy and other areas, Mr. Sinnott brings extensive insight into the oil and gas and financial industries to the CRC Board of Directors. His experience analyzing industry players and managing a multi-billion dollar investment enterprise allows him to provide insight on a broad variety of matters affecting the oil and gas industry generally and the company specifically. He brings deep understanding of and insight into strategic alternatives, industry trends, deal structures and finance.

Mr. Stevens was appointed President, Chief Executive Officer and a Director of CRC in 2014. Mr. Stevens served as Vice President—Corporate Development of Occidental from 2012 to 2014, as Vice President—California Operations, Oxy Oil & Gas from 2008 to 2012, and as Vice President—Acquisitions and Corporate Finance of Occidental from 2004 to 2012.  He also serves on the board of directors of the Western States Petroleum Association.  Mr. Stevens holds a Master of Business Administration degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy.

Skills and Qualifications

Our Board of Directors benefits from Mr. Stevens’ deep knowledge of the oil and gas industry and his expertise in strategically evaluating and valuing oil and gas assets that is derived from years of buying and integrating exploration and production assets, many of which we currently own. Mr. Stevens also brings specific insight into the Company’s operations from his significant managerial experience as an executive at Occidental, including his strong experience in allocating capital and managing Occidental’s and our assets. Mr. Stevens’ extensive experience dealing with California’s regulatory environment, agencies and political landscape and his ability to forge strong ties within the state have proven a valuable asset to the Company.

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Board of Directors and Corporate Governance 

Board Refreshment and Evaluation

Identifying and Evaluating Nominees for Directors

Our Nominating and Governance Committee is responsible for leading the search for individuals qualified to serve as directors and for recommending to the Board nominees as directors to be presented for election at meetings of the stockholders or of the Board of Directors. Our Nominating and Governance Committee evaluates candidates for nomination to the Board of Directors, including those recommended by stockholders, and conducts appropriate inquiries into the backgrounds and qualifications of possible candidates. The Nominating and Governance Committee may retain outside consultants to assist in identifying director candidates in its sole discretion, but it did not engage any outside consultants in connection with selecting the nominees for election at the Annual Meeting.

Director Criteria, Qualifications and Experience

Our Corporate Governance Guidelines contain qualifications that apply to director nominees recommended by our Nominating and Governance Committee. In the event that a vacancy on the Board of Directors arises, the Nominating and Governance Committee will consider and review the candidate’s following qualifications, relevant skills, qualifications and experience:

Board Diversity

The Board recognizes the value of having directors from a wide variety of backgrounds who bring diverse opinions, perspectives, skills, experiences, backgrounds and orientations to its discussions and its decision-making processes. A diverse board enables a more balanced, wide-ranging discussion in the boardroom, and is also important to the Company’s stockholders, its management and employees. For these reasons, the Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the Board of Directors. For its last vacancy, the Board of Directors appointed Ms. Siegel as a director, which further diversified the board.

Board Evaluations and Incumbent Directors

Our Board believes that a robust annual evaluation process is an important part of its governance practices.  For this reason, the Nominating and Governance Committee oversees an annual evaluation of the performance of the Board.  The committee distributes written evaluation surveys to each director, and the Chairman of the Board discusses the results of these written surveys with the individual directors. In addition, the Chairman shares the results of the surveys and interviews with the full Board for consideration with respect to director nominees, and Board and committee structure, composition and effectiveness.

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Board of Directors and Corporate Governance 

With respect to the reelection of an existing director, the Nominating and Governance Committee will consider the results of the evaluation process and review the director’s:

Board Education

The Board of Directors engages in various activities to obtain additional insight into our business and industry, beneficial perspectives on the performance of the Company, the Board and our management, and on the Company’s strategic direction.  From time to time, the full Board receives presentations from its committees, and internal and external advisors, regarding current topics of interest.  The Company also makes resources available to individual directors, including access to director education from third party providers.

Director Independence Determinations

Majority independent directors 20% non-independent 80% independent

The Board of Directors has reviewed all direct or indirect business relationships of which it is aware between each director (including his or her immediate family) and us, including those relationships described under “Related Party Transactions” below, as well as each director’s relationships with charitable organizations, to assess director independence as defined in the listing standards of the NYSE. Based on this evaluation, the Board of Directors has determined that Messrs. Albrecht, Gannon, Korell, McMahon, Moncrief, Poladian and Sinnott and Mses. Powers and Siegel are independent directors as that term is defined in the listing standards of the NYSE. Mr. Stevens, the President and Chief Executive Officer, is not considered by the Board of Directors to be an independent director because of his current employment with CRC.

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Board of Directors and Corporate Governance 

Board Leadership Structure and Committees

Chairman

The Board of Directors’ leadership structure separates the CEO and Chairman of the Board positions. Mr. Stevens currently serves as our President and CEO, and Mr. Albrecht serves as our non-executive Chairman.

The Board of Directors believes that there is no single, generally accepted approach to providing board leadership and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company, as the right leadership structure may vary as circumstances change. The Board of Directors believes it is in the best interest of the Company and its stockholders at this time to have separate CEO and Chairman positions. The Board of Directors has found that this structure enables the CEO to focus on operation of the Company’s business, while the Chairman focuses on leading the Board of Directors in its oversight role.

Lead Independent Director

Mr. Korell has served as Lead Independent Director since December 2014. The responsibilities of the Lead Independent Director include acting as chair at meetings of the Board of Directors when the Chairman is not present, and preparing the agenda and presiding over executive sessions of the non-management directors of the Board of Directors.

Board Meetings and Attendance

During 2019, the Board of Directors held five meetings, and each of the standing committees held the number of meetings included in the description of the committees set forth below. Each director attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that occurred during such directors’ terms in 2019.

Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meetings of stockholders. All of our directors attended the annual meeting in May 2019.

Executive Sessions of the Board

The Board of Directors intends to hold regularly scheduled meetings of independent directors in executive session without management present in conjunction with each regular board meeting. In addition to these regularly scheduled meetings, executive sessions may be called upon the request of any independent director. In 2019, the Board of Directors held executive sessions on the day of all of the regularly scheduled board meetings.

