SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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The Dow Chemical Company
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The Dow Chemical Company
Midland, Michigan 48674
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 9, 201314, 2015 AT 10:00 A.M. EDT
March 28, 201327, 2015
Dear Stockholder of The Dow Chemical Company:
We are pleased to invite you to the 2015 Annual Meeting of Stockholders of The Dow Chemical Company (the “Meeting”) to be held on Thursday, May 9, 2013,14, 2015, at 10:00 a.m. Eastern Daylight Time, at the Midland Center for the Arts, 1801 West St. Andrews, Midland, Michigan. A map is printed on the back page of this Proxy Statement and is also included on your admittance ticket. At the 2015 Meeting, stockholders will vote on the following matters either by proxy or in person:
Election of the ten13 Directors named in the attached Proxy Statement.
| • | Ratification of the appointment of Deloitte & ToucheLLP as independent registered public accounting firm for |
Advisory Resolutionresolution to Approve Executive Compensation.approve executive compensation.
One proposal submitted by a stockholder, if properly presented.
Transaction of any other business as may properly come before the 2015 Meeting.
Your vote is important. Whether or not you plan on attending the Meeting, please vote your shares as soon as possible on the Internet, by telephone or by mail. Questions may be directed to 877-227-3294 (a toll-free telephone number in the United States and Canada) or 989-636-1792, or faxed to 989-638-1740.
Your Board of Directors has set the close of business on March 18, 2013,16, 2015, as the record date for determining stockholders who are entitled to receive notice of the 2015 Meeting and any adjournment, or postponement, and who are entitled to vote. A list of stockholders of record entitled to vote shall be open to any stockholder for any purpose relevant to the Meeting for ten days before the 2015 Meeting, during normal business hours, at the Office of the Corporate Secretary, 2030 Dow Center, Midland, Michigan.
A ticket of admission or proof of stock ownership is necessary to attend the Meeting. A ticket is included with your proxy materials. Stockholders with registered accounts or who are in the Dividend Reinvestment Program or employees’ savings plans should check the box on the voting form if attending in person. Other stockholders holding stock in nominee name or beneficially through a bank or broker (in “street name”) need only bring their ticket of admission. Street name holders without tickets will need proof of record date ownership for admission to the Meeting, such as a March 2013 brokerage statement or letter from the bank or broker. Questions may be directed to 877-227-3294 (a toll-free telephone number in the United States and Canada) or 989-636-1792, or faxed to 989-638-1740.
Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend. A ticket of admission or proof of stock ownership is necessary to attend the 2015 Meeting, as described in this Proxy holders are asked to present their credentials in the lobby before the Meeting begins.Statement under “Voting and Attendance Procedures.” If you are unable to attend the 2015 Meeting, please listen to the live audio webcast at the time of the 2015 Meeting, or the audio replay after the event, atwww.DowGovernance.com.
Thank you for your continued support and your interest in The Dow Chemical Company.
Charles J. KalilAmy E. Wilson
Executive Vice President,
Corporate Secretary and Assistant General Counsel and Corporate Secretary
®™ Trademark of The Dow Chemical Company
PROXY STATEMENT SUMMARY INFORMATION
This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all information that you should consider, and you should read the entire Proxy Statement carefully before voting.
Annual Meeting of Stockholders
• Time and Date: | 10:00 | |
• Place: | Midland Center for the Arts, 1801 West St. Andrews, Midland, Michigan | |
• Record Date: | March |
Meeting Agenda and Voting Recommendations
| Agenda Item | Board Recommendation | Page | ||||||
(1) | Election of | FOR EACH NOMINEE | 3 | |||||
(2) | Ratify the appointment of Deloitte & ToucheLLP as the Company’s Independent Registered Public Accounting Firm | FOR | 48 | |||||
(3) | Advisory Resolution to Approve Executive Compensation | FOR | 50 | |||||
(4) | Stockholder Proposal | AGAINST | 51 | |||||
2014 Business Highlights
2014 represented a milestone year for Dow. The Company drove continued progress against its stated commitments – enhancing adjusted return on capital, delivering adjusted earnings and adjusted EBITDA growth and expanding adjusted EBITDA margins amidst ongoing macroeconomic volatility. Dow continued to execute on its aggressive portfolio actions aligned with the Company’s market-driven strategy, reducing its exposure to non-strategic assets and businesses while at the same time achieving progress across key growth investments. Steps to further enhance commercial and operational productivity supported results and were underscored by the Company’s foundational focus on returning value to stockholders.
As a result of the Company’s disciplined approach to delivering on its priorities, Dow achieved a number of strategic milestones and performance records in 2014:
| • | Full-year 2014 earnings were $3.11 per share, on an adjusted basis1, or $2.87 per share on an as-reported basis. This compared with prior-year adjusted earnings of $2.48 per share – or earnings of $3.68 per share as-reported. |
| • | Dow achieved record adjusted EBITDA2 of $9.3 billion, or $8.9 billion on an as-reported basis3 with adjusted EBITDA growth across all operating segments. |
| • | Adjusted EBITDA margins4 expanded 140 basis points, with growth reported across all operating segments. |
The Company accelerated portfolio management actions – with $2 billion in proceeds expected from divestitures of non-strategic assets and businesses signed or completed in 2014 – demonstrating progress against its previously stated target. The Company increased its divestiture target to $7 to 8.5 billion by mid-2016 – demonstrating its commitment to ongoing value creation.
Dow delivered $6.5 billion of cash flow from operations in 2014 – a reflection of the Company’s ongoing productivity focus. Excluding the K-Dow award, this represents a more than $320 million increase since 2013 and second consecutive year of record cash flow.
The Company delivered to stockholders a record $6 billion through declared dividends and share repurchases – announcing two dividend increases during the year and restoring the Company’s dividend to historical levels.
The Company completed its initial $4.5 billion share buy-back program and announced an additional $5 billion in repurchases the Company expects to be completed in line with portfolio actions.
Dow achieved significant milestones with key, enterprise growth projects, including its investments to further enhance the Company’s industry-leading, low-cost feedstock position on the U.S. Gulf Coast and Sadara Chemical Company joint venture, together with the achievement of certain regulatory milestones for its ENLIST™ Weed Control System.
In Environment, Health and Safety – total unplanned events are at all-time low levels – exceeding 2013 performance by nearly 10 percent.
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PROXY STATEMENT SUMMARY (continued)
| 1 | “Adjusted earnings per share” is defined as earnings per share excluding the impact of “Certain items.” See Appendix A on pages A-1 – A-2 for a reconciliation of Adjusted earnings per share to “Earnings per common share — diluted.” |
| 2 | Adjusted EBITDA is defined as EBITDA excluding the impact of “Certain Items.” See Appendix A on pages A-1 – A-2 for a reconciliation to the most directly comparable U.S. GAAP measure. |
| 3 | EBITDA is defined as earnings (i.e. “Net Income”) before interest, income taxes, depreciation and amortization. See Appendix A on pages A-1 – A-2 for a reconciliation of EBITDA to “Net Income Available for The Dow Chemical Company Common Stockholders.” |
| 4 | “Adjusted EBITDA margin” is defined as EBITDA excluding the impact of certain items as a percentage of reported sales. |
Response to Say-On-Pay Vote & Stockholder Outreach
Following the Company’s 2014 Annual Meeting of Stockholders, we reviewed the results of the stockholder advisory vote on our executive compensation programs. Approximately 79% of the votes cast supported our compensation programs. The Compensation and Leadership Development Committee (“Committee”) carefully evaluated the results of the advisory vote from our 2014 Annual Meeting at subsequent meetings.
Throughout 2014, we engaged in discussions with a broad cross-section of stockholders to solicit feedback on our compensation programs. We view this as an important opportunity to develop broader relationships with key investors over the long–term and to engage in open dialogue on compensation and governance related issues. A substantial majority of our investors indicated they viewed our executive compensation program as sound. Even when supportive, our investors shared a number of observations which we took into account in evaluating ways to further enhance our executive compensation program and related disclosures. The table below summaries actions we took as a result of recent say-on-pay vote results and related engagement with our stockholders. As a result of our on-going engagement and communication with our stockholders both before and after our 2014 Annual Meeting, we have taken a number of actions to further enhance our executive compensation programs.
Executive Compensation | What We Heard From Stockholders | Actions We Took to Address Feedback | ||
Long-Term Incentive (LTI) Mix | Strong preference for performance based equity | Effective January 1, 2014, we increased the Performance Share weighting in our LTI mix from 35% to 45% (continuing the trend that was started in 2012 when the Performance Share weighting was moved from 25% to 35%). | ||
| Support for Relative Total Shareholder Return (“TSR”) as a metric in our Performance Share Program | Relative TSR and Return on Capital* are equally weighted measures in the Performance Share Program. Relative TSR was first used in 2011 and continued each year thereafter. | |||
| Annual Performance Award | Preference for greater weighting toward Net Income and Management Operating Cash Flow in the annual incentive program | The 2014 Performance Award design has 85% of the award linked to two critical measures for Dow — Net Income* and Management Operating Cash Flow*. Net Income is weighted at 50%, Management Operating Cash Flow is weighted at 35% and 15% is linked to personal goals and achievements. | ||
| Share Usage | Concern about share usage in our LTI program | We modified our LTI mix at all levels which significantly reduced our 2014 annual share usage compared to 2013 levels. Grants reflecting this shift appear for the first time in this proxy statement. • Share usage for 2014 totaled 7.9 million shares versus 2013 share usage of 21.8 million shares. • Our annual burn rate for shares decreased to 0.43% in 2014 from 1.65% in 2013 using a 1:1 counting method. • Year to date share usage in 2015 totaled 7.5 million shares, continuing the significant reduction in share usage that began in 2014. | ||
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PROXY STATEMENT SUMMARY (continued)
Executive Compensation | What We Heard From Stockholders | Actions We Took to Address Feedback | ||
| Disclosure | Desire for greater clarity on our incentive plan metrics | We added additional disclosure in this proxy statement on our metrics and the mechanics of our incentive programs. | ||
| Desire for additional clarity on how we use our Survey Peer Group and TSR Peer Group | We added more detail in this proxy statement on our two peer groups and how they are used. | |||
| * | These measures are non-GAAP financial measures. For additional information on the use of these financial performance measures, please see the “Performance Award” and “Return on Capital” sections of “Section Two: The 2014 Executive Compensation Program in Detail” beginning on page 21 and Appendix A. |
In addition to these most recent changes, over the past few years, the Committee and Board of Directors have made other changes to our compensation programs that further align executives’ compensation with stockholder interests.
| Executive Compensation Program Item | Governance Best Practices and OtherFeedback | Actions We Have Taken | ||
| Incentive Plan Design | Incentive program maximum payout levels | In light of governance trends, we reduced the maximum payout level of our annual and long-term incentive programs from 250% to 200%. | ||
| Stock Ownership Requirements | Rigorous stock ownership requirements in place for both Directors and Management | In 2013, the Board approved an increase to the stock ownership guidelines for Non-Employee Directors – to five times their annual meeting retainer fee. Stock ownership requirements levels for executive management were increased in 2012. | ||
| Director Compensation | Appropriate mix of equity and cash | In 2013, the Governance Committee and the Board increased the weighting of equity in the total compensation structure for Non-Employee Directors. Equity now represents 54% of the total compensation structure, up from 48%. | ||
| Perquisites | Limited perquisites for named executive officers | Eliminated the car perquisite for NEOs (other than the CEO) in 2012. | ||
| Change-in-Control Agreements | No new or modified change in control agreements | The Board prohibits new or amended change-in-control agreements. Under legacy change-in-control agreements, an executive must be involuntarily terminated within two years of a change-in-control in order to receive benefits (“double trigger”). | ||
How Executive Compensation is Aligned with Company Performance
The objectives of Dow’s compensation program, set by the Compensation and Leadership Development Committee (the “Committee”) of the Board of Directors, are to align executives’ compensation with Dow’s short-term and long-term financial and operational performance and to provide the compensation framework to attract, retain and motivate key executives who are critical to achieving Dow’s vision, strategy and our long-term success. To achieve these objectives:
We target all elements of our compensation programs to provide a competitive compensation opportunity at themedian of our peer group(the “Survey Peer Group”) of companies whose compensation is surveyed by the Committee. Actual payouts under these programs can be above or below the median based on Company and personal performance.
At least 70% of the total compensation opportunity for each of our Named Executive Officers (“NEOs”) is variable performance-based compensation tied to critical financial measures that drive shareholder value and consist of metrics used to report financial results in our quarterly earnings releases.
| Compensation Element | Financial Metrics | |
| Short-Term Incentive: Annual Performance Award Program | Net Income* Management Operating Cash Flow* | |
| Long-Term Incentives: Performance Share Program | Relative Total Shareholder Return (“TSR”) Return on Capital* |
| • | We emphasize stock ownership. LTI awards are delivered as equity-based awards to senior executives. Dow executives are required to maintain, until retirement, between four and six times their annual base salary in Dow stock. This encourages managing from an owner’s perspective and better aligns their financial interests with those of Dow stockholders. |
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PROXY STATEMENT SUMMARY (continued)
Ourexecutives participate in the same group benefit programs, including pension and retirement plans, on substantially the same terms as other salaried employees.
Our executives are providedlimited perquisites which are granted to facilitate strong, focused performance on their jobs.
The Committee exercises discretion in determining compensation actions when necessary due to extraordinary changes in the economy, unusual events or overall Company performance.
| * | These measures are non-GAAP financial measures. For additional information on the use of these financial performance measures, please see the “Performance Award” and “Return on Capital” sections of “Section Two: The 2014 Executive Compensation Program in Detail” beginning on page 21. |
Board Nominees
Each director nominee is elected annually by a majority of votes cast. The following table provides summary information about each director nominee.
| Nominee | Age | Director Since | Principal Occupation | Committees | ||||
Arnold A. Allemang | 70 | 1996 | Former Senior Advisor, The Dow Chemical Company | EHS&T | ||||
Ajay Banga | 53 | 2013 | President and Chief Executive Officer, MasterCard | |||||
Jacqueline K. Barton | 60 | 1993 | Professor of Chemistry & Chair, Division of Chemistry & Chemical Engineering, California Institute of Technology | EHS&T (Chair) | ||||
James A. Bell | 64 | 2005 | Former Executive Vice President, Corporate President & CFO, The Boeing Company | Audit (Chair) Governance | ||||
Jeff M. Fettig (Lead Director) | 55 | 2003 | Chief Executive Officer and Chairman, Whirlpool Corporation | Compensation Governance (Chair) | ||||
Andrew N. Liveris | 58 | 2004 | President, Chief Executive Officer and Chairman, The Dow Chemical Company | |||||
Paul Polman | 56 | 2010 | Chief Executive Officer, Unilever PLC/NV | EHS&T | ||||
Dennis H. Reilley | 59 | 2007 | Former Non-Executive Chairman, Covidien, Ltd. | Compensation (Chair) Governance | ||||
James M. Ringler | 67 | 2001 | Chairman, Teradata Corporation | Audit | ||||
Ruth G. Shaw | 64 | 2005 | Former Executive Advisor, Duke Energy Corporation | Audit |
Financial Highlights
2012 was a challenging year due to the ongoing slow and volatile growth of the global economy. Dow maintained its earnings growth trajectory through the first half of 2012. However, the second half of 2012 saw significant deterioration in the markets we serve, particularly in China. In response, Dow identified and took aggressive action to mitigate the effects of a slow-to-no-growth global environment – decisively deploying cost reduction and cash flow improvement levers, and driving aggressive portfolio management to mitigate the impact of downward adjustments to growth forecasts. Despite these efforts, Dow fell short of its profit plan for the year.
These results have driven a below target payout for our 2012 Performance Award Program and all three current outstanding performance shares plans are tracking below target payout levels, reflecting the connection between performance and pay.
Through hard work, focus and discipline, the Company achieved several significant milestones in 2012.
Launched $2.5 billion of cost reduction and cash flow improvement actions in response to volatile macro-economic conditions
Generated nearly $8 billion in cash from operations over the two year period ending December 31, 2012, in line with our stated target
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Increased dividends declared per share by 34% in 2012 vs. 2011
Achieved significant milestones with key, enterprise growth projects – U.S. Gulf Coast investments and Sadara Chemical Company – investments that will further enhance our industry-leading, low-cost feedstock position
Maintained focus on investment grade rating – received an upgrade from Moody’s
K-Dow Arbitration resulted in a $2.16 Billion Partial Award issued in the Company’s favor by the International Court of Arbitration of the International Chamber of Commerce (ICC). On March 4, 2012 the Company received the release of the Final Award representing the awarding of additional costs and interest with the two awards totaling $2.48 Billion
Set forth below is the fiscal 2012 compensation for each named executive officer. See notes accompanying the Summary Compensation Table on page 34 for more information.
Compensation Highlights
| Named Executive Officer | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
Andrew Liveris | 2012 | 1,808,333 | 0 | 8,446,171 | 4,840,080 | 1,368,640 | 6,160,388 | 366,055 | 22,989,668 | |||||||||||||||||||||||||||
William Weideman | 2012 | 836,815 | 0 | 2,408,410 | 1,380,079 | 407,001 | 3,465,782 | 29,469 | 8,527,557 | |||||||||||||||||||||||||||
Charles Kalil | 2012 | 951,618 | 0 | 2,408,410 | 1,380,079 | 459,478 | 2,798,980 | 70,339 | 8,068,904 | |||||||||||||||||||||||||||
Carol Williams | 2012 | 900,110 | 0 | 2,408,410 | 1,380,079 | 454,670 | 3,028,396 | 65,858 | 8,237,524 | |||||||||||||||||||||||||||
James Fitterling | 2012 | 836,636 | 35,518 | 2,408,410 | 1,380,079 | 424,879 | 2,853,921 | 53,243 | 7,992,687 | |||||||||||||||||||||||||||
For fiscal year 2012, our Compensation and Leadership Development Committee continued its practice of awarding a significant majority of total compensation to the named executive officers in the form of performance-based incentive compensation, with only a minority of the total potential compensation being provided in the form of base salary.
We encourage you to read our Compensation Discussion and Analysis (CD&A) beginning on page 20, which describes our pay for performance philosophy.
| Nominee | Age | Director Since | Principal Occupation | Committees | ||||||||
| Ajay Banga | 55 | 2013 | President and Chief Executive Officer, MasterCard Incorporated | Compensation | ||||||||
| Jacqueline K. Barton | 62 | 1993 | Professor of Chemistry & Chair, Division of Chemistry & Chemical Engineering, California Institute of Technology | EHS&T (Chair) | ||||||||
| James A. Bell | 66 | 2005 | Former Executive Vice President, Corporate President & CFO, The Boeing Company | Audit (Chair) Governance | ||||||||
| Richard K. Davis | 56 | — | Chairman, President and Chief Executive Officer, U.S. Bancorp | — | ||||||||
Jeff M. Fettig (Lead Director) | 57 | 2003 | Chief Executive Officer and Chairman, Whirlpool Corporation | Compensation Governance (Chair) | ||||||||
| Andrew N. Liveris | 60 | 2004 | President, Chief Executive Officer and Chairman, The Dow Chemical Company | — | ||||||||
| Mark Loughridge | 61 | 2015 | Former Chief Financial Officer, International Business Machines | Audit | ||||||||
| Raymond J. Milchovich | 65 | 2015 | Lead Director, Nucor Corporation and Former Chairman and Chief Executive Officer, Foster Wheeler AG | Compensation | ||||||||
| Robert S. (Steve) Miller | 73 | 2015 | Non-Executive Chairman, American International Group (AIG) | EHS&T Governance | ||||||||
| Paul Polman | 58 | 2010 | Chief Executive Officer, Unilever PLC/NV | EHS&T | ||||||||
| Dennis H. Reilley | 61 | 2007 | Non-Executive Chairman, Marathon Oil Corporation | Compensation (Chair) Governance | ||||||||
| James M. Ringler | 69 | 2001 | Chairman, Teradata Corporation | Audit | ||||||||
| Ruth G. Shaw | 66 | 2005 | Former Executive Advisor, Duke Energy Corporation | Audit | ||||||||
Corporate Governance Highlights
As part of Dow’s commitment to high ethical standards, the Board Independencefollows sound governance practices. These practices are described in more detail beginning on page 8 and our website:www.DowGovernance.com.
8 of 10 Directors standing for re-election are Independent
Independent Lead Director with clearly identified roles and responsibilities (Jeff Fettig)
Retirement Age (72)
Director Elections
Annual Board elections
Directors are elected by a majority of votes cast
Stockholder Rights
Stockholder right to call special meetings
No super-majority voting requirements
Corporate/Sustainability Highlights
Named for 12th time to Dow Jones Sustainability World Index, with overall score 33 percentage points higher than industry group average.
Published Annual Sustainability Report based on Global Reporting Initiative guidelines, receiving A+ designation for completeness and accuracy.
Signed strategic partnership with The University of Queensland to establish the Dow Centre for Sustainable Engineering Innovation.
Published annual collaboration report and first pilot site outcomes (Freeport) from breakthrough collaboration with The Nature Conservancy.
| Board Independence | 12 of 13 Directors standing for re-election or election are independent | |
| Director Elections |
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Continued strong progress toward 2015 Sustainability goals:
| Directors not elected by a majority of votes are subject to the Company’s resignation policy | ||
| Board Practices |
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| Board member orientation and education | ||
| Stock Ownership Requirements |
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| We prohibit executives and directors from hedging or pledging company stock | ||
| Stockholder Rights |
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20132015 ANNUAL MEETING OF STOCKHOLDERS
THE DOW CHEMICAL COMPANY
Notice of the Annual Meeting and Proxy Statement
This Proxy Statement is issued in connection with the 20132015 Annual Meeting of
Stockholders of The Dow Chemical Company to be held on May 9, 2013.14, 2015.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON
THURSDAY, MAY 9, 201314, 2015 AT 10:00 A.M. EDT
The 20132015 Proxy Statement and 20122014 Annual Report (with Form 10-K)
are available athttps://materials.proxyvote.com/260543
VOTING AND ATTENDANCE PROCEDURES
In the following pages of this Proxy Statement, you will find information on your Board of Directors, the candidates for election to the Board, and three other agenda items to be voted upon at the 2015 Annual Meeting of Stockholders (the “Meeting”) and any adjournment or postponement of thatthe 2015 Meeting. The background information in this Proxy Statement has been supplied to you at the request of the Board of Directors to help you decide how to vote and to provide information on the Company’s corporate governance and compensation practices. References in this document to the Company“the Company” and Dow“Dow” mean The Dow Chemical Company. This Proxy Statement is first being distributed to stockholders on or about March 28, 2013.27, 2015.
Vote Your Shares in Advance
You may vote your shares through the Internet, by telephone or by signing and returning the enclosed proxy or other voting form.Your shares will be voted if the proxy or voting form is properly executed and received by the independent Inspector of Election prior to the 2015 Meeting. IfExcept as provided below with respect to shares held in employees’ savings plans, if no specific choicesinstructions are madegiven by you when you execute your voting form, as explained on the form, your shares will be voted as recommended by your Board of Directors.
You may revoke your proxy or voting instructions at any time before itstheir use at the 2015 Meeting by sending a written revocation, by submitting another proxy or voting form on a later date, or by attending the 2015 Meeting and voting in person. No matter which voting method you choose, however, you should not vote any single account more than once unless you wish to change your vote. Be sure to submit votes for each separate account in which you hold Dow shares.
Confidential Voting
The Company has a long-standing policy of vote confidentiality. Proxies and ballots of all stockholders are kept confidential from the Company’s management and Board unless disclosure is required by law and in other limited circumstances. The policy further provides that employees may confidentially vote their shares of Company stock held by the Company’s employees’ savings plans, and requires the appointment of an independent tabulator and inspectorInspector of electionElection for the 2015 Meeting.
Dividend Reinvestment Plan Shares and Employees’ Savings Plans Shares
If you are enrolled in the dividend reinvestment plan (“DRP”), the shares of common stock owned on the record date by you directly, plus all shares of common stock held for you in the DRP, will appear together on a single voting form. The DRP administrator, Computershare Trust Company, N.A., will vote all shares of stock held in your DRP account as directed by you only if you return your proxy form. If no specific instruction is given on an executed proxy form, the DRP administrator will vote as recommended by your Board of Directors.
Participants in various employees’ savings plans, including The Dow Chemical Company Employees’ Savings Plan (each a “Plan” or the “Plans”), will receive, as appropriate, a confidential voting instruction form. Your executed form will provide voting instructions to the respective Plan Trustee. If no instructions are provided, the Trustees will vote the respective Plan shares according to the provisions of each Plan.
To allow sufficient time for voting by the Trustees and/or administrators of the Plans, your voting instructions must be received by 11:59 p.m. Eastern Daylight Time on May 6, 2013.11, 2015.
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VOTING AND ATTENDANCE PROCEDURES (continued)
Dow Shares Outstanding and Quorum
At the close of business on the record date, March 18, 2013,16, 2015, there were 1,208,129,7851,152,022,939 shares of Dow common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote. There were 4,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock outstanding; however, no such shares of preferred stock outstanding as of the record date are entitled to vote. The holders of at least 50% of the issued and outstanding shares of common stock entitled to vote that are present in person or represented by proxy constitutesconstitute a quorum for the transaction of business at the 2015 Meeting. Abstentions and broker non-votes will be included in determining the presence of a quorum at the 2015 Meeting. Broker non-votes occur when a person holding shares in street“street name,” meaning that their shares are held in a nominee name or beneficially through a bank or brokerage firm, does not provide instructions as to how to vote their shares and the broker is not permitted to exercise voting discretion. Under New York Stock Exchange rules, your
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VOTING PROCEDURES (continued)
broker may vote shares held in street name on the Ratification of the Appointment of the Independent Registered Public Accounting Firm without instruction from you, but may not vote on any other matter to be voted on at the Annual2015 Meeting without instruction from you.
ProxiesProxy Solicitation on Behalf of the Dow Board
Your Board of Directors is soliciting proxies to provide an opportunity to all stockholders of record to vote on agenda items, whether or not the stockholders are able to attend the 2015 Meeting or an adjournment or postponement thereof. Proxies may be solicited on behalf of the Board in person,
by mail, by telephone or by electronic communication by Dow officers and employees. The proxy representatives of the Board of Directors will not be specially compensated for their services in this regard.
Dow has retained D. F. King & Co., Inc. to aid in the solicitation of stockholders (primarily brokers, banks and other institutional investors) for an estimated fee of $50,000, plus out-of-pocket expenses. Arrangements have been made with brokerage houses, nominees and other custodians and fiduciaries to send materials to their principals, and their reasonable expenses will be reimbursed by Dow on request. The cost of solicitation will be borne by the Company.
A ticket of admission or proof of stock ownership is necessary to attend the 2015 Meeting. A ticket is included with your proxy materials. Stockholders with registered accounts (meaning that your shares are represented by certificates or book entries in your name so that you appear as a stockholder on the records of our stock transfer agent) or who are participants in the Dividend Reinvestment Program or employees’ savings plans should check the box on the voting form if attending in person. Other stockholders holding stock in street name should bring their ticket of admission. Street name holders without tickets of admission will need proof of record date ownership for admission to the 2015 Meeting, such as a letter from the bank or broker. In addition, street name holders who wish to vote in person at the 2015 Meeting must obtain a “legal proxy” from the bank, broker or other holder of record that holds their shares in order to be entitled to vote at the 2015 Meeting. All stockholders wishing to attend the meeting should also bring and present a government issued photo identification for admittance to the 2015 Meeting.
Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend. Proxy holders are asked to present their credentials in the lobby before the 2015 Meeting begins. If you are unable to attend the 2015 Meeting, please listen to the live webcast at the time of the 2015 Meeting, or the replay after the event, atwww.DowGovernance.com.
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CANDIDATES FOR ELECTION AS DIRECTOROF DIRECTORS
In accordance with the recommendation of the Governance Committee, the Board of Directors has nominated Arnold A. Allemang, Ajay Banga, Jacqueline K. Barton, James A. Bell, Richard K. Davis, Jeff M. Fettig, Andrew N. Liveris, Mark Loughridge, Raymond J. Milchovich, Robert S. Miller, Paul Polman, Dennis H. Reilley, James M. Ringler and Ruth G. Shaw for election as Directors, to serve for a one-year term that expires at the Annual Meeting in 2014,2016, and until their successors are elected and qualified. John B. HessArnold A. Allemang is not standing for re-election at the Annual Meeting, and the Board thanks him for his exemplary service to the Company.
Each nominee, except Mr. Davis, is currently serving as a Director and each has consented to serve for the new term. Director Ajay BangaDirectors Loughridge, Milchovich and Miller joined the Board following the 20122014 Annual Meeting having been elected by the Board to serve as a DirectorDirectors effective February 15, 2013. Mr. Banga wasJanuary 1, 2015. Messrs. Milchovich and Miller were recommended for nomination as Directors by a Directorstockholder of the Company. Messrs. Davis and Loughridge were recommended for nomination as Directors by the Company’s Chairman and several independent Directors. All
Messrs. Davis, Loughridge, Milchovich and Miller were appointed to the Board and/or nominated for election at the 2015 Meeting pursuant to an agreement dated as of November 20, 2014, between the Company and certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)). Pursuant to this agreement, Third Point designated Messrs. Milchovich and Miller as nominees for election as Directors at the 2015 Meeting, the Company designated Messrs. Davis and Loughridge as nominees for election as Directors at the 2015 Meeting, and the Governance Committee and the Board identified nine other nominees for election as Directors at the 2015 Meeting.
All nominees, except Messrs. Davis, Loughridge, Milchovich and Miller, have previously been elected as Directors by the Company’s stockholders. Information in the biographies below is current as of February 18, 2013.16, 2015. Please see pages 1512 to 1714 for additional information on “Director Qualifications and Diversity.”
The Board of Directors unanimously recommends a vote FOR the election of ALL of these nominees as Directors.
The Company’s Bylaws prescribe the voting standard for election of Directors as a majority of the votes cast in an
uncontested election, such as this one, where the number of nominees does not exceed the number of Directors to be elected. Under this standard, a nominee must receive more “for” than “against” votes to be elected. Abstentions and broker non-votes are not included.counted in determining whether a nominee is elected. Under the Company’s Corporate Governance Guidelines, if a nominee who already serves as a Director is not elected, that nominee shall offer to tender his or her resignation to the Board. The Governance Committee will then recommend to the Board whether to accept or reject the resignation, or whether other action should be taken. Within 90 days of the certification of election results, the Board will publicly disclose its decision regarding whether to accept or reject the resignation. As explained on the accompanying proxy, it is the intention of the persons named as proxies to vote executed proxies “for” the candidates nominated by the Board unless contrary voting instructions are provided. If something unanticipated should occur prior to the Annual2015 Meeting making it impossible for one or more of the candidates to serve as a Director, votes will be cast in the best judgment of the persons authorized as proxies.
The New York Stock Exchange rules do not permit brokers discretionary authority to vote in the election of directors. Therefore, if you hold your shares of Company common stock in street name and do not provide voting instructions to your broker, your shares will not be voted in the election of directors. We urge you to promptly provide voting instructions to your broker to ensure that your shares are voted on this matter. Please follow the instructions set forth in the voting information provided by your bank or broker.
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CANDIDATES FOR ELECTION AS DIRECTORAGENDA ITEM 1 (continued)
| Ajay Banga, | |
MasterCard Incorporated (a
Director of |
| Jacqueline K. Barton, | |
California Institute of
|
| James A. Bell, | |
The Boeing Company (an aerospace company and manufacturer of commercial jetliners and military aircraft) – Executive Vice President, Corporate President and Chief Financial Officer, 2008 to
Director of J.P. Morgan Chase & Co. |
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U.S. Bancorp (a financial services holding company) – Chairman 2007 to date; Chief Executive Officer 2006 to date; President 2004 to date. Various management positions at U.S. Bancorp since joining StarBanc Corporation, one of its predecessors, in 1993 as Executive Vice President. Director of Xcel Energy. |
| 4 | | 2015 Proxy Statement |
AGENDA ITEM 1 (continued)CANDIDATES FOR ELECTION AS DIRECTOR
| Jeff M. Fettig, | |
Whirlpool Corporation (a manufacturer of home appliances) – Chairman and Chief Executive Officer 2004 to date; President and Chief Operating Officer 1999-2004; Executive Vice President 1994-1999; President, Whirlpool Europe and Asia 1994-1999; Vice President, Group Marketing and Sales, North American Appliance Group 1992-1994; Vice President, Marketing, Philips Whirlpool Appliance Group of Whirlpool Europe B.V. 1990-1992; Vice President, Marketing, KitchenAid Appliance Group 1989-1990; Director, Product Development 1988-1989. Director of the Indiana University Foundation. Member of the National Board of Governors for the Boys & Girls Club.
Director of Whirlpool Corporation. |
| Andrew N. Liveris, | |
Employee of Dow since 1976.
