Thursday, March 13, 2014,
4:00 p.m., Eastern Time, at:
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Cabot Corporation
(Name of Registrant as Specified In Its Charter)
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Cabot Corporation
2017 Proxy Statement
The Annual Meeting of Stockholders
of Cabot Corporation will be held:
Thursday,March 9, 2017 at 4:00 p.m. ET
Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, MA 02210-2019 USA
January 28, 201427, 2017
Dear Fellow Cabot Corporation Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders of Cabot Corporation, which will be held on Thursday, March 13, 2014,9, 2017, at 4:00 pm, Eastern Time, at the Corporate Headquarters of Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts. For your convenience, we will host a live webcast of our Annual Meeting on our website athttp://investor.cabot-corp.com.
At the Annual Meeting, we will ask you to elect four members of our Board of Directors, provide your advisory approval of our executive compensation, provide your advisory vote on the frequency of future executive compensation advisory approvals, approve our 2017 long-term incentive plan, and ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm. We will review the Company’s performance during the past year andalso discuss any other business matters properly brought before the meeting. The attached Proxy Statement explains our voting procedures, describes the business we will conduct, and provides information about the Company that you should consider when you vote your shares.
Your vote is very important to us. Whether or not you plan to attend the Annual Meeting in person, we encourage you to vote promptly. You may vote by mailing a completed proxy card or, if your proxy card or voterbroker voting instruction form so indicates, by phone or the Internet.
Thank you for your continued support of Cabot Corporation.
Sincerely,
PATRICK M. PREVOST
SEAN D. KEOHANE
President and
Chief Executive Officer
Notice of Annual Meeting of Stockholders
Date: | March |
Time: | 4:00 p.m., Eastern Time |
Place: | Corporate Headquarters of Cabot Corporation |
Two Seaport Lane, Suite 1300
| Two Seaport Lane, Suite 1300 |
Boston, Massachusetts
| Boston, Massachusetts 02210-2019 |
Record Date: | You may vote if you were a stockholder of record at the close of business on January |
Voting by Proxy: | To ensure that your vote is properly recorded, please vote as soon as possible, even if you plan to attend the annual meeting. Most stockholders have three options for submitting their vote: (1) by Internet, (2) by phone or (3) by mail. You may |
| If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide your broker with instructions on how to vote your shares in order for your shares to be voted on important matters presented at the annual meeting. If you do not instruct your broker on how to vote in the election of directors, |
Items of Business | • | To elect four directors, Juan Enriquez, William C. Kirby, |
To approve, in an advisory vote, our executive compensation;
To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
This notice and proxy statement are first being sent to stockholders on or about February 3, 2014.2017.Our Annual Report on Form10-K is being sent with this notice and proxy statement.
By order of the Board of Directors,
Jane A. Bell
Secretary
Boston, Massachusetts 02210-2019
January 28, 201427, 2017
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Proposal 5 — Ratification of Appointment of Independent Registered Public Accounting Firm | 72 | |||
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Appendix A — | A-1 | |||
Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, Massachusetts 02210-2019
Proxy Statement
References to “the Company”, “Cabot”, “we”, “us”, and “our” in this proxy statement mean Cabot Corporation.
About the Annual Meeting
Who is soliciting my vote?
The Board of Directors of Cabot Corporation is soliciting your vote at the 20142017 Annual Meeting of Stockholders (“20142017 Annual Meeting” or “the meeting”the “meeting”).
What am I voting on?
You are voting on:
| • | Proposal 1: Election of Juan Enriquez, William C. Kirby, |
| • | Proposal 2: Advisory approval of our executive compensation (see page |
| • | Proposal 3: Advisory approval of whether future executive compensation advisory votes should occur every one, two or three years (see page 62); |
| • | Proposal 4: Approval of the Cabot Corporation 2017 Long-Term Incentive Plan (see page 63); |
| • | Proposal 5: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, |
Any other business properly coming before the meeting.
How does the Board recommend that I vote my shares?
The Board’s recommendation can be found with the description of each item in this proxy statement. In summary, the Board recommends that you vote:
FOR each of the four nominees for director;
FOR the advisory approval of our executive compensation (commonly referred to as “say-on-pay”“say-on-pay”);
FORthe ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2014.
Unless you give other instructions on your proxy card, the persons named as proxy holders will vote in accordance with the recommendations of the Board of Directors.
Who is entitled to vote?
Only stockholders of record at the close of business on January 17, 201418, 2017 will be entitled to vote at the 20142017 Annual Meeting. As of that date, there were 64,374,17662,189,388 shares of our common stock outstanding. Each share of common stock is entitled to one vote. There is no cumulative voting.
State Street Bank and Trust Company is the trustee of common stock held in the Cabot Common ESOP Fund portion of Cabot’s 401(k) Plan and is the record owner of all of those shares. The Vanguard Fiduciary Trust Company is the trustee of the Cabot Common Stock Fund portionand the Cabot Common ESOP Fund portions of the Cabot 401(k) Plan and is the record owner of all of those shares. EachThe trustee is authorized to vote such shares in accordance with instructions from participants in, and the terms of, the Cabot 401(k) Plan.
How many votes must be present to hold the meeting?
Your shares are counted as present at the 20142017 Annual Meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. In order for us to hold our meeting, holders of a majority of our
CABOT CORPORATION 1
| 2017 PROXY STATEMENT |
About the Annual Meeting(continued)
outstanding shares of common stock as of January 17, 201418, 2017 must be present in person or by proxy at the meeting. This majority is referred to as a quorum. Proxy cards or broker voting instruction forms that reflect abstentions and brokernon-votes will be counted as shares present to determine whether a quorum exists to hold the 20142017 Annual Meeting.
What is a brokernon-vote?
Under the rules that govern brokers who have record ownership of shares that they hold in “street name” for their clients who are the beneficial owners of the shares, brokers normally have discretion to vote such shares on routine matters, such as ratifications of independent registered public accounting firms, but not onnon-routine matters. Brokernon-votes generally occur when the beneficial owner of shares held by a broker does not give the broker voting instructions on anon-routine matter for which the broker lacks discretionary authority to vote the shares. Proposals 1, 2, 3 and 24 arenon-routine matters.
CABOT CORPORATION 1
About the Annual Meeting(continued)
Therefore, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted on proposals 1, 2, 3 and 2,4, your broker will not be able to vote your shares on these proposals. We urge you to provide instructions to your broker so that your votes may be counted on these important matters.
How are votes counted? How many votes are needed to approve each of the proposals?
For each of proposals 1, 2, 4 and 3,5, you may vote “FOR”, “AGAINST”, or “ABSTAIN”. For proposal 3, you may vote to hold asay-on-pay vote once every “ONE”, “TWO” or “THREE” years, or you may “ABSTAIN.”
| • | Proposal 1 — Election of Directors. A nominee will be elected to the Board of Directors if the votes properly cast “for” his election exceed the votes properly cast “against” such nominee’s election. Brokernon-votes and abstentions will have no effect on the results of this vote. |
| • | Proposal 2 —Say-on-Pay. Because proposal 2 is an advisory vote, there is no minimum vote requirement that constitutes approval of this proposal. |
| • | Proposal 3 — Frequency ofSay-on-Pay Vote.Because proposal 3 is an advisory vote and provides shareholders with multiple voting options, there is no minimum vote requirement that constitutes approval of this proposal. |
| • | Proposal 4 — Approval of the Cabot Corporation 2017 Long-Term Incentive Plan.The affirmative vote of a majority of the votes properly cast on proposal 4 is required to approve the Cabot Corporation 2017 Long-Term Incentive Plan. Abstentions will have the effect of votes against this proposal. Brokernon-votes will have no effect on the results of this vote. |
| • | Proposal 5 — Ratification of Independent Registered Public Accounting Firm.The affirmative vote of a majority of the votes properly cast on proposal |
What if there are more votes “AGAINST” a nominee for director than votes “FOR”?
Each of the nominees is an incumbent director who has tendered a conditional resignation that is effective upon (i) the failure to receive a majority of the votes cast for hisre-election at the 20142017 Annual Meeting and (ii) the Board’s acceptance of this resignation. The Governance and Nominating Committee of the Board of Directors is responsible for initially considering the resignation and making a recommendation to the Board of Directors. The director whose resignation is under consideration is expected to abstain from participating in any decision regarding his resignation. The Governance and Nominating Committee may consider any factors it deems relevant in deciding whether to accept a director’s resignation. If the resignation is not accepted, the director will continue to serve until his successor is elected and qualified.
How do I vote?
You can vote either in person at the meeting or by proxy without attending the meeting. If your shares are held in “street name” in a brokerage account or by a bank or other nominee and you wish to vote in person at the meeting, you must request a legal proxy from your bank, broker or other nominee and bring that proxy to the meeting to vote in person atmeeting.
2 CABOT CORPORATION
| 2017 PROXY STATEMENT |
About the meeting.Annual Meeting(continued)
Even if you plan to attend the 20142017 Annual Meeting, we encourage you to vote your shares by proxy. Most stockholders have three options for submitting their votes by proxy: (1) by Internet, (2) by phone or (3) by mail. If you have received your 20142017 Annual Meeting materials by mail, please follow the voting instructions on your proxy card. If you have received your 20142017 Annual Meeting materials electronically, please follow the voting instructions that weree-mailed to you. Proxies submitted by the Internet or telephone must be received by 1:00 a.m.p.m., Eastern Time, on March 13, 2014.9, 2017.
If you hold your Cabot stock in a brokerage account, your ability to vote by telephone or over the Internet depends on your broker’s voting process. Please follow the directions on your votervoting instruction form carefully.
How do I vote if I hold my stock through Cabot’s employee benefit plans?
If you hold your stock through a Cabot employee benefit plan, you have the right to instruct the trustees of the plan or plans in which you participate how to vote your shares. You can vote your shares by following the instructions on the enclosed proxy card. The trustees of each plan will have the voting instructions of each participant in the plans tabulated and will vote the shares of the participants by submitting a final proxy card representing each plan’s shares for inclusion in the tally at the 20142017 Annual Meeting.
If you hold shares in the Cabot 401(k) Plan or the Cabot Canada Ltd. Employees’ Stock Purchase Plan, your vote will influence how the trustees of those plans vote those shares for which no instructions are received from other plan participants as those shares will be voted in the same proportion as shares for which instructions are received. If you hold shares in either of those plans and do not vote, the plan trustees will vote your shares (along with all other shares in the plan for which instructions are not provided) in the same proportion as those shares for which instructions are received from other participants in the plan.
2 CABOT CORPORATION
About the Annual Meeting(continued)
In order for your instructions to be followed, you must provide instructions for the shares you hold through a Cabot employee benefit plan by returning your completed and signed proxy card to the Company’s transfer agent by March 10, 20146, 2017 or by voting over the telephone or the Internet by 1:9:00 a.m., Eastern Time, on March 11, 2014.7, 2017.
Can I change or revoke my vote?
Yes. You can change or revoke your vote by(1) re-voting by telephone or by Internet as instructed above (only your latest telephone or Internet vote will be counted), (2) signing and dating a new proxy card or voting instruction form and submitting it as instructed above (only your latest proxy card or voting instruction form will be counted), or (3) ifattending the meeting and voting in person. If your shares are registered in your name, you may also revoke your vote by delivering timely notice to the Secretary, Cabot Corporation, 2Two Seaport Lane, Suite 1300, Boston, Massachusetts 02210, or (4) attending the meeting and voting in person.02210. Attending the meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request it. If you hold shares through a bank or broker, you must follow the instructions on your voting instruction form to revoke or change any prior voting instructions.
Who counts the votes?
We have hired Computershare Trust Company, N.A., our transfer agent, to count the votes represented by proxies cast by ballot, telephone and the Internet. A representative of Computershare and either Cabot’s Corporate Secretary or a representative of Cabot’s Law DepartmentAssistant Secretary will act as Inspectors of Election.
What if I return my proxy card but don’t vote for some of the matters listed?
If you return a signed proxy card without indicating your vote, your shares will be voted in line with the recommendation of the Board of Directors for each of the proposals for which you did not indicate a vote.
Can other matters be decided at the 20142017 Annual Meeting?
We are not aware of any other matters that will be considered at the 20142017 Annual Meeting. If any other matters properly arise that require a vote, the named proxies will vote in accordance with their best judgment.
CABOT CORPORATION 3
| 2017 PROXY STATEMENT |
About the Annual Meeting(continued)
Who can attend the meeting?
The 20142017 Annual Meeting is open to all Cabot stockholders. If you need directions to the meeting, please call Cabot’s Investor Relations Group at(617) 342-6090.342-6255. When you arrive at Cabot’s Corporate Headquarters, please go to the 13th Floor and signs will direct you to the meeting room. You need not attend the 20142017 Annual Meeting to vote.
Important Notice Regarding the Availability of Proxy Materials for the 20142017 Annual Meeting
This proxy statement and our 20132016 Annual Report on Form10-K are available at the following Internet address: http://www.cabotcorp.com/2014annualmeeting.2017annualmeeting.