Committees of the Board

As of the date of this proxy statement, our Board of Directors has four separately designated standing committees. The membership and purposes of each of the committees are described below. Each of the standing committees operates under a written charter adopted by the Board. The Board of Directors and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary, without consulting or obtaining the approval of any officers of the Company in advance.

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Board of Directors and Corporate Governance 

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Board of Directors and Corporate Governance 

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Board of Directors and Corporate Governance 

The Board’s Role in Risk Oversight

Our Company’s management is responsible for the day-to-day management of risks to the Company. The Board of Directors has broad oversight responsibility for our risk management programs.

BOARD OF DIRECTORS  Informed through committee reports and by the President and CEO about known risks to the Company’s strategy and business. Regularly reviews information regarding the Company’s credit, liquidity and operations, including the risks associated with each.  COMPENSATION COMMITTEE  Overseas the management of risks relating to the Company’s executive compensation plans and arrangements.  AUDIT COMMITTEE  Oversees financial risks and the ethical conduct of the Company’s business, including the steps the Company has taken to monitor and mitigate these risks, and reviews material related party transactions.  NOMINATING AND GOVERNANCE COMMITTEE  Manages risks associated with the independence of the Board of Directors and potential conflicts of interest.  SUSTAINABILITY COMMITTEE  Responsible for overseeing the management of risks in our Company’s operations relating to health, safety and the environment.

BOARD OF DIRECTORS Informed through committee reports and by the President and CEO about known risks to the Company’s strategy and business. Regularly reviews information regarding the Company’s credit, liquidity and operations, including the risks associated with each. COMPENSATION COMMITTEE Oversees the management of risk relating to the Company’s executive compensation plans and arrangements. AUDIT COMMITTEE Oversees financial risks and the ethical conduct of the Company’s business, including the steps the Company has taken to monitor and mitigate these risks, and reviews material related party transactions. NOMINATING AND GOVERNANCE COMMITTEE Manages risks associated with the independence of the Board of Directors and potential conflicts of interest. SUSTAINABILITY COMMITTEE Responsible for overseeing the management of risks in the Company’s operations relating to health, safety, the environment, community engagement and sustainable development.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee is now, or at any time since the beginning of 2019 has been, employed by or served as an officer of CRC or any of its subsidiaries or had any business relationship requiring disclosure with CRC or any of its subsidiaries. None of our executive officers is now, or at any time has been, since the beginning of 2019, a member of the compensation committee or board of directors of another entity one of whose executive officers has been a member of our Board of Directors or Compensation Committee.

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Board of Directors and Corporate Governance 

Communications with Directors

Our Board of Directors welcomes communications from our stockholders and other interested parties. Communications to our Board of Directors, to any committee of our board, or to any director in particular, should be sent to:

Board of Directors, committee name or director’s name, as appropriate

California Resources Corporation

Attention: Corporate Secretary

27200 Tourney Road, Suite 200

Santa Clarita, California 91355

We will forward all correspondence directly to the committee or individual director, as appropriate. Our independent directors approved our process for collecting and organizing stockholder communications to the Board of Directors.

If any stockholder or third party has a complaint or concern regarding accounting, internal controls over financial reporting or audit matters at CRC, they should send their complaint in writing to Mr. Gannon, the Chairman of the Audit Committee, at the address listed above.

Availability of Corporate Governance Documents

We are committed to good corporate governance. In furtherance thereof, the Board of Directors has adopted governance documents to guide the operation and direction of the Board and its committees, which include Corporate Governance Guidelines, a Business Ethics Policy (which applies to all directors and employees, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer) and charters for the Audit, Compensation, Nominating and Governance and Health, Safety and Environmental Committees. Each of these documents is available on our website (www.crc.com), and stockholders may obtain a printed copy, free of charge, by sending a written request to California Resources Corporation, Attention: Corporate Secretary, 27200 Tourney Road, Suite 200, Santa Clarita, California 91355. We will also promptly post on our website any material amendments to these documents and any waivers from the Business Ethics Policy for our directors and principal executive, financial and accounting officers.

Certain Relationships and Related Transactions

Policies and Procedures

Our Board of Directors adopted written policies regarding related party transactions. We review all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our Corporate Secretary’s office implements procedures to obtain information from the directors and executive officers with respect to related party transactions. The Audit Committee reviews and discusses with management and the independent registered public accounting firm any material related party transactions as defined by, and required to be disclosed under, the rules of the Securities and Exchange Commission (“SEC”) and the NYSE. Agreements that embody transactions that are material in amount or significance are filed with the SEC as required.

Our business ethics and corporate policies prohibit significant conflicts of interest. Any waivers of these policies require approval by the compliance officer, or in the case of conflicts of our executive officers or directors, the Board of Directors. Under our Business Ethics and Corporate Policies, conflicts of interest generally are deemed to occur when private or family interests do not appear impartial, interfere or compete with the interests of our Company.

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Board of Directors and Corporate Governance 

We have multiple processes for reporting conflicts of interests and related party transactions. Under our Business Ethics and Corporate Policies, all of our directors and employees are required to report any known or apparent conflict of interest, or potential conflict of interest, to their supervisors, the compliance officer, a member of the corporate compliance committee, our legal counsel, human resources, or the Board of Directors, as appropriate. As part of any review of any conflict of interest, potential conflict of interest or related party transaction, the following factors are generally considered:

We also have other policies and procedures to prevent conflicts of interest and related person transactions. For example, the charter of our Nominating and Governance Committee requires that the committee members assess the independence of the non-management directors at least annually, including a requirement that it determine whether any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described above under “Director Independence Determinations.”

Related Party Transactions

This section discusses transactions and relationships with related persons since the beginning of our most recently completed fiscal year.

Marketing Transactions

We sell and purchase products with subsidiaries of Plains All American Pipeline, L.P. (“Plains”). Funds managed by Kayne Anderson Capital Advisors L.P., of which Mr. Sinnott serves as co-chairman, and affiliates (“Kayne Anderson”) own approximately 7.35% of the general partner of Plains, approximately 1.36% of the limited partner units of Plains and an additional approximately 3.59% general partner interest in Plains GP Holdings, L.P. (the public portion of the general partner). Mr. Sinnott serves as a director for the general partner of Plains. For the year ended December 31, 2019, transactions with Plains accounted for approximately $241 million of our oil and gas sales.