Vice Chairman of the Business Roundtable; Executive Committee Member and past Chairman of the U.S. Business Council; Past Chairman of the U.S.-China Business Council,
Director of International Business Machines Corporation. Former director of Citigroup, Inc. |
| Mark Loughridge, 61. Former Chief Financial Officer of International Business Machines. Director since January 1, 2015. | |
International Business Machines Corporation (a manufacturer of computer hardware and software and IT consulting services) – Chief Financial Officer May 2004-December 2013. Member of the Council on Chicago Booth. Director of The Vanguard Group. |
| Raymond J. Milchovich, 65. Lead Director of Nucor Corporation and Former Chairman and Chief Executive Officer of Foster Wheeler AG. Director since January 1, 2015. | |
Nucor Corporation (a producer of steel and iron) – Director 2002-2007 and 2012-current; Lead director September 2013 to date. Foster Wheeler AG (a company that engineers and constructs facilities for oil and gas, liquid natural gas, refining, chemical, pharmaceutical and power industries) – Non-executive Chairman of the Board and Consultant 2010 to November 2011; Chairman and Chief Executive Officer 2007-2010; Chairman, President and Chief Executive Officer 2001-2007. Delphi Corporation (a manufacturer of automotive electronics, systems, modules and components) – Director 2005-2009. Director of Nucor Corporation. Former director of Foster Wheeler AG (2001-2011). |
| 2015 Proxy Statement | | 5 |
AGENDA ITEM 1 (continued)
| Robert S. Miller, 73. Non-Executive Chairman of American International Group Inc. (AIG). Director since January 1, 2015. | |
American International Group Inc. (a provider of insurance and financial services) – Non-Executive Chairman of the Board May 2009 to date. Hawker Beechcraft, Inc. (a manufacturer of aircraft) – Chief Executive Officer February 2012 to February 2013. Delphi Corporation (a manufacturer of automotive electronics, systems, modules and components) – Executive Chairman 2007-2009; Chairman and Chief Executive Officer July 2005-January 2007. Director of American International Group, Inc. and Symantec Corporation. Former director of Hawker Beechcraft, Inc. (2012-2013), and UAL Corporation (United Airlines) (2003-2010). Mr. Miller was Chief Executive Officer of Hawker Beechcraft, Inc. when it filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in May 2012. |
| Paul Polman, | |
Unilever PLC and Unilever N.V. (a provider of nutrition, hygiene and personal care products) – Chief Executive Officer January 2009 to date. Nestlé S.A. (a worldwide food company) – Executive Vice President of Americas, January
Director of Unilever PLC and Unilever N.V. |
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CANDIDATES FOR ELECTION AS DIRECTOR (continued)
| Dennis H. Reilley, | |
Marathon Oil Corporation (an oil and natural gas exploration and production company) – Non-Executive Chairman, January 2014 to date; Board member 2002 to date. Covidien
Director of Marathon Oil Corporation. Former director of Covidien |
| 6 | | 2015 Proxy Statement |
AGENDA ITEM 1 (continued)
| James M. Ringler, | |
Teradata Corporation (a provider of database software, data warehousing and analytics) – Chairman, October 2007 to date. NCR Corporation (a producer of automated teller machines and point of sale devices) – Director and Chairman 2005-2007. Illinois Tool Works, Inc. – (following its merger with Premark International, Inc.), Vice Chairman 1999-2004. Premark International, Inc. – Chairman 1997-1999; Director 1990-1999; Chief Executive Officer 1996-1999; President and Chief Operating Officer 1992-1996; Executive
Director of Teradata Corporation, Autoliv Inc., |
| Ruth G. Shaw, | |
Duke Energy Corporation (a provider of electricity and natural gas) – Executive Advisor, October
Director of DTE |
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Corporate Governance Guidelines
The Company has adopted Corporate Governance Guidelines that are available atwww.DowGovernance.com. Stockholders may receive a printed copy of the Corporate Governance Guidelines without charge by contacting the Office of the Corporate Secretary.* These Guidelines were adopted by the Board of Directors in order to set forth key areas of importance in Dow corporate governance.
The Board of Directors
The ultimate authority to oversee the business of The Dow Chemicalthe Company rests with the Board of Directors. The role of the Board is to effectively govern the affairs of the Company for the benefit of its stockholders and, to the extent appropriate under Delaware corporation law, other constituencies including employees, customers, suppliers and communities in which it does business. Among other duties, the Board appoints the Company’s officers, assigns to them responsibility for management of the Company’s operations, and reviews their performance.
Director Independence
The Board has assessed the independence of each non-employee Director based upon the Company’s Director independence standards listed on the Company’s corporate governance website (www.DowGovernance.com). These standards incorporate the criteria in the listing standards of the New York Stock Exchange, as currently in effect, as well as additional, more stringent criteria established by the Board. Based upon these standards, the Board has determined that the following members of and nominees for election to the Board are independent: Directors Banga, Barton, Bell, Davis, Fettig, Hess,Loughridge, Milchovich, Miller, Polman, Reilley, Ringler and Shaw. These independent Directors constitute a substantial majority of the Board, consistent with Board policy. In addition, the Board determined that the following members of the Board serving during 2012 were independent at the time they served as directors: Barbara H. Franklin and Paul D. Stern, who retired from the Board in May 2012.
When assessing independence, the Governance Committee and the Board consider all relationships between the Directors and the Company, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. The Company screens for such relationships using an annual Directors and Officers Questionnaire that requires disclosure, among other things, of any transactions with the Company in which the Director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. Given the
large size of our Company and its diverse commercial and geographic markets, there are times when Dow sells products to, or purchases products or services from, other companies for which Dow Directors serve as executive officers or directors. The Governance Committee and the Board took into account the fact that Messrs. Bell, Davis, Fettig, HessLoughridge and Polman served as executive officers during all or a portion of the past three years of entities with which Dow made purchases or sales. All such purchases and sales were made at arms-length, on commercial terms, and the Directors did not personally benefit from such transactions. In all instances, the extent of business represented significantly less than 2% of Dow’s and the other entity’s revenues.consolidated gross revenues in each of the last three fiscal years. In fact, in all cases the amounts were below 0.3%0.45%. With respect to Boeing there were no purchases in 20112013 or 2012, and2014, with respect to HessU.S. Bancorp there were no sales or purchases in 2012,2014, while with respect to Whirlpool, International Business Machines and Unilever there were sales to and purchases from each entity which in all cases were below the 0.3%0.45% amount referenced above.
Board Leadership Structure
Since 2006, Andrew N. Liveris has served as the Chairman, Chief Executive Officer, and President of the Company. Jeff M. Fettig has served as the Lead Director since May 2011.
The Board recognizes that the leadership structure and combination or separation of the CEO and Chairman roles is driven by the needs of the Company at any point in time. The leadership structure at the Company has varied over time and has included combined roles, election of a presiding or lead director, separation of roles, and other transition arrangements for succession planning. As a result, no policy exists requiring combination or separation of leadership roles and the Company’s governing documents do not mandate a particular structure. This has allowed the Board the flexibility to establish the most appropriate structure for the Company at any given time.
| * | Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1792 (telephone), 989-638-1740 (fax). |
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CORPORATE GOVERNANCE (continued)
The Board has determined that the Company and its stockholders are currently best served by having one person serve as Chairman and CEO as it allows for a bridge between the Board and management and provides critical leadership for carrying out the Company’s strategic initiatives and confronting its challenges. Mr. Liveris’ service as Chairman facilitates the Board decision-making process because Mr. Liveris has first-hand knowledge of the Company’s operations and the major issues facing the Company, and he chairs the Board meetings where the Board discusses strategic and business issues. Mr. Liveris is the only member of executive management who is also a Director.
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CORPORATE GOVERNANCE (continued)
As part of the decision to elect Mr. Liveris as Chairman, the independent Directors on the Board elected a Lead Director with clearly defined leadership authority and responsibilities. The independent Directors annually elect one independent Director (who has served at least one full year on the Board) to serve as Lead Director. Mr. Fettig currently serves as Lead Director. Among other responsibilities, the Lead Director works with the Chairman to call Board meetings and set the Board agenda, and determinedetermines the appropriate materials to be provided to the Directors. He leads executive sessions of the Board and other meetings at which the Chairman is not present, has the authority to call meetings of the independent directors,Directors, facilitates communication between the Board and management, and serves as focal point for stockholder communications and requests for consultation addressed to independent directors.Directors. The Lead Director may retain outside professionals on behalf of the Board as the Board may determine is necessary and appropriate. These responsibilities are detailed in the Corporate Governance Guidelines that are available atwww.DowGovernance.com. Contact information for the Lead Director is shown below under “Communication with Directors.”
The election of Mr. Liveris as both Chairman and CEO promotes unified leadership and direction for the Board and executive management. The appointment of the Lead Director and the use of executive sessions of the Board, along with the Board’s strong independent committee system and substantial majority of independent Directors, allows the Board to maintain effective risk oversight and provides that independent Directors oversee such critical items as the Company’s financial statements, executive compensation, the selection and evaluation of Directors, compliance program and the development and implementation of our corporate governance programs.
Risk Oversight
The Board of Directors is responsible for overseeing the overall risk management process for the Company. Risk management is considered a strategic activity within the Company and responsibility for managing risk rests with executive management while the Committees of the Board and the Board as a whole participate in the oversight of the process. Specifically, the Board has responsibility for overseeing the strategic planning process and reviewing and monitoring management’s execution of the corporate and business plan, and each Board Committee is responsible for oversight of specific risk areas relevant to the Committee charters.
The oversight responsibility of the Board and Committees is enabled by an enterprise risk management model and process implemented by management that is designed to identify, assess, manage and mitigate risks. The Audit Committee is responsible for overseeing that management implements and follows this risk management process and for coordinating the outcome of reviews by the other
Committees in their respective risk areas. In addition, the enterprise risk management model and process are reviewed with the Board of Directors annually and the Board recognizes that risk management and oversight comprise a dynamic and continuous process.
The strategic plan and critical issues and opportunities are presented to the Board each year by the CEO and senior management. Throughout the year, management reviews any critical issues and actual results compared to plan with the Board and relevant Committees. Members of executive management are also available to discuss the Company’s strategy, plans, results and issues with the Committees and the Board, and regularly attend such meetings to provide periodic briefings and access. In addition, as noted in the Audit Committee Report on page 52,53, the Audit Committee regularly meets in executive sessions and holds separate executive sessions with the lead client service partner of the independent registered public accounting firm, internal auditor, general counsel and other management as appropriate.
The Committees undertake numerous risk oversight activities related to their charter responsibilities. For example, the Compensation and Leadership Development Committee regularly reviews any potential risks associated with the Company’s compensation policies and practices (see “Compensation Program Risk Analysis” on page 3234 of this Proxy Statement). As another example, the Environment, Health, Safety and Technology Committee regularly reviews the Company’s operational risks including those risks associated with process and product safety, public policy, and reputation risks.
| 2015 Proxy Statement | | 9 |
CORPORATE GOVERNANCE (continued)
Communication with Directors
Stockholders and other interested parties may communicate directly with the full Board, the Lead Director, the non-management Directors as a group, or with specified individual Directors by any of several methods. These methods of communication include mail addressed to The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, and the “Contact Us” feature of Dow’s corporate governance website atwww.DowGovernance.com. The Lead Director and other non-management Directors may also be contacted by email addressed toLeadDirector@Dow.com. Please specify the intended recipient(s) of your letter or electronic message.
Communications will be distributed to any or all Directors as appropriate depending upon the individual communication. However, the Directors have requested that communications that do not directly relate to their duties and responsibilities as Directors of the Company be excluded from distribution and deleted from email that they
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CORPORATE GOVERNANCE (continued)
access directly. Such excluded items include “spam”; advertisements; mass mailings; form letters and email campaigns that involve unduly large numbers of similar communications; solicitations for goods, services, employment or contributions; surveys; and individual product inquiries or complaints. Additionally, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will also be screened for omission by the Office of the Corporate Secretary. Any omitted or deleted communication will be made available to any Director upon request.
Board and Committee Meetings; Annual Meeting Attendance
There were seven11 Board meetings in 20122014 and 23 formal30 Board Committee meetings. All of the Directors attended more than 75% of the sum of the total number of Board meetings and the total number of meetings of the Board Committees on which the Director served during the past year, and all but one had 100% attendance at the six regularly scheduled Board meetings.year. The Directors are encouraged to attend all Annual Meetings of Stockholders, and in 2012 ten2014 nine of the twelveten Directors then serving attended.attended, with the exception of Mr. Polman who was unable to attend due to a conflict with the annual general meetings of Unilever PLC and PLC/Unilever N.V. (the entities for which he serves as chief executive officer)Chief Executive Officer). Ms. Franklin was unable to attend due to a family emergency.
Executive Sessions of Directors
The non-management Directors meet in executive session, chaired by the Lead Director (currently Mr. Fettig), in connection with each regularly scheduled meeting of the Board, and at other times as they may determine appropriate. In 2012,2014, there were sixeight executive sessions of the Board of Directors. The Audit, Compensation and Leadership Development, and Governance Committees of the Board typically meet in executive session in connection with every Committee meeting.
Board Committees
Board Committees perform many important functions. The responsibilities of each Committee are stated in the Bylaws and in their respective Committee charters, which are available atwww.DowGovernance.com. Stockholders may receive a printed copy of the Committee charters without charge by contacting the Office of the Corporate Secretary.* The Board, upon the recommendation of the Governance Committee, elects members to each Committee and has the authority to change Committee chairs, memberships and the responsibilities of any Committee. A brief description of the current standing Board Committees follows, with memberships listed as of March 18, 2013,16, 2015, the record date for the 2015 Meeting. The Audit Committee, Compensation and Leadership Development Committee, and Governance Committee are comprised entirely of independent Directors who meet the applicable independence requirements of the New York Stock Exchange, the U.S. Securities and Exchange Commission (as applicable) and the Company.Company, including the heightened standards applicable to members of the Audit Committee and the Compensation and Leadership Development Committee.
| * | Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1792 (telephone), 989-638-1740 (fax). |
| 2015 Proxy Statement |
CORPORATE GOVERNANCE (continued)
| Standing Committee and Function | Chair and Members | Meetings in | ||
Audit Committee | J. A. Bell, Chair M. Loughridge J. M. Ringler R. G. Shaw | 9 | ||
Oversees the quality and integrity of the financial statements of the Company; the qualifications, independence and performance of the independent auditors; and the Company’s system of disclosure controls and procedures and system of internal control over financial reporting. Has oversight responsibility for the performance of the Company’s internal audit function and compliance with legal and regulatory requirements. A more complete description of the duties of the Committee is contained in the Audit Committee charter available atwww.DowGovernance.com. |
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Compensation and Leadership Development Committee | D. H. Reilley, Chair A. Banga J. M. Fettig R. J. Milchovich | 6 | ||
Assists the Board in meeting its responsibilities relating to the compensation of the Company’s Chief Executive Officer and other senior executives in a manner consistent with and in support of the business objectives of the Company, competitive practice and applicable standards. A more complete description of the duties of the Committee is contained in the Compensation and Leadership Development Committee charter available atwww.DowGovernance.com. |
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Environment, Health, Safety and Technology Committee | J. K. Barton, Chair A. A. Allemang P. Polman R. S. Miller | |||
| 5 | ||||
Assists the Board in fulfilling its oversight responsibilities by assessing the effectiveness of environment, health, safety and technology programs and initiatives that support the environment, health, safety, sustainability, innovation and technology policies and programs of the Company, and by advising the Board on matters impacting corporate citizenship and Dow’s public reputation. A more complete description of the duties of the Committee is contained in the Environment, Health, Safety and Technology Committee charter available atwww.DowGovernance.com. |
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Governance Committee | J. M. Fettig, Chair J. A. Bell R. S. Miller D. H. Reilley | |||
| 10 | ||||
Assists the Board on all matters relating to the selection, qualification, and compensation of members of the Board, as well as any other matters relating to the duties of Board members. Acts as a nominating committee with respect to recommending to the Board candidates for Directors and makes recommendations to the Board concerning the size of the Board and structure of committees of the Board. Assists the Board with oversight of governance |
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CORPORATE GOVERNANCE (continued)
Board of Directors’ Terms
Dow’s Restated Certificate of Incorporation provides that all Directors stand for election at each Annual Meeting of Stockholders.
The Company’s Corporate Governance Guidelines provide that non-employee Directors should not be nominated for election to the Board following their 72nd birthday. Mr. Miller is a current Director who is being nominated for election to the Board at the 2015 Meeting, although he has already reached age 72. Mr. Miller was appointed to the Board and nominated for election for the 2015 Meeting pursuant to an agreement dated November 20, 2014, between the Company and certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)). Given the terms of the agreement and its own evaluation, the Board has determined that the current needs of the Board warrant the nomination of Mr. Miller to stand for re-election as a Director for the 2015 Meeting.
| 2015 Proxy Statement | | 11 |
CORPORATE GOVERNANCE (continued)
Director Qualifications and Diversity
There are certain minimum qualifications for Board membership that Director candidates should possess, including strong values and discipline, high ethical standards, a commitment to full participation on the Board and its Committees, relevant career experience, and a commitment to ethnic, racial and gender diversity. The Governance Committee has adopted guidelines to be used in evaluating candidates for Board membership in order to ensure a diverse and highly qualified Board of Directors. In addition to the characteristics mentioned above, the guidelines provide that candidates should possess individual skills, experience and demonstrated abilities that help meet the current needs of the Board and provide for diversity of membership, such as experience or expertise in some of the following areas: the chemical industry, global business, science and technology, finance and/or economics, corporate governance, public affairs, government affairs, and experience as chief executive officer, chief operating officer or chief financial officer of a major company. Other factors that are considered include independence of thought, willingness to comply with Director stock ownership guidelines, meeting applicable Director independence standards (where independence is desired) and absence of conflicts of interest. The Governance Committee may modify the minimum qualifications and evaluation guidelines from time to time as it deems appropriate. These guidelines for Director qualifications are included in Dow’s Corporate Governance Guidelines, available atwww.DowGovernance.com.
The guidelines for Director qualifications provide that a commitment to diversity is a consideration in the identification and nomination of Director candidates.candidates, and that candidates are evaluated to provide for a diverse and highly qualified Board. The Governance Committee and the full Board implement and assess the effectiveness of these guidelines and the commitment to diversity by referring to these guidelines in the review and discussion of Board candidates when assessing the composition of the Board and by including questions regarding the diversity of the Board membership in the Board’s annual self-evaluations.
The Governance Committee and the Board believe that the qualifications, skills, experience and attributes set forth generally above for all Directors and more specifically below for each of the Directors, support the conclusion that these individuals are qualified to serve as Directors of the Company and collectively possess a variety of skills, professional
experience, and diversity of backgrounds allowing them to effectively oversee the Company’s business. As noted below, the Directors have a diverse combination of the following background and qualifications: leadership experience (including current and former chief executive officer, chief financial officer and other senior executive management positions) at major domestic and foreign companies with global operations in a variety of relevant fields and industries; experience on other public company boards (including chair positions); board or other significant experience with academic, research and philanthropic institutions and trade and industry organizations; and prior government or public policy experience. The Governance Committee and Board have determined that all of the Directors nominated for election meet the personal and professional qualifications identified in this section. Listed below are several of these key attributes as they apply to the individual Directors to support the conclusion that these individuals are highly qualified to serve on the Company’s Board of Directors. Please see pages 74 to 107 for the complete biographies for each of the nominees.
A.A. Allemang
diverse global business leadership experience in various executive management and advisory positions with The Dow Chemical Company providing first-hand knowledge of the Company
extensive experience and knowledge in chemical industry manufacturing and engineering
active involvement with major business and industry organizations including the American Chemical Society which contributes to understanding and addressing issues at the Company
A. Banga
global business and leadership experience as Chief Executive Officer of MasterCard Worldwide
extensive experience and knowledge of international business operations and financial services which is particularly important given the global presence and financial aspects of the Company
active involvement with major business and public policy organizations including the U.S.-India Business Council, the Business Roundtable, the Council on Foreign Relations, and the Foreign Policy Association
J.K. Barton
leadership experience as Chair of the Division of Chemistry and Chemical Engineering of California Institute of Technology
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• global business and leadership experience as Chief Executive Officer of MasterCard Incorporated • extensive experience and knowledge of international business operations and financial services which is particularly important given the global presence and financial aspects of the Company • active involvement with major business and public policy organizations including the U.S.-India Business Council, the Business Roundtable, the International Business Committee of the World Economic Forum, the Council on Foreign Relations, and the Foreign Policy Association | • leadership experience as Chair of the Division of Chemistry and Chemical Engineering of California Institute of Technology • leadership, research, and teaching experience through positions at leading research universities including California Institute of Technology, Columbia University, and Hunter College-City University of New York which is particularly important given the Company’s research and innovation focus • active involvement with major science and technology organizations including the National Academy of Sciences and the American Chemical Society which contributes to understanding and addressing issues at the Company
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CORPORATE GOVERNANCE (continued)
leadership, research, and teaching experience through positions at leading research universities including California Institute of Technology, Columbia University, and Hunter College-City University of New York which is particularly important given the Company’s research and innovation focus
active involvement with major science and technology organizations including the National Academy of Sciences and the American Chemical Society which contributes to understanding and addressing issues at the Company
J.A. Bell
global business and leadership experience as Chief Financial Officer of The Boeing Company
finance and accounting expertise including experience with and direct involvement and supervision in the preparation of financial statements and risk management
active involvement with major business and public policy organizations including World Business Chicago, the Chicago Economic Club, and the Commercial Club of Chicago which contributes to understanding and addressing issues at the Company
J.M. Fettig
global business and leadership experience as Chairman and Chief Executive Officer of Whirlpool Corporation
extensive experience and knowledge of international business operations, manufacturing, marketing, sales and distribution which is particularly important given the global presence and nature of the operations of the Company
extensive experience and knowledge of consumer dynamics, branded consumer products, and end-user markets and servicing relevant to the business operations and focus of the Company
A.N. Liveris
global business and leadership experience as Chairman and Chief Executive Officer of The Dow Chemical Company
active involvement with major business, public policy, and international organizations including the President’s Advanced Manufacturing Partnership (Co-Chair), U.S.-India CEO Forum, the Business Roundtable (Vice-Chairman), U.S. Business Council (Chairman), and the President’s Export Council which contributes to understanding and addressing issues at the Company
additional public company board experience as a director of International Business Machines Corporation and
J. A. Bell |
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• global business and leadership experience as Chief Financial Officer of The Boeing Company • finance and accounting expertise including experience with and direct involvement and supervision in the preparation of financial statements and risk management • additional public company board experience as a | • global business and leadership experience as Chairman, President and Chief Executive Officer of U.S. Bancorp • extensive experience and knowledge of international business operations, financial services and capital allocation which is particularly important given the global presence and financial aspects of the Company • additional public company board experience including current service as Lead Director of Xcel Energy which provides additional corporate governance and compensation experience and financial expertise and board leadership experience | |
J. M. Fettig | A. N. Liveris | |
• global business and leadership experience as Chairman and Chief Executive Officer of Whirlpool Corporation • extensive experience and knowledge of international business operations, manufacturing, marketing, sales and distribution which is particularly important given the global presence and nature of the operations of the Company • extensive experience and knowledge of consumer dynamics, branded consumer products, and end-user markets and servicing relevant to the business operations and focus of the Company | • global business and leadership experience as Chairman and Chief Executive Officer of The Dow Chemical Company • involvement with major business, public policy, and international organizations including the Business Roundtable, U.S. Business Council, the President’s Advanced Manufacturing Partnership, and the President’s Export Council which contributes to understanding and addressing issues at the Company • additional public company board experience as a director of International Business Machines Corporation and academic institution governance experience as a trustee of the California Institute of Technology which provides additional corporate governance and compensation experience and financial expertise | |
M. Loughridge | R. J. Milchovich | |
• global business and leadership experience as Chief Financial Officer of International Business Machines Corporation • finance and accounting expertise including experience with and direct involvement in and supervision of the preparation of financial statements, risk management, and capital allocation • experience as lead director of The Vanguard Group which provides additional corporate governance and financial expertise | • global business and leadership experience as lead director of Nucor Corporation and former Chief Executive Officer of Foster Wheeler AG • finance and accounting expertise including experience with and direct involvement in and supervision of the preparation of financial statements and risk management • additional public company board experience as former director of Foster Wheeler AG and Delphi Corporation which provides additional corporate governance and compensation experience and financial expertise | |
R. S. Miller | P. Polman | |
• global business and leadership experience as Non-Executive Chairman of American International Group • finance and accounting expertise including experience with and direct involvement and supervision in the preparation of financial statements and risk management as former CFO of Chrysler Corporation • additional public company board experience as a director of American International Group and Symantec and former director of Delphi Corporation and Hawker Beechcraft which provides additional corporate governance and compensation experience and financial expertise | • global business and leadership experience as Chief Executive Officer of Unilever PLC and Unilever N.V. • extensive experience and knowledge of international business operations and global consumer product industries and end uses which is particularly important given the global presence and nature of the operations of the Company • active involvement with major trade, public policy and international organizations including the International Business Council of the World Economic Forum, Swiss American Chamber of Commerce, and the World Business Council for Sustainable Development which contributes to understanding and addressing issues at the Company | |
P. Polman
global business and leadership experience as Chief Executive Officer of Unilever PLC and Unilever N.V.
| 2015 Proxy Statement | | 13 |
extensive experience and knowledge of international business operations and global consumer product industries and end uses which is particularly important given the global presence and nature of the operations of the Company
CORPORATE GOVERNANCE (continued)
active involvement with major trade and public policy and international organizations including the European Round Table, The International Business Council of the World Economic Forum, Swiss American Chamber of Commerce, and the World Business Council for Sustainable Development which contributes to understanding and addressing issues at the Company
D.H. Reilley
global business and leadership experience in multiple major corporations including Covidien Ltd. (former non-executive Chairman), Praxair, Inc. (former Chairman, President and Chief Executive Officer), E.I. duPont de Nemours & Co. (former Chief Operating Officer), and Conoco, Inc., (various managerial and executive positions)
extensive experience and knowledge of the global oil, petrochemical and chemical industries which is particularly important given the global presence and nature of the operations of the Company
additional public company board experience as a director of Covidien Ltd., H.J. Heinz and Marathon Oil Company which provides additional corporate governance and compensation experience and financial expertise
J.M. Ringler
global business and leadership experience as Chairman of Teradata Corporation
extensive knowledge and experience in a variety of manufacturing industries which is particularly important given the global presence and nature of the operations of the Company
additional public company board experience as a director of Autoliv, Inc., Ingredion Incorporated, John Bean Technologies Corporation, and FMC Technologies, Inc. which provides additional corporate governance and compensation experience and financial expertise
| J.M. Ringler | |
• global business and leadership experience in multiple major corporations including Marathon Oil Corporation (non-executive Chairman), Covidien public limited company (former non-executive Chairman), Praxair, Inc. (former Chairman, President and Chief Executive Officer), E.I. du Pont de Nemours & Co. (former Chief Operating Officer), and Conoco, Inc., (various managerial and executive positions) • extensive experience and knowledge of the global oil, petrochemical and chemical industries which is particularly important given the global presence and nature of the operations of the Company • additional public company board experience as a director of Marathon Oil Corporation and former director of Covidien public limited company and H.J. Heinz which provides additional corporate governance and compensation experience and financial expertise
| • global business and leadership experience as Chairman of Teradata Corporation • extensive knowledge and experience in a variety of manufacturing industries which is particularly important given the global presence and nature of the operations of the Company • additional public company board experience as a director of Autoliv, Inc., John Bean Technologies Corporation, and FMC Technologies, Inc. which provides additional corporate governance and compensation experience and financial expertise | |
| ||
• global business and leadership experience with Duke Energy Corporation (former Group Executive and Executive Advisor) and Duke Power Company (former President and Chief Executive Officer) and leadership experience at academic institutions including Central Piedmont Community College (former President) and El Centro College (former President) • extensive knowledge of and experience with energy and power industries and markets including nuclear, coal, and natural gas which is particularly important given the global presence and nature of the operations of the Company • additional public company board experience including current service as a director of DTE Energy Co. which provides additional corporate governance and compensation experience and financial expertise | ||
| 14 | | 2015 Proxy Statement |
CORPORATE GOVERNANCE (continued)
R.G. Shaw
global business and leadership experience with Duke Energy Corporation (former Group Executive and Executive Advisor) and Duke Power Company (former President and Chief Executive Officer) and leadership experience at academic institutions including Central Piedmont Community College (former President) and El Centro College (former President)
extensive knowledge of and experience with energy and power industries and markets including nuclear, coal, and natural gas which is particularly important given the global presence and nature of the operations of the Company
additional public company board experience including current service as a director of DTE Energy Co. which provides additional corporate governance and compensation experience and financial expertise
Recommendations and Nominations for Director
Among the Governance Committee’s most important functions is the selection of Directors.Directors who are recommended to the Board as candidates for election. The Committee has a long-standing practice of accepting stockholders’ suggestions of candidates to consider as potential Board members, as part of the Committee’s periodic review of the size and composition of the Board and its Committees. Such recommendations should be sent to the Governance Committee through the Corporate Secretary.*
Under the Company’s Bylaws, stockholders wishing to formally nominate a person for election as a Director at the next Annual Meeting must notify the Corporate Secretary* between the close of business on November 28, 2013,2015, and the close of business on January 27, 2014.2016. However, different deadlines apply if the annual meetingAnnual Meeting is called for a date that is not within 30 days before or after the anniversary of the prior year’s annual meeting.Annual Meeting. Such notices must comply with the provisions set forth in the Bylaws. A copy of the Bylaws may be found on the Company’s website atwww.DowGovernance.com. Alternatively, aA copy of the Bylaws will be provided without charge to any stockholder who requests itsends a request in writing. Such requests should be addressedwriting to the Corporate Secretary.*
The Governance Committee has adopted a process for identifying new Director candidates. Recommendations may be received by the Committee from various sources, including current or former Directors, a search firm retained by the Committee to assist in identifying and evaluating potential candidates, stockholders, Company executives, and by self-nomination. The Governance Committee uses the same process to evaluate Director nominees recommended by stockholders as it does to evaluate nominees identified by other sources.
The evaluation of new Director candidates involves several steps, not necessarily taken in any particular order. A preliminary analysis of a nominee involves securing a resume and other background data and comparing this data to the Director attributes outlined above, as well as to the current needs of the Board for new members including considerations to ensure diversity of membership in accordance with the guidelines identified above. References are checked and analyses are performed to identify potential conflicts of interest and appropriate independence from the Company. Candidate information is provided to all Governance Committee members for purposes of discussion and evaluation. If the Committee decides to further evaluate a candidate, interviews are conducted. Other steps may include requesting additional data from the candidate, providing Company background information to the candidate, and determining the candidate’s schedule compatibility with Dowthe Company’s Board and Committee meeting dates.
Code of Business Conduct
All Directors, officers and employees of Dow are expected to be familiar with the Company’s Code of Business Conduct, and to apply it in the daily performance of their Dow responsibilities. The Code of Business Conduct is intended to focus employees, officers and Directors on our corporate values of integrity and respect for people, help them recognize and make informed decisions on ethical issues, help create a culture of the highest ethical and business standards, and provide mechanisms to report unethical conduct. The full text of Dow’s Code of Business Conduct is available atwww.DowGovernance.com. Stockholders may receive a printed copy of the Code of Business Conduct without charge by contacting the Office of the Corporate Secretary.* In addition, we will disclose on our website any waiver of or amendment to our Code of Business Conduct requiring disclosure under applicable rules.
| * | Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, |
| 15 |
CORPORATE GOVERNANCE (continued)
CORPORATE GOVERNANCE (continued)
Certain Transactions and Relationships
The Federal securities laws require public companies to describe any transaction, since the beginning of the last fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. Related persons are directors and executive officers, nominees for director and any immediate family members of directors, executive officers or nominees for director and greater than 5% holders of Dow common stock. Companies are also required to describe their policies and procedures for the review, approval or ratification of any related person transaction.
Pursuant to Dow’s Code of Business Conduct, and annual review of Director independence, the Company has hadlong maintained procedures in place to monitor related person transactions for several years.transactions. Upon the recommendation of the Governance Committee, the Board of Directors adopted a formal written policy on related person transactions on February 15, 2007 (the “Policy”).
The Governance Committee is responsible for reviewing the material facts of all transactions that could potentially be “transactions with related persons.” The Policy covers any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:
(1) the aggregate amount involved will or may be expected to exceed $100,000 in any calendar year,
(2) the Company is a participant, and
(3) any related person has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).
The Governance Committee is responsible to either approve or disapprove of the entry into the transaction, subject to the exceptions listedreferenced below. If advance Committee approval of the transaction is not feasible, then the transaction shall be considered and, if the Committee determines it to be appropriate, ratified at the Committee’s next regularly scheduled meeting.
The Governance Committee has determined that certain types of transactions in which related persons are not deemed to have a material interest under SEC rules shall be deemed to be preapproved by the Committee even if the amount involved will exceed $100,000, including:
(a) employment of executive officers where the officer’s compensation is either reported in the Proxy Statement or
would have been reported in the Proxy Statement if the officer was a “named executive officer,” and the Compensation and Leadership Development Committee approved such compensation;
(b) Director compensation where such compensation is reported in the Proxy Statement;
(c) certain transactions with other companies where the related person’s only relationship with the other company is as a director, employee or beneficial owner of less than 10% of that company’s shares, and the aggregate amount
involved does not exceed the greater of $1 million or 2% of that company’s total annual revenues;
(d) certain Company charitable contributions where the related person’s only relationship is as an employee or director of the charitable entity and where the aggregate amount does not exceed the greater of $1 million or 2% of the charitable entity’s total annual receipts;
(e) transactions where all stockholders receive proportional benefits;
(f) transactions involving competitive bids; and
(g) regulated transactions.$100,000.
As discussed above, the Governance Committee has responsibility for reviewing issues involving directorDirector independence and related person transactions using information obtained from Directors’ responses to a questionnaire asking about their relationships with the Company, and those of their immediate family members and primary business or charitable affiliations and other potential conflicts of interest, as well as certain data collected by the Company related to transactions, relationships or arrangements between the Company on the one hand and a Director, officer or immediate family member on the other.