If you received your 20142017 Annual Meeting materials by mail, we encourage you to sign up to receive your stockholder communications bye-mail. Electronic delivery benefits the environment and saves the Company money by reducing printing and mailing costs. With electronic delivery, you will be notified bye-mail as soon as the Annual Report onForm 10-K and proxy statement are available on the Internet, and you can easily submit your stockholder votes online. If you are a registered holder (you hold your Cabot shares in your own name through our transfer agent, Computershare Trust Company, N.A., or you have stock certificates), visit
www.computershare.com/us/investor to create a login and to enroll.
Your electronic delivery enrollment will be effective until you cancel it. If you later change your mind and would like to receive paper copies of our proxy statements and annual reports, please revisit Computershare’s websitewww.computershare.com/us/investorto change your delivery preference or call them at(800) 730-4001 in the U.S. or at(781) 575-3170 outside the U.S.
If you hold your Cabot stock through a bank or broker, please refer to the information provided by that entity for instructions on how to elect to view future proxy statements and annual reports over the Internet and how to change your elections.
4CABOT CORPORATION 3
The Board of Directors and its Committees
Our Board of Directors held five meetings in fiscal 20132016 and acted by written consent once. EachDuring fiscal 2016, each director attended at least 85% of the aggregate of the total Board meetings and the total meetings held by all of the Committees on which he or she served during the periods that he or she served. All of our directors are “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO, and Mr. Prevost, our former President and CEO.
The Board of Directors has five standing Committees: Audit, Compensation, Executive, Governance and Nominating (“Governance”), and Safety, Health and Environmental Affairs (“SH&E”). The following table shows the membership of these committees. The Audit, Compensation, Governance, and SH&EGovernance Committees presently are composed entirely of independent directors. The Executive Committee presently is composed of one employee director and three independent directors.
| Name | Audit | Compensation | Executive | Governance | SH&E | |||||||||||||||||||||||||||
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Juan Enriquez | X | X | ||||||||||||||||||||||||||||||
| X | |||||||||||||||||||||||||||||||
William C. Kirby | X | X | ||||||||||||||||||||||||||||||
Roderick C.G. MacLeod | X | X | ||||||||||||||||||||||||||||||
| X | ** | X | |||||||||||||||||||||||||||||
| X | |||||||||||||||||||||||||||||||
John F. O’Brien | X | ** | X | ** | ||||||||||||||||||||||||||||
Patrick M. Prevost | X | X | ||||||||||||||||||||||||||||||
Sue H. Rataj | X | ** | X | X | ||||||||||||||||||||||||||||
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Lydia W. | X | X | ** | |||||||||||||||||||||||||||||
Matthias L. Wolfgruber | X | X | ||||||||||||||||||||||||||||||
Mark S. Wrighton | X | X | ||||||||||||||||||||||||||||||
| * |
| ** | Committee Chair |
Audit Committee
The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of Cabot’s financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function and (v) our risk assessment and risk management processes. The Audit Committee, among other functions:
Has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm.
Monitors the qualifications, independence and performance of our independent registered public accounting firm and approves professional services provided by the independent registered public accounting firm.
Reviews with our independent registered public accounting firm the scope and results of the audit engagement.
Reviews the activities and recommendations of our independent registered public accounting firm.
Discusses Cabot’s annual audited financial statements and quarterly financial statements with management and Cabot’s independent registered public accounting firm, including our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Reviews Cabot’s accounting policies, risk assessment and risk management processes, control systems and compliance activities.
The specific responsibilities and functions of the Audit Committee are identified in the Committee’s charter, a copy of which is posted on our website (www.cabotcorp.com) under the heading “About“Company — About Cabot — Governance.Governance —Resources.” The Audit Committee met fourteenten times in fiscal 2013.2016.
4 CABOT CORPORATION 5
The Board of Directors and its Committees(continued)
Compensation Committee
The primary responsibilities of the Compensation Committee are to:
Approve the corporate goals and objectives relevant to the compensation of our Chief Executive Officer (“CEO”), evaluate the CEO’s performance and approve the CEO’s salary and incentive compensation.
Establish policies applicable to the compensation, severance or other remuneration of Cabot’s managementManagement Executive Committee, review and approve performance measures and goals under incentive compensation plans applicable to such employees, and approve their salaries, annual short-term and long-term incentive awards, any severance payments and any other remuneration.
Review the aggregate amount of bonuses to be paid to participants in Cabot’s annual short-term incentive plan.
Administer Cabot’s incentive compensation plans, equity-based plans and supplemental benefits arrangements, which includes approving the aggregate number of shares of stock awards granted under Cabot’s long-term incentive program.
Appoint the members of the Company’s Benefits and Investment Committees and monitor their activities.
The specific responsibilities and functions of the Compensation Committee are identified in the Committee’s charter, a copy of which is posted on our website (www.cabotcorp.com) under the heading “About“Company — About Cabot —Governance — Governance.Resources.” The Compensation Committee met four times and acted by written consent five times during fiscal 2013.2016.
Executive Committee
The Executive Committee reviews and, where appropriate, approves corporate action with respect to the conduct of our business between Board of Directors’ meetings. Actions taken by the Executive Committee are reported to the Board at its next meeting. The Executive Committee did not meetacted by written consent once during fiscal 2013.2016.
Governance Committee
The Governance Committee is charged primarily with:
Developing and recommending to the Board corporate governance policies and procedures.
Identifying individuals qualified to become directors of Cabot.
Recommending director candidates to the Board to fill vacancies and to stand for election at the annual meeting of stockholders.
Recommending committee assignments.
Leading the annual review of the Board’s performance.
Recommending compensation and benefit policies for Cabot’s directors.
Reviewing and making determinations regarding interested transactions under Cabot’s Related Person Transaction Policy and Procedures.
The specific responsibilities and functions of the Governance Committee are identified in its charter, a copy of which is posted on our website (www.cabotcorp.com) under the heading “About“Company — About Cabot — Governance.Governance — Resources.” The Governance Committee met four times during fiscal 2013.2016.
SH&E Committee
The SH&E Committee reviews all aspects of Cabot’s safety, health and environmental management programs and performance. In particular, the Committee reviews the following:
Cabot’s environmental reserve, and risk assessment and risk management processes.
Environmental and safety audit reports, performance metrics, performance as benchmarked against industry peer groups, assessed fines or penalties, and site security and safety issues.
Safety, health and environmental training initiatives.
Cabot’s safety, health and environmental budget and capital expenditures.
6 CABOT CORPORATION
| 2017 PROXY STATEMENT |
The Board of Directors and its Committees(continued)
The specific responsibilities and functions of the SH&E Committee are identified in the Committee’s charter, a copy of which is posted on our website (www.cabotcorp.com) under the heading “About“Company — About Cabot — Governance.Governance — Resources.” The SH&E Committee met threefour times during fiscal 2013.2016.
Our Board’s Role in Risk Oversight
Our Board oversees our enterprise-wide program of risk management. Cabot management is primarily responsible forday-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment is updated on a continual basis and includes a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance, and managerial risks which may potentially affect the Company. From this assessment, the most significant risks in terms of their likelihood and severity are identified, and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full
CABOT CORPORATION 5
The Board of Directors and its Committees(continued)
Board or the relevant Committee of the Board our major risk exposures, their potential operational or financial impact on Cabot, and the steps we take to manage them.
Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure, market exposure and country specific risks. Each Committee also has responsibility for risk oversight. The Audit Committee focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processes. The SH&E Committee assists the Board in fulfilling its oversight responsibility by reviewing the effectiveness of our safety, health and environmental programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes. The Compensation Committee considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistent with our business strategy. The Compensation Committee also oversees senior management succession planning and development. Finally, the Governance Committee considers governance and Board and CEO succession planning risks, and evaluates director skills and qualifications to ensure each Committee has directors with the requisite skills to oversee the applicable risks that are the focus of that Committee. The Company has a robust risk management program, the strength of which is not dependent on the Board’s leadership structure.
Our “CompensationCompensation Discussion and Analysis”Analysis (“CD&A”) describes our compensation policies, programs and practices for our named executive officers. Our corporate goal-setting, performance assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate shortshort- and long-term incentive programs.
Participants in our long-term incentive program who are not members of the management Executive Committee receive awards consisting of time-based
restricted stock units and performance-based restricted stock units, and, otherwisein the program is consistent throughoutcase of members of the Company.Management Executive Committee and a limited number of other participants, stock options. Beyond our corporate short-andshort- and long-term incentive programs, substantially alla substantial number of our facilities outside North America offer an annual cash incentive plans.plan.
Our management, with the assistance of Pearl Meyer, the independent compensation consultant retained by the Compensation Committee, evaluates the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment is presented to and reviewed by the Compensation Committee. Among the program features evaluated are the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelines for members of the managementManagement Executive Committee; a company compensation recoupment policy; and significant controls for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designed to mitigate risk, includinginclud-
CABOT CORPORATION 7
| 2017 PROXY STATEMENT |
The Board of Directors and its Committees(continued)
ing the oversight provided by the Compensation Committee, which reviews and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
68 CABOT CORPORATION
Directors who are Cabot employees do not receiveAnnual compensation for their services as directors. Annual compensation forour non-employee directors is comprised of cash compensation and a grant of Cabot common stock. The Governance Committee is responsible for reviewing the form and amount of compensation paid to ournon-employee directors and recommends changes to our Board of Directors as appropriate. In reviewing director compensation, theThe Governance Committee regularly reviews competitive market data with the assistance of Mercer LLC, a national executive compensation firm engaged by this Committee, to evaluate the reasonableness of our director compensation and the appropriate mix of cash and equity compensation. During calendar year 2016, following a review of competitive market data, including from the compensation peer group used to gauge the reasonableness and competitiveness of our executive compensation program and based on the advice of Mercer, stock compensation for non-employee directors was increased, effective for calendar year 2017, to an award of shares having a grant date value as close as possible to $110,000. With this change, total compensation paid to our directors will more closely approximate peer median levels, and the mix between cash and equity compensation will place slightly more emphasis on equity compensation. Prior to this increase, the compensation for our non-employee directors was last increased in January 2012. Directors who are Cabot employees do not receive compensation for their services as directors.
Cash Compensation
Cash compensation for ournon-employee directors consists of an annual retainer of $75,000, plus the following annual amounts for specific roles:
$16,000 for serving on the Audit Committee (plus another $25,000 for serving as Chair of the Audit Committee).
$7,000 for serving on each of the Compensation, SH&E or Governance Committees (plus another $10,000 for serving as Chair of the Compensation, SH&E or Governance Committees).
$110,000 for serving asNon-Executive Chairman of the Board of Directors.
Mr. O’Brien has elected to not receive the cash compensation described above for his role as Chair of the Governance Committee in light of his role as ourNon-Executive Chairman of the Board. Cash compensation is paid quarterly and, when changes occur in Board or Committee membership changes during a quarter, is pro-rated to reflect service during the quarter.compensation ispro-rated.
Stock Compensation
Under our Non-Employeethe Cabot Corporation 2015 Directors’ Stock Compensation Plan (the “Directors’ Stock Plan”), eachnon-employee director is eligible to receive each calendar year shares of Cabot common stock as a portionpart of his or her compensation for services to be performed in that year. The number of shares awarded is set each year by the Governance Committee. For calendar 2013,year 2016, eachnon-employee director whose term of office continued after the Governance Committee approved2016 Annual Meeting of Stockholders received an award of shares withhaving a grant date value as close as possible to $75,000 (1,987 shares). Henry F. McCance and Ronaldo H. Schmitz, who retired at the 2016 Annual Meeting, each received apro-rated grant of $75,000 (1,748 shares) to each non-employee director.497 shares. The closing price of our common stock on January 11, 2013,8, 2016, the date such shares were granted, was $42.91.$37.75. On September 9, 2016, Mr. Prevost received apro-rated grant of 760 shares as compensation for his service as anon-employee director following the end of his employment with Cabot on July 15, 2016. The closing price of our common stock on September 9, 2016 was $49.32.
As of January 17, 2014,18, 2017, there were 124,948311,382 shares available for issuance under the Directors’ Stock Plan.
We believe that it is desirable for directors to have an equity interest in Cabot and we encourage all directors to own a reasonable amount of Cabot stock to align director and stockholder interests and to enhance a director’s long-term perspective. Accordingly, our Corporate Governance Guidelines requirenon-employee directors to have an equity ownership in Cabot of at least 10,000 shares. It is expected that this ownership interestlevel will generally be achieved within a five-year period beginning when a director is first elected to the Board. For purposes of determining a director’s compliance with this ownership requirement, any deferred shares are considered owned by the director. In addition, eachnon-employee director is required to retain the shares granted in any given year for a period of three years from the date of issuance or until the director’s earlier retirement.
CABOT CORPORATION 9
| 2017 PROXY STATEMENT |
Director Compensation (continued)
Reimbursement of Certain ExpensesExpenses; Charitable Giving
Our Corporate Governance Guidelines state that Cabot will not provide retirement or other benefits or perquisites tonon-employee directors. Directors, however, are reimbursed for reasonable travel andout-of-pocket expenses incurred in connection with attending Board and Committee meetings and other Cabot business-related events, and are covered by Cabot’s travel accident insurance policy for such travel. In connection with the retirements of Mr. McCance and Dr. Schmitz from the Board of Directors at the 2016 Annual Meeting of Stockholders and in recognition for their many years of service, we made contributions of $25,000 on each of their behalf to charities that they each selected.