Transactions with Related Persons, Promoters and Certain Control Persons

Certain funds controlled by Kayne Anderson Investment Management, Inc. (“Kayne Anderson Investment”), of which Mr. Sinnott serves as President, purchased in 2016, and during 2019 continued to hold up to approximately $18.5 million in aggregate principal amount of our 8% secured second lien notes due 2022, but sold its remaining interest in May 2019 and did not reacquire an interest in the notes thereafter. Mr. Sinnott did not participate in Kayne Anderson’s decision-making process with respect to these transactions.

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Other Governance Matters 

Other Governance Matters

Shareholder Engagement

In 2019, we reached out to our largest shareholders, including those who held in aggregate over half of our total outstanding shares, for meetings on corporate governance issues.  In the meetings that were arranged, we discussed recent governance changes, board refreshment and diversity practices, and compensation philosophy.  We also asked about broader trends and practices on corporate governance for Board feedback and consideration.  

At the 2018 and 2019 annual meetings, the Board submitted proposals to amend the Company’s certificate of incorporation to reduce the current supermajority vote thresholds to majority votes.  These proposals only received votes for approval from approximately 42% in 2018 and 43% in 2019 of the total outstanding shares, which were short of the 75% required approval threshold.  We received feedback from our shareholder engagement meetings that it is reasonable to suspend our efforts to pass these proposals until our shareholder composition changes to more institutional ownership to make such passage more likely, so the Board has not included these proposals in this proxy statement.

Sustainability and Stewardship

In 2017, we consulted with our workforce, state and community leaders, sustainability professionals and labor and non-profit groups about ways to expand our annual HSE metrics and enhance our life-of-field planning process.  As a result of this dialogue, in 2017 we adopted four 2030 Sustainability Goals – for water recycling, integration of renewable energy into our operations, methane emission reduction and carbon capture and sequestration – which advance the State of California’s 2030 goals and aid in our life-of-field planning. We issued a Sustainability Report describing the goals that year, in addition to our annual water management summary.  The report noted that the Sustainability Goals are subject to liquidity, funding and permitting and are measured against a 2013 baseline, the year before our launch as an independent company and also a baseline year for certain state goals.

In 2018, we adopted specific quantitative targets for the Sustainability Goals, and our 2018 Sustainability Report described those targets, the specific projects and teams assigned to each goal and our progress toward attaining the goals.  We provide updates at least annually on our progress, which in 2018 and 2019 was specifically tied to the review of individual performance of Company executives. The specific 2030 targets and our progress are detailed on our website Sustainability page (www.crc.com/sustainability) and the latest Sustainability Report which is hosted on the Sustainability page.  Our 2030 targets against a 2013 baseline are summarized below:

Water Goal -- Increase volume of recycled produced water by 30%.

Renewables Goal -- Integrate renewables into oil and gas operations by adding 10 MW from renewable sources.

Methane Goal -- Reduce methane emissions by 50%.

Carbon Goal -- Design and permit a carbon capture and sequestration system at Elk Hills by 2030 that would, if permitted, funded and installed, reduce GHG emissions by 30%.  

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Other Governance Matters 

In 2019, the Board updated the name and scope of the Sustainability Committee to underscore our commitments to serve as a responsible steward of California’s natural resources, to integrate sustainability, HSE and community engagement into our life-of-field planning and to advance California’s long-term goals.  Importantly, by helping to safely and responsibly increase local production of oil, natural gas and electricity, we also:

We view our workforce as an asset and the Board provides oversight over significant aspects of our human capital.  Management provides regular updates to and receives guidance from the Board with respect to employee engagement, diversity and career development initiatives.

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Audit Committee Report 

Audit Committee Report

The Audit Committee of the Board of Directors of California Resources Corporation approves the appointment and services of the independent registered public accounting firm, and monitors (1) the integrity of the financial statements of CRC; (2) the independent registered public accounting firm’s qualifications, independence and performance; (3) the effectiveness and performance of CRC’s internal audit function; (4) CRC’s system of disclosure controls and procedures, internal control structure over financial reporting and compliance with ethical standards; and (5) the compliance by CRC with legal and regulatory requirements related to financial statements.

The Board of Directors has determined that each of the members of the Audit Committee satisfies the standards of independence established under the SEC’s rules and regulations and listing standards of the NYSE. The Board of Directors has further determined that each of the members of the Audit Committee is financially literate and that Mr. Gannon is an “audit committee financial expert” as defined by the rules and regulations of the SEC.

In connection with our financial statements for the year ended December 31, 2019, the Audit Committee has:

Based on the review and discussions with CRC’s management, independent registered public accounting firm and independent reserves audit firms, as set forth above, the Audit Committee recommended to CRC’s Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for filing with the SEC.

Audit Committee,

Justin A. Gannon

Harry T. McMahon

Richard W. Moncrief

Laurie A. Siegel

February 26, 2020

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Compensation Discussion and Analysis 

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) provides a description of the elements and key features of our compensation program, as well as context and rationale for decisions made with respect to the compensation for our “named executive officers” or “NEOs” for the year ended December 31, 2019, who are identified below:

Table of Contents

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Compensation Discussion and Analysis 

Execution on Our Strategic Priorities in 2019

In 2019, our management team continued to deliver significant accomplishments against our strategic priorities which the Compensation Committee considered as part of its review of management’s performance for compensation purposes.

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Compensation Discussion and Analysis 

Historical Perspective – Drivers of Strategic Priorities

CRC was spun off from Occidental Petroleum Corporation (“Occidental”) on November 30, 2014. Occidental burdened CRC with a substantial debt load of $6.3 billion, which peaked at $6.8 billion including the effect of the capital program being implemented by Occidental immediately prior to the Spin-off, and implemented the Spin-off just as a severe and extended downturn in commodity prices began.

Our highly leveraged balance sheet, resulting from decisions made by Occidental prior to the Spin-off, has been a significant factor disproportionately affecting our stock price performance in a negative manner compared to our industry peers during the recent downturn. For perspective, despite achieving total shareholder returns that were the best of our peer group for 2018 and top quartile for the two-year period 2017-2018, CRC’s market capitalization decreased almost 86%, from $2.8 billion at the Spin-off to $0.4 billion at December 31, 2019.