As part of its annual independence assessment and review of related person transactions, the Governance Committee reviewed the fact that in 2012From time to time, the Company made purchases or salesmay have employees who are related to our executive officers and directors. An adult child of products or servicesCharles J. Kalil (General Counsel and Executive Vice President) is employed by the Company in a non-executive position. In 2014 she received compensation in the ordinary courseapproximate amount of business$124,500, which amount and other terms of her employment is commensurate with certain entities for which somethat of our Directors are executive officers or directors. The Governance Committee reviewed such transactionsher peers and believes thatdetermined on a basis consistent with the related persons’ interests in the transactions are not material.
More specifically and as discussed earlier in this Proxy Statement in the section entitled “Director Independence,” the Governance Committee and the Board reviewed these transactions and the fact that Messrs. Bell, Fettig, Hess and Polman served as executive officers during all or a portion
|
Company’s human resources policies.
CORPORATE GOVERNANCE (continued)
of the past three years of entities with which Dow made purchases or sales (The Boeing Company, Whirlpool Corporation, Hess Corporation, and Unilever PLC/N.V. respectively). All such purchases and sales were made at arms-length, commercial terms, and the Directors did not personally benefit from such transactions. In all instances, the extent of business represented significantly less than 2% of Dow’s and the other entity’s revenues. In fact, in all cases the amounts were below 0.3%. With respect to Boeing there were no purchases in 2011 or 2012, and with respect to Hess there were no sales in 2012, while with respect to Whirlpool and Unilever there were sales to and purchases from each entity which in all cases were below the 0.3% amount referenced above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s Directors and executive officers and persons who own
more than 10% of a registered class of the Company’s equity securities (the “Reporting Persons”) to file with the U.S. Securities and Exchange Commission (“SEC”) reports on Forms 3, 4 and 5 concerning their ownership of and transactions in the common stock and other equity securities of the Company, generally within two business days of a reportable transaction. As a practical matter, the Company seeks to assist its Directors and executives by monitoring transactions and completing and filing reports on their behalf.
Based solely upon a review of SEC filings furnished to the Company and written representations that no other reports were required, we believe that all Reporting Persons complied with these reporting requirements during fiscal year 2012.2014.
| 16 | | 2015 Proxy Statement |
COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE REPORT
The Compensation and Leadership Development Committee (the “Committee”) of the Board of Directors reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with Company management. Based on this review and discussion, the Committee recommended to the Board of Directors that the CD&A be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20122014 (“20122014 Annual Report”), as incorporated by reference from this Proxy Statement.
The charter of the Committee can be found atwww.DowGovernance.com.
D. H. Reilley, Chair
A. Banga
J. M. Fettig
R. J. B. HessMilchovich
| 17 |
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION DISCLOSURE
SECTION ONESection One – OVERVIEW AND EXECUTIVE SUMMARYExecutive Summary
20122014 Company Results
2012 was2014 represented a challengingmilestone year duefor Dow. The Company drove continued progress against its stated commitments – enhancing adjusted return on capital, delivering adjusted earnings and adjusted EBITDA growth and expanding adjusted EBITDA margins amidst ongoing macroeconomic volatility. Dow continued to execute on its aggressive portfolio actions aligned with the ongoing slowCompany’s market-driven strategy, reducing its exposure to non-strategic assets and volatilebusinesses while at the same time achieving progress across key growth investments. Steps to further enhance commercial and operational productivity supported results and were underscored by the Company’s foundational focus on returning value to stockholders.
As a result of the global economy.Company’s disciplined approach to delivering on its priorities, Dow maintained its earnings growth trajectory through the first halfachieved a number of 2012. However, the second half of 2012 saw significant deteriorationstrategic milestones and performance records in the markets we serve, particularly in China. In response, Dow identified and took aggressive action to mitigate the effects of a slow-to-no-growth global environment – decisively deploying cost reduction and cash flow improvement levers, and driving aggressive2014:
| • | Full-year 2014 earnings were $3.11 per share, on an adjusted basis1, or $2.87 per share on an as-reported basis. This compared with prior-year adjusted earnings1 of $2.48 per share – or earnings of $3.68 per share as-reported. |
| • | Dow achieved record adjusted EBITDA2 of $9.3 billion, or $8.9 billion on an as-reported basis3 with adjusted EBITDA growth across all operating segments. |
| • | Adjusted EBITDA4 margins expanded 140 basis points, with growth reported across all operating segments. |
The Company accelerated portfolio management actions – with $2 billion in proceeds expected from divestitures of non-strategic assets and businesses signed or completed in 2014 – demonstrating progress against its previously stated target. The Company increased its divestiture target to mitigate the impact of downward adjustments$7 to growth forecasts.
Despite these efforts, Dow fell short of8.5 billion by mid-2016 – demonstrating its profit plan for the year.
Sales of $56.8 billion, down 5 percent year over year on a reported basis.commitment to ongoing value creation.
Net Income was $842 million, or $2,249 million excluding certain items.*
These results have driven a below target payout for our 2012 Performance Award Program and all three current outstanding performance shares plans are tracking below target payout levels reflecting the connection between performance and pay.
Through hard work, focus and discipline, the Company achieved several significant milestones in 2012.
Implemented $2.5Dow delivered $6.5 billion of cost reduction and cash flow improvement actionsfrom operations in response to volatile macro-economic conditions2014 – a reflection of the Company’s ongoing productivity focus. Excluding the K-Dow award, this represents a more than $320 million increase since 2013 and second consecutive year of record cash flow.
Generated nearly $8The Company delivered stockholders a record $6 billion through declared dividends and share repurchases – announcing two dividend increases during the year and restoring the Company’s dividend to historical levels.
The Company completed its initial $4.5 billion share buy-back program and announced an additional $5 billion in cash from operations duringrepurchases the two year period ended December 31, 2012,Company expects to be completed in line with our stated targetportfolio actions.
Increased dividends declared per share by 34% in 2012 vs. 2011
AchievedDow achieved significant milestones with key, enterprise growth projects, –including its investments to further enhance the Company’s industry-leading, low-cost feedstock position on the U.S. Gulf Coast investments and Sadara Chemical Company joint venture, together with the achievement of certain regulatory milestones for its ENLIST™ Weed Control System.
In Environment, Health and Safety – investmentstotal unplanned events are at all-time low levels – exceeding 2013 performance by nearly 10 percent.
| 1 | “Adjusted earnings per share” is defined as earnings per share excluding the impact of “Certain items.” See Appendix A on pages A-1 – A-2 for a reconciliation of Adjusted earnings per share to “Earnings per common share — diluted”. |
| 2 | Adjusted EBITDA is defined as EBITDA excluding the impact of “Certain Items.” See Appendix A on pages A-1 – A-2 for a reconciliation to the most directly comparable U.S. GAAP measure. |
| 3 | EBITDA is defined as earnings (i.e. “Net Income”) before interest, income taxes, depreciation and amortization. See Appendix A on pages A-1 – A-2 for a reconciliation of EBITDA to “Net Income Available for The Dow Chemical Company Common Stockholders.” |
| 4 | “Adjusted EBITDA margin” is defined as EBITDA excluding the impact of certain items as a percentage of reported sales. |
| 18 | | 2015 Proxy Statement |
COMPENSATION INFORMATION (continued)
Response to Say-On-Pay Vote and Stockholder Outreach
Following the Company’s 2014 Annual Meeting of Stockholders, we reviewed the results of the stockholder advisory vote on our executive compensation programs. Approximately 79% of the votes cast supported our compensation programs. The Committee carefully evaluated the results of the say-on-pay vote from our 2014 Annual Meeting at subsequent meetings.
Throughout 2014 both during the proxy solicitation period and following our 2014 Annual Meeting, we engaged in discussions with a broad cross-section of stockholders to solicit feedback on our compensation programs. We view this as an important opportunity to develop broader relationships with key investors over the long-term and to engage in open dialogue on compensation and governance related issues. We also held discussions with stockholders before year-end in advance of preparing for the 2015 proxy statement allowing for additional input and discussions.
A substantial majority of our investors indicated that willthey viewed our executive compensation program as sound and our engagement did not indicate a broad-based negative referendum on our compensation policies and practices. However, even when supportive, our investors shared a number of observations or concerns which we took into account in evaluating ways to further enhance our industry-leading, low-cost feedstock positionexecutive compensation programs and related disclosures. The table below summarizes actions we took both before and after our 2014 Annual Meeting as a result of recent say-on-pay vote results and our related engagement with our stockholders.
| Executive Compensation Program Item | What We Heard From Stockholders | Actions We Took to Address Feedback | ||
| Long-Term Incentive (“LTI”) Mix | Strong preference for performance based equity | Effective January 1, 2014, we increased the Performance Share weighting in our LTI mix from 35% to 45% (continuing the trend that was started in 2012 when the Performance Share weighting was moved from 25% to 35%). | ||
| Support for Relative Total Shareholder Return (“TSR”) as a metric in our Performance Share Program | Relative TSR and Return on Capital* continue to be equally weighted measures in the Performance Share Program. (Relative TSR was first used in 2011 and continued each year thereafter.) | |||
| Annual Performance Award | Preference for greater weighting toward Net Income and Management Operating Cash Flow in the annual incentive program | The 2014 Performance Award design has 85% of the award linked to two critical measures for Dow — Net Income* and Management Operating Cash Flow*. Net Income will be weighted at 50%, Management Operating Cash Flow will be weighted at 35% and 15% will be linked to personal goals and achievements. | ||
| Share Usage | Concern about share usage in our LTI program | We modified our LTI mix at all levels which significantly reduced our 2014 annual share usage compared to 2013 levels. Grants reflecting this shift appear for the first time in this proxy statement. • Share usage for 2014 totaled 7.9 million shares versus 2013 share usage of 21.8 million shares • Our annual burn rate for shares decreased to 0.43% in 2014 from 1.65% in 2013 using a 1:1 counting method • Year to date share usage in 2015 totaled 7.5 million shares, continuing the significant reduction in share usage that began in 2014. | ||
| Disclosure | Desire for greater clarity on our incentive plan metrics | We added additional disclosure in this proxy statement on our metrics and the mechanics of our incentive programs. | ||
| Desire for additional clarity on how we use our Survey Peer Group and TSR Peer Group | We added more detail in this proxy statement on our two peer groups and how they are used. | |||
| * | These measures are non-GAAP financial measures. For additional information on the use of these financial performance measures, please see the “Performance Award” and “Return on Capital” section of “Section Two: The 2014 Executive Compensation Program in Detail” beginning on page 21 and Appendix A. |
| 2015 Proxy Statement | | 19 |
COMPENSATION INFORMATION (continued)
In addition to these most recent changes, over the past few years, the Committee and Board have made other changes to our compensation programs that further align our executives’ compensation with stockholder interests.
| Executive Compensation Program Item | Governance Best Practices and Other Feedback | Actions We Have Taken | ||
| Incentive Plan Design | Incentive program maximum payout levels | In light of governance trends, we reduced the maximum payout level of our annual and long-term incentive programs from 250% to 200%. | ||
Stock Ownership Requirements | Rigorous stock ownership guidelines in place for both Directors and Management | In 2013, the Board approved an increase to the stock ownership guidelines for Non-Employee Directors – to five times their annual meeting retainer fee. Stock ownership guideline levels for executive management were increased in 2012. | ||
Director Compensation | Appropriate mix of equity and cash | In 2013, the Governance Committee and the Board increased the weighting of equity in the total compensation structure for Non-Employee Directors. Equity now represents 54% of the total compensation structure, up from 48%. | ||
| Perquisites | Limited perquisites for NEOs | Eliminated the car perquisite for NEOs (other than the CEO) in 2012 | ||
| Change-in-Control Agreements | No new or modified change in control agreements | The Board prohibits new or amended change-in-control agreements. Under legacy change-in-control agreements, an executive must be involuntarily terminated within two years of a change-in-control in order to receive benefits (“double trigger”). | ||
How Executive Pay is Linked to Company Performance
A number of financial and operational performance metrics directly affect amounts earned under our annual Performance Award incentive plan and our Performance Share program. The following tables show each of these performance metrics, their weighting, the rationale for each measure, target metrics, the actual result and payout result.
2014 Performance Award Program
| Performance Measure Used (Weighting) | Rationale for Measure | Threshold Goal (in $ millions) | Target Goal (in $ millions) | Maximum Goal (in $ millions) | 2014 Actual Results (in $ millions) | Payout | ||||||
Net Income (50%) | Reflects operating strength, efficiency and profitability. Balances revenue growth with margin expansion. | $3,050 | $3,600 | $4,250 | $3,709 | 117% (59% weighted) | ||||||
Management Operating Cash Flow (35%) | Reflects our ability to translate earnings to cash which can be used to return capital to stockholders through increased dividends and share repurchase as well as prioritized organic growth investments in high return attractive markets. | $1,500 | $2,500 | $3,500 | $3,160 | 166% (58% weighted) | ||||||
Individual Performance (15%) | Reflects individual contributions and achievements of each executive. | n/a | n/a | n/a | Varies | Varies |
2012-2014 Performance Share Program (Earned shares delivered in February 2015)
| Performance Measure Used (Weighting) | Rationale for Measure | Threshold Goal | Target Goal | Maximum Goal | Result/ Payout | |||||
ROC (50%) | Reflects operating strength, effectiveness in utilizing capital and profitability. | 8.5% | 11.0% | 13.5% | 9.6% ROC / 62.4% Payout | |||||
Relative TSR (50%) | Reflects Dow’s TSR versus a peer group of companies’ TSR. | 26th Pctl. | 51st Pctl. | 76th Pctl. | 38th Pctl./ 64.9% Payout | |||||
Total Payout | 63.7% | |||||||||
| 20 | | 2015 Proxy Statement |
COMPENSATION INFORMATION (continued)
NEO Pay-at a Glance
Consistent with our pay-for-performance philosophy, a significant portion of our NEO’s 2014 compensation consisted of variable performance-based annual and long-term incentives. The Committee assessed each NEO’s performance in the context of our stated 2014 operational and financial goals.
For 2014, the major Committee actions regarding our NEOs’ compensation were as follows:
Salaries generally were increased by 3%, based on peer group alignment.
Maintained focus on investment grade rating – received an upgrade from Moody’sAnnual incentives under our Performance Award Program paid out at between 132% and 137% of target.
Finalized the K-Dow arbitration which resultedGrant date fair values of long-term equity awards granted in a $2.16 billion partial award issued in the Company’s favor by the International Chamber of Commerce. On March 4, 2013, the Company received the release of the final award representing the awarding of additional costs and interest with the two2014 increased over prior year awards totaling $2.48 billion.based on peer group alignment.
Named2011-2013 Performance Share awards vested in February 2014 at 24.7% of target, as reported in the “Option Exercises and Stock Vested for 12th time to Dow Jones Sustainability World Index2014” table on page 39 reflecting Relative TSR below the threshold level.
Received National Safety Council’s Green Cross Medal2012-2014 Performance Share awards vested in February 2015 at 63.7% of target, which will be reported in the 2016 proxy statement reflecting Return on Capital and Relative TSR results below the target level.
The table below shows our NEO’s total direct compensation awarded by the Committee for 2014.
| Name | Base Salary ($) | Performance Award ($) | Deferred Stock Awards ($) | Performance Share Awards ($) | Option Awards ($) | Total Compensation ($) | ||||||||||||||||||
Andrew Liveris | 1,930,800 | 4,232,314 | 3,025,407 | 5,445,452 | 3,630,036 | 18,264,009 | ||||||||||||||||||
Howard Ungerleider | 976,968 | 1,516,743 | 921,588 | 1,658,672 | 1,105,568 | 6,179,539 | ||||||||||||||||||
William Weideman | 940,453 | 1,303,468 | 879,549 | 1,583,002 | 1,055,357 | 5,761,829 | ||||||||||||||||||
James Fitterling | 976,968 | 1,539,213 | 921,588 | 1,658,672 | 1,105,568 | 6,202,009 | ||||||||||||||||||
Joe Harlan | 976,968 | 1,505,508 | 879,549 | 1,583,002 | 1,055,357 | 6,000,384 | ||||||||||||||||||
Charles Kalil | 1,029,659 | 1,427,107 | 837,510 | 1,507,799 | 1,005,030 | 5,807,106 | ||||||||||||||||||
SECTION TWO – THE 2014 EXECUTIVE COMPENSATION PROGRAM IN DETAIL
Executive SummaryBase Salary
Base salary is a fixed portion of compensation based on an individual’s skills, responsibilities, experience and sustained performance. Base salaries for executives are benchmarked against similar jobs at other companies and are targeted at the median (50th percentile) of the Survey Peer Group after adjusting for Dow’s Compensation Programsrevenue size. Actual salaries reflect an individual’s responsibilities and more subjective factors, such as the Committee’s (and the CEO’s in the case of other NEOs) assessment of the individual NEO’s performance.
Changes in base salary for the NEOs, as well as for all Dow salaried employees, depend on compensation versus the external market for similar jobs, the individual’s current salary compared to the market, changes in job responsibilities and the employee’s contributions to Dow’s performance as determined by the Committee.
2014 Base Salary Decisions: All NEOs were given salary adjustments of 3% effective as of March 1, 2014, which was consistent with the salary adjustments provided to Dow’s salaried employee population. Messrs. Ungerleider and Fitterling received an additional adjustment based upon the Committee’s review of base salaries for comparable positions within Dow’s Survey Peer Group. There were no material differences between the Survey Peer Group of base salary values and the actual base salary for any of the NEOs.
| Name | 2013 Base Salary ($) | 2014 Base Salary ($) | Percent Increase | |||||||
| Andrew Liveris | 1,874,600 | 1,930,800 | 3% | |||||||
| Howard Ungerleider | 851,180 | 976,968 | 15% | |||||||
| William Weideman | 913,061 | 940,453 | 3% | |||||||
| James Fitterling | 912,607 | 976,968 | 7% | |||||||
| Joe Harlan | 948,506 | 976,968 | 3% | |||||||
| Charles Kalil | 999,669 | 1,029,659 | 3% | |||||||
| 2015 Proxy Statement | | 21 |
COMPENSATION INFORMATION (continued)
Performance Award
The Performance Award is an annual cash incentive program. Dow uses this component of compensation to reward employees for achieving critical annual Company goals. Meeting or exceeding our annual business and financial goals is important to executing our long-term business strategy and delivering long-term value to stockholders. No Performance Award is payable to NEOs or any officer of the Company unless pre-established minimum net income goals are achieved. The 1994 Executive Performance Plan establishes a minimum performance goal of $700 million of net income in order for NEOs to be eligible to receive a payout of the Company component of the Performance Award. This requirement is part of Dow’s strategy for complying with Internal Revenue Code Section 162(m).
Actual award payouts are determined each February following provides an overviewcompletion of our compensation philosophythe plan year by measuring the performance against each award component for the Company Component of the plan. The Committee reviews individual performance and programs as detailed in later sections.contributions of the NEOs to determine the individual performance component payout level which can range from 0-30%.
2014 Performance Award Metrics and Design: The 2014 Performance Award Program focused participants on critical financial and operational goals. At the beginning of 2014, the Committee and the Board approved the financial and operational goals for the Company. In setting the goals for each measure listed below, the Committee considered the following:
2013 actual business results, the 2014 business plan and expected global macroeconomic conditions. The compensation programstarget goal is typically set at Dow are designed primarily tosupport the realization of Dow’s vision of being the most profitableexpected business plan with thresholds and respected science-driven chemical companymaximums representing a reasonable risk/reward profile around that target based upon global macroeconomic business conditions and stretch embedded in the world, while promoting the long-term interests of our stockholders and other stakeholders.business plan.
Our compensation programs are designed toattract, motivate, reward and retainThe Performance Award program covers nearly all ~53,000 Dow employees globally including the most talented executiveswho can drive business performance.NEOs
Dow believes inpay-for-performance,The Committee may use discretion to adjust the earned award for all employees or executive management when all year-end results are known. If discretion is used to adjust awards, it will be clearly explained. No adjustments were made to the stated metrics for 2014.
The Committee also reviewed and approved the target award opportunity for each NEO which we implement through anis expressed as a percentage of base pay. Individual award opportunities vary by job level and are targeted at the median level for comparable positions within the Survey Peer Group. There were no material differences between Dow’s Survey Peer Group median range of annual incentive award that includes objective performance criteriabonus targets and through equity awards where the value realized is tied to our stock price performance, including shares that vest only if certain performance hurdles are satisfied. These performance components represent at least 80%target Performance Award for any of the direct compensationNEOs.
The amount earned is equal to a participant’s target award times the sum of the Named Executive Officers (“NEOs”)Company performance results and individual performance assessment. The actual results for each performance measure can range from 0-200% of target, and are weighted as indicated in the table below.
The 2014 Performance Award corporate target goals and 2014 results are shown below. Net Income (excluding certain items) is a non-GAAP measure used by the Company in presentations to investors and is the primary financial metric in our plan. We exclude the impact of certain items from both our presentations to investors and our executive compensation performance calculations because they are not reflective of our underlying operations for the particular period in which they are recorded and, therefore, could mask our underlying operating trends. See Appendix A on pages A-1 – A-2 for a reconciliation and explanation of the items we exclude. Management Operating Cash Flow is a non-GAAP measure of cash from operations defined as net income excluding certain items plus depreciation and amortization minus capital spending and plus the change in trade working capital.
Performance Measure Used (Weighting) | Rationale for Measure | Threshold Goal (in $ millions) | Target Goal (in $ millions) | Maximum Goal (in $ millions) | 2014 Actual Results (in $ millions) | Payout | ||||||
| Net Income (50%) | Reflects operating strength, efficiency and profitability. Balances revenue growth with margin expansion. | $3,050 | $3,600 | $4,250 | $3,709 | 117% (59% weighted) | ||||||
| Management Operating Cash Flow(35%) | Reflects our ability to translate earnings to cash which can be used to return capital to stockholders through increased dividends and share repurchase as well as prioritized organic growth investments in high return attractive markets. | $1,500 | $2,500 | $3,500 | $3,160 | 166% (58% weighted) | ||||||
| Individual Performance(15%) | Reflects individual contributions and achievements of each executive. | n/a | n/a | n/a | Varies | Varies |
| 22 | | 2015 Proxy Statement |
COMPENSATION INFORMATION (continued)
As detailed on page 20 and in the table above, the 2014 Performance Award resulted in an earned base award equal to 117% (reflecting the 59% weighted result for net income and the 58% weighted result for management operating cash flow) of the target award opportunity for corporate employees. As allowed by the plan, the Committee determines the individual component payout level for each NEO to reflect their personal contributions (shown in the table below).
| Name | Year End Base Salary (a) | PA Target Percent (b) | PA Target Amount (c) | Company Component (d) | Committee Assessment (e) | Total PA Payment Percent (f) | Total PA Payout Amount | |||||||||||||
| Formulas | (a * b) | (d+e) | (c*f) | |||||||||||||||||
| Andrew Liveris | 1,930,800 | 160% | 3,089,280 | 117% | 20% | 137% | 4,232,314 | |||||||||||||
| Howard Ungerleider | 976,968 | 115% | 1,123,513 | 117% | 18% | 135% | 1,516,743 | |||||||||||||
| William Weideman | 940,453 | 105% | 987,476 | 117% | 15% | 132% | 1,303,468 | |||||||||||||
| James Fitterling | 976,968 | 115% | 1,123,513 | 117% | 20% | 137% | 1,539,213 | |||||||||||||
| Joe Harlan | 976,968 | 115% | 1,123,513 | 117% | 17% | 134% | 1,505,508 | |||||||||||||
| Charles Kalil | 1,029,659 | 105% | 1,081,142 | 117% | 15% | 132% | 1,427,107 | |||||||||||||
In approving the foregoing amounts, the Committee took into account the following individual performance considerations.
2014 NEO Individual Accomplishments
President, Chief Executive Officer and Chairman | Mr. Liveris serves as President, Chief Executive Officer and Chairman. Mr. Liveris’ compensation for 2014 reflects his leadership and decisive actions to drive ongoing earnings growth, enhanced return on capital and increased shareholder value. Mr. Liveris led the institutionalization of the strategic framework for Dow’s transformation. He established and personally led a metrics-driven weekly drumbeat of achieving Dow’s financial targets while staying true to the Board-approved strategy. As a result, Dow delivered nine consecutive quarters of year-over-year adjusted earnings per share1 growth – representing a pattern of strong performance and reflecting rigorous management of the Company’s priorities in line with its market-driven strategy. Specifically, the Committee considered the fact that under Mr. Liveris’ leadership, in 2014, Dow increased adjusted earnings by more than 25 percent and delivered record adjusted EBITDA of $9.3 billion2. At the same time, the Company delivered continuous progress against its divestiture program – with $2 billion in proceeds expected from divestitures of non-strategic assets and businesses signed or completed in 2014. Dow also delivered a second consecutive year of record cash flow from operations, excluding the K-Dow award. These collective actions enabled the return of a record $6 billion to shareholders in declared dividends and share repurchases – a more than 300 percent increase versus 2013. Shareholder actions also included two increases to the Company’s dividend – restoring it to historical levels. The Committee also considered Mr. Liveris’ leadership in driving substantial progress against key growth projects, including the Company’s strategic feedstock investments on the U.S. Gulf Coast and its Sadara joint venture, as well as the achievement of regulatory milestones for its ENLIST™ Weed Control System. The Committee considered Mr. Liveris’ leadership in the transformation of Dow’s culture – driving a strong focus on markets and customers enabling the cultural transformation to an agile entrepreneurial culture. Finally, the Committee considered the role Mr. Liveris played in building Dow’s brand and becoming an employer of choice through his involvement as Chair to the U.S. Business Council, the President’s Export Council, Vice Chair of the Business Roundtable and as Chair of the Advanced Manufacturing Partnership. | |
Howard I. Ungerleider Chief Financial Officer and Executive Vice President | Mr. Ungerleider serves as Chief Financial Officer and Executive Vice President, beginning his tenure on October 1, 2014. He is accountable for overseeing the Company’s financial management and the integrity of its internal controls, together with leading its Finance function. Prior to this role, he served as Executive Vice President, Advanced Materials. Mr. Ungerleider’s compensation for 2014 reflects his achievements spanning both positions. Through his leadership of businesses aligned to the former Electronic and Functional Materials and Coatings and Infrastructure Solutions operating segments, Mr. Ungerleider drove a series of targeted actions to prioritize innovation investments in attractive, high-margin portions of the value chain, while streamlining structural costs – resulting in EBITDA increases for these segments during the first three quarters of 2014. The Committee also considered Mr. Ungerleider’s leadership in driving crucial cost-mitigation actions in the fourth quarter that resulted in $2.8 billion of cash flow from operations for Dow in the fourth quarter of 2014 – an increase of $500 million year over year. |
| 1 | “Adjusted earnings per share” is defined as earnings per share excluding the impact of “Certain items.” See Appendix A on pages A-1 – A-2 for a reconciliation of Adjusted earnings per share to “Earnings per common share — diluted.” |
| 2 | Adjusted EBITDA is defined as EBITDA excluding the impact of “Certain Items.” See Appendix A on pages A-1 – A-2 for a reconciliation to the most directly comparable U.S. GAAP measure. |
| EBITDA is defined as earnings (i.e. “Net Income”) before interest, income taxes, depreciation and amortization. See Appendix A on pages A-1 – A-2 for a reconciliation of EBITDA to “Net Income Available for The Dow Chemical Company Common Stockholders.” |
| 2015 Proxy Statement | | 23 |
COMPENSATION INFORMATION (continued)
William H. Weideman Former Chief Financial Officer and Executive Vice President | Mr. Weideman served as Chief Financial Officer and Executive Vice President through September 30, 2014, and provided oversight for the financial management and integrity of the internal controls for the Company, together with leadership for its Finance function. Mr. Weideman’s compensation for 2014 reflects his contributions in driving ongoing progress against the Company’s portfolio management priorities during this period, including $2 billion in proceeds expected from divestitures of non-strategic assets and businesses signed or completed in 2014. In addition, he drove targeted productivity and working capital management actions to offset various headwinds and ongoing macroeconomic volatility, enabling an adjusted return on capital of 10.8 percent for 2014. Mr. Weideman led balance sheet-focused measures and the implementation of productivity actions that enabled the Company to achieve record cash flow from operations of $6.5 billion, excluding theK-Dow award. The Committee also considered his leadership in the implementation of the Company’s new operating segments. | |
James R. Fitterling Vice Chairman, Business Operations | Mr. Fitterling serves as Vice Chairman, Business Operations – appointed as Vice Chairman and receiving revised accountability effective October 1, 2014. Under Mr. Fitterling’s leadership, the Performance Plastics segment delivered significant, year-over-year adjusted EBITDA growth – resulting in a sequential full-year adjusted EBITDA record for the segment. Within his oversight of the Company’s U.S. Gulf Coast investment program, Mr. Fitterling maintained operational discipline, overcoming cost-pressures and delivering crucial milestones for these key long-term growth catalysts – including advancing construction progress in line with commitments on both the world-scale ethylene production facility and derivative units. The Committee also considered Mr. Fitterling’s contributions aligned to the Company’s seminal project to carve out Dow’s chlorine value chain – which remains on track for completion. Additionally, Mr. Fitterling’s achievements aligned to his newly appointed and expanded role were also considerations in the Committee’s decision – notably an 18 percent EBITDA increase in Performance Materials & Chemicals, illustrating Mr. Fitterling’s leadership in maintaining continued progress in line with previously committed actions to further streamline costs, enhance productivity and drive growth. | |
Joe E. Harlan Vice Chairman, Market Businesses and Chief Commercial Officer | Mr. Harlan serves as Vice Chairman, Market Businesses and Chief Commercial Officer – appointed as Vice Chairman and Chief Commercial Officer and receiving revised accountability effective October 1, 2014. The Committee considered Mr. Harlan’s leadership of margin-improvement actions across various under-performing businesses – notably his role in the more than $400 million EBITDA improvement in Polyurethanes and Epoxy. The Committee also considered Mr. Harlan’s achievements within his recently appointed role – including the decisive steps he is taking to prioritize costs and enhance returns across various businesses. In the Consumer Solutions, Infrastructure Solutions and Agricultural Sciences segments, Mr. Harlan’s leadership resulted in various fourth quarter achievements for these market-aligned portfolios: Agricultural Sciences achieved record fourth quarter sales and EBITDA; Consumer Solutions reported increased adjusted EBITDA, with strong volume and cost-discipline actions. In line with his leadership of the Company’s marketing and sales strategy and organization, the Committee recognized Mr. Harlan’s implementation of a multi-tiered go-to-market action plan and sell-up/sell-out strategy to drive higher long-term returns. | |
Charles J. Kalil General Counsel and Executive Vice President | Mr. Kalil serves as General Counsel and Executive Vice President. Mr. Kalil’s compensation for 2014 reflects his oversight and contributions as counsel to the Company as well as his leadership of the Company’s litigation and corporate transactions. The Committee also considered Mr. Kalil’s commitment to ethics and compliance, as under his leadership the Ethics and Compliance group revised the Company’s anti-corruption due diligence process to improve cycle time and monitoring, revised its global investigation procedures, and prepared management of change process for Office of Ethics and Compliance charters, policies and tools. |
| 24 | | 2015 Proxy Statement |
COMPENSATION INFORMATION (continued)
Long-Term Incentive Awards
Each year the Company grants equity-based LTI awards to leaders and other key employees who demonstrate high performance. Dow chooses this component of compensation to motivate and reward employees for long-term stockholder value creation and the attainment of Company performance goals, retain top talent and create an ownership alignment with stockholders. As with Dow’s approach for all elements of compensation, LTI grant levels are targeted at the median of the Survey Peer Group for comparable positions. Performance metrics and stock price determine the actual payout of LTI grants.
2014 Long-Term Incentive Award Decisions
As part of our response to stockholder feedback, the Committee made two substantive changes to our LTI program that took effect for LTI programs beginning in 2014. The weighting for Performance Shares was increased to 45% – making it the largest component of our LTI mix. The Committee made this change in response to stockholder feedback and to align a greater portion of our executives’ earned compensation to Dow’s relative TSR and ROC performance. The Committee also reduced the maximum payout of the Performance Share programs to 200% from 250% reflecting best practices.
| LTI Vehicle | 2014 Weighting | Vesting Terms and Other Conditions | ||||
| Performance Shares | 45 | % | Performance Shares can be earned at between 0 and 200% (250% for awards granted prior to 2014) of the target award opportunity after a three-year performance period based on an equal weighting of two goals: • Dow’s TSR versus a pre-established peer group • Dow’s ROC relative to pre-established goals Accumulated dividend equivalents are paid only on earned shares after the three-year performance period has ended. | |||
| Stock Options | 30 | % | The exercise price equals the closing price on the date of grant. Options vest in three equal annual installments and expire after ten years. | |||
| Deferred Stock | 25 | % | Deferred stock grants vest after three years. During the vesting period, holders of outstanding deferred stock grants receive quarterly payments equal to the dividend paid on equivalent shares of Dow Common Stock. | |||
In February 2014, the Committee approved the LTI grant for each NEO as shown in the Summary Compensation Table based upon Dow’s Survey Peer Group median LTI values and reflective of the mix of equity vehicles described above. There were no material differences between the Survey Peer Group median LTI target values and the target LTI award values for any of the NEOs. The Committee also approved the results of the 2012-2014 Performance Share Program which delivered earned shares in February 2015 and the 2014-2016 Performance Share Program design and metrics.