Deferred Compensation
Under the Cabot Corporation Deferred CompensationNon-Employee Directors’ Deferral Plan (the “Deferred Compensation Plan”), directors can elect to defer receipt of any cash compensation payable in a calendar year for a period of at least three years or until they cease to be members of the Board of Directors. In any year, these deferred amounts are, at the director’s choice, either (i) credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable year or (ii) treated as invested in Cabot phantom stock units, based on the market price of shares of Cabot common stock at the time of deferral (with phantom dividends being accrued and treated as if reinvested in Cabot phantom stock units). Mr.Messrs. Enriquez and Mr. McCance and Dr. Wolfgruber elected to defer receipt of their calendar year 20132016 cash compensation and treat the deferred amounts as invested in Cabot phantom stock units. Mr. Kirby elected to defer receipt of his calendar year 20132016 cash compensation and have it credited with interest at a rate equal to the Moody’s Corporate Bond Rate. The Moody’s Corporate Bond Rate used to calculate interest during calendar year 20132016 was 3.92%4.62%.
CABOT CORPORATION 7
Director Compensation(continued)
Under the Non-Employee Directors’ Stock DeferralDeferred Compensation Plan, (the “Stock Deferral Plan”), directors also may defer receipt of the shares of common stock issuable to them under the Directors’ Stock Plan. For each share of stock deferred, a director is credited with one Cabot phantom stock unit to a notional account created in the director’s name. Dividends that would otherwise be payable on the deferred shares accrue in the account and are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the begin-
ningbeginning of the year. The rate used to calculate interest during calendar year 20132016 was 3.92%4.62%. At the end of the deferral period, the deferred shares of Cabot common stock are issued to the director, along with the accrued cash dividends and interest earned, either in one issuance or in installments over a period of up to ten years.years, as selected by the director. Messrs. Enriquez, Kirby, McCance and McGillicuddy, and Dr.Drs. Schmitz, Thomas, and Wolfgruber elected to defer their calendar year 20132016 stock awards.
10 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Director Compensation (continued)
Director Compensation Table
The following table sets forth the compensation earned by ournon-employee directors in fiscal 2013:2016:
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | All Other ($)(4) | Total ($) | |||||||||||||||||||||||||||
John S. Clarkeson | 99,000 | 75,007 | 660 | 174,667 | ||||||||||||||||||||||||||||||||
Juan Enriquez | 99,250 | 75,007 | 610 | 174,867 | 98,000 | 75,009 | 1,677 | — | 174,686 | |||||||||||||||||||||||||||
Gautam S. Kaji | 99,250 | 75,007 | — | 174,257 | ||||||||||||||||||||||||||||||||
William C. Kirby | 92,250 | 75,007 | 1,230 | 168,487 | 94,500 | 75,009 | 7,872 | — | 177,381 | |||||||||||||||||||||||||||
Roderick C.G. MacLeod | 99,250 | 75,007 | — | 174,257 | 98,000 | 75,009 | — | — | 173,009 | |||||||||||||||||||||||||||
Henry F. McCance | 99,000 | 75,007 | 610 | 174,617 | 49,500 | 18,762 | 701 | 25,000 | 93,963 | |||||||||||||||||||||||||||
John K. McGillicuddy | 128,000 | 75,007 | 212 | 203,219 | 123,000 | 75,009 | 800 | — | 198,809 | |||||||||||||||||||||||||||
John F. O’Brien | 192,000 | 75,007 | — | 267,007 | 192,000 | 75,009 | — | — | 267,009 | |||||||||||||||||||||||||||
Patrick M. Prevost | 20,500 | 37,483 | — | — | 57,983 | |||||||||||||||||||||||||||||||
Sue H. Rataj | 99,250 | 75,007 | — | 174,257 | 94,000 | 75,009 | — | — | 169,009 | |||||||||||||||||||||||||||
Ronaldo H. Schmitz | 89,000 | 75,007 | 783 | 164,790 | 44,500 | 18,762 | 845 | 25,000 | 89,107 | |||||||||||||||||||||||||||
Lydia W. Thomas | 109,250 | 75,007 | — | 184,257 | 108,000 | 75,009 | 42 | — | 183,051 | |||||||||||||||||||||||||||
Matthias L. Wolfgruber | 89,000 | 75,009 | 53 | — | 164,062 | |||||||||||||||||||||||||||||||
Mark S. Wrighton | 89,000 | 75,007 | 8,107 | 172,114 | 89,000 | 75,009 | 11,667 | — | 175,676 | |||||||||||||||||||||||||||
| 1. |
| 2. | Reflects the grant date fair value of shares of stock granted to eachnon-employee director computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the number of shares granted to |
| the director by the closing price of our common stock on the date of grant, which, for all directors other than Mr. Prevost, was January |
| 3. | Represents above-market interest (the portion exceeding 120% of the applicable long-term rate) on compensation |
| 4. | Consists of charitable contributions made on behalf of Mr. McCance and Dr. Schmitz in connection with their retirement from the Board of Directors at the 2016 Annual Meeting of Stockholders. |
8 CABOT CORPORATION 11
Proposal 1 — Election of Directors
Director Qualifications
The Governance Committee identifies candidates for election to the Board of Directors; reviews their skills, qualifications and experience; and recommends nominees for director to the Board for approval.
We believe that potential directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of our stockholders. In addition to reviewing a candidate’s background and accomplishments, candidates are evaluated in the context of the current composition of the Board of Directors and the evolving needs of our businesses. It is the Board’s policy that at all times at least a majority of the Board’s members must be independent under Cabot’s Corporate Governance Guidelines. It is also the Board’s policy that the Board as a whole reflect a range of talents, skills, diversity and expertise, particularly in the areas of (i) management, (ii) strategic planning, (iii) accounting and finance, (iv) domestic and international markets, (v) corporate governance, and (vi) the specialty chemicals and related industries, sufficient to provide sound and prudent guidance about Cabot’s operations and interests.
In addition, the desired attributes of individual directors are (i) integrity and demonstrated high ethical standards; (ii) sound judgment; (iii) demonstrated leadership; (iv) knowledge, experience and skills in at least one specialty area, such as corporate management, accounting or finance, marketing, manufacturing, technology, information systems, international business or the specialty chemicals industry; (v) compassion; (vi) willingness and ability to work with other members of the Board openly and constructively; (vii) the ability to communicate clearly and persuasively; and (viii) diversity of origin, background, experience and thought. We believe that it is valuable to have a diverse Board that is representative of our global business, customers, employees and stockholders. The Governance Committee implements and assesses the effectiveness of this practice by considering each Board member’s professional experience, background, education, skill, age, race, gender and national origin when selecting nominees for director. We also require that our Board members be able to dedicate the
time sufficient to ensure the diligent performance of their duties on our behalf.
Board of Directors
Our Board of Directors currently has thirteeneleven members and is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires.
Four directors are proposed to be elected at the 20142017 Annual Meeting. The terms of Juan Enriquez, William C. Kirby, Henry F. McCance and Patrick M. Prevost and Sean D. Keohane expire this year and our Board of Directors has nominated each of them for a three-year term that will expire at the annual meeting in 2017.2020. All of them are current directors and, with the exception of Mr. Kirby,Keohane, have been elected by stockholders at previous annual meetings. On the recommendation of certain of the non-management directors, and the further recommendation of the Governance Committee, theThe Board elected Mr. KirbyKeohane President and Chief Executive Officer of the Company and a directormember of the Board of Directors effective March 11, 2016.
Dr. Thomas is retiring from the Board effective at the 2017 Annual Meeting in 2012.
accordance with the Board’s retirement policy fornon-employee directors. Upon the election of the nominated directors, and the resignation of Mr. Kaji in accordance with the Board’sthis retirement, policy for non-employee directors, Cabot’s Board of Directors will have twelveten members. We expect that all of the nominees will be available for election, but if any of the nominees is not available at the time of the 20142017 Annual Meeting, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than four nominees.
Vote Required
A nominee will be elected to the Board of Directors if the votes properly cast “for” his election exceed the votes properly cast “against” such nominee’s election.
Recommendation
The Board of Directors recommends that you vote “FOR” the election of its four nominees.
12CABOT CORPORATION 9
Proposal 1 — Election of Directors(continued)
Certain Information Regarding Directors
In addition to the information presented below regarding the specific experience, qualifications, attributes and skills that qualify the nominees and the directors whose terms of office will continue after the 20142017 Annual Meeting to serve as a director of the Company, all of the nominees and directors have a reputation for honesty, integrity, sound judgment and adherence to high ethical standards. Each of the nominees and directors has demonstrated the willingness and ability to make the significant commitment of time and energy to serve on our Board and its Committees, and to engage management and each other openly and constructively.
(Nominee for Election) | Age: Committee Memberships: Director since: Term of Office Expires:
| |
|
Business Experience: Mr. Enriquez has served as Chairman of the Board of Directors and Chief Executive Officer of Biotechonomy Ventures, a life sciences research and investment firm, since 2003 and Managing Director of Excel Venture Management, a life sciences investment company, since March 2008. Prior to that, Mr. Enriquez served as Director of the Life Science Project at Harvard Business School from 2001 to 2003. He is also a member of the Board of Directors of variousstart-up companies. Mr. Enriquez’s background and experience in technology ventures has provided him the opportunity to develop significant expertise in technology,start-up companies, and international business matters, which makes him well qualified to serve on the Board. Mr. Enriquez brings to the Board the extensive leadership experience he gained through his involvement in Biotechonomy Ventures and Excel Venture Management. | |
Sean D. Keohane (Nominee for Election) | Age: 49 Committee Memberships: Executive Director since: 2016 Term of Office Expires: 2017 Business Experience: Mr. Keohane is Cabot’s President and Chief Executive Officer, a position he has held since March 2016. Mr. Keohane joined Cabot in August 2002 and has held a number of general management positions. In March 2005, he was elected a Vice President and in May 2008 he was named General Manager of Performance Chemicals. From March 2012 until November 2014, he was Senior Vice President and President of Performance Chemicals, and from November 2014 until March 2016 he was Executive Vice President and President of Reinforcement Materials. Prior to joining Cabot, Mr. Keohane worked for Pratt & Whitney, a division of United Technologies, in a variety of general management positions. Mr. Keohane is also a member of the Board of Directors of the American Chemistry Council, a trade association representing the business of chemistry at the global, national and state levels. Mr. Keohane has a deep understanding of Cabot’s business that makes him uniquely qualified to serve on the Board of Directors. During his tenure at the Company, he has developed a strong knowledge of Cabot and the chemicals industry and has gained significant experience in management, strategic planning and international business. |
10 CABOT CORPORATION 13
Proposal 1 — Election of Directors(continued)
William C. Kirby (Nominee for Election) | Age: Committee Memberships: Audit, SH&E Director since: 2012 Term of Office Expires: Business Experience:Mr. Kirby is the Spangler Family Professor of Business Administration at the Harvard Business School and T.M. Chang Professor of China Studies at Harvard University, positions he has held since July 2008. Since July 2006, he has also been a Harvard University Distinguished Service Professor |
Roderick C.G. MacLeod | Age: Committee Memberships: Audit, SH&E Director since: 1998 Term of Office Expires: Business Experience: Mr. MacLeod is a Principal of Waverley Investments Ltd., a private equity investment company, a position he has held sinceco-founding the company in 1999, and a Principal of St. Martins Finance Ltd., a private equity investment company, sinceco-founding the company in 1985. Prior to his current positions, Mr. MacLeod served as General Manager for Business Development for Adia S.A. (now Adecco S.A.), a human resources company, from 1980 to 1991. Through Mr. MacLeod’s tenure on our Board of Directors, he has developed an extensive knowledge of the Company and the specialty chemicals industry. As a qualified chartered accountant, Mr. MacLeod brings to the Board his expertise in business and accounting and finance matters, which he gained through his substantial experience in private equity. | |
|
|
14CABOT CORPORATION 11
Proposal 1 — Election of Directors(continued)
John K. McGillicuddy | Age: Committee Memberships: Audit (Chair), Executive, Governance Director since: 2008 Term of Office Expires: Business Experience: Mr. McGillicuddy was a partner with KPMG LLP, a public accounting firm, from 1975 until his retirement in 2000. During his tenure with KPMG, he served as an audit partner, SEC reviewing partner and in various management positions. Mr. McGillicuddy is |
John F. O’Brien Non-Executive Chairman of the Board | Age: Committee Memberships: Executive (Chair), Governance (Chair) Director since:1990 Term of Office Expires: Business Experience: Mr. O’Brien was Chief Executive Officer and President of Allmerica Financial Corporation (now known as The Hanover Insurance Group, Inc.), an insurance and diversified financial services company, from 1995 until his retirement in 2002. From 1989 until 2002, Mr. O’Brien also served as President and Chief Executive Officer of First Allmerica Financial Life Insurance Company, Chairman of the Board of Directors of Allmerica Investment Trust and Chairman of the Board of Directors of Allmerica Securities Trust. Mr. O’Brien is also a member of the Board of Directors of LKQ Corporation, a nationwide provider of recycled auto parts; a family of mutual funds managed by BlackRock, Inc., an investment management advisory firm; and the lead director of The TJX Companies, Inc., anoff-price retailer of apparel and home fashions in the U.S. and worldwide. Mr. O’Brien’s tenure as Chief Executive Officer and President of a Fortune 500 insurance company and significant leadership and management experience provides him with substantial knowledge and skills with respect to strategic planning, accounting and finance, and corporate governance and makes him uniquely qualified to serve asNon-Executive Chairman of the Board. In addition, his service as lead director of The TJX Companies and a member of the boards of LKQ and |
12 CABOT CORPORATION 15
Proposal 1 — Election of Directors(continued)
Patrick M. Prevost (Nominee for Election) | Age: Committee Memberships:Executive, SH&E Director since: 2008 Term of Office Business Experience: Mr. Prevost | |
Sue H. Rataj | Age: Committee Memberships: Director since: 2011 Term of Office Expires: Business Experience: Ms. Rataj was Chief Executive, Petrochemicals for BP, a global energy company, from April 2008 until her retirement in April 2011, with global responsibility for BP’s petrochemicals operations. Prior to that, Ms. Rataj held a variety of senior management positions with BP, most recently serving as Group Vice President, Refining and Marketing from July 2007 until April 2008. Ms. Rataj is also a member of the Supervisory Board of Bayer AG, a |
16CABOT CORPORATION 13
Proposal 1 — Election of Directors(continued)
|
Committee Director Term of Office Business |
|
Committee Director Term of Office Business |
14 CABOT CORPORATION
Proposal 1 — Election of Directors (continued)
|
|
CABOT CORPORATION 15 17
CORPORATE GOVERNANCECorporate Governance
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that address the following matters, among others: director qualifications and independence, Board Committees, director retirement, director compensation, Board performance evaluations, Board and Committee meetings, access to senior management, CEO evaluation and succession planning. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “About“Company — About Cabot — Governance.Governance — Resources.”