To address stockholder concerns regarding CRC’s leverage, our management team focused on the difficult task of reducing our debt in the low commodity price environment. Since the second quarter

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Compensation Discussion and Analysis 

following the Spin-off, when our debt level reached its peak, management has significantly reduced our debt without unduly increasing our interest costs or significantly diluting our equity.

As a result of these priorities, CRC has had very limited capital available to invest and production has declined compared to CRC’s peers, who had greater access to capital because of their lower leverage.

The charts below outline the swift, decisive actions management has taken through the commodity downturn that have positioned CRC for growth as commodity prices recover, as well as the different mechanisms our management team utilized to reduce CRC’s outstanding debt. During this period our management team worked constructively with our bank lenders to negotiate multiple amendments to our credit facility, including an amendment in 2019.

HISTORY OF PROACTIVE DECISIONS

Brent Crude Oil Price ($/BBL) $20 $50 $80 $110 07/14 07/15 07/16 07/17 07/18 07/19 5 10 15 20 25 30 Brent Crude Price CRC + JV Rig Count CRC Rig Count VALUE PRESERVATION SEPARATION ANNOUNCEMENT Spin Date  Cut rigs Began Hedging Managed liabilities Utilized existing facilities Protected base production TRANSITION TO OFFENSE Increased activity Engaged in JVs Locked in hedges Increased liquidity Extended maturities QUICK RESPONSE TO PRICE CHANGE Invest for value preservation Drill high-graded portfolio Invest in exploration and facilities Strengthen balance sheet Entered into JV with Alpine

HISTORY OF PROACTIVE DECISIONS Brent Crude Oil Prices ($/BBL) $20 $50 $80 $110 Rig Count 5 10 15 20 25 30 07/14 01/15 07/15 01/16 07/16 01/17 07/17 01/18 07/18 01/19 07/19 01/20 Brent Crude Price CRC + JV Rig Count CRC Rig Count SEPARATION ANNOUNCEMENT VALUE PRESERVATION TRANSITION TO OFFENSE QUICK RESPONSE TO PRICE CHANGE Spin Date Cut rigs Began hedging Managed liabilities Utilized existing facilities Protected base production Increased activity Engaged in JVs Locked in hedges Increased liquidity Extended maturities Invest for value preservation Drill high-graded portfolio Invest in exploration and facilities Strengthen balance sheet Entered into JV with Alpine

ACTIONS TO REDUCE DEBT

Net Debt ($MM) 4,000 5,000 6,000 7,000 2Q 2015 Net Debt Reduction 6,765 3Q and 4Q 2015 $634 Million During 2016 $875 million During 2017 $(35) Million During 2018 $56 million During 2019 $272 million YE 2019 Total $1,802 million 4,963 Represents mid-second quarter 2015 peak net debt.

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Compensation Discussion and Analysis 

The table below compares CRC’s stock performance to our 2019 Peer Group identified on page 36.

EQUITY PERFORMANCE

0% 20% 40% 60% 80% 100% 120% Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 –CRC –2019 Peer Group

In summary, our stock price performance during the industry downturn has been disproportionately affected by the highly leveraged balance sheet that we inherited from Occidental. Our management team has made significant accomplishments in deleveraging the balance sheet and improving CRC’s strategic position to take advantage of potential future commodity price increases.

Aligning Pay with Stockholder Interests

Since our Spin-off in 2014, the Compensation Committee has taken several actions to ensure our executive compensation program is aligned with stockholder interests.

2014 SPIN-OFF √ Occidental determines executive compensation in effect at Spin-off 2015 √ CRC Compensation Committee selects new peer group and designs compensation program 2016 √ Compensation Committee reduces base salaries by 10% during severe downturn √ Compensation Committee applies negative discretion and reduces annual incentive payouts due to severe business conditions √ Compensation Committee reduces long-term incentive grant date values in anticipation of market movement during severe downturn 2017 √ Compensation Committee changes long-term incentive to address retention concerns and equity burn rate with cash-based performance award 2018 √ Compensation Committee selects expanded peer group for 2018 √ Compensation Committee reduces qualitative portion of annual incentive √ Compensation Committee changes long-term performance award to equity-based 2019 √ Compensation Committee reduces number of metrics under Annual Incentive to provide greater focus on key objectives √ Compensation Committee changes long-term performance award metrics to include a relative Total Shareholder Return metric

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Compensation Discussion and Analysis 

Linkage Between Pay and Performance

Our compensation program is well designed to link the pay realized by our executives to the performance of CRC and the returns to our stockholders, while also providing incentives necessary to retain our executives through this challenging period.

The pay mix at target grant date values for our chief executive officer and other NEOs for 2019 was primarily long-term and performance-based.

PAY MIX OF CEO 12% 13% 45% 30% 88% At Risk salary annual incentive performance-based long-term incentive time-vested long-term incentive at risk AVERAGE PAY MIX OF NEOs OTHER THAN CEO 21% 19% 36% 24% 79% At Risk

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Compensation Discussion and Analysis 

Realizable Pay Analysis

The chart below illustrates the degree to which our CEO’s realizable pay has been impacted by changes in the stock price after the grant date, illustrating the significant alignment of CRC’s compensation program with shareholder returns.

Stock Price 12/31/2019 vs. Grant Date 22% 59% 48% 49% 42% Realizable Pay 38% of Target 110% of Target 85% of Target 62% of Target 58% of Target millions $6.7 $2.5 $5.0 $5.5 $6.5 $5.5 $7.0 $4.4 $7.2 $4.2 Target Realizable 2015 2016 2017 2018 2019 Base Salary Annual Incentive Long Term Incentives

Notes regarding the CEO Realizable Pay:

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Compensation Discussion and Analysis 

Stockholder Outreach

We regularly request meetings with several of our stockholders to discuss our governance and executive compensation practices. We received positive feedback on our corporate governance and compensation practices as part of our 2019 stockholder outreach initiative, in particular with regards to the changes we made to our compensation program in 2019:

We will continue to reach out to stockholders to solicit feedback to ensure that our governance and executive compensation practices align with stockholders’ expectations.