Performance Share Program Results and Design
The 2012-2014 Performance Share Program focused participants on Relative TSR and ROC. The metric goals and payout result for the programs were as follows:
2012-2014 Performance Share Program (Earned shares delivered in February 2015)
Performance Measure Used (Weighting) | Rationale for Measure | Threshold Goal | Target Goal | 200% Goal | Result/Payout | |||||
| ROC (50%) | Reflects operating strength, effectiveness in utilizing capital and profitability | 8.5% | 11.0% | 13.5% | 9.56% ROC/ 62.4% Payout | |||||
| Relative TSR (50%) | Reflects Dow’s TSR versus a peer group of companies’ TSR | 26th Pctl. | 51st Pctl. | 76th Pctl. | 38th Pctl./ 64.9% Payout | |||||
| Total Weighted Payout | 63.7% | |||||||||
In February 2014, the Committee approved the 2014-2016 Performance Share Plan. As noted above, Performance Share vesting is based upon TSR and ROC performance over a three-year calendar year period. The following table illustrates the measures used, weighting and goals for the 2014-2016 Performance Share Program.
| 2015 Proxy Statement | | 25 |
COMPENSATION INFORMATION (continued)
2014-2016 Performance Share Program (Earned shares delivered in February 2017)
Performance Measure Used (Weighting) | Rationale for Measure | Threshold Goal | Target Goal | Maximum 200% Goal | ||||
| ROC (50%) | Reflects operating strength, effectiveness in utilizing capital and profitability. | 9.75% | 12.0% | 13.5% | ||||
| Relative TSR (50%) | Reflects Dow’s TSR versus a peer group of companies’ TSR. | 26th Pctl. | 51st Pctl. | 76th Pctl. |
Return on Capital
ROC measures how effectively a company has utilized the money invested in its operations and is calculated as Net Operating Profit after Tax (excluding certain items) divided by total average capital. Net Operating Profit after Tax (excluding certain items) is a net income measure the Company uses in presentations to investors that excludes preferred stock dividends, non-controlling interests, and interest expense, exclusive of the certain items identified on pages A-1 – A-2, and as presented in the reconciliations available atwww.dow.com/investor/earnings. To achieve a target payout on the ROC portion, Dow’s ROC must equal or exceed pre-established ROC goals for the same period.
The target goal represents our expected level of ROC over the three-year performance period while the threshold goal represents the minimum level of performance that would warrant any payout and the maximum goal represents stretch performance that would warrant a maximum payout. Dow’s ROC target is 10% across the industry cycle and as a result the target for Performance Share Programs ranges from 10% to 12% on current outstanding grants.
Relative Total Shareholder Return and TSR Peer Group
TSR is defined as stock price appreciation plus dividends paid. For Dow and each company in the peer group, a beginning price using a 30 trading day averaging period at the beginning of the performance period and an ending price using a 30 trading day averaging period at the end of the performance period are calculated and used to create a percentile ranking.
Dow competes with a wide variety of both industry and non-industry specific companies for executive talent and investor assets. In order to ensure our executive pay program is competitive and has a strong link to relative stock price performance, we maintain two peer groups to evaluate and determine executive compensation: the Total Shareholder Return (“TSR”) Peer Group and the Survey Peer Group (discussed on page 29).
The TSR peer group is comprised predominately of companies selected from the S&P 500 Chemical Index and several companies from Dow’s Survey Peer Group that are technology-based and manufacturing-based global companies. The table below shows the 17 company TSR peer group used for performance share programs prior to 2015.
TSR Peer Group
| Description | Purpose | Source | Companies | |||||||||||
| Represents a selection of companies that Dow competes with for investor assets and is comprised of companies within the S&P 500 Chemicals Index and Dow’s Survey Peer Group | Used to assess relative TSR performance and used to determine any payout related to the relative TSR portion of Dow’s Performance Share Program | TSR data is gathered through financial reporting tools such as Capital IQ | Data provided by Capital IQ $ in millions |
| ||||||||||
Company | Revenues FY 2014 | Market Cap 31-Dec-14 | ||||||||||||
| Air Products and Chemicals Inc. | $ | 10,439 | $ | 30,824 | ||||||||||
| CF Industries Holdings, Inc. | $ | 4,743 | $ | 13,555 | ||||||||||
| Ecolab Inc. | $ | 14,281 | $ | 31,368 | ||||||||||
| FMC Corporation | $ | 4,038 | $ | 7,600 | ||||||||||
| Monsanto Company | $ | 15,855 | $ | 57,776 | ||||||||||
| Praxair, Inc. | $ | 12,273 | $ | 37,750 | ||||||||||
| 3M Company | $ | 31,821 | $ | 104,514 | ||||||||||
| Honeywell International Inc. | $ | 40,306 | $ | 78,218 | ||||||||||
| Johnson Controls, Inc. | $ | 42,828 | $ | 32,271 | ||||||||||
| BASF SE | $ | 81,934 | $ | 71,085 | ||||||||||
| Eastman Chemical Company | $ | 9,527 | $ | 11,267 | ||||||||||
| E.I. du Pont de Nemours and Company | $ | 34,906 | $ | 66,986 | ||||||||||
| International Flavors & Fragrances Inc. | $ | 3,089 | $ | 8,207 | ||||||||||
| PPG Industries, Inc. | $ | 15,360 | $ | 31,722 | ||||||||||
| Sigma-Aldrich Corporation | $ | 2,785 | $ | 16,348 | ||||||||||
| The Procter & Gamble Company | $ | 83,062 | $ | 246,136 | ||||||||||
| United Technologies Corporation | $ | 65,100 | $ | 104,841 | ||||||||||
| Median | $ | 15,360 | $ | 32,271 | ||||||||||
| The Dow Chemical Company | $ | 58,167 | $ | 53,754 | ||||||||||
| 26 | | 2015 Proxy Statement |
COMPENSATION INFORMATION (continued)
In 2014, after a thorough review of prevalent and emerging market practices, the Committee decided that beginning with the 2015-2017 Performance Share Program, the TSR peer group will be the S&P 500 Index. The Committee believes the S&P 500 Index represents the broadest and most reliable measurement to assess total shareholder return.
Instead of receiving the Performance Share Award in the form of Dow common stock, the NEOs and other executives subject to stock ownership requirements may elect to receive a cash payment equal to the value of the stock award on the date of delivery. Participants may only make this cash election if they meet or exceed the executive stock ownership guidelines for their job level.
SECTION THREE: ADDITIONAL INFORMATION ABOUT OUR EXECUTIVE COMPENSATION PROGRAM
Objectives of Dow’s Executive Compensation Program
There are four primary objectives of Dow’s executive compensation program. The following table describes each objective and how it is achieved.
Compensation Program Objective | How Objective is Achieved | |
| Support the achievement of Dow’s vision and strategy | • Incentive program metrics are tied to both annual and long-term strategic objectives of the Company and reflect metrics used in our reporting of quarterly financial results. • The compensation programs provide an incentive for executives to meet and exceed Company goals. | |
| Motivate and reward executives when they deliver desired business results and stockholder value | • Compensation awards are based upon performance against Company financial and operational goals and business division goals as well as personal performance. Consistent with those metrics used in reporting quarterly results, the financial goals are relative TSR, ROC, Net Income, and Management Operating Cash Flow. • Relative TSR versus a peer group drives half of the payout value in our Performance Share program. | |
| Attract and retain the most talented executives to succeed in today’s competitive marketplace | • Compensation elements and pay opportunities are targeted at the median of the Survey Peer Group that we compete with for talent. • Executives are held accountable for results and rewarded above target levels when Company and personal goals are exceeded. When goals are not met, compensation awards will deliver below target levels. | |
| Create an ownership alignment with stockholders | • LTI awards are equity-based. • Stock ownership requirements in place for top executives, and all NEOs exceed their ownership requirements. • Prohibit speculative transactions, hedging, pledging or margining Company securities. • Approximately 65-70% of NEO pay is equity-based where the value is directly linked to share price appreciation and TSR. |
| 2015 Proxy Statement | | 27 |
COMPENSATION INFORMATION (continued)
Principle Elements of Pay
The elements of the Company’s executive compensation program are presented below in summary format.
| Program | Description & Purpose of Element | |||
Annual Cash Compensation | Base Salary | Annual Base Salary is designed to provide a competitive fixed rate of pay recognizing different levels of responsibility and performance within the Company. | ||
Performance Award
| The Performance Award is an annual cash incentive program to reward employees for achieving critical financial and operational Company goals. | |||
Incentive Equity | Performance Shares | Performance Shares are granted to motivate employees and to reward the achievement of specified financial goals and superior TSR performance over a three-year period. Performance Shares represent 45% of the annual LTI grant value. | ||
| Stock Options | Stock Options are granted to provide incentive for long-term creation of stockholder value. Stock Options represent 30% of the annual LTI grant value. | |||
| Deferred Stock | Deferred Stock is granted in order to help the Company retain its NEOs and other key employees. Deferred Stock represents 25% of the annual LTI grant value. | |||
Benefit Programs | Health, Welfare and Retirement Programs | Executives participate in the same benefit programs that are offered to other salaried employees. Dow benefits are designed to provide market competitive benefits to protect employees’ and their covered dependents’ health and welfare and provide retirement benefits. | ||
| Other | Perquisites | Limited perquisites are provided to executives to facilitate strong performance on the job and enhance their personal security and productivity. | ||
Pay at Risk
The following elements comprisemix of the total direct compensation awardedelements for the CEO and other NEOs are shown below. The charts outline the size, in percentage terms, of each element of targeted direct compensation at the date of grant. The red section of the charts reflects the incentive or at-risk performance-based components of compensation (e.g., 71% of the CEO’s compensation is at-risk performance based).
| 28 | | 2015 Proxy Statement |
COMPENSATION INFORMATION (continued)
Peer Group and Survey Pay Data
Dow competes with a wide variety of both industry and non-industry specific companies for executive talent and investor assets. In order to ensure our NEOs:executive pay program is competitive and has a strong link to stock price performance, we maintain two peer groups to evaluate and determine executive compensation: the Survey Peer Group (discussed below) and the Total Shareholder Return (“TSR”) Peer Group (discussed on page 26).
The Committee considers relevant market pay practices as one of several factors when establishing executive compensation levels and evaluating compensation programs including base salary, performance-based annual cash incentive award (“Performance Award”),incentives and equity based Long Term Incentive (“LTI”) awards consisting of Performance Shares, Stock Options and Deferred Stock.
We emphasize stock ownership. LTI awards are delivered as equity-based awards to senior executives. Dow executives are requiredlong-term incentives. In order to maintain until retirement, between four and six times their annual base salary in Dow stock. This encourages managing from an owner’s perspective and better aligns their financial interests with those of Dow stockholders.
We target all elementsthe competitiveness of our compensation programs, toDow compares its executive compensation programs against a Survey Peer Group of 20 companies. These companies provide a competitiverelevant comparison based on their similarity to Dow in size and complexity taking into account factors such as revenues, market capitalization, global scope of operations and diversified product portfolios. The Committee believes that a mix of both industry and non-industry peers provides a balanced and realistic perspective on the competition for the pool of potential executive talent.
Market pay data for the Survey Peer Group is gathered through compensation opportunity atsurveys conducted by Towers Watson, Mercer and Equilar. Dow targets themedian range of ourthe Survey Peer Group for all compensation elements in order to attract, motivate, develop and retain top level executive talent. Annual Performance Award targets and long-term incentive grants reflect market median values while actual payouts are dependent on performance.
The Survey Peer Group is periodically evaluated and updated to ensure the companies in the group remain relevant. The Survey Peer Group was last modified in 2012 when Tyco International and Kraft Foods were eliminated since both companies split into two companies and the resulting company size and profile no longer met the peer group(the “Survey Group”) criteria.
Lockheed Martin and Coca-Cola were selected as replacements based upon an assessment of companies whose compensation is surveyed by the Compensationwithin our industry and Leadership Development Committee (the “Committee”). Actual payouts under these programs can be above in adjacent industries, companies with profiles similar to Dow’s based upon business complexity, innovation and/or below the median based on Companytechnology, industries and personal performance.markets served, as well as companies with similar revenue size, market capitalization, geographic footprint, and those companies we compete with for talent.
Survey Peer Group
| Description | Purpose | Source | Companies | |||||||||||
| Represents companies that Dow competes with for talent and with profiles similar to Dow in terms of revenues, market capitalization, global presence, business complexity, innovation and/or technology and industries/markets served. | To understand and evaluate how each NEO’s total direct compensation (Base salary + Performance Award + LTI) compares with the total direct compensation provided to similar roles within this peer group. Dow targets the median of the Survey Peer Group for all elements of compensation. Also used to compare program design and best practices. | Data is gathered through Mercer, Equilar and Towers CDB Executive Compensation Survey and from companies’ proxy statements or other public disclosures. | Data provided by Capital IQ $ in millions |
| ||||||||||
Company | Revenues FY 2014 | Market Cap 31-Dec-14 | ||||||||||||
| 3M Company | $ | 31,821 | $ | 104,514 | ||||||||||
| Alcoa Inc. | $ | 23,906 | $ | 18,614 | ||||||||||
| Archer Daniels Midland Company | $ | 81,201 | $ | 33,477 | ||||||||||
| The Boeing Company | $ | 90,762 | $ | 92,667 | ||||||||||
| Caterpillar Inc. | $ | 55,184 | $ | 55,412 | ||||||||||
| The Coca-Cola Company | $ | 45,998 | $ | 184,928 | ||||||||||
| E.I. du Pont de Nemours and Company | $ | 34,906 | $ | 66,986 | ||||||||||
| Eli Lilly and Company | $ | 19,616 | $ | 73,598 | ||||||||||
| Emerson Electric Co. | $ | 24,537 | $ | 42,732 | ||||||||||
| General Electric Company | $ | 148,462 | $ | 253,766 | ||||||||||
| Honeywell International Inc. | $ | 40,306 | $ | 78,218 | ||||||||||
| Johnson & Johnson | $ | 74,331 | $ | 292,703 | ||||||||||
| Johnson Controls Inc. | $ | 42,828 | $ | 32,271 | ||||||||||
| Lockheed Martin Corporation | $ | 45,600 | $ | 60,491 | ||||||||||
| Monsanto Company | $ | 15,855 | $ | 57,776 | ||||||||||
| PepsiCo, Inc. | $ | 66,683 | $ | 141,519 | ||||||||||
| Pfizer Inc. | $ | 49,605 | $ | 196,265 | ||||||||||
| PPG Industries, Inc. | $ | 15,360 | $ | 31,722 | ||||||||||
| The Procter & Gamble Company | $ | 83,062 | $ | 246,136 | ||||||||||
| United Technologies Corporation | $ | 65,100 | $ | 104,841 | ||||||||||
| Median | $ | 45,799 | $ | 75,908 | ||||||||||
| The Dow Chemical Company | $ | 58,167 | $ | 53,754 | ||||||||||
| 2015 Proxy Statement | | 29 |
COMPENSATION INFORMATION (continued)
OurexecutivesBenefits
The Company provides a comprehensive set of benefits to eligible employees. These include medical, dental, life, disability, accident, retiree medical and life, pension and savings plans. The NEOs are eligible to participate in the same group benefitplans as most other salaried employees. In addition, because highly compensated employees are subject to U.S. tax limitations on contributions to some retirement plans, the Company has created non-qualified retirement programs including pension and retirement plans, on substantiallyintended to provide these employees with the same termsbenefits they would have received under the qualified plans without the tax limits. The NEOs are eligible to participate in the same non-qualified retirement plans as all other highly compensated salaried employees.
Perquisites
The Company provides the NEOs and other selected executives limited perquisites in order to enhance their security and productivity. The Committee regularly reviews the perquisites provided to the NEOs as part of their overall review of executive compensation. In 2012, the Committee eliminated the company car perquisite for all executives except the CEO. The Committee determined that the other current perquisites are within an appropriate range of competitive compensation practices. Details about the NEOs’ perquisites, including the aggregate incremental cost to the Company, are shown in the Summary Compensation Table under the “All Other Compensation” column and the accompanying narrative. The Company provides the NEOs and other selected executives the following limited perquisites:
Financial and Tax Planning Support
Our executives are providedlimited perquisites which are granted to facilitate strong, focused performance on their jobs.Executive Physical Examination
Executive Excess Umbrella Liability Insurance
Home Security Alarm System
In addition, the CEO is provided a company car and is required by the Board of Directors for security and immediate availability reasons to use corporate aircraft for personal travel.
Factors and Steps in Setting Pay
Compensation for the NEOs and other executive officers is evaluated and set annually by the Committee after considering the following factors:
Median levels of compensation for similar jobs and job levels in the market, taking into account revenue relative to the Survey Peer Group
Company performance against financial measures including net income, earnings per share, EBITDA (i.e. Net Income, before interest, income taxes, depreciation, and amortization), ROC, relative TSR, operating cash flow, and cost management discipline
Company performance relative to goals approved by the Committee
Business climate, economic conditions and other factors
Each executive’s experience, knowledge, skills and personal contributions
The CEO makes recommendations to the Committee regarding compensation for senior executives after reviewing the Company’s overall performance, each executive’s personal contributions and relevant compensation market data from Dow’s Survey Peer Group for similar jobs and job levels. The CEO uses discretion when making pay recommendations to the Committee. The Committee exercisesis responsible for approving NEO compensation and has broad discretion when setting compensation types and amounts.
With respect to the CEO, the Committee annually reviews and approves the corporate goals and objectives relevant to the CEO’s compensation, evaluates the CEO’s performance against those objectives and makes recommendations to the Board of Directors regarding the CEO’s compensation level based on that evaluation. The Committee considers compensation market data from Dow’s Survey Peer Group and uses broad discretion when setting compensation types and amounts for the CEO. The Board of Directors is responsible for approving the CEO’s compensation types and amounts.
As part of the review, Company management and the Committee may also review summary total compensation scenarios for the NEOs. All aspects of compensation are modeled under various scenarios, such as stock price sensitivity and business performance. The scenario sheets present the estimated dollar value of compensation components provided to the NEOs during the most recent fiscal year. They are used as a reference point to assist the Committee’s overall understanding of NEO compensation.
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COMPENSATION INFORMATION (continued)
Committee Resources in Setting Pay
The Committee, which is comprised entirely of independent Directors, is responsible for overseeing the Company’s executive compensation policies and programs with the goal of maintaining compensation that is competitive within the markets in which Dow competes for talent and reflective of the long-term investment interests of Company stockholders. The Committee reviews and approves the compensation design, compensation levels and benefits programs for the NEOs and other senior leaders. The Committee also monitors Company processes on executive succession and work environment/culture. You can learn more about the Committee’s purpose, responsibilities, structure and other details by reading the Committee’s charter which can be found in the Corporate Governance section of the Company’s website atwww.DowGovernance.com.
The Committee has several resources, analytical tools and performance measures it considers in determining compensation actions when necessary duelevels.
| Committee Resource | Description | |
| Committee Consultant | The Committee has retained a compensation consultant from Mercer. The consultant, Michael Halloran, reports directly to the Committee. He advises the Committee on trends and issues in executive compensation and the group of companies in the Survey Peer Group. He consults on the competitiveness of the compensation structure and levels of Dow’s executive officers and provides advice and recommendations related to proposed compensation and the design of our compensation programs. The Committee has the sole authority to retain and oversee the work of Mr. Halloran. Mr. Halloran does not provide services to Company management unless approved by the Chair of the Committee. In 2014, no such approvals were requested or given as Mr. Halloran provided no services to management. Mercer has multiple safeguards and procedures in place to maintain the independence of the consultants in their executive compensation consulting practice, and the Committee has determined that the compensation consultant’s work has not raised any conflict of interest. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer’s executive compensation consulting and its other administrative and consulting business units from a leadership, performance measurement, and compensation perspective. In 2014, Mercer and its affiliates provided approximately $1.7 million in unrelated human resources consulting services to Dow. The decision to engage Mercer to provide these other services was made by management and was reported to the Committee. Mercer’s aggregate fees for executive and director compensation consulting services in 2014 were approximately $121,041. The Committee has considered factors relevant to Mr. Halloran’s independence from management under SEC rules and has determined that Mr. Halloran is independent from management. | |
| Dow’s Executive Compensation Department | Dow’s Executive Compensation Department provides additional analysis and counsel as requested by the Committee related to: • Gathering the compensation data of the Survey Peer Group • Benchmarking compensation components (base salary, Performance Award, LTI awards) against the Survey Peer Group • Assisting the CEO in making preliminary recommendations of base salary structure, design and target award levels for the Performance Award and design and award levels for LTI awards The Executive Compensation Department has retained the compensation consulting services of Towers Watson. Towers Watson provides the following assistance to the Executive Compensation Department: • Survey Peer Group compensation information for executives and non-employee Directors • Benchmarking of key compensation practices and trends in executive compensation |
| 2015 Proxy Statement | | 31 |
COMPENSATION INFORMATION (continued)
SECTION FOUR – EXECUTIVE COMPENSATION GOVERNANCE
In addition to extraordinary changesadhering to the processes described in the economy, unusual events or overall Company performance.preceding sections, the Committee has adopted several policies related to Executive Compensation as detailed below.
Best Practices in Executive Compensation
In an era of increased attention to corporate governanceFinancial and the link between pay and performance, the Company continues to focus on the following key governance practices for executive compensation. For more information on other governance practices, refer to Section Four “Executive Compensation Governance.”
Use of an independent compensation consultant who is engaged directly by the Committee to advise on executive compensation matters.Tax Planning Support
Maintain a strong link between financial and operational goals, stockholder value creation and executive compensation by having relative Total Stockholder Return (“TSR”), Net Income, Return on Capital (“ROC”) and cost control in our incentive programs. In 2012, the Committee added Cash Flow to the annual Performance Award program (starting with the 2013 program) which will measure our ability to translate earnings to cash which allows the Company to invest for the future as well as return value to the shareholders.Executive Physical Examination
Ensure our LTI mix includes significant weighting (75% of the LTI grant) toward performance equity vehicles (Stock Options and Performance Shares).Executive Excess Umbrella Liability Insurance
Balance risk throughHome Security Alarm System
In addition, the CEO is provided a company car and is required by the Board of Directors for security and immediate availability reasons to use corporate aircraft for personal travel.
Factors and Steps in Setting Pay
Compensation for the NEOs and other executive officers is evaluated and set annually by the Committee after considering the following factors:
Median levels of compensation programs that are designedfor similar jobs and job levels in the market, taking into account revenue relative to discourage excessive risk taking by executive officers. These design features include a robust clawback policy, strong stock ownership guidelines, and multiple bottom line measures in our incentive programs.the Survey Peer Group
Prohibit our executives from engaging in speculative transactions in Company securitiesperformance against financial measures including net income, earnings per share, EBITDA (i.e. Net Income, before interest, income taxes, depreciation, and from pledging Company securities, or holding Company securities in margin accounts.amortization), ROC, relative TSR, operating cash flow, and cost management discipline
Prohibit new or amended Change-in-Control (“CIC”) agreements. For existing CIC agreements, severance payments are equalCompany performance relative to two timesgoals approved by the executive’s annual base salary and target Performance Award (2.99 times for the CEO) and double triggers are in place in order for an executive to receive benefits.Committee
Consider input of stockholders received through our active stockholder engagement initiativesBusiness climate, economic conditions and the advisory say-on-pay results. In making executive compensation determinations,other factors
Each executive’s experience, knowledge, skills and personal contributions
The CEO makes recommendations to the Committee consideredregarding compensation for senior executives after reviewing the results ofCompany’s overall performance, each executive’s personal contributions and relevant compensation market data from Dow’s Survey Peer Group for similar jobs and job levels. The CEO uses discretion when making pay recommendations to the non-binding, advisory proposal on our executiveCommittee. The Committee is responsible for approving NEO compensation set forth in our 2012 Proxy Statement. Our stockholders approved our executiveand has broad discretion when setting compensation program with 83% support. After considering our say-on-pay voting results, stockholder input, compensation consultant advicetypes and other factors addressed inamounts.
With respect to the following discussion,CEO, the Committee determined notannually reviews and approves the corporate goals and objectives relevant to make any changes to our executive compensation programs as a result of the vote. The Committee will continue to consider the results from this year’s and future advisory stockholder votes regarding our executive compensation program.
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Objectives of Dow’s Executive Compensation Program
There are four primary objectives of Dow’s executive compensation program. The following table describes each objective and how it is achieved.
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Elements of Dow’s Executive Compensation Program
The elements of the Company’s executive compensation program are presented below in summary format and more fully explained in the sections that follow.
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The mix of the three key compensation elements for the CEO and other NEOs are shown below. The charts outline the size, in percentage terms, of each element of targeted direct compensation. The gray sections of the charts reflect the incentive or at-risk performance-based components of compensation (e.g., 89% of the CEO’s compensation, evaluates the CEO’s performance against those objectives and makes recommendations to the Board of Directors regarding the CEO’s compensation level based on that evaluation. The Committee considers compensation market data from Dow’s Survey Peer Group and uses broad discretion when setting compensation types and amounts for the CEO. The Board of Directors is at risk).responsible for approving the CEO’s compensation types and amounts.
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ElementsAs part of Compensation: Base Salary
Base salary is a fixed portionthe review, Company management and the Committee may also review summary total compensation scenarios for the NEOs. All aspects of compensation based on an individual’s skills, responsibilities, experience and sustained performance. Base salaries for executives are benchmarked against similar jobs at other companies and are targeted at the median (50th percentile) of the Survey Group after adjusting for Dow’s revenue size. Actual salaries reflect an individual’s responsibilities and more subjective factors,modeled under various scenarios, such as stock price sensitivity and business performance. The scenario sheets present the estimated dollar value of compensation components provided to the NEOs during the most recent fiscal year. They are used as a reference point to assist the Committee’s (and the CEO’s in the caseoverall understanding of other NEOs) assessment of the individual NEO’s performance.NEO compensation.
Changes in base salary for the NEOs, as well as for all Dow salaried employees, depend on compensation versus the external market for similar jobs, the individual’s current salary compared to the market, changes in job responsibilities and the employee’s contributions to Dow’s performance as determined by the Committee.
Elements of Compensation: Performance Award
The Performance Award is an annual cash incentive program. Dow uses this component of compensation to reward employees for achieving critical annual Company goals. Meeting or exceeding our annual business and financial goals is important to executing our long-term business strategy and delivering long-term value to stockholders. No Performance Award is payable to NEOs or any officer of the Company unless pre-established minimum Net Income goals are achieved. The 1994 Executive Performance Plan establishes a minimum performance goal of $700 million of net income in order for NEOs to be eligible to receive a payout of the Company component of the Performance Award. This requirement is part of Dow’s strategy for complying with Internal Revenue Code Section 162(m).
Actual award payouts are determined each February following completion of the plan year by measuring the performance against each award component (earned base award). Actual awards for employees including NEOs can be adjusted up or down by 25% from the earned base award based on individual performance and contributions as determined by the Committee.
Elements of Compensation: Long-Term Incentive Awards
Each year the Company grants equity-based LTI awards to leaders and other key employees who demonstrate high performance. Dow chooses this component of compensation to motivate and reward employees for long-term stockholder value creation and the attainment of Company performance goals, retain top talent and create an ownership alignment with stockholders. As with Dow’s approach for all elements of compensation, LTI awards are targeted at the median of the Survey Group for comparable positions.
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COMPENSATION INFORMATION (continued)
ElementsCommittee Resources in Setting Pay
The Committee, which is comprised entirely of Compensation: Benefitsindependent Directors, is responsible for overseeing the Company’s executive compensation policies and programs with the goal of maintaining compensation that is competitive within the markets in which Dow competes for talent and reflective of the long-term investment interests of Company stockholders. The Committee reviews and approves the compensation design, compensation levels and benefits programs for the NEOs and other senior leaders. The Committee also monitors Company processes on executive succession and work environment/culture. You can learn more about the Committee’s purpose, responsibilities, structure and other details by reading the Committee’s charter which can be found in the Corporate Governance section of the Company’s website atwww.DowGovernance.com.
The Company provides a comprehensive set of benefits to eligible employees. These include medical, dental, life, disability, accident, retiree medicalCommittee has several resources, analytical tools and life, pension and savings plans. The NEOs are eligible to participateperformance measures it considers in the same plans as most other salaried employees. In addition, because highly compensated employees are subject to U.S. tax limitations on contributions to some retirement plans, the Company has created non-qualified retirement programs intended to provide these employees with the same benefits they would have received under the qualified plans without the tax limits. The NEOs are eligible to participate in the same non-qualified retirement plans as all other highly compensated salaried employees.determining compensation levels.
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| Committee Consultant | The Committee has retained a compensation consultant from Mercer. The consultant, Michael Halloran, reports directly to the Committee. He advises the Committee on trends and issues in executive compensation and the group of companies in the Survey Peer Group. He consults on the competitiveness of the compensation structure and levels of Dow’s executive officers and provides advice and recommendations related to proposed compensation and the design of our compensation programs. The Committee has the sole authority to retain and oversee the work of Mr. Halloran. Mr. Halloran does not provide services to Company management unless approved by the Chair of the Committee. In 2014, no such approvals were requested or given as Mr. Halloran provided no services to management. Mercer has multiple safeguards and procedures in place to maintain the independence of the consultants in their executive compensation consulting practice, and the Committee has determined that the compensation consultant’s work has not raised any conflict of interest. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer’s executive compensation consulting and its other administrative and consulting business units from a leadership, performance measurement, and compensation perspective. In 2014, Mercer and its affiliates provided approximately $1.7 million in unrelated human resources consulting services to Dow. The decision to engage Mercer to provide these other services was made by management and was reported to the Committee. Mercer’s aggregate fees for executive and director compensation consulting services in 2014 were approximately $121,041. The Committee has considered factors relevant to Mr. Halloran’s independence from management under SEC rules and has determined that Mr. Halloran is independent from management. | |
| Dow’s Executive Compensation Department | Dow’s Executive Compensation Department provides additional analysis and counsel as requested by the Committee related to: • Gathering the compensation data of the Survey Peer Group • Benchmarking compensation components (base salary, Performance Award, LTI awards) against the Survey Peer Group • Assisting the CEO in making preliminary recommendations of base salary structure, design and target award levels for the Performance Award and design and award levels for LTI awards The Executive Compensation Department has retained the compensation consulting services of Towers Watson. Towers Watson provides the following assistance to the Executive Compensation Department: • Survey Peer Group compensation information for executives and non-employee Directors • Benchmarking of key compensation practices and trends in executive compensation |
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COMPENSATION INFORMATION (continued)
Elements of Compensation: PerquisitesSECTION FOUR – EXECUTIVE COMPENSATION GOVERNANCE
The Company provides the NEOs and other selected executives limited perquisites in orderIn addition to enhance their security and productivity. The Committee regularly reviews the perquisites providedadhering to the NEOs as part of their overall review of executive compensation. In 2012,processes described in the preceding sections, the Committee eliminated the company car perquisite for all executives except the CEO. The Committee determined that the other current perquisites are within an appropriate range of competitive compensation practices. Details about the NEOs’ perquisites, including the aggregate incremental costhas adopted several policies related to the Company, are shown in the SummaryExecutive Compensation Table under the “All Other Compensation” column and the accompanying narrative. The Company provides the NEOs and other selected executives the following limited perquisites:as detailed below.
FinancialPeer Group and Tax Planning SupportSurvey Pay Data
Dow competes with a wide variety of both industry and non-industry specific companies for executive talent and investor assets. In order to ensure our executive pay program is competitive and has a strong link to stock price performance, we maintain two peer groups to evaluate and determine executive compensation: the Survey Peer Group (discussed below) and the Total Shareholder Return (“TSR”) Peer Group (discussed on page 26).
Executive Physical ExaminationThe Committee considers relevant market pay practices as one of several factors when establishing executive compensation levels and evaluating compensation programs including base salary, annual incentives and long-term incentives. In order to maintain the competitiveness of our compensation programs, Dow compares its executive compensation programs against a Survey Peer Group of 20 companies. These companies provide a relevant comparison based on their similarity to Dow in size and complexity taking into account factors such as revenues, market capitalization, global scope of operations and diversified product portfolios. The Committee believes that a mix of both industry and non-industry peers provides a balanced and realistic perspective on the competition for the pool of potential executive talent.
Market pay data for the Survey Peer Group is gathered through compensation surveys conducted by Towers Watson, Mercer and Equilar. Dow targets the median of the Survey Peer Group for all compensation elements in order to attract, motivate, develop and retain top level executive talent. Annual Performance Award targets and long-term incentive grants reflect market median values while actual payouts are dependent on performance.
Company Car (eliminatedThe Survey Peer Group is periodically evaluated and updated to ensure the companies in the group remain relevant. The Survey Peer Group was last modified in 2012 for all NEOs other thanwhen Tyco International and Kraft Foods were eliminated since both companies split into two companies and the CEO)
Executive Excess Umbrella Liability Insurance
Home Security Alarm System
In addition,resulting company size and profile no longer met the CEO is required by the Boardpeer group criteria.
Lockheed Martin and Coca-Cola were selected as replacements based upon an assessment of Directors for securitycompanies within our industry and immediate availability reasonsin adjacent industries, companies with profiles similar to use corporate aircraft for personal travel.
SECTION TWO – 2012 NEOs’ ACHIEVEMENTS AND COMPENSATION ACTIONS
The following contributionsDow’s based upon business complexity, innovation and/or technology, industries and achievements were taken into consideration by the Committee in making the 2012 compensation decisions.