Our Board of Directors, upon the recommendation of its Governance Committee, has determined that each of Cabot’snon-management directors who served as a director during the fiscal year, other than Mr. Prevost who served as Cabot’s President and Chief Executive Officer until March 2016, is “independent” under the Board’s director independence standards as detailed in our Corporate Governance Guidelines. The Governance Committee annually reviews the independence of all directors and reports its finding to the full Board. To assist in this review, the Board has adopted director independence guidelines. In the event a director has a relationship that is not addressed by the independence guidelines, the Governance Committee evaluates the relevant facts and circumstances of the relationship and makes a recommendation to the full Board of Directors about whether the relationship constitutes a material relationship with Cabot. After examining all known relationships between the directors and Cabot, the Board concluded that none of thenon-management directors who served as directors during the fiscal year had a material relationship with Cabot.Cabot, other than Mr. Prevost, as discussed above.
In evaluating and determining the independence of the non-management directors, the Board considered the following:
Mark S. Wrighton is Chancellor of Washington University in St. Louis (“WUSTL”). Since 2006, Cabot Corporation Foundation has made an annual $60,000 contribution to support a scholar in an MBA or PhD program in WUSTL’s McDonnell International Scholars Academy. To qualify for the McDonnell International Scholars Academy, the candidate must have earned an undergraduate degree from a partner research university in Asia and be a candidate for a graduate or professional degree in any program in WUSTL.
While Cabot is able to indicate to WUSTL its candidate preference, WUSTL selects the scholar. It is expected that the scholar will have an opportunity to spend time at Cabot facilities in the United States. Through its association with WUSTL as a founding partner in the development of the Academy, Cabot benefits by having access to the partner research universities and exposure at various times to a talented group of students at the Academy, which may create hiring opportunities for Cabot. In fiscal 2013, the Foundation renewed this support, and pledged to make an annual $60,000 contribution for five years of study by a PhD student. The Board determined that the contributions to WUSTL would not impair Chancellor Wrighton’s independence or judgment given that the total amount contributed by Cabot will be less than 1% of the total contributions made to WUSTL during WUSTL’s 2013 fiscal year. Further, Chancellor Wrighton has no personal interest in, nor receives any personal benefit from, these contributions.
Transactions with Related Persons
Policy and Procedures for the Review of Related Person Transactions
Our Board has adopted a written policy for the review and approval or ratification of transactions involving related persons. “Related persons” consist of any person who is or was (since the beginning of the fiscal year) a director, nominee for director or executive officer of Cabot, any greater than 5% stockholder of Cabot and the immediate family members of any of those persons. The Governance Committee is responsible for applying the policy with the assistance of our General Counsel.
Transactions covered by the policy consist of any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which (1) the aggregate amount involved will or may be expected to exceed $100,000 with respect to any fiscal year, (2) Cabot 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 (an “interested transaction”).
Under the policy, the following interested transactions have a standingpre-approval from the Governance Com-
16 CABOT CORPORATION
Corporate Governance (continued)
mittee,Committee, even if the aggregate amount is greater than $100,000:
| • | Certain sales of stock by executive officers to Cabot. (1) Sales of Cabot stock by an executive officer (including the CEO) to Cabot pursuant to |
| • | Certain transactions with other companies. Any transaction between Cabot and another company if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total revenues, or any transaction where Cabot is indebted to another company if the total amount of Cabot’s indebtedness to the other company does not exceed 1% of that company’s total consolidated assets. In both cases, thepre-approval applies if the related person’s only relationship is as an employee (other than executive officer), director or beneficial owner of less than 10% of the other company’s shares. |
18 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Corporate Governance(continued)
| • | Employment of executive officers; director compensation. Any employment by Cabot of an executive officer if the related compensation is required to be reported in our proxy statement or if the compensation was approved by our Compensation Committee. Any compensation paid to a director if the compensation is required to be reported in our proxy statement. |
| • | Other transactions. Competitively bid or regulated public utility services transactions; transactions involving trustee-type services; and transactions where the related person’s interest arises solely from the ownership of our common stock and all common stockholders received the same benefit on a pro rata basis. |
Each interested transaction by a related person that does not have standingpre-approval under the policy should be reported to our General Counsel for presentation to the Governance Committee for approval before its con-
summationconsummation or for ratification, if necessary, after its consummation. The Chair of the Governance Committee has the authority topre-approve or ratify (as applicable) any interested transaction with a related person in which the aggregate amount involved is expected to be less than $500,000. In determining whether to approve or ratify an interested transaction, the Governance Committee and the Chair may take into account such factors as they deem appropriate, which may include whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Transactions with Related Persons
Since the beginning of fiscal 2016, Cabot and its subsidiaries had no transactions, nor are there any currently proposed transactions in which Cabot or its subsidiaries was or is to be a participant, in which the amount involved exceeds $120,000 and any related person (as defined above) had or will have a direct or indirect material interest reportable under SEC rules, except as described below.rules.
Under our long-term equity incentive program, employees are permitted to satisfy withholding taxes that may be due upon vesting or settlement of shares of time-based and performance-based restricted stock units by having Cabot withhold shares otherwise issuable upon vesting or settlement with a value equal to the withholding tax obligation. These shares are valued at a per share price equal to the closing price of Cabot common stock on the date the units vest or, in the case of performance-based restricted stock units, the units are settled. In accordance with this program, Cabot withheld from each of our named executive officers shares of Cabot common stock to satisfy withholding tax obligations on the time-based restricted stock units that vested on November 13, 2012 and November 12, 2013 (at a per share price of $36.21 and $48.09, respectively) and the performance-based restricted stock units that settled on November 26, 2012 and November 25, 2013 (at a per share price of $36.98 and $48.93, respectively).
CABOT CORPORATION 17
Corporate Governance(continued)
The following table shows the dollar value of Cabot common stock Cabot withheld from each named executive officer to satisfy these withholding tax obligations:
| Name of Named Executive Officer | Value of Shares Withheld on November 13, 2012 | Value of Shares Withheld on November 26, 2012 | Value of Shares Withheld on November 12, 2013 | Value of Shares Withheld on November 25, 2013 | ||||||||||||
Patrick M. Prevost | $ | 531,527 | $ | 881,862 | $ | 629,113 | $ | 745,987 | ||||||||
Eduardo E. Cordeiro | $ | 117,791 | $ | 195,291 | $ | 147,444 | $ | 174,876 | ||||||||
David A. Miller | $ | 89,547 | $ | 148,438 | $ | 101,855 | $ | 120,808 | ||||||||
Brian A. Berube | $ | 89,113 | $ | 145,960 | $ | 108,154 | $ | 128,246 | ||||||||
Sean D. Keohane | $ | 67,749 | $ | 145,960 | $ | 108,154 | $ | 128,246 | ||||||||
As described in detail under “Director Independence” above, we have made certain payments to Washington University in St. Louis where Dr. Wrighton is Chancellor. The Governance Committee determined that Dr. Wrighton did not have a direct or indirect material interest in the payments made by Cabot to WUSTL.
Non-Executive Chairman of the Board; Executive SessionsSessions; Interim Office of the CEO
John F. O’Brien serves asNon-Executive Chairman of the Board. Although our Corporate Governance Guidelines do not require that our Chairman and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing theNon-Executive Chairman of the Board to provide independent leadership of the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time, and as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chairman of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to lead the executive sessions of thenon-management directors at Board meetings.
TheNon-Executive Chairman of the Board is charged primarily with:
presiding over meetings of our Board and stockholders, including executive sessions of thenon-management directors;
serving as anex-officio member of each Board committee of which he is not a member and, upon invitation, attending those committee meetings where possible;
establishing an agenda for each Board meeting in collaboration with our CEO and meeting with our CEO following each meeting to discuss any open issues andfollow-up items;
facilitating and coordinating communication among thenon-management directors and our CEO and an open flow of information between management and our Board;
in collaboration with the Governance Committee, leading our Board’s annual performance review;
meeting with eachnon-management director at least annually;
providing assistance to our CEO by attending selected internal business management meetings and meeting with our CEO as necessary;
coordinating the periodic review of management’s strategic plan;
in collaboration with the Compensation Committee, leading our Board’s review of the succession plans for our CEO and key senior management and coordinating such officers’ annual performance reviews;management;
CABOT CORPORATION 19
| 2017 PROXY STATEMENT |
Corporate Governance(continued)
working with management on effective stockholder communication; and
performing such other duties and services as our Board may require.
In December 2015, Cabot’s then-President and Chief Executive Officer, Mr. Prevost, began a medical leave of absence and the Board established an Interim Office of the Chief Executive Officer (the “CEO Office”) and temporarily transferred Mr. Prevost’s responsibilities to the CEO Office. The CEO Office remained in place until March 11, 2016, at which time Mr. Prevost stepped down from his position as President and CEO of the Company and the Board elected Mr. Keohane President and CEO. During this time, Mr. O’Brien worked closely with and provided oversight to the CEO Office.
Director Attendance at Annual Meeting
Recognizing that director attendance at the annual meeting can provide our stockholders with an opportunity to communicate with Board members about issues affecting Cabot, we actively encourage our directors to attend the annual meeting. In 2013,2016, all of our directors whose term of office continued after the annual meeting attended the annual meeting.
Code of Business Conduct and Ethics
We have adopted a code of ethics that applies to all of our employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Controller and other senior financial officers. The codeCode of ethicsBusiness Ethics is posted on our website (www.cabotcorp.com) under the caption “About“Company — About Cabot — Governance.Code of Business Ethics.”
18 CABOT CORPORATION
Corporate Governance (continued)
Stockholders or other interested parties wishing to communicate with the Board, thenon-management directors or any individual director may contact theNon-Executive Chairman of the Board by calling1-800-853-7602; by submitting a form onsending an email through our website using the link that is located under the caption “About“Company — About Cabot — Governance — Contacting Cabot’sContact the Board of Directors”; or by writing to Cabot Corporation Board of Directors, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277.
Anyone who has a complaint or concern regarding our accounting, internal accounting controls or auditing matters may communicate that concern to the Chair of the Audit Committee by calling1-800-853-7602; by submitting a form onsending an email through our website using the link that is located under the caption “About“Company — About Cabot — Governance — Contacting Cabot’sContact the Board of Directors”; or by writing to Cabot Corporation Audit Committee, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277. All communications to the Board of Directors or the Audit Committee will also be sent to Cabot’s Office of Compliance.
Governance Committee Processes for Director Nominations
Process for Identifying and Evaluating Director Nominees
Generally, the Governance Committee identifies candidates for election to the Board of Directors through the business and other networks of the directors and management. The Committee may also solicit recommendations for director nominees from third-party search firms or any other source it deems appropriate. The Governance Committee’s review and evaluation of a candidate generally includes inquiries as to the candidate’s reputation and background, examination of the candidate’s experience and skills in relation to the Board’s requirements at the time, consideration of the candidate’s independence as measured by the Board’s independence standards, and any other considerations that the Governance Committee deems appropriate. Candidates recommended by our stockholders are evaluated on the same basis as candidates recommended by our directors, management, third-party search firms or other sources.