Stockholder Approval of Executive Compensation

Our stockholder advisory vote in 2019 on the compensation paid to our NEOs in 2018, resulted in a 97.5% approval of such compensation. In adjusting our executive compensation programs, the Compensation Committee considered the results of last year’s advisory vote on executive compensation and many other factors, including the Compensation Committee's assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by the Compensation Committee's independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”), feedback from our ongoing stockholder outreach initiative and review of data relating to pay practices of our compensation peer group.

Elements of Our Compensation Program

Compensation Philosophy

The following core principles form the foundation of our compensation program:

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Compensation Discussion and Analysis 

Compensation Program Best Practices

Our executive compensation program is well-designed, incorporates best practices and is governed by a highly engaged Compensation Committee. Our short-term and long-term incentive plans are primarily performance-based and are intended to align with the short- and long-term best interests of stockholders. The Compensation Committee has engaged in best practices to further align executive pay with Company performance and to ensure good governance in the following ways:

WHAT WE DO We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. We are stockholder-aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majority of the outstanding long-term incentive awards for our named executive officers are stock-based.  We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. We have stock ownership requirements. We maintain stock ownership guidelines which require our named executive officers and directors to have meaningful stock ownership in the Company. We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.

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Compensation Discussion and Analysis 

WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for executives. We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company.

Compensation Peer Group Selection

The Compensation Committee believes that the most relevant compensation peer companies are those that could compete for our talent with similar operating complexity and financial characteristics to CRC. The Compensation Committee reviews the peer companies each year based on the criteria below and adjusts as necessary to ensure alignment with those objectives.

Peer company selection based on equity market capitalization would generally result in companies that are much smaller in complexity and scope of operations than CRC due to our highly leveraged balance sheet and resulting depressed equity market capitalization. The Compensation Committee does not believe that companies with similar equity market capitalizations represent the competitive market for our executive team’s skills and experience and accordingly believes that setting CRC compensation levels consistent with these smaller companies would penalize our management team for factors beyond their control, causing substantial retention problems.

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Compensation Discussion and Analysis 

2019 Peer Group

Prior to making 2019 compensation program design decisions in February 2019, the Compensation Committee reviewed our 2018 compensation peer companies and determined that no changes were needed, other than removal of RSP Permian, Inc. and Energen Corporation, due their acquisitions by other companies. The following companies reflect our “2019 Peer Group”.

Following this determination, but prior to making 2019 compensation program design decisions in February 2019, the Compensation Committee removed EP Energy Corporation from the Peer Group compensation analysis in light of its management turnover which led to compensation irregularities.

*

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Compensation Discussion and Analysis 

2020 Peer Group

In October 2019, the Compensation Committee reviewed the compensation peer companies and determined that no changes were needed for 2020 compensation planning purposes, other than removing Newfield Exploration Company and EP Energy Corporation, in light of their acquisition and distressed condition, respectively.

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Compensation Discussion and Analysis 

2019 Compensation Program

In February 2019, the Compensation Committee made 2019 compensation program design decisions focused on paying for performance, motivating and retaining the current management team and managing dilution and the remaining shares available for grants with the continued low stock price.  

Compensation Program Changes Made for 2019

The Compensation Committee considered feedback received through stockholder outreach and made the following changes to the compensation program for 2019:

2019 Compensation Program Elements

Our 2019 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:

2019 COMPENSATION PROGRAM ELEMENTS

Restricted Stock (40% of LTI) > Time-vested 1/3 per year > Stock- and cash- settled Long-Term Incentive (LTI) Annual incentive base salary Performance Stock (50% of LTI) > 3-year performance period > 50% VCI (three-year average) > 50% Relative Total Shareholder Return – CRC vs. 2019 Peer Companies > Stock-based, stock- and cash-settled Stock Options (10% of LTI) > Vest 1/3 per year > 7-year exercise period > Exercise price 10% above grant date price Annual incentive award > VCI (current year) > EBITDAX > Debt > HSE – combined injury and illness rate (IIR) > HSE – spill prevention rate > HSE – net water supplied to agriculture > Individual goals

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Compensation Discussion and Analysis 

2019 Base Salaries

The Compensation Committee reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data and internally aligned, and as a result the Compensation Committee decided to make no changes for 2019 based on the individual’s performance, scope of job responsibilities, internal alignment and position relative to peer group compensation data. Mr. Preston was not an NEO in 2018, so his 2018 annual base salary is not disclosed.

2019 Annual Incentive Design

The annual incentive component of our 2019 compensation program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to reduce the qualitative portion of the award, the performance measures were comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.

Aligning performance criteria with our strategic areas of focus for the year, the Compensation Committee approved performance measures designed to encourage decision making that will enhance stockholder value creation. The Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time they were established in February 2019. Target performance criteria were set at levels that would represent successful execution of the 2019 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2019 business plan. Performance targets were set at more rigorous levels than prior years for VCI, EBITDAX and Debt.

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Compensation Discussion and Analysis 

The table below provides the weightings for each performance measure and the threshold, target, and maximum performance criteria as established by the Compensation Committee. Also shown in the table are the actual 2019 results under each quantitative performance measure and the resulting percentage of target bonus payout.

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Compensation Discussion and Analysis 

All executives were subject to the same Investment, Operations, Health, Safety and Environmental, and Liquidity quantitative measures. The actual 2019 results against these goals yielded a payout of 143.94% of target for the quantitative measures portion of the annual incentive.

2019 Annual Incentive Targets

The Compensation Committee reviewed the annual incentive targets for each of our NEOs against Peer Group market data, and with consideration to internal alignment. In February 2019, the Compensation Committee determined that the 2019 annual incentive targets for the NEOs, other than Mr. Weiss, remained appropriate at the 2018 levels and no changes were made for 2019. For Mr. Weiss, the Compensation Committee determined his target should be increased from 75% to 80% based on the scope of his job and internal alignment. Mr. Preston was not an NEO in 2018, so his 2018 annual incentive target is not disclosed.

2019 Individual Annual Incentive Results

For each of our NEOs, the executive’s performance in 2019 was considered against his strategic and individual objectives in determination of the payout amounts under the 2019 annual incentive as described below. Each of the NEOs had individual objectives covering some of the following areas:

The following tables present a partial list of the accomplishments the Compensation Committee reviewed in determining the payout amounts for each of the NEOs.