Andrew Liveris:Mr. Liveris serves as President, Chief Executive Officer and Chairman. Mr. Liveris’ compensation for 2012 reflects his leadership in identifying the economic volatility early in 2012 and taking decisive action to mitigate the conditions. Despite the ever-changing global business conditions and challenges that resulted in slow global demand, Dow moved quickly to deploy $2.5 billion of cost reductions and cash flow improvementsmarkets served, as well as aggressively manage the Company’s portfoliocompanies with similar revenue size, market capitalization, geographic footprint, and prioritize growth investments. Under Mr. Liveris’ leadership, Dow delivered $4 billion of cash flow from operating activities during the year, reduced $613 million of gross debt, and maintained our commitment to rewarding shareholders by increasing dividends declared per share in 2012 by 34%. The Committee also considered Mr. Liveris’ efforts in implementing key initiatives throughout the Company to champion Dow’s commitment to sustainability through his visible and continuous support of Dow’s 2015 Sustainability Goals and his drive to advance Dow’s reputation and brand.those companies we compete with for talent.
William Weideman: Mr. Weideman serves as Executive Vice President and Chief Financial Officer. He is responsible for overseeing the financial management and integrity of the internal controls for the Company and he leads Dow’s Finance function. Mr. Weideman’s compensation for 2012 reflects his contributions in driving productivity improvements to mitigate external headwinds. This includes managing our $2.6 billion in Capital Expenditures, and taking strategic actions toward cost control, restructuring and cash flow improvement. Finally, the Committee considered the fact that under Mr. Weideman’s leadership Dow improved its investment grade rating – receiving an upgrade from Moody’s in 2012, which allowed us to successfully issue $2.5 billion of new debt with 10- and 30-year tenor at historical low coupons averaging 3.7%.
Charles Kalil: Mr. Kalil serves as Executive Vice President, General Counsel and Corporate Secretary. Mr. Kalil’s compensation for 2012 reflects his oversight and contributions as counsel to the Company as well as his leadership of the Company’s litigation and corporate transactions. Under Mr. Kalil’s leadership, the K-Dow arbitration resulted in a $2.16 billion partial award issued in the Company’s favor by the International Chamber of Commerce. On March 4, 2013, the Company received the release of the final award representing the awarding of additional costs and interest with the two awards totaling $2.4 Billion.
Carol Williams: Ms. Williams serves as Executive Vice President, Manufacturing & Engineering, Supply Chain and Environmental, Health and Safety (EH&S) Operations. The Committee considered Ms. Williams’ leadership of the significant and strategic restructuring in Manufacturing and Engineering which included shutting down nearly 30 Dow manufacturing plants – primarily in Europe and the United States. Ms. Williams worked with the Business leadership to reduce or eliminate capital spending for projects that are no longer a priority in the current slow growth environment. Ms. Williams led efforts that resulted in significant reduction in fixed costs and raw materials savings as well as further improvements in reliability as well as working capital and capacity increases.
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James Fitterling: Mr. Fitterling serves as Executive Vice President and President of Dow Feedstocks, Performance Plastics, Asia and Latin America. Under Mr. Fitterling’s leadership, the Hydrocarbons business and Performance Plastics segment achieved their financial goals for the year. In 2012, Mr. Fitterling enabled a number of key strategic projects for the Company. Mr. Fitterling has oversight for the Company’s U.S. Gulf Coast investment strategy, where we achieved the first major milestone with the successful restart of the St. Charles, Louisiana ethylene cracker. The Committee also considered Mr. Fitterling’s significant contributions to the Corporate Strategy Development.
2012 Compensation Actions
The Committee approved the following compensation and awards for the CEO after considering Dow’s Survey Peer Group market data and the 2012 accomplishments of the Company and the CEO. After considering input from the CEO, the Committee approved the following pay actions for the four other NEOs in 2012. Amounts shown below may differ from those shown in the Summary Compensation Table due to salary adjustments that occurred during the year and the application of financial accounting standards grant pricing for the Long Term Incentives. The values below reflect the compensation decisions made by the Committee.
2012 COMPENSATION ACTIONS
| Name | Base Salary ($) | Performance Award ($) | Deferred Stock Awards ($) | Performance Share Awards ($) | Option Awards ($) | Total Compensation ($) | ||||||||||||||||||
Andrew Liveris | 1,820,000 | 1,368,640 | 3,025,320 | 4,235,040 | 4,840,080 | 15,289,080 | ||||||||||||||||||
William Weideman | 861,378 | 407,001 | 862,580 | 1,207,680 | 1,380,079 | 4,718,718 | ||||||||||||||||||
Charles Kalil | 972,441 | 459,478 | 862,580 | 1,207,680 | 1,380,079 | 4,882,258 | ||||||||||||||||||
Carol Williams | 921,317 | 454,670 | 862,580 | 1,207,680 | 1,380,079 | 4,826,326 | ||||||||||||||||||
James Fitterling | 860,950 | 424,879 | 862,580 | 1,207,680 | 1,380,079 | 4,736,168 | ||||||||||||||||||
Data provided by Capital IQ $ in millions CompanyDescription Purpose Source Companies Represents companies that Dow competes with for talent and with profiles similar to Dow in terms of revenues, market capitalization, global presence, business complexity, innovation and/or technology and industries/markets served. To understand and evaluate how each NEO’s total direct compensation (Base salary + Performance Award + LTI) compares with the total direct compensation provided to similar roles within this peer group. Dow targets the median of the Survey Peer Group for all elements of compensation. Also used to compare program design and best practices. Data is gathered through Mercer, Equilar and Towers CDB Executive Compensation Survey and from companies’ proxy statements or other public disclosures. Revenues
FY 2014 Market Cap
31-Dec-14 3M Company $ 31,821 $ 104,514 Alcoa Inc. $ 23,906 $ 18,614 Archer Daniels Midland Company $ 81,201 $ 33,477 The Boeing Company $ 90,762 $ 92,667 Caterpillar Inc. $ 55,184 $ 55,412 The Coca-Cola Company $ 45,998 $ 184,928 E.I. du Pont de Nemours and Company $ 34,906 $ 66,986 Eli Lilly and Company $ 19,616 $ 73,598 Emerson Electric Co. $ 24,537 $ 42,732 General Electric Company $ 148,462 $ 253,766 Honeywell International Inc. $ 40,306 $ 78,218 Johnson & Johnson $ 74,331 $ 292,703 Johnson Controls Inc. $ 42,828 $ 32,271 Lockheed Martin Corporation $ 45,600 $ 60,491 Monsanto Company $ 15,855 $ 57,776 PepsiCo, Inc. $ 66,683 $ 141,519 Pfizer Inc. $ 49,605 $ 196,265 PPG Industries, Inc. $ 15,360 $ 31,722 The Procter & Gamble Company $ 83,062 $ 246,136 United Technologies Corporation $ 65,100 $ 104,841 Median $ 45,799 $ 75,908 The Dow Chemical Company $ 58,167 $ 53,754
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The 2012 Performance Award resulted in an earned base award equal to 47% of the target award opportunity for corporate employees. As allowed by the plan, an individual performance factor may also be applied for each NEO to reflect their personal contributions for the year as determined by the Committee. Shown below is additional detail on the individual 2012 Performance Award Calculation for each NEO.
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2012 PERFORMANCE AWARD DETAILED CALCULATION
| Name | Year End Base Salary (a) | PA (b) | PA Target Amount (c) | Company / Business Funding Level (d) | Individual (e) | Total PA Payment Percent (f) | Total PA Payout | |||||||||||||||||||||
| Formulas | (a*b) | (d*e) | (c*f) | |||||||||||||||||||||||||
Andrew Liveris | 1,820,000 | 160 | % | 2,912,000 | 47 | % | 100 | % | 47 | % | 1,368,640 | |||||||||||||||||
William Weideman | 861,378 | 105 | % | 904,447 | 47 | % | 95 | % | 45 | % | 407,001 | |||||||||||||||||
Charles Kalil | 972,441 | 105 | % | 1,021,063 | 47 | % | 95 | % | 45 | % | 459,478 | |||||||||||||||||
Carol Williams | 921,317 | 105 | % | 967,383 | 47 | % | 100 | % | 47 | % | 454,670 | |||||||||||||||||
James Fitterling | 860,950 | 105 | % | 903,997 | 47 | % | 100 | % | 47 | % | 424,879 | |||||||||||||||||
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2009-2011 Performance Share Program Results
The 2009-2011 Performance Share Program focused participants on ROC as a critical financial goal and reflected the legacy program that utilized one financial performance measure. With the exception of the 2009-2011 program (that delivered in 2012), the remaining outstanding three-year Performance Share programs utilize two measures – ROC and TSR as described in detail below. The metric goals and payout result for the 2009-2011 program was as follows:
| Measure Used | Rationale for Measure | Threshold Goal | Target Goal | Maximum Goal | Result | |||||
ROC | Reflects operating strength, effectiveness in utilizing capital and profitability | 7.5% | 9.5% | 15.0% | 12.1% | |||||
Total Payout | 175% |
2012-2014 Performance Share Program Design
In February 2012, the Committee approved the 2012-2014 Performance Share Plan. As noted above, Performance Share vesting is based on TSR and ROC performance over a three calendar year period. The following table illustrates the measures used, weighting and goals for the 2012-2014 Performance Share program:
| Measure Used/ Weighting | Rationale for Measure | Threshold Goal | Target Goal | Maximum Goal | ||||
| ROC (50%) | Reflects operating strength, effectiveness in utilizing capital and profitability | 8.5% | 11.0% | 15.5% | ||||
| Relative TSR (50%) | Reflects Dow’s TSR versus a peer group of companies’ TSR | 26th Pctl. | 51st Pctl. | 100th Pctl. |
ROC measures how effectively a company has utilized the money invested in its operations and is calculated as Net Operating Profit after Tax (excluding certain items) divided by total average capital. Net Operating Profit after Tax (excluding certain items) is a net income measure the Company uses in presentations to investors that excludes preferred stock dividends, non-controlling interests, and interest expense, exclusive of the certain items identified on page 26, and as presented in the reconciliations available on the Internet atwww.dow.com/investor/earnings. For the Performance Share Award program ending in 2011, the ROC result also reflects certain adjustments related to the Rohm and Haas acquisition. To achieve a target payout on the ROC portion, Dow’s ROC must equal or exceed pre-established ROC goals for the same period. Dow’s ROC target is 10% across the industry cycle and as a result the target for Performance Share Awards ranges from 8.5% to 12.0% on current outstanding grants.
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The relative TSR peer group is comprised of companies selected from the S&P 500 Chemical Index and several companies from Dow’s Survey Group that are technology-based and manufacturing-based global companies. The table below shows the 17 company TSR peer group.
TSR is defined as stock price appreciation plus dividends paid. For Dow and each company in the peer group, a beginning price using a 30 trading day averaging period at the beginning of the performance period and an ending price using a 30 trading day averaging period at the end of the performance period are calculated and used to create a percentile ranking. The TSR portion of the Performance Share Award will pay out at 100% if Dow’s TSR is at the 51st percentile of the peer group. No payout will occur if Dow’s TSR is at or below the 25th percentile. A maximum payout of 250% will occur if Dow’s TSR is at the 100th percentile.
Instead of receiving the Performance Share Award in the form of Dow common stock, the NEOs and other executives subject to stock ownership requirements may elect to receive a cash payment equal to the value of the stock award on the date of delivery. Participants may only make this cash election if they meet or exceed the executive stock ownership guidelines for their job level.
SECTION THREE – HOW EXECUTIVE PAY IS ESTABLISHED
Responsibilities of the Committee
The Committee, which is comprised entirely of independent Directors, is responsible for overseeing the Company’s executive compensation policies and programs with the goal of maintaining compensation that is competitive within the markets in which Dow competes for talent and reflective of the long-term investment interests of Company stockholders. The Committee reviews and approves the compensation design, compensation levels and benefits programs for the NEOs and other senior leaders. The Committee also monitors Company processes on executive succession and work environment/culture. You can learn more about the Committee’s purpose, responsibilities, structure and other details by reading the Committee’s charter which can be found in the Corporate Governance section of the Company’s website atwww.DowGovernance.com.
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COMPENSATION INFORMATION (continued)
Committee Resources in Setting PayBenefits
The Company provides a comprehensive set of benefits to eligible employees. These include medical, dental, life, disability, accident, retiree medical and life, pension and savings plans. The NEOs are eligible to participate in the same plans as most other salaried employees. In addition, because highly compensated employees are subject to U.S. tax limitations on contributions to some retirement plans, the Company has created non-qualified retirement programs intended to provide these employees with the same benefits they would have received under the qualified plans without the tax limits. The NEOs are eligible to participate in the same non-qualified retirement plans as all other highly compensated salaried employees.
Perquisites
The Company provides the NEOs and other selected executives limited perquisites in order to enhance their security and productivity. The Committee has several resources, analytical toolsregularly reviews the perquisites provided to the NEOs as part of their overall review of executive compensation. In 2012, the Committee eliminated the company car perquisite for all executives except the CEO. The Committee determined that the other current perquisites are within an appropriate range of competitive compensation practices. Details about the NEOs’ perquisites, including the aggregate incremental cost to the Company, are shown in the Summary Compensation Table under the “All Other Compensation” column and performance measures they consider in determining compensation levels.the accompanying narrative. The Company provides the NEOs and other selected executives the following limited perquisites:
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Dow The Committee considers relevant market pay practices as one of several factors when establishing executive compensation levels and evaluating compensation programs including base salary, annual incentives and long-term incentives. In order to maintain the competitiveness of our compensation programs, Dow compares its executive compensation programs against a Survey Peer Group of 20 companies. These companies provide a relevant comparison based on their similarity to Dow in size and complexity taking into account factors such as revenues, market capitalization, global scope of operations and diversified product portfolios. The Committee believes that a mix of both industry and non-industry peers provides a balanced and realistic perspective on the competition for the pool of potential executive talent. Market pay data for the Survey Peer Group is gathered through compensation surveys conducted by Towers The Survey Peer Group is periodically evaluated and updated to ensure the companies in the group remain relevant. The Survey Peer Group was Data provided by Capital IQ $ in millions Company COMPENSATION INFORMATION (continued) The Company provides a comprehensive set of benefits to eligible employees. These include medical, dental, life, disability, accident, retiree medical and life, pension and savings plans. The NEOs are eligible to participate in the same plans as most other salaried employees. In addition, because highly compensated employees are subject to U.S. tax limitations on contributions to some retirement plans, the Company has created non-qualified retirement programs intended to provide these employees with the same benefits they would have received under the qualified plans without the tax limits. The NEOs are eligible to participate in the same non-qualified retirement plans as all other highly compensated salaried employees. Perquisites The Company provides the NEOs and other selected executives limited perquisites in order to enhance their security and productivity. The Committee regularly reviews the perquisites provided to the NEOs as part of their overall review of executive compensation. In 2012, the Committee eliminated the company car perquisite for all executives except the CEO. The Committee determined that the other current perquisites are within an 3M Company Alcoa Inc. Archer Daniels Midland Company The Boeing Company Caterpillar Inc. The Coca-Cola Company* E. I. du Pont de Nemours and Company Eli Lilly and Company Emerson Electric Co. General Electric Company Honeywell International Inc. Johnson & Johnson Johnson Controls Inc. Lockheed Martin Corporation Monsanto Company Pepsico, Inc.* Pfizer Inc. PPG Industries Inc. Procter & Gamble Co. United Technologies Corp. Observations 75th Percentile Average Median 25th Percentile The Dow Chemical Company Executive Physical Examination Executive Excess Umbrella Liability Insurance Home Security Alarm System In addition, the CEO is provided a company car and is required by the Board of Directors for security and immediate availability reasons to use corporate aircraft for personal travel. Factors and Steps in Setting Pay Compensation for the NEOs and other executive officers is evaluated and set annually by the Committee after considering the following factors: Median Company performance against financial measures including net income, earnings per share, EBITDA Company performance relative to goals approved by the Committee Business climate, economic conditions and other factors Each executive’s experience, knowledge, skills and personal contributions The CEO makes recommendations to the Committee regarding compensation for senior executives after reviewing the Company’s overall performance, each executive’s personal contributions and relevant compensation market data from Dow’s Survey Peer Group for similar jobs and job levels. The CEO uses discretion when making pay recommendations to the Committee. The Committee is responsible for approving NEO compensation and has broad discretion when setting compensation types and amounts. With respect to the CEO, the Committee annually reviews and approves the corporate goals and objectives relevant to the CEO’s compensation, evaluates the CEO’s performance against those objectives and makes recommendations to the Board of Directors regarding the CEO’s compensation level based on that evaluation. The Committee considers compensation market data from Dow’s Survey Peer Group and uses broad discretion when setting compensation types and amounts for the CEO. The Board of Directors is responsible for approving the CEO’s compensation types and amounts. As part of the review, Company management and the Committee may also review summary total compensation scenarios for the NEOs. All aspects of compensation are modeled under various scenarios, such as stock price sensitivity and business performance. The scenario sheets present the estimated dollar value of compensation components provided to the NEOs during the most recent fiscal year. They are used as a reference point to assist the Committee’s overall understanding of NEO compensation. COMPENSATION INFORMATION (continued) Committee Resources in Setting Pay The Committee, which is comprised entirely of independent Directors, is responsible for overseeing the Company’s executive compensation policies and programs with the goal of maintaining compensation that is competitive within the markets in which Dow competes for talent and reflective of the long-term investment interests of Company stockholders. The Committee reviews and approves the compensation design, compensation levels and benefits programs for the NEOs and other senior leaders. The Committee also monitors Company processes on executive succession and work environment/culture. You can learn more about the Committee’s purpose, responsibilities, structure and other details by reading the Committee’s charter which can be found in the Corporate Governance section of the Company’s website atwww.DowGovernance.com. The Committee has several resources, analytical tools and performance measures it considers in determining compensation levels. The Committee has retained a compensation consultant from Mercer. The consultant, Michael Halloran, reports directly to the Committee. He advises the Committee on trends and issues in executive compensation and the group of companies in the Survey Peer Group. He consults on the competitiveness of the compensation structure and levels of Dow’s executive officers and provides advice and recommendations related to proposed compensation and the design of our compensation programs. The Committee has the sole authority to retain and oversee the work of Mr. Halloran. Mr. Halloran does not provide services to Company management unless approved by the Chair of the Committee. In 2014, no such approvals were requested or given as Mr. Halloran provided no services to management. Mercer has multiple safeguards and procedures in place to maintain the independence of the consultants in their executive compensation consulting practice, and the Committee has determined that the compensation consultant’s work has not raised any conflict of interest. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer’s executive compensation consulting and its other administrative and consulting business units from a leadership, performance measurement, and compensation perspective. In 2014, Mercer and its affiliates provided approximately $1.7 million in unrelated human resources consulting services to Dow. The decision to engage Mercer to provide these other services was made by management and was reported to the Committee. Mercer’s aggregate fees for executive and director compensation consulting services in 2014 were approximately $121,041. The Committee has considered factors relevant to Mr. Halloran’s independence from management under SEC rules and has determined that Mr. Halloran is independent from management. Dow’s Executive Compensation Department provides additional analysis and counsel as requested by the Committee related to: • Gathering the compensation data of the Survey Peer Group • Benchmarking compensation components (base salary, Performance Award, LTI awards) against the Survey Peer Group • Assisting the CEO in making preliminary recommendations of base salary structure, design and target award levels for the Performance Award and design and award levels for LTI awards The Executive Compensation Department has retained the compensation consulting services of Towers Watson. Towers Watson provides the following assistance to the Executive Compensation Department: • Survey Peer Group compensation information for executives and non-employee Directors • Benchmarking of key compensation practices and trends in executive compensation COMPENSATION INFORMATION (continued) SECTION FOUR – EXECUTIVE COMPENSATION GOVERNANCE In addition to adhering to the processes described in the preceding sections, the Committee has adopted several policies related to Executive Compensation as detailed below. Best Practices in Executive Compensation In an era of increased attention to corporate governance and the link between pay and performance, the Company continues to focus on the following key governance practices for executive compensation. ü Engage in active shareholder engagement on compensation and governance related issues. Engage in careful consideration of the annual say-on-pay results and shareholder feedback. û Executives are prohibited from engaging in speculative transactions in Company securities and from hedging or pledging Company securities, or holding Company securities in margin accounts. ü Maintain a strong link between financial and operational goals, stockholder value creation and executive compensation by having relative Total Stockholder Return (“TSR”), Net Income, Return on Capital (“ROC”), Management Operating Cash Flow, and cost control in our incentive programs. û The Board prohibits new or amended Change-in-Control (“CIC”) agreements. ü Ensure our compensation programs are designed to discourage excessive risk taking. These design features include a robust clawback policy, strong stock ownership guidelines, and multiple bottom line measures in our incentive programs. û Our legacy CIC agreements (no new or amended agreements since 2007) do not provide single trigger payments, but instead severance payments are equal to two times the executive’s annual base salary and target Performance Award (2.99 times for the CEO) and double triggers are in place in order for an executive to receive benefits. ü Ensure our LTI mix includes significant weighting (75% of the LTI grant) toward performance-based equity vehicles (Stock Options and Performance Shares). û Our stock incentive plan prohibits stock option repricing, reloads, exchanges or options granted below market value without shareholder approval. ü Use an independent compensation consultant who is engaged directly by the Committee to advise on executive compensation matters. û Executives do not have employment agreements. Stock Ownership Guidelines Dow has had stock ownership guidelines in place for its NEOs and other senior executives since 1998. The Committee regularly reviews the guidelines relative to market practice and the current value of Dow stock. Specific stock ownership requirements vary by job level and are determined by applying a multiple between four and six to the base salary midpoint. The guideline values are converted to a fixed share amount for each job level and remain at that level until the Committee determines that an adjustment is appropriate. data. The CEO is required to own stock with a value of six times base salary and the other NEOs are required to own stock with a value of four times base salary. The executives are given five years to achieve the initial ownership guideline for their job level following promotion to that level and must maintain these levels until retirement. For purposes of these guidelines, stock ownership includes Dow Common Stock beneficially owned (including stock owned by immediate family members), Deferred Stock not yet delivered, Performance Shares vested but not yet delivered, and stock held beneficially through the Company’s savings plans. All NEOs currently hold shares significantly in excess of the guidelines providing further evidence of Dow’s philosophy of encouraging the holding of shares in excess of stock ownership guidelines until retirement. COMPENSATION INFORMATION (continued) The following table shows the stock ownership guideline for each NEO and their holdings as of December 31, EXECUTIVE STOCK OWNERSHIP GUIDELINES & HOLDINGS FOR Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling LTI Grant Practices LTI awards are granted under The Dow Chemical Company 2012 Stock Incentive Plan (as amended and restated), Dow’s omnibus stockholder approved plan for equity awards to employees and directors. LTI grants are approved by the Committee and administered by Dow’s Executive Compensation Department. The annual grant date for all employees is traditionally the Friday following the Committee’s February meeting – held on the second Wednesday of February each year. The Company does not grant discounted options, backdate options or re-price outstanding options. Dow calculates the aggregate grant date fair value of awards in the year of grant in accordance with the same standard it applies for financial accounting purposes. Executives must continue to meet their stock ownership guidelines until retirement and since LTI awards do not have provisions for accelerated vesting at retirement, NEOs continue to hold a significant portion of their compensation value in Dow stock for at least three years after retirement. Change-in-Control and Severance Arrangements While legacy agreements remain in existence, the Committee prohibits new or amended change-in-control agreements. The Committee adopted a change-in-control arrangement for senior executives, including Messrs. Liveris and Kalil, in 2007. The change-in-control arrangement provides, among other things, a severance payment equal to two times the executive’s base salary and target Performance Award (2.99 times for the CEO) and tax gross-up protection in the event severance benefits exceed statutory thresholds and become subject to an excise tax. Under the change-in-control agreements, an executive must be involuntarily terminated within two years of a change-in-control in order to receive benefits. The Company believes this “double-trigger” practice is in the best interest of stockholders as it does not pay any benefits to an executive unless he or she is negatively impacted by a change-in-control event that is in the best interest of Dow stockholders. No new agreements have been executed since 2007. Executive Compensation Recovery (Clawback) Policy The Company has adopted an Executive Compensation Recovery Policy for executive officers that is set forth in the Company’s Corporate Governance Guidelines. Under this policy, the Company may recover incentive income that was based on achievement of quantitative performance targets if an executive officer engaged in grossly negligent conduct or intentional misconduct resulting in a financial restatement or in any increase in his or her incentive income. Incentive income includes income related to the annual Performance Award and LTI awards. The Company may also recover any awards made to an executive during the prior three years should the executive engage in activity that competes with, or is otherwise harmful to the Company or its affiliated companies. Tax Deductibility of Executive Compensation Section 162(m) of the U.S. Internal Revenue Code generally limits the tax deductibility of compensation paid by a public company to its CEO and certain other highly compensated executive officers to $1 million in the year the compensation becomes taxable to the executive. There is an exception to the limit on deductibility for COMPENSATION INFORMATION (continued) decisions, Dow policy does not require all executive compensation to be tax-deductible. In the interest of flexibility and overall benefit for the Company’s stockholders, the Committee will continue to facilitate the awarding of responsible but adequate executive compensation while taking advantage of Section 162(m) whenever feasible. Amounts paid under the compensation program, including base salary, Performance Awards and grants of Deferred Stock (Restricted Stock and Restricted Stock Units) may not qualify as Trading, Hedging and Pledging Restrictions As set forth in the Company’s Corporate Governance Guidelines, it is against Company policy for executive officers to engage in speculative transactions in Company securities. Specifically, it is against Company policy for executive officers to trade in puts or calls in Company securities or sell Company securities short. In addition, it is against Company policy for executive officers to pledge or hedge Company securities, or hold Company securities in margin accounts. Compensation Program Risk Analysis In conducting the last review in late 2013, COMPENSATION INFORMATION (continued) COMPENSATION TABLES AND NARRATIVES Summary Compensation Table The following table summarizes the compensation of our CEO, CFO, and our three other most highly compensated executive officers for the fiscal year ended December 31, Andrew Liveris, CEO & Chairman William Weideman, Exec. VP & CFO Charles Kalil, Exec. VP Carol Williams, Exec. VP James Fitterling, Exec. VP Name and Principal Position Total ($) Note: In order to show the effect that the year-over-year change in pension value had on total compensation, as determined under applicable SEC rules, we have included an additional column to show total compensation minus the change in pension value. The amounts reported in the Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column required under SEC rules and are not a substitute for total compensation. Total without Change in Pension Value represents total compensation, as determined under applicable SEC rules, minus the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column. The change in pension value is subject to many external variables, such as interest rates, that are not related to Company performance. Therefore, we do not believe a year-over-year change in pension value is helpful in evaluating compensation for comparative purposes. COMPENSATION INFORMATION (continued) Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling The following COMPENSATION INFORMATION (continued) Grants of Plan-Based Awards The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. This table includes both equity and non-equity awards. GRANTS OF PLAN-BASED AWARDS FOR Grant Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling Estimated Future Payouts Estimated Future Payouts Andrew Liveris William Weideman COMPENSATION INFORMATION (continued) Outstanding Equity Awards The following table lists outstanding equity grants for each NEO as of December 31, Number That Have Market That Have Andrew Liveris Joe Harlan Charles Kalil Option Date Market Value of Stock That Have Not ($) (b) (c) Equity (d) Equity (c) (d) Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling COMPENSATION INFORMATION (continued) Option Exercises and Stock Vested The following table summarizes the value received from stock option exercises and stock grants vested during OPTION EXERCISES AND STOCK VESTED FOR Value Realized ($) Number of Shares (a) Value Realized on Vesting ($) Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling Pension Benefits The following table lists the pension program participation and actuarial present value of each NEO’s defined benefit pension as of December 31, PENSION BENEFITS AS OF DECEMBER 31, Number of Years Service (#) Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling COMPENSATION INFORMATION (continued) The following table lists the U.S. pension annuity value for each participating NEO and the corresponding replacement value as a percent of total target cash compensation as of December 31, PENSION REPLACEMENT VALUE AS OF DECEMBER 31, Pension Annuity (a) Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling Pension Benefits – Additional Information The Dow Employees’ Pension Plan For employees hired prior to January 1, 2008: The Company provides the Dow Employees’ Pension Plan (“DEPP”) for its U.S. employees and for employees of some of its wholly owned U.S. subsidiaries. Upon retirement, NEOs receive an annual pension under the DEPP formula subject to statutory limitations. The benefit is paid in the form of a monthly annuity and is calculated based on the sum of the employee’s yearly basic and supplemental accruals up to a maximum of 425% for basic accruals and 120% for supplemental accruals. Basic accruals equal the employee’s highest consecutive three-year average compensation (“HC3A”) multiplied by a percentage ranging from 4% to 18% based on the age of the employee in the years earned. Supplemental accruals are for compensation in excess of a rolling 36-month average of the Social Security wage base. Supplemental accruals range from 1% to 4%, based on the age of the employee in the years earned. The sum of the basic and supplemental accruals is divided by a conversion factor to calculate an immediate monthly benefit. If the employee terminates employment before age 65 and defers payment of the benefit, the account balance calculated under this formula will be credited with interest. All NEOs other than Mr. Harlan participate in DEPP. For employees hired on or after January 1, 2008: The Personal Pension Account (“PPA”) grows annually based on Pay Credits and Interest Credits. At the end of each year, 5% of an employee’s base When a vested employee leaves the Company, the PPA can be taken as an immediate annuity, as a deferred annuity or as a lump sum. Vesting is three years. Mr. Harlan participates in PPA. The Executives’ Supplemental Retirement Plan: Because the U.S. Internal Revenue Code limits the benefits otherwise provided by DEPP, the Board of Directors adopted the Executives’ Supplemental Retirement Plan (“ESRP”) to provide employees who participate in DEPP with non-qualified benefits calculated under the same formulas