Procedures for Stockholders to Recommend Director Nominees
The Governance Committee will considerhas a policy with respect to the submission of recommendations by shareholders of candidates for director candidates recommendednominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the date that Cabot released its proxy statement to stockholders in accordanceconnection with the procedures set forth in our by-laws. Those procedures require a stockholderprevious year’s annual meeting. Recom-
20 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Corporate Governance(continued)
mendations should be submitted to notify the Company’s Secretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts 02210, of a proposed nominee not less than 60 days and no more than 90 days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders.02210. The notice to the Secretary should include the following:
the candidate’s name, age and address;
the candidate’s principal occupation or employment;
the class and number of shares of Cabot stock, if any, beneficially owned by the candidate;
the name and address of the stockholder as they appear on Cabot’s books;
the class and number of shares of Cabot stock directly or indirectly held of record, owned beneficially and represented by proxy by such stockholder as of the date of the notice;
any “derivative security” directly or indirectly owned beneficially by the stockholder and any other “pecuniary interest” or “indirect pecuniary interest” in Cabot stock, as such terms are defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”);
a representation that the stockholder intends to appear in person or by proxy at the meeting to nominateall information about the candidate specified in the notice;
a description of all direct and indirect compensation and other material monetary arrangements, agreements or understandings during the past three years, and any other material relationship, if any, between the stockholder and its respective affiliates or associates, or others with whom they are acting in concert, on the one hand, and the candidate and his or her respective affiliates, associates and others with whom any of them are acting in concert, on the other hand;
any other information regarding the candidate or stockholder that Cabot would be required to be includeddisclose in a proxy statement relating to the election of directors;in accordance with Securities and
a statement signed Exchange Act rules or as required by the Company’sby-laws, consent of the candidate confirming that,to serve on the Board of Directors, if nominated and elected, he or she willand agreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with Cabot’s code of ethics, Policy on Transactions in Securities, Corporate Governance Guidelines and any other applicable rule, regulation, policy or standard of conduct applicable to the directors.
Company policies.
CABOT CORPORATION 19
Corporate Governance(continued)
In addition, any person nominated by a stockholder must complete and submit a questionnaire, in a form available from Cabot upon the request of the stockholder, with the notice described above. If the stockholder holds its shares by or through a nominee, the information required to be provided in the notice shall be provided about the person who has the power to direct the voting and disposition of the shares of Cabot stock and who has a pecuniary interest in such shares in lieu of the stockholder.
The Board of Directors’ retirement policy fornon-employee directors requires each director who is not a Cabot employee to submit his or her resignation to the Board prior to, and effective at, the annual meeting of stockholders next following the calendar year of such director’s seventy-second birthday. Dr. Thomas is retiring under this policy. The Board is authorized to make exceptions to this retirement policy for special circumstances involving the company.Company.
The Board of Directors also has a retirement policy for employee directors that requires each employee director to submit his or her resignation to the Board (i) prior to and, if accepted, effective at the annual meeting of stockholders following the calendar year of such director’s sixty-fifth birthday, or (ii) if the director ceases to be an employee of Cabot prior to such annual meeting, no later than the date of and, if accepted, effective upon the termination of such director’s employment with Cabot. Each resignation submitted pursuant to this policy is required to specifically state that the resignation is to be effective only upon acceptance by the Board of Directors. In each case, the Governance Committee will consider the resignation and make a recommendation to the Board. If a resignation submitted pursuant to this policy is not accepted, the employee director is thereafter required to submit his or her resignation annually to the Board of Directors for consideration.
20 CABOT CORPORATION 21
Beneficial Stock Ownership of Directors, ExecutiveOfficers and Persons Owning More Than Five Percent of Common Stock
The following table shows the amount of Cabot common stock beneficially owned as of January 18, 2017 (unless otherwise indicated) by each person known by Cabot to beneficially own more than 5% of our outstanding common stock, by each director of Cabot, by each of our named executive officers and by all directors, nominees for director and executive officers of Cabot as a group. Unless otherwise indicated, each person has sole investment and voting power over the securities listed in the table.
| Name | Total Number of Shares(1) | Percent of Class(2) | ||||||
Holders of More than Five Percent of Common Stock | ||||||||
BlackRock, Inc. | 5,401,140 | (3) | 8.7 | % | ||||
55 East 52nd Street | ||||||||
New York, NY | ||||||||
The Vanguard Group | 4,232,660 | (4) | 6.8 | % | ||||
100 Vanguard Blvd. | ||||||||
Malvern, PA | ||||||||
Directors and Executive Officers | ||||||||
Brian A. Berube | 94,894 | (5) | * | |||||
Eduardo E. Cordeiro | 109,861 | (6) | * | |||||
Nicholas S. Cross | 63,599 | (7) | * | |||||
Juan Enriquez | 27,584 | (8) | * | |||||
Hobart C. Kalkstein | 34,153 | (9) | * | |||||
Sean D. Keohane | 140,490 | (10) | * | |||||
William C. Kirby | 9,898 | (11) | * | |||||
Roderick C.G. MacLeod | 32,634 | (12) | * | |||||
John K. McGillicuddy | 17,984 | (13) | * | |||||
John F. O’Brien | 49,084 | * | ||||||
Patrick M. Prevost | 842,818 | (14) | 1.3 | % | ||||
Sue H. Rataj | 11,944 | * | ||||||
Lydia W. Thomas | 32,849 | (15) | * | |||||
Friedrich von Gottberg | 91,634 | (16) | ||||||
Matthias L. Wolfgruber | 6,239 | (17) | * | |||||
Mark S. Wrighton | 40,184 | (18) | * | |||||
Directors and executive officers as a group (16 persons) | 1,605,849 | (19) | 2.5 | % | ||||
| * | Less than one percent. |
| 1. | For Cabot’s executive officers the number includes shares of Cabot common stock held for their benefit by the trustee of Cabot’s 401(k) Plan. The shares of common stock allocated to the accounts of Cabot’s executive officers in the 401(k) Plan constitute less than 1% of our common stock. |
| 2. | The calculation of percentage of ownership of each listed beneficial owner is based on 62,189,388 shares of Cabot common stock, which represents the number of shares outstanding on January 18, 2017, plus any shares that such individual or entity has the right to acquire within 60 days of January 18, 2017. |
22 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock(continued)
| 3. | Based on a Schedule 13G filed with the SEC on January 23, 2017 by BlackRock, Inc. (“BlackRock”). The Schedule 13G reports that BlackRock has sole voting power with respect to 4,996,037 shares and sole dispositive power with respect to 5,401,140 shares. |
| 4. | Based on a Schedule 13G filed with the SEC on February 10, 2016 by The Vanguard Group (“Vanguard”). The Schedule 13G reports that Vanguard has sole voting power with respect to 45,513 shares, sole dispositive power with respect to 4,187,047 shares and shared dispositive power with respect to 45,613 shares. |
| 5. | Includes 68,657 shares of common stock that Mr. Berube has the right to acquire within 60 days of January 18, 2017 upon the exercise of stock options and 8,372 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit. |
| 6. | Includes 70,150 shares of common stock that Mr. Cordeiro has the right to acquire within 60 days of January 18, 2017 upon the exercise of stock options and 9,836 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit. |
| 7. | Includes 31,735 shares of common stock that Mr. Cross has the right to acquire within 60 days of January 18, 2017 upon the exercise of stock options. |
| 8. | Includes 25,484 shares the receipt of which Mr. Enriquez has deferred under applicable Cabot deferred compensation plans. Mr. Enriquez has shared investment power for 2,100 shares. |
| 9. | Includes 16,823 shares of common stock that Mr. Kalkstein has the right to acquire within 60 days of January 18, 2017 upon the exercise of stock options and 5,927 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit. |
| 10. | Includes 100,169 shares of common stock that Mr. Keohane has the right to acquire within 60 days of January 18, 2017 upon the exercise of stock options and 11,285 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit. |
| 11. | Mr. Kirby has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
| 12. | Includes 16,850 shares held by Mr. MacLeod’s wife, who retains sole voting control over the shares. Mr. MacLeod disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
| 13. | Mr. McGillicuddy has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
| 14. | Includes 589,549 shares of common stock that Mr. Prevost has the right to acquire within 60 days of January 18, 2017 upon the exercise of stock options and 49 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit. |
| 15. | Includes 4,238 shares the receipt of which Dr. Thomas has deferred under applicable Cabot deferred compensation plans. |
| 16. | Includes 65,013 shares of common stock that Mr. von Gottberg has the right to acquire within 60 days of January 18, 2017 upon the exercise of stock options and 15,257 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit. Also includes 1,000 shares held by Mr. von Gottberg’s wife, who retains sole voting control over the shares. Mr. von Gottberg disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
| 17. | Dr. Wolfgruber has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
| 18. | Includes 100 shares held by Dr. Wrighton’s wife, who retains sole voting control over the shares. Dr. Wrighton disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
| 19. | Shares of our common stock shown as being beneficially owned by directors and executive officers as a group includes 50,726 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for the benefit of Cabot’s executive officers. |
CABOT CORPORATION 23
| 2017 PROXY STATEMENT |
The Compensation Committee of the Board of Directors (referred to as the “Compensation Committee” or the “Committee”) has reviewed the Compensation Discussion and Analysis (“CD&A”) section included in this Proxy Statement. The Compensation Committee (referred to as the Compensation Committee or the Committee) has also reviewed and discussed the CD&A with the members of management who are involved in the compensation process.
Based on this reviewthese reviews and discussion,discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated by reference into our Annual Report on Form10-K for the fiscal year ended September 30, 2013.2016.
Henry F. McCance,Sue H. Rataj, Chair
John S. Clarkeson
Ronaldo H. SchmitzMatthias L. Wolfgruber
Mark S. Wrighton
Compensation Discussion and Analysis
To provideAs context for our executives’ 2016 fiscal year compensation, below we provide below highlights ofsummarize Cabot’s performance for our 20132016 fiscal year and provide a brief overview of decisions made with respect to executive compensation in fiscal 20132016 and our executive compensation program.program for this year. We then describe our compensation philosophy and objectives, theour compensation setting process elements ofand other compensation- and governance-related policies, and compensation compensationawarded, earned and paid for fiscal 2013 and other compensation-related policies.2016. For fiscal 2013,2016, our named executive officers (NEOs) are Patrick M. Prevost, our(“NEO”s) and their current positions are:
| • | Nicholas S. Cross, Executive Vice President, and President, Performance Chemicals and Specialty Fluids segments, and President, EMEA region(1); |
| (1) | A portion of Mr. Cross’s compensation is paid in Swiss Francs, which, for purposes of this Proxy Statement, unless otherwise noted, has been translated to U.S. Dollars using the average daily exchange rate during the twelve-month period ended September 30, 2016 of U.S. $1.017932 per Swiss Franc. |
In fiscal 2016, each of Messrs. Keohane, Cordeiro, Cross and Berube also served as members of the Interim Office of the Chief Executive Officer (the “CEO Office”), which was established when Mr. Prevost began a medical leave of absence, as described below. During the term of the CEO Office, Mr. Berube served as our principal executive officer for reporting purposes.
Executive Summary
Our Performance in Fiscal 2016
Fiscal 2016 was a year of change, transition and growth for Fiscal 2013. During fiscal 2013 we strengthened our global leadership position in specialty chemicalsthe Company. We returned to profitability growth and performance materials. Our accomplishments, some of which are highlighted below, reflect our continued efforts to create value for our shareholders.
We delivered $2.91 in adjusted earnings per share (adjusted EPS) and delivered a 5% increase in adjusted
|
We further strengthened our global leadership positions in the industries we serve through our investments in capacity and emerging market expansion. We completed the construction of our new carbon black plant in Xingtai, China, entered into an agreement to acquire the remaining stake in our carbon black joint venture in Mexico (NHUMO), completed our fumed silica expansion in Wales, and opened a new plastics development lab in Shanghai, China.
We maintained our strong focus on innovation to maintain our technological leadership and manufacturing excellence and enhance the performance and differentiation of our product. We launchedaccomplished a number of new products for specialty applications suchkey strategic initiatives. Specifically, we:
We made substantial progress in our commercial excellence initiative, particularly in Reinforcement Materials and Performance Materials, improving the engagement with our customerssafety performance from 2015, reducing total recordable injuries by 20% and our alignment with their long-term strategies.
We continued to perform at world-class levels with respect to safety and environmental performance, and in our legacy Cabot businesses (Reinforcement Materials, Performance Materials and Advanced Technologies) achieved both a record-low total recordable safety incidentinjury rate and a record-low number of environmental non-conformances.
We achieved several critical milestones in the integration of Purification Solutions that positions the business to achieve long-term success, including improving the segment’s capabilities in safety, health and environmental (SH&E) matters, globalizing the organizational structure and asset management, migrating the business to Cabot’s Enterprise Resource Planning platform, and integrating the research and development resources.
We initiated and completed restructuring actions in the Advanced Technologies Segment, focused on the Aerogel and Security businesses, and in the corporate development function. The savings achieved were approximately $10 million. In the year, we also closed our Reinforcement Materials facility in Port Dickson, Malaysia.
24CABOT CORPORATION 21
Executive Compensation(continued)
Despite allIn 2016, we launched a new vision, strategy, financial goals and capital allocation framework, which we refer to as our “Advancing the Core” strategy. We believe this new strategic framework supports the changing needs of these achievements, dueour customers, the global nature of our industry and our ability to soft market conditions affectingadapt and grow our Reinforcement Materials SegmentCompany. The aim of our Advancing the Core strategy is to deliver sustained and attractive total shareholder return (TSR), built on earnings growth and our capital allocation framework.