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Compensation Discussion and Analysis 

Todd A. Stevens – President and Chief Executive Officer

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Compensation Discussion and Analysis 

Marshall D. Smith – Senior Executive Vice President and Chief Financial Officer

Darren Williams – Executive Vice President – Operations and Geoscience

Charles F. Weiss – Executive Vice President – Public Affairs

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Compensation Discussion and Analysis 

Michael L. Preston – Senior Executive Vice President, Chief Administrative Officer and General Counsel

The Compensation Committee assessed the CEO’s performance against his Strategic and Individual objectives as exceptional, but decided to limit his individual component result to approximately target due to CRC’s negative shareholder return for the year.  The CEO’s assessments of the other NEOs against their respective Strategic and Individual objectives also exceeded expectations, but were similarly limited. As a result, the Compensation Committee approved the following 2019 annual incentive payouts:

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Compensation Discussion and Analysis 

2019 Long-Term Incentives

For 2019, the long-term incentives consisted of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards. The performance-based awards consisted of performance stock unit awards and premium-priced stock options.

2019 LONG-TERM INCENTIVE MIX (percent of grant date value) Restricted Stock Units (RSU) 40% Premium-Priced Stock Options (10%) Performance Stock Units (PSU)

2018 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%

2019 Restricted Stock Unit Award – The 2019 Restricted Stock Unit Award (RSU Award) is a stock-based, stock- and cash- settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts. One-third of the RSU Award vests at the end of each year during the three-year period commencing at the grant date. The RSU Award will be settled 50% in shares and 50% in cash with required tax withholding taken first from the cash portion of the payout, in order to manage the remaining shares available for awards under the Long-Term Incentive Plan (LTIP).

2019 Performance Stock Unit Award – The 2019 Performance Stock Unit Award (PSU Award) is a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on relative total shareholder return and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the PSU Award will be settled 50% in stock and 50% in cash. For payouts greater than the target number of units subject to the PSU Award, the payout of such excess of units will be settled in cash. Required tax withholding on settlements will be taken first from the cash portion of the payouts.

The performance measures for the 2019 PSU Award continue to focus the management team on making decisions that will enhance stockholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative total shareholder return measure directly ties compensation to shareholder returns.

The peer companies chosen for the relative total shareholder return performance measure under these awards are the same as those selected by the Compensation Committee for the 2019 Peer Group as shown on page 36.

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Compensation Discussion and Analysis 

The PSU Award will vest at the end of three years from the grant date contingent on the Compensation Committee’s certification of achievement of the performance measures shown below:

Key Features of the 2019 Performance Stock Unit Award

2019 Stock Options – The Compensation Committee granted stock options as part of the 2019 long-term incentive awards to further align executives with stockholders. The 2019 stock options were premium-priced, granted with an exercise price that was 10% above stock price on the grant date. The options will vest one-third at the end of each year during the three-year period commencing on the grant date and remain exercisable until the end of the seventh year following the grant date.

The Compensation Committee reviewed the long-term incentive grant date target values of the NEOs to determine if they remained appropriately positioned against the Peer Group data and internally aligned. The Compensation Committee increased the long-term incentive grant date values for the CEO and other NEOs based on the individual’s performance and position relative to peer group compensation data. Mr. Preston was not an NEO in 2018, so his 2018 value is not disclosed.

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Compensation Discussion and Analysis 

Payouts Under 2016 Performance Incentive Award – In August, 2019, the 2016 cash-based Performance Incentive Awards vested and were paid in cash.  Performance under the award was based 50% on a relative Cost per Boe measure and 50% on a weighted-average VCI metric during the three-year performance period. The Compensation Committee certified the following performance under the award:

Cost per Boe Portion:  This portion was based on the change in CRC’s Cost per Boe of production compared to the change in Cost per Boe of production for the peer group. Cost per Boe is the sum of the production costs and general and administrative expenses, both measured on a per Boe basis for the applicable period.  CRC’s three-year weighted average Cost per Boe increased by 0.2%, while the peer groups’ three-year average weighted Cost per Boe decreased by 7.5%, resulting in a net 7.7% increase. Under the terms of the award, this performance resulted in the following payout factor of 80.66% of target for the Cost per Boe portion of the award as shown below:

Cumulative VCI Portion:  This portion was based on the weighted-average VCI results for 2016, 2017 and 2018.  The weighted-average VCI result of 1.53 produced a payout of 200% of target for the cumulative VCI portion of the award, as shown below:

Payout Calculation:  The resulting payout was 140.3% of target incentive amounts, calculated as follows:

[50% * 80.66% (Cost per Barrel)] + [50% * 200% (Cumulative VCI)]

The following amounts were certified and paid in 2019 to the NEOs under the terms of these 2016 Performance Incentive Awards:

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Compensation Discussion and Analysis 

Other Compensation and Benefits

In addition to the components of the executive compensation program described above, we provided the following programs to our NEOs.

Qualified Defined Contribution Plan – All of our employees, including our NEOs, were eligible to participate in a tax-qualified, defined contribution plan. The defined contribution plan provided for periodic cash contributions by us based on annual employee cash compensation and employee-elected deferrals. Employees were permitted to contribute into the plan a percentage of their annual salary and bonus up to the annual limit set by the Internal Revenue Service (“IRS”). Employees were able to direct their account balances to a variety of investments.

Nonqualified Defined Contribution Plans – Substantially all employees, including our NEOs, whose participation in our qualified defined contribution plan was limited by applicable tax laws were eligible to participate in our supplemental savings plan (the “SSP”), a nonqualified defined contribution plan, which provided additional retirement benefits outside of those limitations.

Annual allocations for each participant were generally intended to restore the amounts that would have been contributed to our qualified defined contribution plan but for certain tax law limitations, and certain employer allocations were subject to a vesting schedule that required the completion of three years of service. Vested account balances will be payable following separation from service.

Interest on SSP account balances was allocated monthly to each participant’s account based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor.

In addition, we sponsored a supplemental retirement plan (the “SRP II”), which was established for purposes of the assumption by us of certain liabilities under the Occidental Petroleum Corporation Supplemental Retirement Plan II, including those for all of our NEOs. All account balances under the SRP II were fully vested at all times and are credited with interest on a monthly basis based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor. No additional allocations were made under the SRP II other than the crediting of interest.