described above. Some parts of the supplemental benefit may be taken in the form of a lump sum depending upon date of hire and plan participation. All NEOs participate in the ESRP. In addition, Mr. Kalil elected to have his ESRP benefit secured by enrolling in the Key Employee Insurance Program (“KEIP”) in 1997. KEIP is a life insurance program that secured benefits otherwise available under ESRP, which was offered to certain employees as an alternative to the ESRP. Dow has not offered KEIP to employees since 1999 and has no plans to reinstate this program for new participants. COMPENSATION INFORMATION (continued) Dow Employees’ Savings Plan – 401(k): The Company provides all U.S. salaried employees the opportunity to participate in a 401(k) plan (The Dow Chemical Company Employees’ Savings Plan). In Non-Qualified Deferred Compensation The following table provides information on compensation the NEOs have elected to defer as described in the narrative that follows. NON-QUALIFIED DEFERRED COMPENSATION FOR Andrew Liveris William Weideman Charles Kalil Carol Williams James Fitterling Because the U.S. Internal Revenue Code limits contributions to The Dow Chemical Company Employees Savings Plan, the Board of Directors adopted the Elective Deferral Plan in order to further assist employees in saving for retirement. This plan allows participants to voluntarily defer the receipt of base salary (maximum deferral of 75%) and Performance Award (maximum deferral of 100%). Each participant enrolled in the plan receives a matching contribution using the same formula authorized for salaried participants under the 401(k) plan for employer matching contributions. The current formula provides for a matching contribution on the first 6% of base Investment choices include a fund with an interest rate equal to the sum of the 60-month rolling average of ten-year U.S. Treasury Note yield plus the current five-year Dow The Elective Deferral Plan allows for distributions to commence on January 31 after separation or after a specific future year that can be later or earlier than the separation date. Distributions may be paid either in a lump sum or in equal monthly, quarterly or annual installments up to 15 years based on the employee’s initial election as to the time and form of payment. If installments were elected, the unpaid balance will continue to accumulate gains and losses based on the employee’s investment selections. COMPENSATION INFORMATION (continued) Potential Payments Upon Termination or Change-in-Control All of the NEOs (except Messrs. Fitterling, Harlan, and Ungerleider) are currently retirement eligible and entitled to benefits similar to most other salaried employees upon separation from the Company. They are also entitled to additional benefits in the case of an involuntary termination without cause or a change-in-control event. The summary below shows the impact of various types of separation events on the different compensation elements the NEOs receive. Retirement, Death or Disability: Base Salary: Paid through date of separation on the normal schedule. Performance Award: Prorated for the portion of the year worked and paid on the normal schedule. Benefits: All NEOs (except Mr. Harlan) are eligible for retiree medical and life insurance coverage similar to most other salaried U.S. employees. Retirement Plans: Participants have access, in accordance with elections and plan features, to the following retirement plan benefits: Elective Deferral Plan benefits as shown in the Non-Qualified Deferred Compensation Table and accompanying narrative. Pension benefits as shown in the Pension Benefits Table and described in the accompanying narrative. Participants in DEPP and ESRP are paid a monthly annuity and/or lump sum. Participants in PPA may elect either an annuity or lump sum payout. Participants in KEIP have additional lump-sum features available. Employee Savings Plan (defined contribution 401(k) plan). Outstanding LTI Awards: For grants made in 2013 and beyond, the following LTI treatment applies if the executive meets the age 55 and 10 years of service requirement (age 50 and 10 years of service for grants prior to 2013). Stock Options: Current year grants are prorated for the portion of year worked. Other grants are retained in full. Vesting Deferred Stock: Current year grants are prorated for the portion of year worked. Other grants are retained in full. Vesting and delivery dates remain unchanged. Performance Shares: Current year grants are prorated for the portion of year worked. Other grants are retained in full. Vesting periods and delivery dates remain unchanged. If the executive separates before meeting the age and service requirements of a particular grant, such grant is forfeited. Involuntary Termination With Cause: Because all NEOs (except Messrs. Fitterling, Harlan, and Ungerleider) are currently retirement eligible, they will receive the same benefits under an Involuntary Termination with Cause as under retirement, as described above, with the exception of incentive income (including LTI), which may be recovered by the Company as described in the Executive Compensation Recovery Policy. Involuntary Termination Without Cause: In addition to the benefits received due to retirement, as described above, NEOs will receive the following benefits if involuntarily terminated without cause. A lump-sum severance payment of two weeks per year of service (up to a maximum of 18 months) under the U.S. Severance Plan, plus six months base salary under the Executive Severance Supplement. The U.S. Severance Plan covers most salaried employees in the United States. Outplacement counseling and financial/tax planning with a value of $30,000. For outstanding LTI grants not meeting the age and years of service requirements referenced above, in the event an NEO is involuntarily terminated without cause, they will receive the following: Stock Options: Vesting and expiration periods are shortened to the earlier of the existing expiration date or one year. Deferred Stock: Grants are prorated for the number of days worked during the vesting period. Vesting and delivery dates remain unchanged. COMPENSATION INFORMATION (continued) Performance Shares: Grants are prorated for the number of days worked during the performance period. Vesting periods and delivery dates remain unchanged. Change-in-Control: In addition to benefits received due to retirement, as described above, the non-qualified portion of the pension benefit is payable as a lump sum if any of the NEOs are involuntarily separated within two years of a change-in-control event (double-trigger). Separately, pursuant to agreements entered into in 2007, Messrs. Liveris and Kalil will also receive the following benefits if separated within two years of a change-in-control event as referenced in the Compensation Discussion and Analysis. An executive must be involuntarily terminated within two years of a change-in-control in order to receive benefits (double-trigger). A severance payment equal to two times the executive’s annual base salary and target Performance Award (2.99 times for the CEO). An additional two years of credited service and age for purposes of calculating retirement benefits (three years for the CEO). A financial, tax and outplacement allowance of $50,000. Eighteen months of health and welfare benefits at employee rates. Tax gross-up protection in the event severance exceeds statutory thresholds and becomes subject to an excise tax. LTI awards in the form of Performance Shares and Deferred Stock will vest and be delivered as soon as possible after the change-in-control event. Stock Options will vest immediately. The following table summarizes the value of the incremental benefits to be received due to an Involuntary Termination without cause or a change-in-control event as of December 31, INVOLUNTARY TERMINATION OR CHANGE-IN-CONTROL VALUES COMPENSATION INFORMATION (continued) Director Compensation Dow DIRECTOR COMPENSATION FOR Arnold A. Allemang Jacqueline K. Barton James A. Bell Jeff M. Fettig Barbara H. Franklin John B. Hess Paul Polman Dennis H. Reilley James M. Ringler Ruth G. Shaw Paul G. Stern Non-Employee Directors’ Fees Earned or Paid in Cash Annual Retainer Meeting Retainer Audit Committee Chairmanship All Other Committee Chairmanships Audit Committee Membership Lead Director Service Non-Employee Directors Stock Grant In Non-employee Directors who join the Board of Directors after the annual grant of Restricted Stock COMPENSATION INFORMATION (continued) Non-Employee Directors’ Stock Ownership Guidelines After reviewing data from the Survey Peer Group, the Board approved an increase to the stock ownership guidelines for non-employee Directors in 2014. Non-employee Directors have a guideline of owning common stock of the Company equal in value to at least DIRECTOR STOCK OWNERSHIP GUIDELINES FOR Arnold A. Allemang Jacqueline K. Barton James A. Bell Jeff M. Fettig John B. Hess Paul Polman Dennis H. Reilley James M. Ringler Ruth G. Shaw Non-Employee Director Deferred Compensation Plan Non-employee Directors may choose prior to the beginning of each year to have all or part of their fees credited to a deferred compensation account as participants in The Dow Chemical Company Voluntary Deferred Compensation Plan for Non-Employee Directors effective January 1, 2005. At the election of the Director, fees are deferred into one of several hypothetical investment accounts that accrue investment returns according to the account selected. Investment choices include a fund with an interest rate equal to the sum of the 60-month rolling average of ten-year U.S. Treasury Note yield plus the current five-year Dow Business Travel Accident Insurance for Non-Employee Directors Dow has a rider on its Business Travel Accident insurance policy covering each non-employee Director for $300,000, which will cover accidental death and dismemberment if the Director is traveling on Dow business. In addition to the compensation described above to be paid by the Company as compensation for their service as directors, Messrs. Milchovich and Miller received additional compensation in connection with their election to the board of directors from a third party. Specifically, Messrs. Milchovich and Miller were appointed to the Board and/or nominated for election for the 2015 Annual Meeting of Stockholders (“2015 Meeting”) pursuant to an agreement dated as of November 20, 2014, between the Company and certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners COMPENSATION INFORMATION (continued) L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)). In connection with their agreement to serve as Third Point designees, each of Messrs. Milchovich and Miller entered into an agreement with Third Point LLC (together, the “TP Agreements”). Pursuant to the TP Agreements, each of Messrs. Milchovich and Miller received from Third Point LLC: $250,000 in cash paid upon the execution by each of Messrs. Milchovich and Miller of the TP Agreement; $250,000 in cash paid upon the appointment of each of Messrs. Milchovich and Miller to the Board. The TP Agreements required each of Messrs. Milchovich and Miller to invest $250,000 in Dow common stock if they did not already own stock equivalent to that amount at the time of their appointment to the Board or their nomination by Third Point LLC for election to the Board. As each of them owned $250,000 worth of Dow common stock at the time of their appointment to the Board, each of them received $250,000 in cash and were not required to invest this amount in Dow common stock; and certain stock appreciation rights (“SARs”) with respect to a total of 396,668 shares of Dow common stock as follows: (a) SARs with respect to 198,334 shares of Dow common stock payable in 2018 (the “2018 SARs”); and (b) SARs with respect to 198,334 shares of Dow common stock payable in 2020 (the “2020 SARs”). The 2018 SARs and 2020 SARs are each subject to continued service as a Director on the applicable vesting date, subject to certain exceptions. As described in two Form 3s filed with the U.S. Securities and Exchange Commission on January 9, 2015, for each of Messrs. Milchovich and Miller the appreciation amount payable by Third Point LLC, if any, will be based upon the difference between $50.42 (the closing price of the Company’s common stock on the date of execution of the TP Agreements) and the volume weighted average price of the Company’s common stock during the 30 day period prior to January 1, 2018, in the case of the 2018 SARs and January 1, 2020, in the case of the 2020 SARs. The 2018 SARs vest as follows: 50% on January 1, 2017 and 50% on January 1, 2018 and will be settled in cash by Third Point LLC within 30 days following January 1, 2018. The 2020 SARs vest as follows: 50% on January 1, 2019 and 50% on January 1, 2020 and will be settled in cash by Third Point LLC within 30 days following January 1, 2020. The receipt by each of Messrs. Milchovich and Miller of each of the payments pursuant to the 2018 SARs and the 2020 SARs is contingent upon him agreeing to stand for election to the Board (whether or not re-nominated) and not resigning from the Board, regardless of whether Third Point LLC remains a stockholder. The payment obligations with respect to the SARs are the subject of the TP agreements. The Company is not party to the TP agreements nor is the Company responsible for any such payments. Equity Compensation Plan Information The table below shows the Equity Compensation Plan Information as of December 31, EQUITY COMPENSATION PLAN INFORMATION Equity Compensation Plans Not Approved by Security Holders (c) As of December 31, 2014 BENEFICIAL OWNERSHIP OF COMPANY STOCK The following table presents the beneficial ownership of Dow’s Common Stock as of February A. A. Allemang A. Banga J. K. Barton J. A. Bell J. M. Fettig J. R. Fitterling J. Harlan J. B. Hess C. J. Kalil A. N. Liveris P. Polman D. H. Reilley J. M. Ringler R. G. Shaw W. H. Weideman C. A. Williams Group Total All Directors and Executive Officers as a Group (23 persons) Certain Other Owners: Capital Research Global Investors Capital World Investors BlackRock, Inc. RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM RESOLVED, that the appointment of Deloitte & ToucheLLP to The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm. The Company Bylaws provide that the selection of the independent registered public accounting firm must be presented for stockholder ratification or rejection at Before making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates for the independent registered public accounting firm. For Deloitte & ToucheLLP, The Audit Committee has expressed its satisfaction with Deloitte & Touche Representatives of Deloitte & ToucheLLP will attend the Approval of this proposal to ratify the appointment of Deloitte & ToucheLLP requires a majority of votes actually cast on the matter. For purposes of determining the number of votes cast on the matter, only those cast “for” or “against” are included. Abstentions The Board of Directors unanimously recommends that stockholders vote FOR the proposal to ratify the selection of Deloitte & ToucheLLP as the independent registered public accounting firm for Dow and its subsidiaries for AGENDA ITEM 2 (continued) For the years ended December 31, Audit Fees (a) Audit-Related Fees (b) Tax Fees (c) All Other Fees TOTAL Peer Group and Survey Pay Databenchmarkscompetes with a wide variety of both industry and non-industry specific companies for executive talent and investor assets. In order to ensure our executive pay program is competitive and has a strong link to stock price performance, we maintain two peer groups to evaluate and determine executive compensation: the Survey Peer Group (discussed below) and the Total Shareholder Return (“TSR”) Peer Group (discussed on page 26).Watson.Watson, Mercer and Equilar. Dow targets the median of the Survey Peer Group for all compensation elements in order to attract, motivate, develop and retain top level executive talent. Annual Performance Award targets and long-term incentive grants reflect market median values while actual payouts are dependent on performance.evaluatedlast modified in 2012 and was modified to eliminatewhen Tyco International and Kraft Foods were eliminated since both companies split into two companies and the resulting company size and profile no longer met the peer group criteria.The Committee used a filtering approach to identify appropriate replacements. The Committee evaluatedLockheed Martin and Coca-Cola were selected as replacements based upon an assessment of companies within our industry and in adjacent industries, companies with profiles similar to Dow’s based upon business complexity, innovation and/or technology, industries and markets served, as well as companies with similar revenue size, market capitalization, geographic footprint, and those companies we compete with for talent.
Survey Peer GroupDescription Purpose Source Companies Represents companies that Dow competes with for talent and with profiles similar to Dow in terms of revenues, market capitalization, global presence, business complexity, innovation and/or technology and industries/markets served. To understand and evaluate how each NEO’s total direct compensation (Base salary + Performance Award + LTI) compares with the total direct compensation provided to similar roles within this peer group. Dow targets the median of the Survey Peer Group for all elements of compensation. Also used to compare program design and best practices. Data is gathered through Mercer, Equilar and Towers CDB Executive Compensation Survey and from companies’ proxy statements or other public disclosures. Revenues
FY 2014 Market Cap
31-Dec-14 3M Company $ 31,821 $ 104,514 Alcoa Inc. $ 23,906 $ 18,614 Archer Daniels Midland Company $ 81,201 $ 33,477 The Boeing Company $ 90,762 $ 92,667 Caterpillar Inc. $ 55,184 $ 55,412 The Coca-Cola Company $ 45,998 $ 184,928 E.I. du Pont de Nemours and Company $ 34,906 $ 66,986 Eli Lilly and Company $ 19,616 $ 73,598 Emerson Electric Co. $ 24,537 $ 42,732 General Electric Company $ 148,462 $ 253,766 Honeywell International Inc. $ 40,306 $ 78,218 Johnson & Johnson $ 74,331 $ 292,703 Johnson Controls Inc. $ 42,828 $ 32,271 Lockheed Martin Corporation $ 45,600 $ 60,491 Monsanto Company $ 15,855 $ 57,776 PepsiCo, Inc. $ 66,683 $ 141,519 Pfizer Inc. $ 49,605 $ 196,265 PPG Industries, Inc. $ 15,360 $ 31,722 The Procter & Gamble Company $ 83,062 $ 246,136 United Technologies Corporation $ 65,100 $ 104,841 Median $ 45,799 $ 75,908 The Dow Chemical Company $ 58,167 $ 53,754 302015 Proxy Statement 2013 DOW PROXY STATEMENT29 Based uponBenefitsassessmentappropriate range of those criteria (with no particular weighting), Lockheed Martincompetitive compensation practices. Details about the NEOs’ perquisites, including the aggregate incremental cost to the Company, are shown in the Summary Compensation Table under the “All Other Compensation” column and Coca Cola werethe accompanying narrative. The Company provides the NEOs and other selected as replacements. The 20 companies are listed below.SURVEY PEER GROUPexecutives the following limited perquisites:Company Fiscal Year 2012
Revenues Market Cap
as of 12/31/2012 $ 29,904 $ 64,246 $ 23,700 $ 9,263 $ 89,038 $ 18,038 $ 81,698 $ 56,827 $ 65,875 $ 58,598 $ 46,542 $ 162,587 $ 34,812 $ 41,941 $ 22,603 $ 54,636 $ 24,412 $ 38,321 $ 147,359 $ 220,107 $ 37,665 $ 49,721 $ 67,224 $ 194,265 $ 41,955 $ 20,976 $ 47,182 $ 29,679 $ 13,504 $ 50,634 $ 66,504 $ 105,851 $ 58,986 $ 184,648 $ 15,200 $ 20,756 $ 83,680 $ 185,627 $ 57,708 $ 75,166 20 20 $ 66,684 $ 120,035 $ 52,778 $ 82,094 $ 46,862 $ 55,732 $ 28,531 $ 36,160 $ 56,786 $ 38,770 Data reported in $ millionsFinancial and Tax Planning Support*Reflects trailing 12-month revenues as of September 30, 2012.rangelevels of compensation for similar jobs and job levels in the market, taking into account revenue relative to the Survey Peer Group(earnings i.e.(i.e. Net Income, before interest, income taxes, depreciation, and amortization), ROC, relative TSR, operating cash flow, and cost management disciplineBusiness climate, economic conditions and other factors2013 DOW PROXY STATEMENT3130 2015 Proxy Statement Committee Resource Description Committee Consultant Dow’s Executive Compensation Department 2015 Proxy Statement 31 What We Do What We Don’t Do AfterThe guidelines were adjusted upward in 2012, after a review of current stock ownership guidelines and relevant market data, the Committee adjusted the specific stock ownership requirements upward based on more current salary data in 2012.32 2015 Proxy Statement 2012.2014.20122014NEO & Guidelines NEO & Guidelines Personal Holdings NEO & Guidelines Personal Holdings Name Guideline
# Shares Multiple of
Base Salary 2012
Personal
Holdings Shares Held
In Excess of
Guideline Percent in
Excess of
Guideline Shares Held as a
Multiple of Base
Salary Guideline
# Shares Multiple of
Base Salary 2014
Personal
Holdings Shares Held
In Excess
of Guideline Percent in
Excess
of Guideline Shares
Held as a
Multiple of
Base Salary 250,000 6x 855,488 605,488 242 % 15x 250,000 6x 943,988 693,988 278% 22x Howard Ungerleider 80,000 4x 117,355 37,355 47% 5x 80,000 4x 190,233 110,233 138 % 7x 80,000 4x 240,684 160,684 201% 12x James Fitterling 80,000 4x 182,604 102,604 128% 9x Joe Harlan 80,000 4x 156,087 76,087 95% 7x 80,000 4x 225,147 145,147 181 % 7x 80,000 4x 408,056 328,056 410% 18x 80,000 4x 179,394 99,394 124 % 6x 80,000 4x 151,378 71,378 89 % 6x &and Holding Requirements322013 DOW PROXY STATEMENTperformance basedperformance-based compensation meeting certain requirements. Although the Company does consider the impact of this rule when making compensation2015 Proxy Statement 33 performance basedperformance-based compensation excluded from the limitation on deductibility.In 2012, theThe Committee reviewedperiodically reviews the Company’s compensation policies and practices and has determined that our incentive compensation programs do not create risks that are reasonably likely to have a material adverse effect on our Company. To DOW PROXY STATEMENT33conduct this review, the Company completed an inventory of its incentive compensation plans and policies. The evaluation covered a wide range of practices and policies including: the balanced mix between pay elements, the balanced mix between short and long termlong-term programs, caps on incentive payouts, governance controls in place to establish, review and approve goals, use of multiple performance measures, discretion on individual awards, use of stock ownership guidelines, use and provisions in severance/change-in-control policies, use of a compensation recovery policy, and Committee oversight of compensation programs. Several of our incentive plans and programs have features that mitigate risk, including the use of multiple measures in our annual and long-term incentive plans, use of reported performance measures, the Committee’s discretion in incentive payment levels, a balanced mix of long-term incentive vehicles, significant stock ownership guidelines and our Executive Compensation Recovery Policy.Advisory Vote on Executive CompensationThe Company provided stockholders a “say-on-pay” advisory vote on its executive compensation in May 2012 under recently adopted Section 14A of the Securities Exchange Act of 1934, as amended. At the Company’s 2012 Annual Meeting of Stockholders, approximately 83% of the votes cast for approval of the say-on-pay advisory vote. The Committee carefully evaluated the results of the 2012 annual advisory say-on-pay vote at their subsequent meetings. The Committee also considered numerous other factors in evaluating the Company’s executive compensation program as discussed in this CD&A. While each of these factors informed the Committee’s decisions regarding the NEOs’ compensation, the Committee did not implement changes to the Company’s executive compensation program as a result of the stockholder advisory vote. The Board of Directors has adopted a policy providing for an annual say-on-pay advisory vote. Although non-binding, the Board and the Committee will review and carefully consider the voting results when evaluating our executive compensation program.34 2013 DOW PROXY STATEMENT2015 Proxy Statement 2012.SUMMARY COMPENSATION TABLE FOR 20122014. On October 1, 2014, Mr. Weideman stepped down as CFO and Mr. Ungerleider became CFO.Name and Principal Position Year Salary ($) Bonus
($) (a) Stock
Awards
($) (b) Option
Awards
($) (b) (c) Non-Equity
Incentive Plan
Compensation
($) (d) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) (e) All Other
Compensation
($) (f) Total ($) 2012 1,808,333 0 8,446,171 4,840,080 1,368,640 6,160,388 366,055 22,989,668 2011 1,741,667 0 7,659,470 4,400,095 1,498,114 3,711,285 263,994 19,274,624 2010 1,691,667 0 5,683,729 5,060,006 5,000,000 3,644,180 297,145 21,376,727 2012 836,815 0 2,408,410 1,380,079 407,001 3,465,782 29,469 8,527,557 2011 755,000 80,000 2,402,766 1,380,058 477,519 2,231,656 29,088 7,356,087 2010 575,474 0 1,191,649 1,060,969 1,215,522 1,351,143 14,894 5,409,651 2012 951,618 0 2,408,410 1,380,079 459,478 2,798,980 70,339 8,068,904 2011 913,606 92,000 2,298,114 1,320,092 558,624 1,937,812 59,125 7,179,372 2010 877,116 0 2,015,197 1,791,818 1,791,139 2,240,220 46,697 8,762,187 2012 900,110 0 2,408,410 1,380,079 454,670 3,028,396 65,858 8,237,524 2012 836,636 35,518 2,408,410 1,380,079 424,879 2,853,921 53,243 7,992,687 Year Salary ($) Bonus
($) Stock
Awards
($) (a) Option
Awards
($) (b) Non-Equity
Incentive Plan
Compensation
($) (c) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) (d) All Other
Compensation
($) (e) Total
Without
Change in
Pension
Value ($) Andrew Liveris, 2014 1,921,433 0 9,369,108 3,630,036 4,232,314 7,135,205 410,276 26,642,438 19,507,233 CEO & Chairman 2013 1,865,500 0 8,312,228 5,324,003 4,559,027 3,212 388,907 20,452,877 20,449,665 2012 1,808,333 0 8,446,171 4,840,080 1,368,640 6,160,388 366,055 22,989,668 16,829,280 Howard Ungerleider, 2014 932,278 0 2,853,865 1,105,568 1,516,743 3,013,541 76,130 9,498,125 6,484,584 CFO & Exec. VP William Weideman, 2014 935,888 0 2,723,673 1,055,357 1,303,468 2,927,610 19,071 8,933,626 6,006,016 Former CFO & Exec VP 2013 904,447 0 2,301,569 1,474,051 1,601,053 393,911 16,024 6,691,054 6,297,143 2012 836,815 0 2,408,410 1,380,079 407,001 3,465,782 29,469 8,527,557 5,061,774 James Fitterling, 2014 965,922 0 2,853,865 1,105,568 1,539,213 2,897,381 63,598 9,363,622 6,466,241 Vice Chairman 2013 903,997 0 2,301,569 1,474,051 1,676,915 1,135 36,293 6,393,961 6,392,826 2012 836,636 35,518 2,408,410 1,380,079 424,879 2,853,921 53,243 7,992,687 5,138,765 Joe Harlan, 2014 972,220 0 2,723,673 1,055,357 1,505,508 165,278 114,037 6,507,755 6,342,477 Vice Chairman 2013 943,902 0 2,301,569 1,474,051 1,663,205 91,910 65,434 6,540,071 6,448,161 2012 902,067 0 2,199,134 1,260,015 435,116 75,987 56,555 4,928,873 4,852,886 Charles Kalil, 2014 1,024,661 0 2,594,026 1,005,030 1,427,107 2,991,336 70,200 9,082,830 6,091,494 General Counsel & Exec. VP 2013 995,131 0 2,499,820 1,407,017 1,752,920 2,613 76,834 6,734,334 6,731,721 2012 951,618 0 2,408,410 1,380,079 459,478 2,798,980 70,339 8,068,904 5,269,923 (a) Bonus amount for Mr. Fitterling in 2012 was a special one-time recognition award for extraordinary effort and contribution toward corporate strategy activities.(b)Amounts represent the aggregate grant date fair value of awards in the year of grant in accordance with the same standard applied for financial accounting purposes. AIf valued assuming a maximum payout on the Performance Share programsprogram, the value of the awards would result in additional value of:be: Liveris $5,166,749;$12,687,402; Ungerleider $3,864,554; Weideman $1,473,370;$3,688,248; Fitterling $3,864,544; Harlan $3,688,248; Kalil $1,473,370; Williams $1,473,370; Fitterling $1,473,370.$3,513,032.(c)(b)Dow’s valuation for financial accounting purposes uses the widely accepted lattice-binomial model. The option value calculated for the NEOs’ grants was $9.38$11.49 for the grant date of February 10, 2012.14, 2014. The exercise price of $34.00$46.71 is the closing Dow stock price on the date of grant.(d)(c)Individual results for Non-Equity Incentive Plan Compensation are detailed in the Performance Award section of the 20122014 Executive Compensation ActionsProgram in Detail and reflect income paid in 20132015 under our annual Performance Award (PA) program for performance achieved in 2012.2014.(e)(d)Reflects the aggregate change in the actuarial present value of accumulated pension benefits at age 65 using the actuarial assumptions included in the Company’s audited financial statements. Negative changes in pension value are included as zero in the Summary Compensation Table. An analysis of the Change in Pension Value for 2012 is shown below. 2015 Proxy Statement 35 The amounts recorded in this column vary with a number of factors, including the discount rate applied to determine the value of future payment streams. An analysis of the Change in Pension Value for 2014 is shown below. As a result of a reductiondecrease in prevailing interest rates in the credit markets since late 2008,in 2014, the discount rate used pursuant to pension accounting rules to calculate the present value of future payments decreased from 5.05%5.00% for fiscal year 20112013 to 4.10% infor fiscal year 2012. This drives substantial increases in the amount shown in the Summary Compensation Table and is detailed in the table below.2014. The increase in pension value resulting from the change in discountinterest rates does not result in any increase into the underlying benefits payable to participants under the plan. Mr. Harlan participates in the Personal Pension Account plan. The $165,278 represents the increase in his 2014 cash balance account due to the increase in annual pay and interest credits.Name Change in
Discount
Interest Rate
($) Change in
Deferral Period,
Benefits, and
Other ($) Total Change
($) 3,962,050 2,179,984 6,142,034 1,316,496 2,146,946 3,463,442 1,534,001 1,250,813 2,784,814 1,447,897 1,575,698 3,023,595 1,363,258 1,485,794 2,849,052 Also includes 2012 above-market non-qualified deferred compensation earnings: Liveris $18,354; Weideman $2,340; Kalil $14,166; Williams $4,801; Fitterling $4,869Name Change in Discount
Interest Rate ($) Change in Deferral
Period, Benefits,
and Other ($) Change due to
Change in
Mortality Table Total Change ($) Andrew Liveris 3,924,306 2,437,810 773,089 7,135,205 Howard Ungerleider 1,533,993 1,376,219 103,329 3,013,541 William Weideman 1,476,858 1,163,473 287,279 2,927,610 James Fitterling 1,673,863 1,044,913 178,605 2,897,381 Joe Harlan 0 165,278 0 165,278 Charles Kalil 1,479,430 1,134,501 377,405 2,991,336 2013 DOW PROXY STATEMENT(e) 35(f)All Other Compensation includes the cost of Company provided automobile (which was discontinued in 20122013 for the NEOs other than the CEO), personal use of corporate aircraft by the CEO as required by Company policy for security and immediate availability purposes, Company contributions to employee savings plans, reimbursements of costs paid for financial and tax planning support, home security, executive health examinations and personal excess liability insurance premiums. The incremental cost to the Company of personal use of Company aircraft is calculated based on the variable operating costs to the Company including fuel, landing, catering, handling, aircraft maintenance and pilot travel costs. Fixed costs, which do not change based upon usage, such as pilot salaries or depreciation of the aircraft or maintenance costs not related to personal travel, are excluded. NEOs also are provided a tax reimbursement for taxes incurred when a spouse travels for business purposes as it is sometimes necessary for spouses to accompany NEOs to business functions. These taxes are incurred because of the Internal Revenue Service’s rules governing business travel by spouses and the Company reimburses the associated taxes. No NEO is provided a tax reimbursement for personal use of aircraft.other compensation“All Other Compensation” items exceeded $10,000 in value:– Liveris: Personal use of Company aircraft ($221,240), Company contributions to savings plans ($79,854), financial and tax planning ($56,238), tax reimbursements ($30,383) – Ungerleider: Company contributions to savings plans ($41,189), financial and tax planning ($25,153) – Weideman: Company contributions to savings plans ($15,616) – Kalil: Company contributions to savings plans ($47,422) – Harlan: Company contributions to savings plans ($46,237), financial and tax planning ($38,596), tax reimbursement ($24,294) – Fitterling: Company contributions to savings plans ($41,578), financial and tax planning ($15,723) – Liveris: Personal use of Company aircraft ($157,917), Company contributions to savings plans ($73,464), financial and tax planning ($98,012), tax reimbursements ($33,080)36 2015 Proxy Statement – Weideman: Company contributions to savings plans ($13,587)– Kalil: Automobile ($10,947), Company contributions to savings plans ($40,341)– Williams: Company contributions to savings plans ($34,799), financial and tax planning ($18,359)– Fitterling: Company contributions to savings plans ($34,479), home security system ($11,250)20122014Name
Date Date of Action
by the
Compensation
Committee Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards Estimated Future Payouts
Under Equity Incentive Plan
Awards (a) All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#) (b) All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) (c) Exercise
or Base
Price of
Option
Awards
($/Sh) Grant
Date
Fair
Value of
Stock
and
Option
Awards
($) (d) Threshold
($) Target
($) Maximum
($) Threshold
(#) Target
(#) Maximum
(#) 2/8/2012 2/8/2012 0 2,912,000 7,280,000 2/10/2012 2/8/2012 0 124,560 311,400 5,420,851 2/10/2012 2/8/2012 88,980 3,025,320 2/10/2012 2/8/2012 516,000 34.00 4,840,080 2/8/2012 2/8/2012 0 904,447 2,261,117 2/10/2012 2/8/2012 0 35,520 88,800 1,545,830 2/10/2012 2/8/2012 25,370 862,580 2/10/2012 2/8/2012 147,130 34.00 1,380,079 2/8/2012 2/8/2012 0 1,021,063 2,552,658 2/10/2012 2/8/2012 0 35,520 88,800 1,545,830 2/10/2012 2/8/2012 25,370 862,580 2/10/2012 2/8/2012 147,130 34.00 1,380,079 2/8/2012 2/8/2012 0 967,383 2,418,458 2/10/2012 2/8/2012 0 35,520 88,800 1,545,830 2/10/2012 2/8/2012 25,370 862,580 2/10/2012 2/8/2012 147,130 34.00 1,380,079 2/8/2012 2/8/2012 0 903,997 2,259,993 2/10/2012 2/8/2012 0 35,520 88,800 1,545,830 2/10/2012 2/8/2012 25,370 862,580 2/10/2012 2/8/2012 147,130 34.00 1,380,079 Name Date of Action
by the
Compensation
Committee
Under Non-Equity Incentive
Plan Awards
Under Equity Incentive Plan
Awards (a) All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#) (b) All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) (c) Exercise
or Base
Price of
Option
Awards
($/Sh) Grant
Date Fair
Value of
Stock
and
Option
Awards
($) (d) Grant
Date Threshold
($) Target
($) Maximum
($) Threshold
(#) Target
(#) Maximum
(#) 2/12/2014 2/12/2014 0 3,089,280 6,178,560 2/14/2014 2/12/2014 0 116,580 233,160 6,343,701 2/14/2014 2/12/2014 64,770 3,025,407 2/14/2014 2/12/2014 315,930 46.71 3,630,036 Howard Ungerleider 2/12/2014 2/12/2014 0 1,123,513 2,247,026 2/14/2014 2/12/2014 0 35,510 71,020 1,932,277 2/14/2014 2/12/2014 19,730 921,588 2/14/2014 2/12/2014 96,220 46.71 1,105,568 2/12/2014 2/12/2014 0 987,476 1,974,951 2/14/2014 2/12/2014 0 33,890 67,780 1,844,124 2/14/2014 2/12/2014 18,830 879,549 2/14/2014 2/12/2014 91,850 46.71 1,055,357 James 2/12/2014 2/12/2014 0 1,123,513 2,247,026 Fitterling 2/14/2014 2/12/2014 0 35,510 71,020 1,932,277 2/14/2014 2/12/2014 19,730 921,588 2/14/2014 2/12/2014 96,220 46.71 1,105,568 Joe Harlan 2/12/2014 2/12/2014 0 1,123,513 2,247,026 2/14/2014 2/12/2014 0 33,890 67,780 1,844,124 2/14/2014 2/12/2014 18,830 879,549 2/14/2014 2/12/2014 91,850 46.71 1,055,357 Charles Kalil 2/12/2014 2/12/2014 0 1,081,142 2,162,284 2/14/2014 2/12/2014 0 32,280 64,560 1,756,516 2/14/2014 2/12/2014 17,930 837,510 2/14/2014 2/12/2014 87,470 46.71 1,005,030 (a) Performance Share awards as described in the Elements of Dow’s Executive Compensation Program section of the Compensation Discussion and Analysis. (b) Deferred Stock awards as described in the Elements of Dow’s Executive Compensation Program section of the Compensation Discussion and Analysis. (c) Stock Option awards as described in the Elements of Dow’s Executive Compensation Program section of the Compensation Discussion and Analysis. (d) Amounts represent the aggregate grant date fair value of awards in the year of grant in accordance with the same standard applied for financial accounting purposes consistent with the values shown in the Summary Compensation Table. 362015 Proxy Statement 2013 DOW PROXY STATEMENT37 2012.2014. The table includes outstanding equity grants from past years as well as the current year.OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END Option Awards Stock Awards Name Grant Date Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(a) Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(a) Option
Exercise
Price
($) Option
Expiration
Date
of Shares
or Units of
Stock
Not Vested
(#) (b)
Value of
Shares or
Units of
Stock
Not Vested