During fiscal 2016, we accomplished a number of key milestones that are critical for the execution of our Advancing the Core strategy. Specifically, we:
A number of management changes also took place at the Company during fiscal 2013 fell short2016. In December 2015, Mr. Prevost began a medical leave of absence and the Board established the CEO Office, comprised of Messrs. Keohane, Cordeiro, Cross and Berube. Effective March 11, 2016, Mr. Prevost stepped down from his position as President and CEO of the aggressive earnings growth objectives we established forCompany, and the Board elected Mr. Keohane President and CEO of the Company. The compensation decisions made in connection with these events are described below under the heading “Compensation Decisions Relating to Our CEO Transition”. Other decisions made by the Committee in respect of fiscal 2016 compensation are described later in this CD&A.
Compensation Decisions Relating to Our CEO Transition
Mr. Keohane.In connection with his election as President and CEO of the Company on March 11, 2016, and following a review of compensation benchmarking data from our compensation peer group as well as certain surveys, as described below under “Use of Benchmarking Comparison Data”, and taking into account advice provided by Pearl Meyer, the Committee’s independent compensation consultant, Mr. Keohane’s annual base salary was increased to $850,000, effective March 11, 2016. In addition, his target short-term incentive (STI) award was increased from 60% of his annual base salary to 100% of his annual base salary, with his target fiscal 2016 STI award based on a blend of his previous and current annual base salaries. He also was granted an equity award under our long-term incentive (LTI) programs.program with a grant date value of $1 million, consisting of 7,105 performance-based restricted stock units (PSUs) (assuming target level achievement of applicable performance metrics), 6,090 time-based restricted stock units (TSUs) and 26,455 stock options. These awards have the same vesting dates as the LTI awards granted to our executive officers in November 2015, described below under “How Did our LTI Plan Work”.
Messrs. Cordeiro and Berube. In recognition of the increased job responsibilities that Messrs. Cordeiro and Berube assumed during the period of Mr. Prevost’s medical leave of absence and in connection with the transition of CEO responsibilities to Mr. Keohane during the fiscal year, the Compensation Committee believed it was appropriate to provide each executive with additional compensation. As a result, Mr. Cordeiro received an award of 16,425 TSUs and Mr. Berube received an award of 10,000 TSUs, which the Committee believed fairly compensated them for the additional responsibilities they assumed, encouraged their retention, and further aligned their interests with those of our shareholders. The payouts madeTSUs awarded to Mr. Cordeiro will vest in their entirety on March 11, 2018 and the TSUs awarded to Mr. Berube will vest in their entirety on March 11, 2019, in each case subject to their continued employment with Cabot through the applicable vesting date.
Mr. Prevost. Effective March 11, 2016, Mr. Prevost stepped down from his position as President and CEO of the Company. Mr. Prevost’s employment with Cabot terminated effective July 15, 2016, but he remains a member of our Board. Under the terms of his transition and separation agreement with Cabot, upon his termination of employment Mr. Prevost received cash payments totaling $1,412,653, which included a payment of $1,166,000, representing Mr. Prevost’s target STI award for fiscal 2016. Mr. Prevost also received a $116,600 contribution to the Company’s
CABOT CORPORATION 25
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Deferred Compensation Plan in respect of the portion of his separation payments that represented his target STI award for fiscal 2016. In addition to these payments, the Committee accelerated the vesting of Mr. Prevost’s outstanding equity awards, consisting of an aggregate of 77,536 TSUs, 78,163 PSUs (assuming target level of achievement of applicable performance metrics for awards for which the performance period had not been completed) and 210,034 stock options, and extended the exercise period of his stock options to the earlier of (i) October 15, 2019 and (ii) the original expiration date of the stock options. The Company also agreed to pay a portion of Mr. Prevost’s COBRA premiums for up to 18 months following the termination of his employment and reimbursed his legal expenses in the amount of $15,000. When considering the level of separation payments and benefits to be provided to Mr. Prevost, the Committee considered the length and level of his service with the Company, his significant contributions to the Company and the Company’s achievements under his leadership, as well as advice provided by Pearl Meyer.
Highlights of our Fiscal Year 2016 NEO Compensation Decisions and the Impact of Company Performance on Compensation.
We believe fiscal 2016 compensation appropriately aligned pay with our corporate performance, with a significant portion of the total direct compensation paid to our named executive officers (other than Mr. Prevost) based on our performance against pre-established corporate financial goals. The principal financial performance metrics we historically have used under our STI and LTI programs for the fiscal year reflect this performance.
The bar graphs below depict our performance over the last five fiscal years measured byare adjusted EBITDAearnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EPS. These are the principal financial performance metricsearnings per share (EPS) because we use under our STI and LTI plans because
believe they reflectreflected our important near-term and longer-term business and financial goals of improving operating profitability andafter-tax profitability. In addition, our STI metrics have included net working capital (NWC) measured in days, which reflects how efficiently we manage theday-to-day cash used to run our operations. Because our business is capitalasset intensive, we have also includeincluded a return metric, in the terms of our performance-based restricted stock units. In the past, we selected adjusted return on invested capital (adjusted ROIC), but for fiscal 2013 awards we selected adjusted return on net assets (adjusted RONA), whichfor our PSUs. Adjusted RONA measures how effectively and efficiently we believe is a better measureuse our operating assets to generate earnings.
Base Salary.In calendar 2016, none of operational effectivenessthe members of our Management Executive Committee (consisting of our CEO and more closely aligned with our business metrics. Adjusted EPS, adjusted EBITDA, adjusted ROIC and adjusted RONA are non-GAAP financial measures. Reconciliationsthe officers who report directly to the closest GAAP measure and/or an explanation of how we calculate these measures are contained in Appendix A to this proxy statement.
Highlights of our Fiscal Year 2013 NEO Compensation Decisions. We believe fiscal 2013 compensation appropriately aligned pay and performance. ForCEO), including our named executive officers, more than halfreceived a base salary increase during our annual salary review process that took place in November 2015, with the exception of their total direct compensation is performance-based, and not guaranteed. We established aggressive earnings growth objectives for our STI and LTI programs and because our financial results fell shortMr. Kalkstein, who became a member of the Management Executive Committee in April 2016. This decision was made in recognition of our expectationsmixed financial performance in certain respects,fiscal 2015 and our commitment to improving our performance in fiscal 2016. Messrs. Keohane and Kalkstein received base salary increases during the payouts madeyear in connection with their promotions and the associated increased job responsibilities each assumed in the year, as further described in this CD&A. (See pages 37 and 40 for further details).
STI Awards and Payouts. The Company achieved performance between the threshold and target levels of the adjusted EBITDA metrics and above the maximum level of the NWC days metric established by the Committee under our STI and LTI programs for the fiscal year, which are described below, reflect this performance.
Annual Base Salary. Base salary increases from calendar 2012 to 2013 for our named executive officers, other than Mr. Prevost, averaged 3%. At his request, Mr. Prevost did not receiveprogram, resulting in a salary increase in calendar 2013. The increases for the other officers reflected individual job responsibilities, internal equity considerations, competitive market pay practices for the applicable positions, and the individual performancepayout of the executive.
STI Awards. For payments made under the STI program, the portion of the award opportunitythat is based on corporate
our financial performance paid out at 52%of 99.5% of target (with a potential payout range of 0-200% of target), as a result of our lower than expected financial performance for the year. The Company’s adjusted EBITDA achievement for fiscal 2013 was just above the threshold performance goal established by the Committee.awards. The balance of the amounts paid in respect of STI awards made to eachour named executive officerofficers reflected each officer’stheir strong individual performance and leadership, duringwith the year, as well as his contribution to the Company’s successes highlighted above. The total STI award paid forawards ranging from 103% to 110% of the year to our CEO was 75% of his target award opportunity and the STI awards paid to our other named executive officers were, on average, 68% of theirofficer’s target award opportunities.award. (See pages 37-40 for further details).
LTI Awards and Payouts. Our LTI awards consist of a combination of performance-based restricted stock units (PSUs)PSUs (35%), time-based restricted stock units (TSUs),TSUs (30%) and stock options.options (35%) (with percentages measured based on the awards’ grant date values). The grant date value of the awards granted in fiscal 2013 were2016 to each named executive officer was based on an assessment of the named executive officer’s position, role and responsibilities within the Company, the overall competitiveness of his total direct compensation, and internal equity (the relationship of pay among the executive officers in the context of their responsibilities) considerations. In addition, as described herein, Mr. Keohane received a supplemental LTI award in connection with his promotion to the role of President and CEO, Mr. Kalkstein received a supplemental LTI award in connection with his promotion to Senior Vice President and President, Reinforcement Materials segment, and Messrs. Cordeiro and Berube each received supplemental awards of TSUs in recognition of their increased roles as part of the CEO Office and in connection with the transition of CEO responsibilities to Mr. Keohane during the year, and for retention purposes. (See pages 25 and 40 for further details).
2226 CABOT CORPORATION
Executive Compensation(continued)
compensation, and internal equity considerations based primarily on each executive’s job responsibilities, effectiveness and experience.
With respect to outstanding PSUs, the percentage of the target award earned for the fiscal 2013 performance year2016 is set forth below. The percentFor each performance metric, achieving the target level of shares earned reflects
achievementperformance results in a payout of below target for the portions100% of the awardsportion of the award that were earned based on adjusted EPS and our failureis payable with respect to achieve threshold levels of adjusted ROIC or adjusted RONA performance for the fiscal 2013 performance period.that metric.
| Outstanding LTI Award | Performance Metrics and % of Target Earned based on Fiscal 2016 Performance | Total % of Target PSU Award Earned based on Fiscal | ||
Fiscal | Adjusted | |||
Fiscal | Adjusted | |||
Fiscal | Adjusted |
Characteristics of our Executive Compensation Program and Recent Modifications. Below we highlight certain of our
Our executive compensation program includes a number of practices bothintended to align the practices we have implemented to drive performanceinterests of management and the practices we have not implemented because we do not believe they would serve our shareholders’ long-term interests.
What We Doshareholders.
| What We Do | What We Don’t Do | |
✓ Tie performance-based awards to achievement ofpre-established financial ✓ Use our STI awards to recognize individual leadership and |
✓ Cap incentive awards |
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STI and LTI incentive compensation performance targets are tied and heavily weighted to financial metrics that reflect our near- and longer-term business goals.
In addition to financial metrics, STI awards are based on an assessment of individual leadership qualities and contributions toward the achievement of business and strategic goals.
STI and LTI programs provide for different percentage payouts based on the level of performance.
The shares issuable upon vesting of PSUs depends on the degree of achievement of financial performance metrics for each year within a three-year performance cycle.
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CABOT CORPORATION 23
Executive Compensation(continued)
What We Don’t Doan international assignment
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×Permit × |
Changes in Retirement Benefits for U.S.-based Employees. A number of changes in the retirement benefits we provide to our U.S.-based employees, which includes all of our named executive officers, became effective on January 1, 2014. These changes, collectively, will reduce the retirement benefits we provide to those employees by approximately 8% of eligible pay. The changes include the expiration of our leveraged Employee Stock Ownership Plan, which expired by its terms on December 31, 2013, and our freezing of the Cash Balance Plan, a defined benefit pension plan, and our Supplemental Cash Balance Plan, a non-qualified supplemental defined benefit plan.
Consideration of Results of StockholderShareholder Advisory Votes on Executive Compensation and What’s New for 2017 Compensation
At our 20132016 Annual Meeting, we conducted an advisory(non-binding) stockholder shareholder vote on executive compensation, as required by the Dodd-Frank Act. Over 95%96% of the shares voting approved the executive compensation discussed and disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and other related tabular and narrative disclosures contained in the 2013 Proxy Statement.fiscal 2015 proxy statement. In considering the results of this most recent favorable advisory vote on executive compensation, the Compensation Committee takes notenoted that the Company’s current executive compensation program has been effective in implementing the Company’s stated compensation philosophy and objectives. Nevertheless,objectives, and did not make any changes in the program in response to shareholder concerns.
In connection with the adoption of our new Advancing the Core strategy, our management team recommended to the Compensation Committee adjustments to our STI and LTI programs to better reflect this new strategy. As a result, the Compensation Committee changed the principal financial performance metric under the STI program from adjusted EBITDA to adjusted earnings before interest and taxes (EBIT) for fiscal 2017 awards. EBIT is closely correlated to, and a
CABOT CORPORATION 27
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
key factor in, a company’s TSR and also includes depreciation. Accordingly, this financial measure will better tie short-term incentive compensation to the achievement of our earnings growth and capital efficiency goals. In addition, the NWC days metric under our STI program will now include NWC days used in our Purification Solutions and Aerogel businesses, which we have not included in past years. The Committee also reviewed the financial goals under our LTI Program and determined that they were still appropriate in light of the Company’s new strategy. To reinforce the capital allocation goal of returning a substantial portion of discretionary free cash flow to shareholders under our new Advancing the Core strategy, however, beginning with PSU awards made in November 2016, the Committee approved a change in the awards to provide that PSUs that are earned on the basis of our corporate performance will receive dividend equivalent payments prior to their time-based vesting on the same terms as our time-based restricted stock units.