In order to provide greater financial planning flexibility to participants while not increasing costs under the plan, the SRP II allowed in-service distribution of a participant’s account at a specified age, but not earlier than age 60, as elected by the participant when initially participating in the plan. After a participant receives a specified age distribution, future allocations under the SRP II and earnings on those allocations are to be distributed in the first 70 days of each following year.

Nonqualified Deferred Compensation Plan – Certain management and other highly compensated employees (including each of our NEOs) were eligible to participate in our nonqualified deferred compensation plan (the “DCP”). Under the DCP, participants were able to elect to defer a portion of their base salary and annual bonus for a given year. For the year of deferral, we allocated an additional amount to a participant’s account equal to the sum of 7% (which is immediately vested) and 12% (which is subject to a vesting schedule that required the completion of three years of service) of the compensation deferred by the participant under the DCP to restore amounts that were not contributed to the qualified and nonqualified defined contribution plans due to such deferral of compensation under the DCP. Deferred amounts earned interest based on the yield on five-year U.S. Treasury Constant Maturities based on a monthly frequency plus 2%, converted to a monthly allocation factor. Vested account balances will be payable following separation from service, or upon attainment of a specified age elected by the participant.

Tax Preparation and Financial Planning – Our executives, including each of the NEOs, were eligible to receive reimbursement, up to certain annual limits, for income tax preparation, financial planning and investment advice, including legal advice related to tax and financial matters.

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Compensation Discussion and Analysis 

Insurance – We offered a variety of health coverage options to all employees. NEOs participated in these plans on the same terms as other employees. In addition, for executives, including the NEOs, we paid for an annual comprehensive physical examination. We provided all employees with life insurance equal to twice the employee’s base salary. We also provided executives, including the NEOs, with excess liability insurance coverage.

Severance Benefits – We maintained a notice and severance pay plan that, in connection with a qualifying termination of employment, provided for up to 12 months of base salary and other insurance coverage, depending on years of service, for non-bargained employees, including the NEOs.

Employee Stock Purchase Plan – We adopted the California Resources Corporation 2014 Employee Stock Purchase Plan (the “ESPP”), effective January 1, 2015, which provided our employees (including our NEOs) the ability to purchase shares of our common stock at a price equal to 85% of the closing price of a share of our common stock as of either the first day of each offering period or the last day of each offering period, whichever amount was less.

The maximum number of shares of our common stock authorized to be issued pursuant to the ESPP is 1.5 million, subject to adjustment pursuant to the terms of the ESPP. In addition, participants in the ESPP were subject to certain limits on the number of shares that could be purchased in any given year and during any given offering period (a calendar quarter) under the ESPP.

Corporate Aircraft Use – Executives and directors could use the Company’s fractional interest in aircraft for personal travel, if space was available. The executives and directors reimbursed CRC for personal use of the Company’s fractional interest in aircraft, including any guests accompanying them, at not less than the standard industry fare level rate (which is determined annually by the IRS), or income was imputed and the executive or director was reimbursed for related taxes.

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Compensation Discussion and Analysis 

2020 Compensation Program

In February 2020, the Compensation Committee made 2020 compensation program design decisions continuing to focus on paying for performance, retention of the current management team and managing shareholder dilution with a continued low stock price.  

Compensation Program Changes Made for 2020

The Compensation Committee considered the favorable feedback received through stockholder outreach regarding the changes to the compensation program made in 2019 and determined that the structure of the program remained appropriate for 2020 with the following changes to the performance metrics under the program’s annual incentive awards:

2020 Compensation Program Elements

Our 2020 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:

2020 COMPENSATION PROGRAM ELEMENTS

Restricted Stock (40% of LTI) Time-vested 1/3 per year Stock- and cash- settled Long-Term Incentive (LTI) Annual Incentive Base Salary Performance Stock (50% of LTI) 3-year performance period 50% VCI (three-year average) 50% Relative Total Shareholder Return (TSR) – CRC vs. 2020 Peer Companies Stock-based, stock- and cash-settled Stock Options (10% of LTI) Vest 1/3 per year 7-year exercise period Exercise price 10% above grant date price Annual Incentive Award VCI (current year) EBITDAX Debt Sustainability Safety (combined injury and illness rate (IIR)) Spill prevention rate Net water supplied to agriculture Project milestones relating to water recycling renewable energy methane capture carbon capture workforce diversity and development community partnerships individual goals

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Compensation Discussion and Analysis 

2020 Annual Incentive Design

The annual incentive component of our 2020 compensation program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to emphasize the quantitative portion of the award, the performance measures are comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.

Aligning performance criteria with our strategic areas of focus for the year, the Compensation Committee approved performance measures designed to encourage decision making that will enhance stockholder value creation. The Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time the criteria were established in February 2020. Target performance criteria were set at levels that would represent successful execution of the 2020 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2020 business plan.

Project milestones relating to water recycling, renewable energy, methane capture, carbon capture, workforce diversity and development and community partnerships were added for 2020 to drive progress toward our 2030 Sustainability Goals. Many of our 2030 Sustainability Goals are multi-year efforts, so the project milestone approach allows us to track interim progress during the current year against multi-year goals.

The table below provides the weightings for each performance measure as established by the Compensation Committee.

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Compensation Discussion and Analysis 

All executives are subject to the same Investment, Operations, and Liquidity quantitative measures.

2020 Long-Term Incentives

For 2020, the long-term incentives consist of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards.  The performance-based awards consist of performance stock unit awards and stock options.

2020 LONG-TERM INCENTIVE MIX (percent of grant date value) Restricted Stock Units (RSU) 40% Premium-Priced Stock Options (10%) Performance Stock Units (PSU) 50%

2019 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%

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Compensation Discussion and Analysis 

2020 Restricted Stock Unit Award – The 2020 Restricted Stock Unit Award (RSU Award) is a stock-based, stock- and cash- settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts. One-third of the RSU Awards vest at the end of each year during the three-year period commencing at the grant date. The RSU Award will be settled 50% in shares and 50% in cash with required tax withholding taken first from the cash portion of the payout.

2020 Performance Stock Unit Award – The 2020 Performance Stock Unit Award (PSU Award) is a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on relative total shareholder return and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the PSU Award will be settled 50% in stock and 50% in cash. For payouts greater than the target number of units, the payout of such excess units will be settled in cash. Required tax withholding on payouts will be taken first from the cash portion of the payouts.