($) (b) (c) Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#) (d) Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($) (c) (d) 02/18/2005 180,000 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 400,000 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 460,000 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 619,370 — 38.62 02/18/2018 n/a n/a n/a n/a 02/13/2009 909,100 — 9.53 02/13/2019 n/a n/a n/a n/a 02/12/2010 551,800 — 27.79 02/12/2020 n/a n/a n/a n/a 02/11/2011 412,380 38.38 02/11/2021 n/a n/a n/a n/a 02/10/2012 343,998 172,002 34.00 02/10/2022 88,980 4,058,378 124,560 5,681,182 02/15/2013 253,886 507,774 32.16 02/15/2023 103,470 4,719,267 144,860 6,607,065 02/14/2014 — 315,930 46.71 02/14/2024 64,770 2,954,160 116,580 5,317,214 Howard Ungerleider 02/18/2005 8,340 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 12,950 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 23,510 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 30,750 — 38.62 02/18/2018 n/a n/a n/a n/a 02/13/2009 11,288 — 9.53 02/13/2019 n/a n/a n/a n/a 02/12/2010 22,400 — 27.79 02/12/2020 n/a n/a n/a n/a 02/11/2011 18,600 — 38.38 02/11/2021 n/a n/a n/a n/a 02/10/2012 54,946 27,474 34.00 02/10/2022 14,220 648,574 19,900 907,639 02/15/2013 70,293 140,587 32.16 02/15/2023 28,650 1,306,727 40,110 1,829,417 02/14/2014 — 96,220 46.71 02/14/2024 19,730 899,885 35,510 1,619,611 William Weideman 02/18/2005 13,340 — 53.53 02/18/2015 n/a n/a n/a n/a 02/13/2009 57,035 — 9.53 02/13/2019 n/a n/a n/a n/a 02/12/2010 115,700 — 27.79 02/12/2020 n/a n/a n/a n/a 02/11/2011 129,340 — 38.38 02/11/2021 n/a n/a n/a n/a 02/10/2012 98,086 49,044 34.00 02/10/2022 25,370 1,157,126 35,520 1,620,067 02/15/2013 70,293 140,587 32.16 02/15/2023 28,650 1,306,727 40,110 1,829,417 02/14/2014 — 91,850 46.71 02/14/2024 18,830 858,836 33,890 1,545,723 James 02/18/2005 13,000 — 53.53 02/18/2015 n/a n/a n/a n/a Fitterling 03/01/2006 18,610 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 39,050 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 70,960 — 38.62 02/18/2018 n/a n/a n/a n/a 02/12/2010 43,700 — 27.79 02/12/2020 n/a n/a n/a n/a 02/11/2011 118,090 — 38.38 02/11/2021 n/a n/a n/a n/a 02/10/2012 98,086 49,044 34.00 02/10/2022 25,370 1,157,126 35,520 1,620,067 02/15/2013 70,293 140,587 32.16 02/15/2023 28,650 1,306,727 40,110 1,829,417 02/14/2014 — 96,220 46.71 02/14/2024 19,730 899,885 35,510 1,619,611 09/01/2011 128,700 — 27.60 09/01/2021 n/a n/a n/a n/a 02/10/2012 89,552 44,778 34.00 02/10/2022 23,170 1,056,784 32,430 1,479,132 02/15/2013 70,293 140,587 32.16 02/15/2023 28,650 1,306,727 40,110 1,829,417 02/14/2014 — 91,850 46.71 02/14/2024 18,830 858,836 33,890 1,545,723 03/01/2000 n/a n/a n/a n/a 108 4,926 n/a n/a 02/23/2001 n/a n/a n/a n/a 55 2,509 n/a n/a 02/18/2005 17,500 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 48,550 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 70,000 — 43.59 02/16/2017 n/a n/a n/a n/a 02/10/2012 — 49,044 34.00 02/10/2022 25,370 1,157,126 35,520 1,620,067 02/15/2013 67,096 134,194 32.16 02/15/2023 27,350 1,247,434 38,290 1,746,407 02/14/2014 — 87,470 46.71 02/14/2024 17,930 817,787 32,280 1,472,291 Name Option Awards Stock Awards Grant Date Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(a) Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(a) Option
Exercise
Price
($)
Expiration Number of
Shares or
Units of
Stock That
Have
Not Vested
(#) (b)
Shares or
Units of
Vested
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($) 02/13/2004 90,000 — 43.49 02/13/2014 n/a n/a n/a n/a 02/18/2005 180,000 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 400,000 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 460,000 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 619,370 — 38.62 02/18/2018 n/a n/a n/a n/a 02/13/2009 909,100 — 9.53 02/13/2019 n/a n/a n/a n/a 02/12/2010 367,865 183,935 27.79 02/12/2020 91,100 2,945,263 91,100 2,945,263 02/11/2011 137,459 274,921 38.38 02/11/2021 71,660 2,316,768 100,320 3,243,346 02/10/2012 — 516,000 34.00 02/10/2022 88,980 2,876,723 124,560 4,027,025 02/14/2003 12,250 — 27.40 02/14/2013 n/a n/a n/a n/a 02/13/2004 11,670 — 43.49 02/13/2014 n/a n/a n/a n/a 02/18/2005 13,340 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 16,190 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 36,400 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 41,250 — 38.62 02/18/2018 n/a n/a n/a n/a 02/13/2009 57,035 — 9.53 02/13/2019 n/a n/a n/a n/a 02/12/2010 77,132 38,568 27.79 02/12/2020 19,100 617,503 19,100 617,503 02/11/2011 43,113 86,227 38.38 02/11/2021 22,480 726,778 31,470 1,017,425 02/10/2012 — 147,130 34.00 02/10/2022 25,370 820,212 35,520 1,148,362 03/01/2000 n/a n/a n/a n/a 108 3,492 n/a n/a 02/23/2001 n/a n/a n/a n/a 55 1,778 n/a n/a 02/13/2004 8,000 — 43.49 02/13/2014 n/a n/a n/a n/a 02/18/2005 17,500 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 48,550 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 70,000 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 165,710 — 38.62 02/18/2018 n/a n/a n/a n/a 02/13/2009 102,978 — 9.53 02/13/2019 n/a n/a n/a n/a 02/12/2010 130,266 65,134 27.79 02/12/2020 32,300 1,044,259 32,300 1,044,259 02/11/2011 41,239 82,481 38.38 02/11/2021 21,500 695,095 30,100 973,133 02/10/2012 — 147,130 34.00 02/10/2022 25,370 820,212 35,520 1,148,362 02/13/2004 15,000 — 43.49 02/13/2014 n/a n/a n/a n/a 02/18/2005 16,670 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 21,040 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 33,480 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 65,890 — 38.62 02/18/2018 n/a n/a n/a n/a 02/12/2010 67,866 33,934 27.79 02/12/2020 16,800 543,144 16,800 543,144 02/11/2011 35,569 71,141 38.38 02/11/2021 18,540 599,398 25,960 839,287 02/10/2012 — 147,130 34.00 02/10/2022 25,370 820,212 35,520 1,148,362 02/13/2004 11,170 — 43.49 02/13/2014 n/a n/a n/a n/a 02/18/2005 13,000 — 53.53 02/18/2015 n/a n/a n/a n/a 03/01/2006 18,610 — 43.68 03/01/2016 n/a n/a n/a n/a 02/16/2007 39,050 — 43.59 02/16/2017 n/a n/a n/a n/a 02/15/2008 70,960 — 38.62 02/18/2018 n/a n/a n/a n/a 02/13/2009 76,720 — 9.53 02/13/2019 n/a n/a n/a n/a 02/12/2010 77,132 38,568 27.79 02/12/2020 19,100 617,503 19,100 617,503 02/11/2011 39,363 78,727 38.38 02/11/2021 20,520 663,412 28,730 928,841 02/10/2012 — 147,130 34.00 02/10/2022 25,370 820,212 35,520 1,148,362 (a)38 2015 Proxy Statement (a) Stock Option award grants vest in three equal installments on the first, second and third anniversaries of the grant date shown in the table. (b) Deferred Shares vest and are delivered three years after the grant date. (c) Market values based on the 12/31/ 1214 closing stock price of $32.33$45.61 per share.2013 DOW PROXY STATEMENT37(d) Performance Shares granted 2/ 12/2010,10/2012, 2/11/201115/2013 and 2/10/201214/2014 will vest and be delivered in AprilFebruary of the year following the end of the three-year performance period. Shares granted in February 2010-20122012-2014 are shown at the target level of performance. The actual number of shares to be delivered will beis determined at the end of the three-year performance period.(e)In addition to the equity grants described above, Messrs. Liveris, Weideman and Kalil received dividend unit grants on 3/9/1988 of 846 shares, 846 shares and 1,125 shares, respectively, which generate a quarterly payment equal to the dividend paid on equivalent shares of Dow Common Stock. These grants will expire on 3/9/2013.2012.2014.20122014 Option Awards Stock Awards Name Number of Shares
Acquired on
Exercise
(#)
on Exercise
Acquired on
Vesting (#) 100,800 385,833 441,755 15,363,961 7,500 28,313 28,503 990,732 118,676 2,170,652 138,845 4,837,347 33,608 814,658 46,640 1,623,871 19,200 57,043 37,240 1,295,225 Option Awards Stock Awards Name Number of
Shares
Acquired
on Exercise
(#) Value
Realized
on Exercise
($) Number
of Shares
Acquired
on Vesting
(#) (a) Value
Realized
on Vesting
($) Andrew Liveris 90,000 164,700 96,439 4,513,981 Howard Ungerleider 7,000 13,055 7,820 365,701 William Weideman 105,510 850,245 30,253 1,416,040 James Fitterling 83,170 1,576,793 27,616 1,292,611 Joe Harlan — — 163,910 8,146,336 Charles Kalil 590,916 9,709,413 37,435 1,780,369 (a) Reflects delivery of shares from the 2009-20112011-2013 Performance Share program the 2007 Deferred Stock grants with 5-year vesting and the 20092011 Deferred Stock grants with 3-year vesting. Mr. Harlan received 135,000 shares upon his hire date which vested on 11/3/2014. All were previously reported in the Summary Compensation Tables in the year they were granted.2012.2014.20122014Name Plan Name
Credited Present Value of
Accumulated
Benefit ($) (a) Dow Employees’ Pension Plan 17.1 1,353,280 Dow Executives’ Supplemental Retirement Plan (b) 37.0 26,772,038 Dow Employees’ Pension Plan 36.6 1,399,032 Dow Executives’ Supplemental Retirement Plan 36.6 7,902,740 Dow Employees’ Pension Plan 32.9 1,549,372 Dow Executives’ Supplemental Retirement Plan 32.9 11,365,734 Dow Employees’ Pension Plan 32.6 1,325,074 Dow Executives’ Supplemental Retirement Plan 32.6 7,196,293 Dow Employees’ Pension Plan 29.0 1,057,969 Dow Executives’ Supplemental Retirement Plan 29.0 5,858,766 Name Plan Name Number of Years
Credited Service
(#) Present Value of
Accumulated Benefit ($)
(a) Andrew Liveris Dow Employees’ Pension Plan 19.1 1,549,255 Dow Executives’ Supplemental Retirement Plan (b) 39.0 32,178,656 Howard Ungerleider Dow Employees’ Pension Plan 24.5 920,805 Dow Executives’ Supplemental Retirement Plan 24.5 6,083,837 William Weideman Dow Employees’ Pension Plan 38.6 1,597,232 Dow Executives’ Supplemental Retirement Plan 38.6 11,025,651 James Fitterling Dow Employees’ Pension Plan 31.0 1,204,843 Dow Executives’ Supplemental Retirement Plan 31.0 8,604,288 Joe Harlan Dow Employees’ Pension Plan 3.4 51,687 Dow Executives’ Supplemental Retirement Plan 3.4 313,285 Charles Kalil Dow Employees’ Pension Plan 34.9 1,775,567 Dow Executives’ Supplemental Retirement Plan 34.9 13,755,845 (a) Unless otherwise noted, all present values reflect accrued age 65 benefits. The form of payment, discount rate (4.10%) and mortality (UP94G) are based on assumptions used to determine pension plan obligations as reflected in the consolidated financial statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 2012.2014.38(b)2013 DOW PROXY STATEMENT(b)Mr. Liveris was asked by the Company to permanently transfer to the United States from Australia in 1995, at which time he began participation in the Dow Employees’ Pension Plan (“DEPP”) and Executives’ Supplemental Retirement Plan (“ESRP”), and ceased contributions to the Australian Superannuation Fund (“Australian Fund”). Mr. Liveris’ retirement benefit will equal the amount payable under the DEPP formula based on 3739 years of actual service with Dow (17(19 years as a U.S. employee of Dow plus 20 years as an Australian employee of Dow). The ESRP benefit will be reduced by the value of his Australian Fund at the time of retirement. The value of Mr. Liveris’ Company contributions in the Australian Fund at 12/31/12December 31, 2014 was 698,998852,870 AUD.2015 Proxy Statement 39 2012.2014. The replacement value percentages for the NEOs are comparable to most other salaried employees with similar age and years of service.20122014Name
Value ($) Replacement
Value (%)
(b) 2,274,024 48 % 754,740 43 % 920,532 46 % 615,672 33 % 409,032 23 % Name Pension Annuity
Value ($) (a) Replacement
Value (%) (b) Andrew Liveris 2,596,452 52% Howard Ungerleider 308,292 15% William Weideman 974,568 51% James Fitterling 614,148 29% Joe Harlan 22,476 1% Charles Kalil 1,120,452 53% (a) Annual pension benefit if NEO retired on December 31, 2012,2014, stated as a single-life annuity with no survivor options.(b) Annual pension benefit as a percentage of annual Base Salary + Target Performance Award. paysalary and actual variable pay is credited to the account (“Pay Credit”). Additionally, the Personal Pension Account is credited with an annual Interest Credit equal to the Interest Credit Rate multiplied by the Personal Pension Account balance as of December 31 of the previous year. The Interest Credit Rate is determined annually by the Company, and is based on the closing rate on the six-month U.S. Treasury bill on the last business day of September immediately preceding the Plan Year plus 1.5%.2013 DOW PROXY STATEMENT3940 2015 Proxy Statement 2012,2014, for salaried employees who contributed 2% of annual salary, Dow provided a matching contribution of 100% of the employee’s contribution. For salaried employees who contributed up to an additional 4%, Dow provided a 50% match. All NEOs participate in the 401(k) plan on the same terms as other eligible employees.20122014Name Executive
Contributions
in Last Fiscal
Year ($) (a) Company
Contributions
in Last Fiscal
Year ($) (b) Aggregate
Earnings
in Last
Fiscal
Year ($)
(c) Aggregate
Withdrawals /
Distributions
($) Aggregate
Balance at
Last Fiscal
Year-End
($) (d) 90,417 59,867 194,427 — 2,087,094 — — 6,438 — 141,930 47,581 26,744 54,523 — 1,028,108 84,918 21,202 63,387 — 755,655 288,173 20,882 275,876 — 2,465,762 Name Executive
Contributions
in Last Fiscal
Year ($) (a) Company
Contributions
in Last Fiscal
Year ($) (b) Aggregate
Earnings
in Last Fiscal
Year ($) Aggregate
Withdrawals/
Distributions
($) Aggregate
Balance
at Last
Fiscal
Year-End
($) (c) Andrew Liveris 96,072 64,420 (8,701 ) — 2,627,817 Howard Ungerleider 37,291 23,526 29,422 — 902,061 William Weideman — — 4,906 — 152,182 James Fitterling 38,637 25,960 192,099 — 3,411,319 Joe Harlan 38,889 27,556 15,490 — 505,182 Charles Kalil 40,986 29,605 46,134 — 1,280,819 (a) Executive contributions are also reported as salary for 20122014 in the Summary Compensation Table.(b) Company contributions are also reported as All Other Compensation for 20122014 in the Summary Compensation Table.(c) A portion of the amounts in the aggregate earnings in last fiscal year column is also reported as Change in Pension Value and Nonqualified Deferred Compensation Earnings in the Summary Compensation Table (as disclosed in footnote (d) to the Summary Compensation Table)(d)Includes Company and executive contributions with respect to Mr. Liveris of $87,083$150,284 for 20112012 and $139,968$155,608 for 20102013 previously reported in the Summary Compensation Table andTable; Company and executive contributions with respect to Mr. Kalil of $45,680$74,325 for 20112012 and $43,856$67,870 for 20102013 previously reported in the Summary Compensation Table; Company and executive contributions with respect to Mr. Fitterling of $309,055 for 2012 and $36,160 for 2013 previously reported in the Summary Compensation Table; and executive contributions with respect to Mr. Harlan of $37,756 for 2013 previously reported in the Summary Compensation Table.paysalary deferred. For purposes of calculating the match under the Elective Deferral Plan, the Company will assume each participant is contributing the maximum allowable amount to the 401(k) plan and receiving a match thereon. The assumed match from the 401(k) plan will be offset from the matching contribution calculated under the Elective Deferral Plan. The NEOs’ balances consist primarily of voluntary deferrals (and related earnings), not contributions made by the Company.402013 DOW PROXY STATEMENT Chemical credit spread, a phantom Dow stock fund tracking the market value of Dow Common Stock with market dividends paid and reinvested, as well as funds tracking the performance of several mutual funds.2015 Proxy Statement 41 • • • • • period remains unchanged;and expiration periods are shortened to the earlier of the existing expiration date or five years.remain unchanged.2013 DOW PROXY STATEMENT41EighteenIf eligible for retiree medical, eighteen months of health and welfare benefits at employee rates.42 2015 Proxy Statement 422013 DOW PROXY STATEMENT2012.2014.Name Type of Benefit Involuntary
Termination
Without Cause ($) Change-in-Control ($) (a) Type of Benefit Involuntary Termination
Without Cause ($) Change-in-
Control ($) (a) Andrew Liveris Severance 3,500,000 14,148,680 Severance 3,861,600 15,010,039 Increase in Present Value of Pension n/a 6,426,765 Double-trigger LTI Acceleration n/a 38,163,768 Health & Welfare Benefits 5,886 5,886 Increase in Present Value of Pension n/a 3,975,426 Outplacement & Financial Planning 30,000 50,000 Health & Welfare Benefits 4,923 4,923 Outplacement & Financial Planning 30,000 50,000 Howard Ungerleider Severance 1,409,088 1,409,088 Double-trigger LTI Acceleration n/a 9,421,721 Increase in Present Value of Pension n/a 2,007,529 Health & Welfare Benefits n/a n/a Outplacement & Financial Planning 30,000 30,000 William Weideman Severance 1,643,244 1,643,244 Severance 1,866,437 1,866,437 Increase in Present Value of Pension n/a 1,606,206 Double-trigger LTI Acceleration n/a 10,778,192 Health & Welfare Benefits 4,896 4,896 Increase in Present Value of Pension n/a 749,392 Outplacement & Financial Planning 30,000 30,000 Health & Welfare Benefits 4,797 4,797 Charles Kalil Severance 1,716,733 3,987,008 Increase in Present Value of Pension n/a 2,495,334 Health & Welfare Benefits 5,886 5,886 Outplacement & Financial Planning 30,000 50,000 Carol Williams Severance 1,615,849 1,615,849 Increase in Present Value of Pension n/a 2,240,031 Health & Welfare Benefits 5,886 5,886 Outplacement & Financial Planning 30,000 30,000 Outplacement & Financial Planning 30,000 30,000 James Fitterling Severance 1,390,765 1,390,765 Severance 1,653,330 1,653,330 Increase in Present Value of Pension n/a 2,381,424 Double-trigger LTI Acceleration n/a 10,893,129 Health & Welfare Benefits 3,385 3,385 Increase in Present Value of Pension n/a 2,468,282 Outplacement & Financial Planning 30,000 30,000 Health & Welfare Benefits 3,150 3,150 Outplacement & Financial Planning 30,000 30,000 Joe Harlan Severance 616,241 616,241 Double-trigger LTI Acceleration n/a 10,487,387 Increase in Present Value of Pension n/a 0 Health & Welfare Benefits n/a n/a Outplacement & Financial Planning 30,000 30,000 (a)2015 Proxy Statement 43 Name Type of Benefit Involuntary Termination
Without Cause ($) Change-in-
Control ($) (a) Charles Kalil Severance 1,896,949 4,221,602 Double-trigger LTI Acceleration n/a 10,435,422 Increase in Present Value of Pension n/a 555,269 Health & Welfare Benefits 9,333 9,333 Outplacement & Financial Planning 30,000 50,000 (a) An executive must meet the double trigger requirement of being involuntarily terminated within two years of a change-in-control in order to receive benefits. 2013 DOW PROXY STATEMENT43benchmarkscompares its non-employee Director compensation programs, designs and compensation elements againstto the same Survey Peer Group used for executive compensation, as described in the Market BenchmarkingPeer Group and Survey Pay Data section of the Compensation Discussion and Analysis. Dow targets the median range of compensation of the Survey Peer Group for all Director compensation elements. The following table lists the compensation provided to Dow’s non-employee Directors in 2012.2014.20122014Name Fees Earned
or Paid in
Cash ($) Stock
Awards
($) (a) Option
Awards
($) Non-Equity
Incentive Plan
Compensation
($) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
(b) All Other
Compensation
($) Total ($) 115,000 106,124 — — — — 221,124 125,000 106,124 — — 6,595 — 237,719 145,000 106,124 — — 4,475 — 255,599 155,000 106,124 — — — — 261,124 65,000 106,124 — — — — 171,124 115,000 106,124 — — — — 221,124 115,000 106,124 — — — — 221,124 125,000 106,124 — — — — 231,124 130,000 106,124 — — 3,392 — 239,516 125,000 106,124 — — 1,902 — 233,026 65,000 106,124 — — 2,777 — 173,900 Name Fees Earned or
Paid in Cash ($) Stock
Awards ($) (a) Option
Awards ($) Non-Equity
Incentive Plan
Compensation ($) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($) All Other
Compensation ($) Total ($) Arnold A. Allemang 115,000 135,185 — — — — 250,185 Ajay Banga 115,000 135,185 — — — — 250,185 Jacqueline K. Barton 130,000 135,185 — — — — 265,185 James A. Bell 150,000 135,185 — — — — 285,185 Jeff M. Fettig 160,000 135,185 — — — — 295,185 Paul Polman 115,000 135,185 — — — — 250,185 Dennis H. Reilley 135,000 135,185 — — — — 270,185 James M. Ringler 130,000 135,185 — — — — 265,185 Ruth G. Shaw 130,000 135,185 — — — — 265,185 (a) The March 5, 2012May 10, 2014 full grant date fair value of Restricted Stock granted is $33.69$48.98 per share with a total value of $106,124$135,185 for each Director (3,150(2,760 shares) represented in accordance with the same standard applied for financial accounting purposes.(b)Consists exclusively of above-market nonqualified deferred compensation earnings.20122014 Directors’ fees paid in cash as stated below are paid only to Directors who are not employees of the Company.Fee Category Annual Rate Annual Rate $ 70,000 $ 115,000 $ 45,000 $ 15,000 Audit and Compensation & Leadership Development Committee Chairmanships $ 20,000 $ 10,000 $ 15,000 $ 15,000 $ 15,000 $ 25,000 $ 30,000 2012,2014, each non-employee Director received 3,1502,760 shares of Restricted Stock representing the target equity award value of $135,000, with provisions limiting transfer while serving as a Director of the Company, and, at a minimum, for two years from the date of grant. The 2012 grants were made from the 2003 Non-Employee Directors Stock Incentive Plan. and Stock Options for that year and prior to December 31 of that year are eligible to receive a one-time cash payment (“New Director Retainer”) within 30 days of the effective date of their election as a Director. The intent of this New Director Retainer is to encourage a new Director to make44 2013 DOW PROXY STATEMENT2015 Proxy Statement new Director to make an initial investment in the stock of the Company. The amount of the New Director Retainer is calculated from the net present value of the cash equivalent of that year’s Restricted Stock grant, with stock values based on the then current price of Company stock. It is based on months of Board service for the first year, and is therefore pro-rated for the number of months remaining in the calendar year.fourfive times the amount of the annual Board retainer fee, with a four-yearfive-year time period after first election to achieve this level. Directors are also required to retain all Deferred Stock and Restricted Stock grants until retirement from the Board. The following table shows the stock ownership guideline and respective holdings of the non-employee Directors as of December 31, 2012.2014.20122014Name Ownership
Guideline 2012
Holdings Shares Held
In Excess of
Guideline Ownership
Guideline 2014
Holdings Shares Held
In Excess of
Guideline 10,000 274,112 264,112 18,000 197,665 179,665 Ajay Banga 18,000 6,756 (a) — 10,000 30,910 20,910 18,000 38,306 20,306 10,000 20,470 10,470 18,000 27,150 9,150 10,000 25,970 15,970 18,000 33,610 15,610 10,000 97,170 87,170 10,000 12,540 2,540 18,000 40,720 22,720 10,000 23,320 13,320 18,000 30,000 12,000 10,000 34,336 24,336 18,000 42,009 24,009 10,000 21,590 11,590 18,000 28,270 10,270 (a) Mr. Banga joined the Board in 2013 and it is expected that he will meet the ownership guideline within the required timeframe. Chemical credit spread, a phantom Dow stock account tracking the market value of Dow Common Stock with market dividends paid and reinvested, as well as funds tracking the performance of several mutual funds. These funds are identical to funds offered as part of the Elective Deferral Plan for management level employees. Such deferred amounts will be paid in installments as elected by the Director at the time of deferral commencing in July following the Director’s termination of Board service, in the following July or in July of the calendar year following the Director’s 72nd birthday. If the Director elects to receive payment in July following his or her 72nd birthday and if he or she remains on the Board beyond his or her 72nd birthday, payments shall start in the July following termination of Board service.Compensation of Non-Management Employee DirectorsIn 2013, the Board formally terminated the Retirement Policy for Employee Directors (“RPED”), which was designed to compensate directors who were employed by, but who had ceased to be executives of, the Company. Under the RPED, an employee director was paid according to a fixed formula calculated as a percentage of the compensation he had received as an executive. No directors were compensated under the RPED in 2012 or in recent years.
Additional Compensation from Third Point LLC2013 DOW PROXY STATEMENT 45 2012 Equity Plan Information.2014.Plan Category (1) (2) (3) (1) (2) (3) Plan Category # of securities to be
issued upon
exercise of
outstanding options,
warrants, rights Weighted-average exercise price of
outstanding options, warrants,
rights ($) # of securities remaining available
for future issuance under equity
compensation plans (excluding
securities reflected in column (1)) # of securities to be
issued upon
exercise of outstanding
options, warrants, rights Weighted-average exercise
price of outstanding
options, warrants, rights ($) # of securities
remaining available for
future issuance under
equity
compensation plans
(excluding securities
reflected in column (1)) 83,426,825 35.30 (a) 80,027,438 (b) 67,497,037 35.75 (a) 91,072,758 (b) 33,850 35.55 — — — — Total 83,460,675 35.30 80,027,438 67,497,037 35.75 91,072,758 2012(a) Calculation does not include outstanding Deferred Stock or Performance Shares that have no exercise price.(b) The 2012 Stock Incentive Plan was approved by shareholders on May 10, 2012 with an initial share pool of 44,500,000 shares.shares and another 50,500,000 shares approved by shareholders on May 15, 2014. Shares available are calculated using the fungible method of counting shares which consumes 2.1 shares for each Deferred Stockdeferred stock and Performance Shareperformance share awarded and 1 share for each Stock Option.stock option. The 2012 Plan also provides that stock awards under the prior 1988 Award and Option Plan which are forfeited or expire shall be added back into this share pool at the fungible ratios. Shares available for grant under other stockholder-approved plans are also included. Total includes 44,749,23162,725,432 shares available under the 2012 Stock Incentive Plan, pursuant to the method described above, 35,000,00023,069,119 shares available under the 2012 Employees’Employee Stock Purchase Plan, and 278,207 shares available under the 1994 Executive Performance Plan.(c) Includes 19,250 and 14,600 outstanding stock options granted prior to 2005 under The Dow Chemical Company 1994 Non-Employee Directors’ Stock Plan (“1994 Plan”) and the 1998 Non-Employee Directors’ Stock Incentive Plan (“1998 Plan”), respectively. The 1994 Plan previously allowed the Company to grant up to 300,000 stock options, and the 1998options. The Plan previously allowed the Company to grant up to 600,000 stock options. Both plansis limited eligibility to non-employee Directors,directors, and both plans provided that stock options were granted pursuant to a formula and had ten-year terms. No further grants will be issued under either plan.this plan and there are no longer outstanding shares.46 2013 DOW PROXY STATEMENT2015 Proxy Statement 28, 2013,16, 2015, except as noted, for (i) each Director of the Company, (ii) each executive officer of the Company listed in the Summary Compensation Table, (iii) all Directors and executive officers as a group, and (iv) each person beneficially owning more than 5% of the outstanding shares of Dow’s Common Stock.Name Current Shares
Beneficially Owned
(a) Rights to Acquire
Beneficial
Ownership of
Shares (b) Total Percent of Shares
Beneficially Owned 241,112.4 90,000.0 331,112.4 * 76.0 0.0 76.0 30,910.0 19,650.0 50,560.0 * 20,470.0 10,950.0 31,420.0 * 25,970.0 19,650.0 45,620.0 * 191,227.8 472,979.0 664,206.8 * 313.1 87,676.0 87,989.1 * 97,170.0 6,050.0 103,220.0 * 167,666.7 739,659.0 907,325.7 * 656,848.7 3,657,187.0 4,314,035.7 * 12,540.0 0.0 12,540.0 * 23,320.0 0.0 23,320.0 * 34,335.6 19,650.0 53,985.6 * 21,590.0 10,950.0 32,540.0 * 136,337.8 426,854.0 563,191.8 * 120,405.8 338,492.0 458,897.8 * 1,780,293.9 5,899,747.0 7,680,040.9 0.64 % 2,908,263.4 10,272,847.0 13,181,110.4 1.09 % 99,337,800.0 (c) 99,337,800.0 8.3 % 97,199,700.0 (d) 97,199,700.0 8.1 % 64,551,940.0 (e) 64,551,940.0 5.38 % Name Current Shares
Beneficially Owned
(a) Rights to Acquire
Beneficial
Ownership of
Shares (b) Total Percent of Shares
Beneficially Owned A. A. Allemang 159,864.5 0.0 159,864.5 * A. Banga 6,756.0 0.0 6,756.0 * J. K. Barton 38,306.0 10,950.0 49,256.0 * J. A. Bell 27,150.0 10,950.0 38,100.0 * R. K. Davis 0.0 0.0 0.0 * J. M. Fettig 33,610.0 10,950.0 44,560.0 * J. R. Fitterling 125,437.4 610,199.0 735,636.4 * J. E. Harlan 100,836.9 434,232.0 535,068.9 * C. J. Kalil 353,982.2 330,942.0 684,924.2 * A. N. Liveris 742,000.4 4,481,731.0 5,223,731.4 * M. Loughridge 2,074.0 0.0 2,074.0 * R. J. Milchovich 5,400.0 0.0 5,400.0 * R. S. Miller 5,000.0 0.0 5,000.0 * P. Polman 40,720.0 0.0 40,720.0 * D. H. Reilley 30,000.0 0.0 30,000.0 * J. M. Ringler 42,009.0 10,950.0 52,959.0 * R. G. Shaw 32,424.0 10,950.0 43,374.0 * H. I. Ungerleider 64,483.4 374,577.0 439,060.4 * W. H. Weideman 181,483.1 620,407.0 801,890.1 * Group Total 1,991,536.9 6,906,838.0 8,898,374.9 * All Directors and Executive Officers as a Group (25 persons) 2,846,941.5 7,975,639.0 10,822,580.5 0.93 % Certain Other Owners: BlackRock, Inc. 68,704,246 (c) 68,704,246 5.80 % The Vanguard Group 63,453,760 (d) 63,453,760 5.38 % Berkshire Hathaway Inc. 0.0 72,603,000.0 (e) 0.0 6.00 % (a) Except as otherwise noted and for shares held by a spouse and other members of the person’s immediate family who share a household with the named person, the named persons have sole voting and investment power over the indicated number of shares. This column also includes all shares held in trust for the benefit of the named party in The Dow Chemical Company Employees’ Savings Plan. Beneficial ownership of some or all of the shares listed may be disclaimed. (b) This column includes any shares that the person could acquire through 4/ 29/2013,17/2015, by (1) exercise of an option granted by Dow; (2) Performance Shares granted by Dow to be delivered prior to 4/29/2013;17/2015; or (3) payment of any balance due under a subscription in The Dow Chemical Company 2012 Employees’ Stock Purchase Plan. To the extent that these shares have not been issued as of the record date, they cannot be voted at the Meeting.(c) Based on a Schedule 13G/A filed by Capital Research Global InvestorsBlackRock, Inc. on February 13, 20132, 2015 with the U.S. Securities and Exchange Commission reporting beneficial ownership as of December 31, 2012. Capital Research Global Investors2014. BlackRock, Inc. has sole voting power over 99,337,80055,817,028 shares and sole dispositive power over 99,337,80068,704,246 shares. Capital Research Global Investors’BlackRock, Inc.’s address is 333 South Hope55 East 52nd Street, Los Angeles, CA 90071.New York, NY 10022.(d) Based on a Schedule 13G/A13G filed by Capital World InvestorsThe Vanguard Group on February 13, 201310, 2015 with the U.S. Securities and Exchange Commission reporting beneficial ownership as of December 31, 2012. Capital World Investors2014. The Vanguard Group has sole voting power over 97,199,7001,951,495 shares, and sole dispositive power over 97,199,70061,601,374 shares and shared dispositive power over 1,852,386 shares. Capital World Investors’The Vanguard Group‘s address is 333 South Hope Street, Los Angeles, CA 90071.100 Vanguard Blvd, Malvern, PA 19355.(e) Based on a Schedule 13G/A13G filed by BlackRock,Berkshire Hathaway Inc. on February 8, 2013August 14, 2014 with the U.S. Securities and Exchange Commission reporting beneficial ownership as of December 31, 2012. BlackRock,2009. Berkshire Hathaway Inc. has sole voting power over 64,551,940, National Indemnity Company, Columbia Insurance Company, and Warren E. Buffett reported beneficial ownership of 72,603,000 shares and sole dispositive power over 64,551,940 shares. BlackRock,of the Company’s stock which are held in the form of convertible preferred stock that can be converted into common stock by the holders within 60 days. Berkshire Hathaway Inc.’s address is 40 East 52nd3555 Farnam Street, New York, NY 10022.Omaha, NE 68131. To the extent that these shares have not been issued as of the record date, they cannot be voted at the Meeting.* Less than 0.36%0.45% of the total shares of Dow Common Stock issued and outstanding.2013 DOW PROXY STATEMENT 47 auditserve as the 2013 consolidated financial statements and related internal control over financial reporting of The Dow Chemical Company and its subsidiaries,Company’s independent registered public accounting firm for 2015, made by the Audit Committee with the concurrence of the Board of Directors, is hereby ratified.theeach Annual Meeting. The Audit Committee has appointed, and the Board has concurred subject to your ratification, Deloitte & ToucheLLP to audit and report onserve as the consolidated financial statements and related internal control over financial reporting of Dow and its subsidiariesCompany’s independent registered public accounting firm for 2013.2015. Deloitte & ToucheLLP served as Dow’s independent registered public accounting firm for 2012.2014. Deloitte & ToucheLLP has offices at or near most of the locations where Dow operates in the United States and other countries. The members of the Audit Committee and the Board believe that the continued retention of Deloitte & Touche LLP is in the best interests of the Company and its investors., this has included a review of its performance in prior years, its independence and processes for maintaining independence, the results of the most recent internal quality control review or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well as its reputation for integrity and competence in the fields of accounting and auditing. The Audit Committee is responsible for the audit fee negotiations with Deloitte & Touche LLP and the Audit Committee is directly involved in the selection of the lead engagement partner in conjunction with the mandated rotation of this position. Additional information may be found in the Audit Committee Report on page 5253 and Audit Committee charter available on the Company’s corporate governance website atwww.DowGovernance.com.LLP. LLP. In October 2012,2014, Deloitte & ToucheLLP advised the Audit Committee that, like all other major accounting firms, it has been named as a defendant in a number of civil lawsuits, most of which are premised on allegations that financial statements issued by clients and reported on by the firm were incorrect. Deloitte & ToucheLLP has further advised the Audit Committee that based on the firm’s historical experience and understanding of the circumstances giving rise to such lawsuits, the firm does not believe that they will have a significant impact on the firm’s ability to serve as the independent registered public accounting firm for the Company. The Audit Committee has concluded that the ability of Deloitte & ToucheLLP to perform services for the Company is not adversely affected by such litigation.Annual2015 Meeting and may make a statement if they wish. They will be available to answer stockholder questions at the 2015 Meeting.and broker non-votes are not included.counted in determining whether this proposal is approved. In the event that the selection of Deloitte & ToucheLLP is not ratified by stockholders, the Audit Committee will take that into account in connection with any future decisions as to the selection of a firm to serve as the Company’s auditors, although by law the Audit Committee has final authority over the determination of whether to retain Deloitte & ToucheLLP or another firm at any time.2013.2015.48 2013 DOW PROXY STATEMENT2015 Proxy Statement INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEESIndependent Registered Public Accounting Firm Fees20122014 and 2011,2013, professional services were performed by Deloitte & ToucheLLP,, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates. Audit and audit-related fees aggregated $26,993,000$29,797,000 and $27,055,000$28,561,000 for the years ended December 31, 20122014 and 2011,2013, respectively. Total fees for the independent registered public accounting firm were:Type of Fees 2012 2011 2014 2013 $ in thousands $ in thousands $ 25,175 $ 24,917 $ 23,221 $ 23,685 1,818 2,138 6,576 4,876 7,507 6,695 9,053 7,725 0 0 0 0 $ 34,500 $ 33,750 $ 38,850 $ 36,286 (a) The aggregate fees billed for the integrated audit of the Company’s annual financial statements and internal control over financial reporting, the reviews of the financial statements in quarterly reports on Form 10-Q, comfort letters, consents, statutory audits, and other regulatory filings. (b) The aggregate fees billed primarily for audits of employee benefit plans’ financial statements, due diligence procedures for acquired businesses,assessment of controls relating to outsourced services, audits and reviews of divested businesses,supporting divestiture activities, and agreed-upon procedures engagements.(c) The aggregate fees billed for preparation of expatriate employees’ tax returns and related compliance services – $6,287,000$8,459,000 in 20122014 and $5,806,000$7,150,000 in 2011;2013; international tax compliance – $670,000$565,000 in 20122014 and $625,000$429,000 in 2011;2013; and corporate tax consulting – $550,000$29,000 in 20122014 and $264,000$146,000 in 2011.2013.
