Governance and Oversight

Board Oversight of Climate and Other Risks

The Nominating and Corporate Governance Committee of the Board is our primary governing body with oversight over sustainability issues and climate-related risks and opportunities. All of the members of this committee are independent directors. The Nominating and Corporate Governance Committee Chair communicates regularly with management regarding our sustainability progress and performance, including monthly updates on assessments of our sustainability performance.

In addition, the full Board communicates regularly with management as part of its oversight of risk management for the Company, including the oversight of material risks, including transition risks relating to climate change. Examples of climate-related risks that management discusses with the Board include, among other things, evolving market demand for lower-emission services and technology, capital investment decisions relating to the development of lower-emissions technology and the purchase of lower-emissions equipment, strategic decisions relating to climate risk, including current and forecasted macroeconomic responses to climate change risk, investor feedback on climate risks and our sustainability practices, and policy and regulatory developments related to climate change. These types of risks are discussed by the Board and management at the regularly quarterly Board meetings, and also between regular meetings outside of the formal Board meeting context.

The Board also reviews communications from, and engages with, shareholders and other stakeholders in response to their climate-related and other inquiries, and directors keep up to date on the latest trends and information relating to climate-related risks. The Board routinely addresses matters relating to corporate responsibility, governance and sustainability at Board and committee meetings.

graphic displaying the corporate structure of Patterson
Reporting structure for climate related risks

Other Board Committees

Our Audit Committee oversees management’s execution of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements.

Among other things, our Compensation Committee sets and administers the policies that govern the compensation of executive officers of Patterson-UTI, and meets on a regular basis to consider executive compensation matters and to review how Patterson-UTI’s plans and policies work in practice.

The Compensation Committee considers ESG matters in its setting of executive compensation. Since 2017, a percentage of the payout under our executives’ cash incentive plan has been linked to the Company’s performance against target on a Health, Safety and Environment key performance indicator (KPI). This Health, Safety and Environment KPI includes, among other things, targets for safety and environmental performance, as the Compensation Committee views these topics as crucial to the well-being of the Company’s employees and to the Company’s risk management. In 2020, the Compensation Committee increased the proportion of our executives’ cash incentive plan linked to the Health, Safety and Environment KPI to 20%. The 2020 Health, Safety and Environment KPI included metrics related to safety incident rates, environmental incidents, audits and training.

In addition to its role as our primary governing body with oversight over sustainability issues and climate-related risks and opportunities, the purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the annual meetings of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management.

Each of these committees is comprised entirely of independent directors. As part of the director nomination process, our Corporate Governance Guidelines require us to consider diversity of director candidates in, among other things, age, gender and ethnicity. The composition of our board of directors is 33% female and 17% racially diverse.

Management’s Role in Risk Assessment and Management

Our senior-level management is responsible for identifying corporate risks, including climate-related risks and opportunities, assessing the potential level of impact to the business, and discussing this risk assessment with the Board on at least a quarterly basis. We believe that climate risks are inherently business risks, and our assessment of these climate-related transition and physical risks is integrated into our business risk assessment process.

Risks and opportunities are identified through discussions with stakeholders, including customers, investors, trade associations and industry groups; engagement with environmental, social and governance (ESG) groups; and our own business risk assessments, as well as regular monitoring of legal, regulatory and policy changes with the potential to affect the industry as well as our company specifically.

Our senior management and representatives from our business units regularly communicate with the Board on risk management matters. For example, the Board and senior management regularly discuss sustainability issues, climate-related risks, information security, safety and other risks that are important to our business. The key environmental and climate-change risks identified and monitored through our most recent risk mapping process were (i) Policy and Legal Risks, (ii) Market/Technology Risks, (iii) Reputational Risks and (iv) Physical Risks. These climate-related transition and physical risks are discussed in more detail in Climate-Related Risks and Opportunities below.

Sustainability Committee

We have a Sustainability Committee, which includes representatives from our major business units. This committee provides advice, counsel and recommendations to senior leadership for the creation, development and implementation of our sustainability initiatives and external and internal sustainability communications, including the preparation of this report.

The Sustainability Committee is composed of the Chief Executive Officer, General Counsel, the head of our marketing group, the head of our investor relations group, and other management, legal, health, safety and environment and technical personnel across the Company.

Information Security Risks

Our Audit Committee is responsible for overseeing information security risk. Senior leadership communicates with the Audit Committee at least quarterly regarding information security risk and formally reports to the entire Board on information security risk at least annually. We continue to improve our cybersecurity practices through industry standard security frameworks and leading practices, including risk assessments/remediations, software and services, continuous systems monitoring, incident response plans, phishing simulations, employee training and communication programs, among other measures.

Our net expenses incurred from information security breaches over the last three years, relative to total revenue, were immaterial, and we had zero net expenses incurred from information security breach penalties and settlements over the last three years.