The performance measures for the 2020 PSU Award continue to focus the management team on making decisions that will enhance stockholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative total shareholder return measure directly ties compensation to shareholder returns.

The peer companies chosen for the relative total shareholder return performance measures under these awards are the same as those selected by the Compensation Committee for the 2020 Compensation Peer Group, as shown on page 37, excluding Carrizo Oil & Gas, Inc., due to its acquisition by Callon Petroleum Company.

The PSU Award will vest at the end of three years from the grant date based on achieved performance against pre-established performance criteria.

2020 Stock Options – The Compensation Committee granted stock options as part of the 2020 long-term incentive awards to further align executives with stockholders. The 2020 stock options were granted with an exercise price that was 10% above stock price on the grant date. The options will vest one-third at the end of each year during the three-year period commencing on the grant date and remain exercisable until the end of the seventh year following the grant date.

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Compensation Discussion and Analysis 

Our Executive Compensation Process

Role of Compensation Committee

Our executive compensation program is overseen by our Compensation Committee, with input from our management and outside compensation consultant, Meridian Compensation Partners, LLC (“Meridian”). In its oversight role, the committee is responsible for making compensation decisions involving our CEO and other executive officers and evaluating performance for compensatory purposes.

Role of Management

Our CEO, Chairman and Vice President of Compensation and Benefits provided input to the Compensation Committee with respect to executive compensation, key job responsibilities, achievement of performance objectives and compensation program design. We believe these individuals provide helpful support to the Compensation Committee in these areas given their understanding of our business and personnel, compensation programs and competitive environment. The Compensation Committee is not obligated to accept management’s recommendations with respect to executive compensation matters, and meets in executive session to discuss such matters outside of the presence of our management. During 2019, the Compensation Committee held one executive session.

Role of Independent Compensation Consultants

The Compensation Committee retained Meridian as its independent compensation consultant in January 2015, after considering all factors relevant to Meridian’s independence from our management and members of our Compensation Committee and determining that it was independent and without conflicts of interest under the Securities and Exchange Commission rules and the NYSE Listed Company Manual standards.

In 2019, Meridian was responsible for reviewing our executive compensation program, assisting in the design of our annual and long-term incentive programs and providing comparative market data and trends on compensation practices and programs based on an analysis of our peer companies and other factors. Representatives of Meridian participated in all meetings of the committee during 2019, including executive sessions without management. Meridian provided no other services to CRC.

Use of Compensation Data

Over the course of the year, our Compensation Committee analyzed the comparative total compensation of our executive officers. To facilitate this analysis, Meridian provided the Compensation Committee with comparative Peer Group compensation data that included base salaries, annual incentive opportunities, and long-term incentive opportunities. This information reflected recent publicly available information and other market data. We believe that it provided our Compensation Committee with a sufficient basis to analyze the comparative total compensation of our executive officers.

Key Compensation Policies and Practices

Stock Ownership Guidelines

We have minimum stock ownership guidelines for senior executives. The target direct and indirect ownership level for the Chief Executive Officer is six times annual base salary, and for the other NEOs, is three times annual base salary. Executives are expected to attain their required ownership levels within five years of assuming their senior executive role. As of December 31, 2019, all of the NEOs were in compliance with the stock ownership guidelines, based on grant/purchase date stock values.

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Compensation Discussion and Analysis 

Clawback Policy

Under the Company’s Compensation Recoupment and Clawback Policy, in the event the Company is required to restate its financial statements, the Company has the right to require in certain circumstances, and to the extent permitted by applicable law, the reimbursement of incentive compensation by a named executive officer whose fraud or misconduct either caused or contributed to the need for such restatement. Such incentive compensation generally includes any cash, equity, equity-based or other award under the LTIP, or an annual bonus or annual incentive plan of the Company.

Anti-Hedging and Anti-Pledging Policy

Under the Company’s Insider Trading Policy, all directors, officers and employees, including the named executive officers, are prohibited from hedging, buying or selling options, engaging in short sales, or trading prepaid variable forwards, equity swaps, exchange funds, forward-sale contracts, collars or other derivatives or monetizations on Company securities. In addition, all directors, officers and employees, including named executive officers, may not pledge or mortgage Company securities as collateral for a loan, or hold Company securities in a margin account.

Compensation Risk Management

Our compensation programs are designed to motivate and reward our employees for their performance during the current year and over the long term, and for taking appropriate business risks to enhance CRC’s business performance. The Compensation Committee has analyzed CRC’s employee compensation programs and policies and believes that they are not reasonably likely to have a material adverse effect on CRC. CRC’s compensation programs do not encourage unnecessary or excessive risk-taking and any potential risk that the executive compensation program could influence behavior that would be inconsistent with the overall interests of CRC and its stockholders is mitigated by several factors:

Tax Considerations

Together with the Compensation Committee, the Company carefully reviews and takes into account current tax law and regulations as they relate to the design of our compensation programs and related decisions.  Prior to the enactment of tax reform legislation signed into law on December 22, 2017, which was originally known as the Tax Cuts and Jobs Act (the “TCJA”), Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limited a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain NEOs, unless the compensation was performance-based as defined under federal tax laws. Subject to certain transitional rules, the TCJA has repealed the exemption for performance-based compensation from the deduction limitation of Section 162(m) of the Code for taxable years beginning after 2017. The Compensation Committee historically reviewed and considered the deductibility of our executive compensation programs; and provided compensation that was not fully deductible when necessary to retain and motivate certain executive officers and when it was in the best interest of the Company and our stockholders. To the extent compensatory awards are not covered by the transitional rules, the performance-based compensation exception to the deduction limitation under Section 162(m) of the Code will no longer be available to the Company and annual compensation paid to certain executives in excess of $1 million will not be deductible.

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Compensation Committee Report

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement relating to the 2020 Annual Meeting of Stockholders.

Compensation Committee,

Justin A. Gannon

Harry T. McMahon

Avedick B. Poladian

Laurie A. Siegel

February 18, 2020

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 Executive Compensation Tables 

Executive Compensation Tables

Summary Compensation Table (SCT)