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ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION
We are asking stockholders to approve an advisory resolution on the Company’s executive compensation as reported in this Proxy Statement. As described above in the “Compensation Discussion and Analysis” section of this Proxy Statement, the Compensation and Leadership Development Committee (the “Committee”) has structured our executive compensation program to achieve the following key objectives:
attract, motivate, reward, and retain the most talented executives who can drive business performance and objectives;
pay for performance by emphasizing variable, at-risk incentive award opportunities which are payable only if specified financial and personal goals are achieved and/or the Company’s stock price appreciates; and
align pay and financial interests of our executives with stockholder value creation.
We urge stockholders to read the “Compensation Discussion and Analysis” beginning on page 2018 of this Proxy Statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives and provides detailed information on the compensation and strategic accomplishments of our named executive officers. There is also a robust discussion of our stockholder engagement around compensation issues including detail on feedback received as part of this engagement process and actions taken by the Committee in response. The Committee and the Board of Directors believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this Proxy Statement reflects and supports these compensation policies and procedures.
Beginning in 2011, a “say on pay” advisory vote to approve executive compensation has been required for all U.S. public companies under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The Board of Directors has adopted a policy providing for an annual “say on pay” advisory vote. Therefore, in accordance with the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the 2013 Annual Meeting of Stockholders:2015 Meeting:
RESOLVED, that the stockholders of The Dow Chemical Company (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company’s 20132015 Annual Meeting of Stockholders.
This advisory resolution is non-binding on the Board of Directors. Although non-binding, the Board and the Committee will review and carefully consider the voting results when evaluating our executive compensation program.
Unless the Board of Directors modifies its policy on the frequency of holding “say on pay” advisory votes, the next “say on pay” advisory vote will occur at the Company’s 20142016 Annual Meeting of Stockholders.
The Board of Directors unanimously recommends a vote FOR the approval of the Advisory Resolution to Approve Executive Compensation.
Vote Required
Approval of the resolution requires a majority of votes actually cast on the matter. For purposes of determining the number of votes cast on the matter, only those cast “for” and “against” are included, while abstentions and broker non-votes are not included.counted in determining whether this resolution is approved.
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STOCKHOLDER PROPOSAL ONTO LIMIT ACCELERATED EXECUTIVE STOCK RETENTIONPAY
A stockholder has stated that its representative intends to present the following proposal at the Annual2015 Meeting. The Company will promptly provide the name and address of the stockholder and the number of shares owned upon request directed to the Corporate Secretary.* Dow is not responsible for the contents of the proposal. If properly presented at the Annual2015 Meeting,your Board unanimously recommends a vote AGAINST the following proposal.
Stockholder Resolution
Proposal 4 – Executives To Retain Significant StockLimit Accelerated Executive Pay
Resolved: Shareholders requestask our board of directors to adopt a policy that in the event of a change in control (as defined under any applicable employment agreement, equity incentive plan or other plan), there shall be no acceleration of vesting of any equity award granted to any senior executive, provided, however, that our board’s executive pay committee adoptmay provide in an applicable grant or purchase agreement that any unvested award will vest on a policy requiring thatpartial,pro rata basis up to the time of the senior executives retain a significant percentage of shares acquired through equity pay programs until reaching normal retirement age. executive’s termination, with such qualifications for an award as the committee may determine.
For the purposepurposes of this policy, normal retirement agePolicy, “equity award” means an award granted under an equity incentive plan as defined in Item 402 of the SEC’s Regulation S-K, which addresses executive pay. This resolution shall be defined by the Company’s qualified retirement plan that has the largest number of plan participants. The shareholders recommend that the committee adopt a share retention percentage requirement of 25% of such shares.
The policy should prohibit hedging transactions for shares subject to this policy which are not sales but reduce the risk of loss to the executive. This policy shall supplement any other share ownership requirements that have been established for senior executives, and should be implemented so as not affect any contractual rights in existence on the date this proposal is adopted.
The vesting of equity pay over a period of time is intended to violate our Company’s existing contractual obligations or the terms of any compensation or benefit plan currentlypromote long-term improvements in effect.
Requiring seniorperformance. The link between executive pay and long-term performance can be broken if such pay is made on an accelerated schedule. Accelerated equity vesting allows executives to hold a significant portion of stock obtainedobtain pay without necessarily having earned it through executive pay plans would focus our executives on our company’s long-term success. A Conference Board Task Force report on executive pay state that hold-to-retirement requirements give executives “an ever-growing incentive to focus on long-term stock pricestrong performance.”
This proposal should also be evaluated in the context of our Company’s overall corporate governance as reported in 2012:
Our company announced that 3,000 employees will be laid off with severance costs of $350 million. Meanwhile our directors did not turnaround any or most of the low-hanging fruit of strengthening our corporate governance specified in this proposal, which does not require even one lay-off. For instance, GMI/The Corporate Library, an independent investment research firm, had rated our company “D” continuously since 2010 with “High Governance Risk.” Also “High Concern” for director
qualifications and “High Concern” in Executive Pay – $19 million for our CEO Andrew Liveris. Plus Mr. Liveris had $22 million in his accumulated pension. Long-term incentive pay for our highest paid executives consisted of performance shares and time-based equity in the form of market-priced stock options and deferred stock. GMI said to be effective, all equity given as a long-term incentive should include job performance requirements.
James Ringer, Arnold Allemang and Jacqueline Barton each had 11 to 19 years long-tenure. Director independence declines after 10 years. A more independent perspective would be a priceless asset for our board of directors. Dennis Reilley and James Ringler each had seats on 4 to 6 boards of major companies – over-extension concern. Mr. Reiley, who chaired our executive pay committee was apparently in demand after his experience with the bankruptcy of Entergy Corporation. James Ringler (audit committee) and Ruth Shaw (executive pay committee) received our highest negative votes.
Please encourage our board to respond positively to this proposalvote to protect shareholder value:
Executives To Retain Significant StockLimit Accelerated Executive Pay – Proposal 4.4
Company’s Statement and Recommendation
Your Board of Directors unanimously recommends a vote AGAINST this proposal.
As described in the Compensation DiscussionThe Board and Analysis section of this Proxy Statement beginning on page 20, the stock ownership and retention guidelines established by the Compensation and Leadership Development Committee (the “Committee”) already alignbelieve the economicCompany’s current treatment of outstanding and unvested stock-based awards in the event of a change-in-control serves the best interest of our stockholders.
The terms and conditions for Dow’s equity awards require a “double trigger” for vesting in the event of a change-in-control, meaning that awards are accelerated only if a change-in-control occursand, within twenty-four months, an executive officer’s employment is terminated by the Company for a reason other than death, disability or cause. This is in contrast to a “single trigger” provision that would accelerate equity awards only upon a change-in-control event. The Board believes that our current practice of double trigger acceleration of awards in these circumstances correctly aligns the interests of our executives with the interests of our stockholders in the context of a change-in-control.
A change-in-control event creates uncertainty surrounding the plans of new ownership and whether, through the loss of employment, employees will forfeit their ability to realize value from unvested equity awards. That uncertainty can reduce the incentive for executives to remain with the Company if a change-in-control is imminent. Losing valuable talent at that critical time could reduce the value of the Company to potential acquirers and could impair our ability to maximize the value that stockholders would realize in the transaction. Additionally, the risk of loss of employment and the expected value of equity awards can create certain distractions and potential conflicts of interest for executives in connection with the consideration, negotiation and implementation of a transaction that would lead to a change-in-control. By assuring our senior executives with thosethat they will realize the full value of Dow stockholders.
Dow executivestheir equity awards if their employment is terminated following a change-in-control, we believe we are required to maintain until retirement, between four and six timesmaintaining the target annual base salary for their job level in Dow stock. All NEOs currently hold shares significantly in excessproper alignment of the guidelines. The Committeeinterests of executives and stockholders when a potential change-in-control transaction is being considered.
We regularly reviews stock ownership and retentionreview our compensation programs relative to market practice and best practices in corporate governance. A recent study conducted by Meridian Compensation Partners evaluated change-in-control practices of 160 major U.S. listed public companies (2014 Study of Executive Change-in-Control Arrangements, published online on October 3, 2014, atwww.meridiancp.com). The study concluded that, in the case of stock options, 73% of the companies accelerate the vesting of equity either upon a change-in-control event (33%) or a change-in-control followed by termination (40%). In the case of performance-based equity awards, 76% of the companies accelerate the vesting of equity either upon a change-in-control
| 2015 Proxy Statement | | 51 |
AGENDA ITEM 4 (continued)
event (35%) or a change-in-control followed by termination (41%). We believe our current valueexecutive compensation programs are consistent with market practice and with the objective of Dow stock,allowing the Company to attract, retain and in fact, adjusted the guidelines upward in 2012.
Separately, Dow policy already prohibits executives from engaging in speculative transactions in Dow securities, including trades in puts or calls, short sales, pledging Dow securities, or holding Dow securities in margin accounts.
motivate talented employees. The Board remains committed to the design and implementation of equity compensation programs and stock ownership and retention guidelines that best align the interests of Dow executives with those of theDow stockholders
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AGENDA ITEM 4 (continued)
while providing competitive compensation, and we believe that requires executivesadoption of this stockholder proposal could undermine the Board’s ability to own a significant portion of Company stock while ensuring appropriate personal flexibility and aligning the long-term interests of employees and stockholders.realize these objectives.
For these reasons, Dow believes this proposal is unnecessary and could have adverse consequences forwould not serve the best interests of stockholders.
Accordingly, your Board unanimously recommends a vote AGAINST this proposal.
Vote Required
Approval of the resolution requires a majority of votes actually cast on the matter. For purposes of determining the number of votes cast on the matter, only those cast “for” and “against” are included, while abstentions and broker non-votes are not included.counted in determining whether this resolution is approved.
| * | Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1792 (telephone), 989-638-1740 (fax). |
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The Audit Committee (the “Committee”) of the Board of Directors is comprised entirely of independent Directors who meet the independence, experience and other qualification requirements of the New York Stock Exchange (“NYSE”) and the Company that are available on the Company’s corporate governance website atwww.DowGovernance.com. The Committee operates pursuant to a charter that is also available atwww.DowGovernance.com.
The Board has determined that Committee members James A. Bell, Mark Loughridge, and James M. Ringler are financially literate and are audit committee financial experts as defined by the applicable standards.
The Committee had nine meetings during 2012,2014, five of which were regularly scheduled meetings that included separate executive sessions of the Committee with the lead client service partner of the independent registered public accounting firm, the internal auditor, the general counsel, management and among the Committee members themselves. Four of the meetings were conference calls related to the Company’s earnings announcements and periodic filings. Numerous other informal meetings and communications among the Chair, various Committee members, the independent registered public accounting firm, the internal auditor and/or members of the Company’s management also occurred.
On behalf of the Board of Directors, the Committee oversees the Company’s financial reporting process and its internal control over financial reporting, areas for which management has the primary responsibility. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally accepted in the United States and for issuing its report on the Company’s internal control over financial reporting.
In this context, the Committee has reviewed and discussed with management and the independent registered public accounting firm the audited financial statements and the quarterly unaudited financial statements, matters relating to the Company’s internal control over financial reporting and the processes that support certifications of the financial statements by the Company’s Chief Executive Officer and Chief Financial Officer.
Among other items, the Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the standards of the Public Company Accounting Oversight Board. The Committee has received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’sregistered public accounting firm’s communications with the Audit Committee concerning independence and discussed with them their independence from the Company and its management. In addition, the Committee has received written materials addressing Deloitte & ToucheLLP‘ LLP‘s internal quality control procedures and other matters as required by the NYSE listing standards.
Further, the Committee pre-approves and reviews audit, audit-related and permitted non-audit services provided by the independent registered public accounting firm to the Company and the related fees for such services. The Committee has pre-approved all services provided and fees charged by the independent registered public accounting firm to the Company, and has concluded that such services are compatible with the auditors’ independence. The Committee’s charter allows delegation of the authority to pre-approve audit, audit-related and permitted non-audit services by the independent registered public accounting firm to a subcommittee consisting of one or more Committee members, provided that such subcommittee decisions be presented to the full Committee at its next scheduled meeting.
Relying on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements and management’s assertionreport on internal control over financial reporting be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012,2014, for filing with the U.S. Securities and Exchange Commission. The Committee has also selected Deloitte & ToucheLLP as the Company’s independent registered public accounting firm for the Company and its subsidiaries for 2013.2015. The Board of Directors has concurred onwith that selection and has presented the matter to the stockholders of the Company for ratification.
Audit Committee
James A. Bell, Chair
Mark Loughridge
James M. Ringler
Ruth G. Shaw
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Future Stockholder Proposals
If you satisfy the requirements of the U.S. Securities and Exchange Commission (the “SEC”) and wish to submit a proposal to be considered for inclusion in the Company’s proxy material for the 20142016 Annual Meeting pursuant to Rule 14a-8, please send it to the Corporate Secretary.* Under SEC Exchange Act Rule 14a-8, these proposals must be received no later than the close of business on November 28, 2013.2015.
Future Annual Meeting Business
Under the Company’s Bylaws, if you wish to raise items of proper business at an annual meeting,Annual Meeting, other than stockholder proposals presented under Rule 14a-8 for inclusion in the Company’s proxy materials, you must give advance written notification to the Corporate Secretary.* For the 20142016 Annual Meeting, written notice must be givenreceived by the Corporate Secretary between the close of business on November 28, 2013,2015, and the close of business on January 27, 2014.2016. However, as provided in the Bylaws, different deadlines apply if the annual meeting2016 Annual Meeting is called for a date that is not within 30 days before or after the anniversary of the prior year’s annual meeting.2015 Meeting. Such notices must comply with the procedural and content requirements of the Bylaws. If notice of a matter is not received within the applicable deadlines or does not comply with the Bylaws, the chairman of the Annual Meeting may refuse to introduce such matter. If a stockholder does not meet these deadlines or, does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual Meeting. A copy of the Bylaws may be found on the Company’s website atwww.DowGovernance.com. Alternatively, onea copy will be sent without charge to any stockholder who sends a written request to the Corporate Secretary.*
Multiple Stockholders with the Same Address
In accordance with a notice sent previously to stockholders with the same surname who share a single address, only one Proxy Statement and accompanying Annual Meeting materials will be sent to an address unless contrary instructions were received from any stockholder at that address. This practice, known as “householding,” is designed to reduce printing and postage costs. If you did not respond that you did not want to participate in householding, you were deemed to have consented to the practice. If you are a registered stockholder, you may revoke your consent at any time by sending your name and your investorholder identification number to the Corporate Secretary.* If you hold your stock in street name, you may revoke your consent to householding at any time by
contacting Broadridge Financial Solutions Inc., 51 Mercedes Way, Edgewood, NY 11717, or by calling 800-542-1061. If you are a registered stockholder receiving multiple copies of these materials at the same address or if you have a number of accounts at a single brokerage firm, you may submit a request to receive a single copy of materials in the future by contacting the Corporate Secretary,Secretary.* if you are a registered holder, or Broadridge Financial Solutions Inc., ifIf you hold your stock in street name, contact Broadridge Financial Solutions Inc. at the address and telephone number provided above. The Company will promptly deliver to a stockholder who received one copy of the proxy materials as the result of householding, a separate copy of the materials upon the stockholder’s written or oral request to the Corporate Secretary.*
Copies of Proxy Materials and Annual Report
Dow’s Proxy Statement and Annual Report (with Form 10-K) are posted on Dow’s website at www.dow.com/financial/investors/reportsorhttps://materials.proxyvote.com/260543. Stockholders may receive printed copies of each of these documents without charge by contacting the Company’s Investor Relations Office at 800-422-8193 or 989-636-1463, or 2030 Dow Center, Midland, MI 48674.
Internet Delivery of Proxy Materials
Stockholders may consent to receive their Proxy Statement and other Annual Meeting materials in electronic form rather than in printed form. This results in faster delivery of the documents and significant savings to the Company by reducing printing and mailing costs. To enroll for electronic delivery, go to our Investor Relations website atvisitwww.DowInvestorRelations.comhttp://www.dow.com/en-us/investor-relations/financial-reporting/proxy-statements/ andthen select “Stockholder Information,” then click on“Enroll Now” under the link under “Register for Online Proxy Delivery of Proxy Materials”Enrollment section and follow the instructions to enroll.register.
| * | Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1792 (telephone), 989-638-1740 (fax). |
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OTHER GOVERNANCE MATTERS (continued)
Corporate Governance Documents
The Company’s Code of Business Conduct, Board Committee charters and Corporate Governance Guidelines are available atwww.DowGovernance.com. Stockholders may obtain a printed copy of these materials upon request by contacting the Office of the Corporate Secretary.*
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Other Matters
The Board does not intend to present any business at the 2015 Meeting not described in this Proxy Statement. The enclosed proxy voting form confers upon the persons designated to vote the shares represented the discretionary authority to vote such shares in accordance with their best judgment. Such discretionary authority is with respect to all matters that may come before the 2015 Meeting in addition to
the scheduled items of business, including matters incident to the conduct of the 2015 Meeting and any stockholder proposal omitted from the Proxy Statement and form of proxy. At the time that this Proxy Statement went to press, the Board of Directors was not aware of any other matter that may properly be presented for action at the 2015 Meeting, but the enclosed proxy form confers the same discretionary authority with respect to any such other matter.
Assistant General Counsel | Midland, Michigan March |
| * | Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center, Midland, MI 48674, 989-636-1792 (telephone), 989-638-1740 (fax). |
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Certain Items Impacting Results
| In millions, except per share amounts (Unaudited) | Pretax Impact1 | Net Income2 | EPS – Diluted3 | |||||||||||||||||||||
| Twelve Months Ended December 31 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
| Adjusted to exclude certain items (non-GAAP measures)4 | $ | 3,709 | $ | 2,981 | $ | 3.11 | $ | 2.48 | ||||||||||||||||
| Certain Items: | ||||||||||||||||||||||||
Asset impairments and related costs | $ | (73 | ) | $ | (194 | ) | (47 | ) | (132 | ) | (0.04 | ) | (0.11 | ) | ||||||||||
Warranty accrual adjustment of exited business | (100 | ) | — | (63 | ) | — | (0.05 | ) | — | |||||||||||||||
Restructuring plan implementation costs | — | (44 | ) | — | (32 | ) | — | (0.03 | ) | |||||||||||||||
1Q12 Restructuring charge | — | 16 | — | 16 | — | 0.01 | ||||||||||||||||||
4Q12 Restructuring charge | — | 6 | — | 5 | — | 0.01 | ||||||||||||||||||
Asbestos-related charge | (78 | ) | — | (49 | ) | — | (0.04 | ) | — | |||||||||||||||
Gain from K-Dow arbitration | — | 2,161 | — | 1,647 | — | 1.37 | ||||||||||||||||||
Gain on sale of Dow Polypropylene Licensing and Catalysts business | — | 451 | — | 356 | — | 0.29 | ||||||||||||||||||
Gain on sale of a 7.5 percent ownership interest Freeport LNG Development, LP | — | 87 | — | 69 | — | 0.06 | ||||||||||||||||||
Gain on sale of ownership interest in Dow Kokam LLC | — | 26 | — | 18 | — | 0.01 | ||||||||||||||||||
Dow Corning implant liability adjustment | 407 | — | 378 | — | 0.32 | — | ||||||||||||||||||
Charge related to Dow Corning’s Clarksville, Tennessee, site abandonment | (500 | ) | — | (465 | ) | — | (0.40 | ) | — | |||||||||||||||
Chlorine value chain separation costs | (49 | ) | — | (31 | ) | — | (0.03 | ) | — | |||||||||||||||
Loss on early extinguishment of debt | — | (326 | ) | — | (205 | ) | — | (0.17 | ) | |||||||||||||||
Adjustment of uncertain tax provision | — | — | — | (276 | ) | — | (0.23 | ) | ||||||||||||||||
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| Total certain items | $ | (393 | ) | $ | 2,183 | $ | (277 | ) | $ | 1,466 | $ | (0.24 | ) | $ | 1.21 | |||||||||
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| Dilutive effect of assumed preferred stock conversion into shares of common stock | — | (0.01 | ) | |||||||||||||||||||||
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| Reported (GAAP amounts)5,6 | $ | 3,432 | $ | 4,447 | $ | 2.87 | $ | 3.68 | ||||||||||||||||
The Company’s management believes that measures of income adjusted to exclude certain items (“non-GAAP” financial measures) provide relevant and meaningful information to investors about the ongoing operating results of the Company. Such financial measures are not recognized in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and should not be viewed as an alternative to U.S. GAAP financial measures of performance.
| 1 | Impact on “Income Before Income Taxes” |
| 2 | “Net Income Available for The Dow Chemical Company Common Stockholders” |
| 3 | “Earnings per common share – diluted” |
| 4 | For the year ended December 31, 2013, conversion of the Company’s Cumulative Convertible Perpetual Preferred Stock, Series A, into shares of the Company’s common stock was excluded from the calculation of “Diluted earnings per share adjusted to exclude Certain Items” as well as the earnings per share impact of Certain Items because the effect of including them would have been antidilutive. |
| 5 | For the year ended December 31, 2013, an assumed conversion of the Company’s Cumulative Convertible Perpetual Preferred Stock, Series A, into shares of the Company’s common stock was included in the calculation of diluted earnings per share (reported GAAP amount). |
| 6 | The Company used “Net Income Attributable to The Dow Chemical Company” when calculating diluted earnings per share (reported GAAP amount) for the twelve-month period ended December 31, 2013, as it excludes preferred dividends of $340 million. |
| 2015 Proxy Statement | | A-1 |
APPENDIX A (continued)
Common Shares — Diluted
The following table presents diluted share counts for the twelve-month periods ended December 31, 2014, and December 31, 2013, including the effect of an assumed conversion of the Company’s Cumulative Convertible Perpetual Preferred Stock, Series A, into shares of the Company’s common stock:
| In millions | ||||||||
| Twelve Months Ended December 31 | 2014 | 2013 | ||||||
| Share count — diluted, excluding preferred stock conversion to common shares | 1,187.0 | 1,193.6 | ||||||
| Potential common shares from assumed conversion of preferred stock, included in reported GAAP EPS calculation | N/A | 96.8 | ||||||
| Share count — diluted, including assumed preferred stock conversion to common shares | N/A | 1,290.4 | ||||||
The Company uses EBITDA (which Dow defines as earnings [i.e., “Net Income”] before interest, income taxes, depreciation and amortization) as its measure of profit/loss for segment reporting purposes. A reconciliation of EBITDA to “Net Income Available for The Dow Chemical Company Common Stockholders” is provided below.
Reconciliation of EBITDA to “Net Income Available for The Dow Chemical Company Common Stockholders”
| In millions (Unaudited) | ||||||||
| Twelve Months Ended December 31 | 2014 | 2013 | ||||||
| EBITDA | $ | 8,944 | $ | 10,545 | ||||
| - Depreciation and amortization | 2,747 | 2,681 | ||||||
| + Interest income | 51 | 41 | ||||||
| - Interest expense and amortization of debt discount | 983 | 1,101 | ||||||
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| Income Before Income Taxes | $ | 5,265 | $ | 6,804 | ||||
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| - Provision for income taxes | 1,426 | 1,988 | ||||||
| - Net income (loss) attributable to noncontrolling interests | 67 | 29 | ||||||
| - Preferred stock dividends | 340 | 340 | ||||||
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| Net Income Available for The Dow Chemical Company Common Stockholders | $ | 3,432 | $ | 4,447 | ||||
Adjusted EBITDA Calculation
| In millions (Unaudited) | ||||||||
| Twelve Months Ended December 31 | 2014 | 2013 | ||||||
| EBITDA | $ | 8,944 | $ | 10,545 | ||||
| - Certain items impacting EBITDA1 | (393 | ) | 2,183 | |||||
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| Adjusted EBITDA | $ | 9,337 | $ | 8,362 | ||||
Adjusted EBITDA Margins Calculation
| In millions (Unaudited) | ||||||||
| Twelve Months Ended December 31 | 2014 | 2013 | ||||||
| Net Sales | $ | 58,167 | $ | 57,080 | ||||
| Adjusted EBITDA | $ | 9,337 | $ | 8,362 | ||||
| Adjusted EBITDA Margins | 16.1 | % | 14.6 | % | ||||
| 1 | See “Pretax Impact” columns on the “Certain Items Impacting Results” chart on page A-1 for additional detail on “Certain items impacting EBITDA.” |
| A-2 | | 2015 Proxy Statement |
2015 ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 9, 201314, 2015 at 10:00 a.m. EDT
Midland Center for the Arts
1801 West St. Andrews, Midland, Michigan
Parking and Attendance
Complimentary self-parking is available at the Midland Center for the Arts, 1801 West St. Andrews, Midland, Michigan. Seating is limited. Tickets of admission or proof of stock ownership are necessary to attend the 2015 Meeting as explained on page 1 of this Proxy Statement. Only stockholders may attend or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms). Proxy holders are asked to present their credentials in the lobby before the Annual Meeting begins. If you are unable to attend the 2015 Meeting, please listen to the live audio webcast at the time of the 2015 Meeting or the audio replay after the event, atwww.DowGovernance.com.
About Dow
Dow (NYSE: DOW) combines the power of science and technology to passionately innovate what is essential to human progress. The Company connects chemistryis driving innovations that extract value from the intersection of chemical, physical and innovation with the principles of sustainabilitybiological sciences to help address many of the world’s most challenging problems such as the need for clean water, renewableclean energy generation and conservation, and increasing agricultural productivity. Dow’s diversifiedintegrated, market-driven, industry-leading portfolio of specialty chemical, advanced materials, agrosciences and plastics businesses delivers a broad range of technology-based products and solutions to customers in approximately 160180 countries and in high growthhigh-growth sectors such as packaging, electronics, water, energy, coatings and agriculture. In 2012,2014, Dow had annual sales of approximately $57more than $58 billion and employed approximately 54,00053,000 people worldwide. The Company’s more than 5,0006,000 products are manufactured at 188201 sites in 3635 countries across the globe. References to “Dow” or the “Company” mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted. More information about Dow can be found atwww.dow.com.
™ Trademark of The Dow Chemical Company
| Form No. |
THE DOW CHEMICAL COMPANY OFFICE OF THE CORPORATE SECRETARY 2030 DOW CENTER MIDLAND, MI 48674 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
| KEEP THIS PORTION FOR YOUR RECORDS | ||||
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
THE DOW CHEMICAL COMPANY
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The Board of Directors recommends you vote FOR the following proposals: Vote on Directors
1. Election of Directors | |||||||||||||||||||||||||||||||
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1b. Jacqueline K. Barton | ¨ | ¨ | ¨ | For | Against | Abstain | |||||||||||||||||||||||||
1c. James A. Bell | ¨ | ¨ | ¨ | 1j. �� Paul Polman | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
1d. Richard K. Davis | ¨ | ¨ | ¨ | 1k. Dennis H. Reilley | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
1e. Jeff M. Fettig | ¨ | ¨ | ¨ | 1l. James M. Ringler | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
1f. Andrew N. Liveris | ¨ | ¨ | ¨ | 1m. Ruth G. Shaw | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
1g. Mark Loughridge 1h. Raymond J. Milchovich 1i. Robert S. Miller | ¨ ¨ ¨ | ¨ ¨ ¨ | ¨ ¨ ¨ |
2. Ratification of the Appointment of the Independent Registered Public Accounting Firm. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
3. Advisory Resolution to Approve Executive Compensation. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||
The Board of Directors recommends you vote AGAINST the following proposal: | |||||||||||||||||||||||||||||||
| For address changes and/or comments, please check this box and write them on the back where indicated. | ¨ | 4. Stockholder Proposal to Limit Accelerated Executive Pay. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||
| Please indicate if you plan to attend this meeting. | ¨ | ¨ | |||||||||||||||||||||||||||||
| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | Yes | No | NOTE:Such other business as may properly come before the meeting or any adjournment or postponement thereof. | ||||||||||||||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | ||||||||||||||||||||||||||||
Annual Meeting of Stockholders The Dow Chemical Company
May Midland Center for the Arts 1801 West St. Andrews, Midland, Michigan
Ticket is not transferable. Cell phones, cameras, tablets, etc. are not permitted at the Meeting |   |
TICKET OF ADMISSION
The Annual Meeting of Stockholders of The Dow Chemical Company will be held on Thursday, May 9, 2013,14, 2015, at 10:00 a.m. EDT at the Midland Center for the Arts, 1801 West St. Andrews, Midland, Michigan. Items of business are:
| 1. | Election of |
| 2. | Ratification of the Appointment of the Independent Registered Public Accounting Firm. |
| 3. | Advisory Resolution to Approve Executive Compensation. |
| 4. | Stockholder Proposal |
The Board of Directors recommends a vote FOR Agenda Items 1 through 3 and a vote AGAINST Agenda Item 4.
Only stockholders who held shares of record as of the close of business on March 18, 2013,16, 2015, are entitled to receive notice of and to vote at the Meeting or any adjournment or postponement thereof.
Your vote is important. Whether or not you plan on attending the Meeting, please vote the shares as soon as possible on the Internet, by telephone or by mailing this form.
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M84315-P59264
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Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.
Your
PROXY AND VOTING INSTRUCTION FORM THIS FORM IS SOLICITED ON BEHALF OF THE DOW BOARD OF DIRECTORS
I/We hereby appoint
Such proxies are directed to vote as specified on the reverse side, or if no specification is made, FOR Agenda Items 1 through 3 and AGAINST Agenda Item 4 and to vote in accordance with their discretion on such other matters as may properly come before the Meeting and at any adjournment or postponement of the Meeting. To vote in accordance with the recommendations of the Dow Board of
NOTICE TO PARTICIPANTS IN EMPLOYEES’ SAVINGS PLANS
This card also constitutes voting instructions for participants in The Dow Chemical Company Employees’ Savings Plan and The Dow Chemical Company Employee Stock Ownership
Form must be signed and dated on the reverse side.
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side | |||||||||||||||||||||||
Printed on recycled paper