The Compensation Committee recognizes that executive pay practices and notions of sound corporate governance principles continue to evolve. Consequently, theAccordingly, it will continue to monitor executive compensation practices and make adjustments as necessary to ensure that our executive compensation continues to support our corporate goals and objectives and reflects good corporate governance principles.
The Compensation Committee continues to refine our executive
compensation practices in its on-going effort to ensure our executive compensation supports our corporate goals and objectives.
The Compensation Committee intends to continue payingpay close attention to the advice and counsel of its compensation advisors and continues to provide access for our stockholdersshareholders who would like to communicate on executive pay directly towith the Compensation Committee or the Board. Please refer to “Communicating withYou may contact the Board” onBoard of Directors through our website.website at “Company — About Cabot — Governance — Contact the Board of Directors”.
Compensation Philosophy, Objectives and Process
Continuing to position Cabot for future success requires the talent to support our strategy to grow earnings through leadership in specialty chemicalsbusiness and performance materials.Advancing the Core strategy. Our executive compensation program is designed to provide a competitive and internally equitable compensation and benefits package that rewards individual and Company performance, and reflects job complexity and the strategic value of the individual’s position while ensuring long-term retention and motivation. We seek to accomplish these goals in a way that is aligned with the long-term interests of our shareholders.
To achieve these goals, our executive compensation program follows these principles:
Offer a total compensation opportunity and a benefits opportunitypackage that isare competitive in our industry;
Reward executives based on our business performance by closely aligning a meaningful portion of thetheir compensation paid to our executives with the performance of the Company on both a short- and long-term basis;
Set challenging but achievable performance goals that support the Company’s short- and long-term financial goals;
Motivate individual performance by rewarding the specific performance and achievements of individual executives and their demonstrated leadership; and
Align the financial interests of our executives and our stockholdersshareholders through equity grants and share retention guidelines.
Our Compensation Setting Process
The Compensation Committee
As discussed under “The Board of Directors and its Committees — Compensation Committee”, on page 5,6, the Compensation Committee is responsible for all compensation actionsdecisions related to members of the Company’s Management Executive Committee.
Each November, the Compensation Committee which consists of Mr. Prevost(i) determines any adjustments to base salaries, with any adjustment typically effective the following January, (ii) sets corporate performance metrics applicable to our STI and LTI programs for the officers who report directly to him, includingnew fiscal year, (iii) grants LTI awards, and (iv) establishes compensation goals and maximum payment levels under our STI program for the new fiscal year, in each case, for each named executive officers.officer. The Compensationannual compensation process also concludes at the Committee’s complete rolesmeeting in November, when the Committee evaluates the Company’s performance against the performance metrics set for the just-concluded fiscal year and responsibilities are setalso evaluates each executive officer’s performance and, on this basis, determines amounts payable or earned, as applicable, in respect of the fiscal year under our STI and LTI programs.
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Executive Compensation(continued)
A description of the Compensation Committee’s roles and responsibilities is set forth in theits written charter adopted by the Board of Directors, which can be found atwww.cabotcorp.com under “About“Company — About Cabot — Governance.Governance — Resources.”
Role of the Compensation Consultant
The Compensation Committee has retained Pearl Meyer & Partners (“PM&P”) as its independent compensation consultant. PM&PPearl Meyer provides the Committee with advice on a broad range of executive compensation matters. The scope of their services include, but are not limited to,includes the following:
Apprising the Committee of compensation-related trends and developments in the marketplace;
Informing the Committee of regulatory developments relating to executive compensation practices;
Assessing the composition of the peer companies used for comparative purposes;
Assessing the composition of the peer companies used for comparative purposes;
Assessing the executive compensation structure to confirm that no design elements encourage excessive risk taking;
Assessing the relationship between executive compensation actually paid and corporate performance;
andRecommendingIdentifying potential changes to the executive compensation program to maintain market competitiveness and ensure consistency with business strategies, good governance practices and alignment with stockholdershareholder interests.
During fiscal 2013, PM&P2016, Pearl Meyer also advised the Committee on compensation matters related to our CEO transition, potential changes in our executive compensation program to reflect our new strategy, and the terms of our 2017 Long-Term Incentive Plan.
During fiscal 2016, Pearl Meyer attended all regularly scheduled meetings of the Compensation Committee.
The Compensation Committee has assessed the independence of PM&PPearl Meyer pursuant to SEC rules and concluded that no conflict of interest exists that would prevent PM&PPearl Meyer from independently representingadvising the Compensation Committee. The Company did not engage PM&P for any other consulting work in fiscal 2013.
Role of the Chief Executive Officer and Other Officers
Our CEO and our Senior Vice President ofChief Human Resources Officer, working with internal resources as well as PM&P,Pearl Meyer, propose to the Compensation Committee the design of our executive compensation programs and recommend modifications to existing, and/or the adoption of new, plans and programs. In addition, our CEO recommends to the Committee the performance metrics to be used to determine payouts under our STI and LTI programs, and each named executive officer’s individual performance goals (other than the CEO’s) are jointly developed by the executive and the CEO.
Before the Compensation Committee makes compensation decisions, the CEO provides his assessment of each named executive officer’s performance, other than his own, addressing such factors as the officer’s achievement of individual goals, leadership accomplishments, contribution to Cabot’s performance and the achievement of Company goals, areas of strength and areas for development. He then makes specific award recommendations. In preparing compensation recommendations for the Committee, our CEO, and Senior Vice President ofour Chief Human Resources Officer and other internal resourcesmembers of management involved in the process review compensation and survey data compiled by PM&PPearl Meyer for similarly-situated executives at our peer group of companies that is described below and specific external competitive market data provided by PM&P. Mr. PrevostPearl Meyer, as described below. Our CEO attends Compensation Committee meetings but is not present for, and does not participate in, theany discussions concerning his own compensation. All decisions relating to the compensation of our named executive officers are made solely by the Committee and are reported to the full Board of Directors.
Use of Benchmarking Comparison Data
The companies we have included in our compensation peer group consist of companies in the diversified chemicals or specialty chemicals industries with similar products and services and comparablewith revenues and a market capitalization to Cabot.betweenone-third and three times the Company’s revenue and market capitalization. The Compensation Committee reviews executive compensation data for executives with comparable positions at these peer group companies to gauge the reasonableness and competitiveness of its executive compensation decisions. The Compensation Committee believes this allows us to successfully attract and retain experienced executive talent who are critical to our long-term success.
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Executive Compensation(continued)
The Compensation Committee annually reviews the companies included in our compensation peer group and may add or eliminate companies as it determines to be appropriate. For purposes of fiscal 20132016 compensation matters our compensation peer group consisted of the following 15 companies:
• A. Schulman, Inc. | • H.B. Fuller Company | |
• Albemarle Corporation | • PolyOne Corporation | |
• Ashland Inc. | • RPM International Inc. | |
• Celanese Corporation | • Sigma-Aldrich Corp. | |
• Chemtura Corporation | • Valspar Corp. | |
• Cytec Industries Inc. | • Westlake Chemical | |
• Eastman Chemical Company | ||
• W.R. Grace & Co. | ||
• FMC Corporation |
CABOT CORPORATION 25
Executive Compensation(continued)
In preparation for the 20142017 executive compensation review season and the decisions that the Compensation Committee has made and will make with respect to 20142017 compensation, the Compensation Committee reviewed the peer group companies listed above and added Celanese CorporationMinerals Technologies and AshlandStepan Company and removed Cytec Industries, Inc. to situate Cabot’s revenue closer to the median of the peer group. We also removed Ferro Corporationwhich was acquired by Solvay in light of its anticipated acquisitionDecember 2015, and Sigma-Aldrich Corp., which was acquired by A. Schulman.Merck in November 2015.
The Compensation Committee and management also consider compensation survey data. The survey data used is based on information reported in variousthe Towers Watson and Mercer Human Resources ConsultingExecutive Compensation surveys. For positions where compensation peer group and survey data are available, the peer group and survey data isare averaged to also provide a market composite perspective for compensation, other than long-term incentive compensation.compensation for which only compensation peer group data is used.
At least annually the Compensation Committee reviews tally sheets that detail all elements of each named executive officer’s compensation and benefits for the current and prior fiscal years, as well as a projection of their compensation for the upcoming year. These are provided to the Committee as a means to review the total compensation and benefits package for each named executive officer and the impact of any compensation decisions. The Compensation Committee made no changes to our current executive compensation program or any individual named executive officer’s proposed compensation for fiscal 2016 based on the information set forth in the tally sheets.
Factors Considered in Determining Amounts of Compensation
The Compensation Committee considers the following factors in determining oureach named executive officer’s total annual and long-term compensation opportunity:
the officer’s role, level of responsibility, performance, leadership, and experience;
employee retention and internal equity (the relationship of pay among the executive officers in the context of their responsibilities) considerations; and
external competitiveness.
The Compensation Committee has targeted our named executive officer’sofficers’ base salaries and target STI opportunities generally at themid-market of the benchmarking data used by the Committee, as further described under “Use of Benchmarking Comparison Data”, and target LTI award values generally at the 65th percentile of thethis benchmarking data. The actual compensation for each named executive officer may be above or below the officer’s target compensation opportunity and above or below the intended market level depending largely on their experience and time in the position, as well as the degree to which Company and individual performance objectives are achieved.
At least annually the Compensation Committee reviews tally sheets that detail all elements of our named executive officer’s compensation and benefits for the current and immediately prior fiscal years, as well as a projection of compensation for the upcoming year. The tally sheets currently include the officer’s base salary, STI awards, the value of LTI awards at the time they were awarded, any unrealized gain on unvested LTI awards at the end of the fiscal year, dividends or dividend equivalents paid on
unvested time-based restricted stock unit awards, the value of accrued benefits under the Cabot retirement plans, the value of health, disability and life insurance and of financial planning assistance, and amounts payable upon termination of employment, including upon a change in control. The tally sheets are provided to the Committee as a means to review the total compensation and benefits package and the impact of compensation decisions. The Compensation Committee made no changes to the current compensation program or any individual named executive officer’s proposed compensation for fiscal 2013 in light of the information set forth in the tally sheet.
Each November, the Compensation Committee (i) determines any adjustments to base salaries, with any adjustment made to be effective the following January, (ii) sets corporate performance metrics applicable to the STI and LTI programs for the new fiscal year, (iii) grants LTI awards, and (iv) establishes compensation goals and maximum payment levels under the Short-Term Incentive Compensation Plan (the “STI Plan”) for the new fiscal year for each named executive officer. The annual compensation process also concludes at the Committee’s meeting in November, when the Committee evaluates the Company’s performance against criteria set for the just-concluded performance period and also evaluates each executive officer’s performance and on this basis determines amounts payable or earned under the STI or LTI program, as applicable.
Developing Company Performance Metrics
The performance metrics we set support our short- and long-term business plans and strategies. In fiscal 2013,2016, we continued to use three differentused four financial metrics to promote well-rounded Company and management performance. performance, as described below.
For our STI awards, in fiscal 2016, we continued to useused adjusted EBITDA as the principal financial performance metric, as it reflects an important near-term goal of improving our operating profitability. To increase the focus on efficiently managing theday-to-day cash we use to run our operations, we also used a NWC days metric in our STI awards. The NWC metric included NWC used in our Reinforcement Materials, Performance Chemicals and forSpecialty Fluids segments because managing cash
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Executive Compensation(continued)
efficiently has been an important short-term objective of the businesses in these segments. It did not include NWC used in our restricted stock unitPurification Solutions segment or our Aerogel business as this had not been a primary focus of these businesses in recent years.
For our PSU awards, in fiscal 2016, we continued to useused adjusted EPS as the principal financial performance metric because they reflect ourit reflects an important near-term and longer-term business and financial goalsgoal of improving operating profitability and ourafter-tax profitability. Because our business is capital intensive, we believebelieved it iswas also appropriate to include a return metric as one ofunder our financial performance measures. Accordingly, in the past we have used adjusted ROICLTI program and, as a performance metric for our restricted stock units. In fiscal 2013, we changed this return metric to adjustedresult, used Adjusted RONA, which measures how effectively and efficiently we believe is a better measure of operational effectiveness and more closely aligned withuse our business metrics.operating assets to generate earnings.
26 CABOT CORPORATION
Executive Compensation(continued)
In setting our shortshort- and long- termlong-term financial performance targets,metrics, we beginbegan with our annual and long-term business plans and consider other factors, including our past variance to targeted performance, economic and industry conditions and industry sector performance. We set challenging, but realizable, goals, including those that are realizable only as
a result of exceptional performance, for the Company and our executives in order to drive the achievement of our short- and long-term objectives. We recognize that the metrics we use may need to change over timethe metrics we use to reflect new priorities and business circumstances. Accordingly,circumstances and we did so for fiscal 2017, as described above. We expect to continue to reassess the performance metrics and goal setting process annually.
Our Performance-based Compensation Philosophy
What We Pay and Why: Elements of Compensation
We have three elements of total direct compensation: base salary, short-term incentive bonuses, and long-term incentive compensation. As illustrated in the accompanying chart, inIn fiscal 2013, more than 50%2016, 62% of total direct compensation (base salary, target STI award and LTI awards (with PSUs valued at target)) awarded to the named executive officersour CEO was performance-based and not guaranteed. The chartschart below showshows the compensation opportunity provided to our NEOsMr. Keohane for fiscal 2013,2016, as well as the mix between long-short- and short-termlong-term compensation and at-risk and not at-risk compensation.
Base Salary
We pay base salaries to attract talented executives and Our executive compensation program is designed to provide a fixed base levelmore than 50% of cash compensation. Base salaries for the named executive officers are individually determined by the Compensation Committee after consideration of:
thean officer’s role, level of responsibility, performance, leadership, and experience;
employee retention and internal equity (the relationship of pay among the executive officerstotal direct compensation opportunity in the contextform of their responsibilities) considerations;
external competitivenessperformance-based compensation. Because of the officer’s base salarymanagement changes that occurred in fiscal 2016 and overallthe related compensation decisions, as described above, the performance-based portion of the total compensation; and
individual performance.
There have generally been three situations that may warrant an adjustmentdirect compensation paid to base salary: annual merit increases; promotions or changes in role; and market adjustments. The Committee considers base salary merit increases for our executive officers, including the named executive officers, annually, based on the factors discussed above. The
Committee’s review of these factors is subjective and no fixed value or weight is assigned to any specific factor when making salary decisions.
Base Salary Adjustments for 2013
Each of our named executive officers, other than Mr. Prevost, received a merit increase in January 2013. At his request, the Committee did not provide Mr. Prevost with a merit increase in January 2013. The Committee believed the merit increases for each of the other named executive officers were appropriate based on their responsibility, internal equity considerations,(other than Mr. Keohane and their individual performance. The salary increases also reflected market adjustments. As noted above, the Committee has a strategy of targeting salaries, over time, at the 50th percentile of the benchmarking data. Our base salaries,Mr. Prevost), on average, have been below this level and the increases were made, in part, to recognize successful performance during fiscal 2012 and the gap between the market data and the individual’s base salary. Base salary increases from January 2012 to January 2013 for our named executive
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Executive Compensation(continued)
officers, other than Mr. Prevost, averaged 3%. Mr. Prevost’s base salary level beginning January 2013 was at the 40th percentile of the market composite data and the base salary levels ofHow Did our other named executive officers beginning January 2013, on average, were at the 40thpercentile of the market composite data.
Short-Term Incentive Compensation2016 STI Program Work
We provide annual STI awards to drive the achievement of key business results and to recognize individuals based on their contributions to those results. Our STI Plan includes a maximum amount for awards that can be paid to our CEOresults and the other named executive officers. For fiscal 2013, the Committee determined the amount of the annual incentive awards that would be paid to the named executive officers, which was less than the plan maximum, based on the achievement of pre-established corporate and individual goals, as described below.
Cabot’s overall performance. Each named executive officer has an annual target incentive opportunity under theour STI Plan,program, which is expressed as a percentage of his base salary (100% for Mr. Prevost and 60% for the other named executive officers).salary. The actual short-term cash incentive paid canamounts in respect of STI awards range from 0% to 200% of the target award opportunity, with 70% of an executive officer’seach award based on the degree to which achievement ofpre-established corporate performancefinancial goals are achieved and the remaining 30% of each award based on his individual performance and achievements.
We continued to use adjusted EBITDA, which measures our operating profitability, and thus, reflects an important near-term business goal,used two financial metrics to measure corporate performance for determining payouts under our STI program for fiscal 2013. Threshold,2016: adjusted EBITDA, which had an 80% weighting, and NWC measured in days, which had a 20% weighting. The Committee established a threshold, target, stretch and maximum goalslevel for adjusted EBITDA were established by the Committee at the beginning of the fiscal year. The percent of the corporate bonus oppor-
tunity that is payable on the basis of our corporate performance is as follows:
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Theeach financial metric, with payout onfor performance between the nearest reference points is interpolatedtwo levels determined on a straight linestraight-line basis. Even ifIf the threshold adjusted EBITDA goal iswas not achieved, no payouts in respect of corporate performance under our STI program would be made. Even if the threshold levels of performance
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Executive Compensation(continued)
are achieved, the Committee nonetheless retainsretained the discretion to decrease the amount of the awards based on our level of achievement of other corporate goals in the areas of safety, and environmental performance, customers, innovation and with respect to customers and innovation.people.
At the beginning of theeach fiscal year, the Compensation Committee,non-Executive Chairman, with input from the other independent directors, establishesdevelops the personal objectives for our CEO, and eachwhich are then approved by the Committee. Each of the other executive officers develops with the CEO his personal objectives for the year. In assessing each executive’sexecutive officer’s individual performance, the Committee considers the officer’s personal achievements, including his achievements against his established personal objectives, as well as his individual contributions to the management team, his leadership and his management of his business, region or function. The Committee does not assign specific numerical weightings or ratings to the individual goals and the performance of each officer is evaluated as a whole. Furthermore, there are no formal threshold levels of achievement applicable to the individual performance component of theour STI program. Ultimately, the determination of the payout of the portion of the total bonus paid forSTI awards based on individual performance is based on the judgment of the CEO (with respect to his direct reports) and the Committee after reviewing all relevant factors, with the final determination made by the Committee.
28 CABOT CORPORATION
Executive Compensation(continued)
STI Awards for Fiscal 2013
TheWe believe that the fiscal 20132016 STI payout properly aligned annual executive pay with the Company’s fiscal 20132016 financial performance, consistent with the plan’s role in our overall compensation mix. Even though we delivered a 5% increase inThe adjusted EBITDA as compared with 2012, our performance fell short of our aggressive earnings growth objectives that underpinned our performance goals, and our plan payout reflects this. The adjusted EBITDANWC days targets for the fiscal 20132016 STI awards and our actual adjusted EBITDAfiscal 2016 performance were as follows:
Fiscal 2013 Short-Term Incentive Plan Company2016 STI Program Targets and Results
Threshold (50% | Target Level (100% | Stretch Level (150% | Maximum (200% | Fiscal 2016 Results | Percent Payout | |||||||||||||||||||
Adjusted EBITDA (80%) | $ | 450 million | $ | 530 million | $ | 558 million | $ | 615 million | $ | 489 million | 74.4 | % | ||||||||||||
NWC Days¹ (20%) | 84 | 79 | 76 | 73 | 70 | 200.0 | % | |||||||||||||||||
Weighted average payout | 99.5 | % | ||||||||||||||||||||||
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The corporate performance payoutbalance of 52%the amounts paid in respect of target, reflecting adjusted EBITDA of $529 million for the 2013 fiscal year, compares to a 128% payout on the basis of our corporate performance for the STI awards made for fiscal 2012. Overall, the STI bonuses paid to our named executive officers for fiscal 2013 were, on average, 69% ofreflected their target awards, largely as a result of ourstrong individual performance against our adjusted EBITDA goals. This represents, on average, an approximate 48% year-over-year reduction inand leadership, with the percent payout for our named executive officers.
The followingtotal STI awards were maderanging from 103% to 110% of the named executive officers for fiscal 2013:officer’s target award.
| Name | Fiscal 2013 Target STI Value | Fiscal 2013 STI Award | ||||||
Patrick M. Prevost | $ | 990,000 | $ | 746,000 | ||||
Eduardo E. Cordeiro | $ | 288,000 | $ | 218,000 | ||||
David A. Miller | $ | 237,000 | $ | 143,000 | ||||
Brian A. Berube | $ | 222,000 | $ | 144,000 | ||||
Sean D. Keohane | $ | 228,000 | $ | 158,000 | ||||
These awards also reflect each officer’s contribution to the Company’s overall financial performance and excellent execution on our strategic goals, which have improved our commercial and operational capabilities. The individual accomplishments of each of our named executive officers are highlighted below.
Patrick M. Prevost, President and Chief Executive Officer:
We further strengthened our global leadership positions in the industries we serve through our investments in capacity and emerging market expansion that we believe will enhance our long-term competitiveness. We also achieved record financial performance in our Advanced Technologies Segment.
Under Mr. Prevost’s leadership, we continued to improve the application of our value pricing strategies and to implement our commercial excellence platform.
We accelerated our new product development activities in all of our segments. We launched a number of new products for specialty applications such as silicone elastomers, toners, adhesives, and conductive compounds, commercialized new materials to the market through our carbon and graphene-based additives for batteries, continued to improve our energy efficiency and process technology across our manufacturing footprint, and made significant progress in important new product research and development activities.
We initiated and completed restructuring actions in our Advanced Technologies Segment, focused on the Aerogel and Security businesses, and in our corporate development function. The savings achieved were approximately $10 million. In the year, we also closed our Reinforcement Materials facility in Port Dickson, Malaysia.
Mr. Prevost oversaw our achievement of several critical milestones in the integration of Purification Solutions that prepares the business to achieve long-term success, including improving the segment’s SH&E capabilities, globalizing the organizational structure and asset management, migrating the business to Cabot’s ERP platform, and integrating the research and development resources. He also successfully reorganized the leadership structure of this business.
We successfully undertook and completed a new modern branding concept.
Mr. Prevost successfully directed activity to ensure that our balance sheet continues to be strong and consistent with our longer term financial requirements.
We achieved record safety and environmental performance in our legacy businesses (Reinforcement Materials, Performance Materials and Advanced Technologies).
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Executive Compensation(continued)
Eduardo E. Cordeiro, EVP and Chief Financial Officer:
With Mr. Cordeiro’s disciplined financial focus, we maintained a strong cash flow and balance sheet, we delivered approximately $150 millionHow Did our LTI Program Work in cash from a net working capital reduction initiative, we undertook in the second half of the year, and implemented a commercial paper program as an alternative short-term funding source to traditional bank lending, significantly reducing our borrowing costs.
Mr. Cordeiro continued to provide strong guidance to our corporate strategy and business development efforts, including with respect to our NHUMO transaction, and oversaw the integration of Purification Solutions.
Under Mr. Cordeiro’s direction, the Information Technology organization completed a number of important IT projects, including implementing a new management reporting system and migrating Purification Solutions to Cabot’s ERP system. In addition, Mr. Cordeiro oversaw the implementation of our new corporate brand.
David A. Miller, EVP and President, Reinforcement Materials Segment and Americas Region:
Under Mr. Miller’s direction, we further increased our global carbon black manufacturing capacity, increasing the Company’s competitiveness. Specifically, we completed the construction of our third carbon black plant in China, and entered into an agreement to acquire NHUMO.
Under Mr. Miller’s leadership, Reinforcement Materials continued to implement energy recovery and process technology improvements at several of our carbon black plants that improve operating performance and energy efficiency, reduce manufacturing costs, and enable improvements in environmental performance.
Under Mr. Miller’s direction, we raised our leadership in sustainability by becoming the first carbon black manufacturer to settle with the U.S. Environmental Protection Agency in connection with USEPA’s initiative focused on the carbon black industry, and under this settlement will be installing advanced technology controls and continuous emission monitoring systems at our carbon black facilities in the U.S., demonstrating our commitment to remaining a reliable, long-term partner for our customers.
Brian A. Berube, SVP and General Counsel:
Mr. Berube is a trusted advisor to the Board and members of the Management Executive Committee. He continued to provide strong support to our Board on
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Mr. Berube continued to provide strong legal guidance and support to our M&A and other strategic activities, including in respect of our acquisition of NHUMO.
Under Mr. Berube’s leadership, the Law Department provided strong legal support to our businesses, particularly in the negotiation of important commercial arrangements and in the settlement with USEPA.
Sean D. Keohane, SVP and President, Performance Materials Segment:
Under Mr. Keohane’s leadership, the Performance Materials Segment launched a number of new, differentiated products for specialty applications such as silicone elastomers, toners, adhesives, and conductive compounds that enhance the performance of our customers’ products. We also commercialized new materials to the market through our carbon and graphene-based additives for batteries.
Mr. Keohane continued to play an instrumental role in the development and implementation of the Company’s commercial excellence initiatives. These initiatives, which in the Performance Materials Segment included value pricing actions, joint development with customers and marketing actions to better improve our understanding of our customers’ needs, will improve operating results and are critical to the Company’s long-term competitiveness.
Under Mr. Keohane’s direction, we expanded our fumed silica manufacturing capacity in Wales, allowing us to further extend our long-term partnership with Dow Corning. Our FMO business reported record financial results in fiscal 2013, including a 14% volume improvement over fiscal 2012 and strong business performance from the successful commercialization of our new capacity in China that came on line in late 2012.
Long-Term Incentive CompensationFiscal 2016?
We provide our named executive officers with long-term incentiveLTI awards to promote retention, to incentincentivize sustainable growth and long-term value creation, and to further align the interests of our executives with those of our shareholders by tying the executive’sexecutives’ realized compensation towith stock price changes during the performance and
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Executive Compensation(continued)
vesting periods. The awardgrant date value for equityof LTI awards granted to each named executive officer for a given year is based on an assessment of the individual’s position, role and responsibilities within the Company, the overall competitiveness of his total direct compensation, and internal equity considerations based primarily on each executive’s job responsibilities, effectiveness and experience.considerations. The Committee also considers current competitive market informationcompensation peer group data for a general understanding of competitive equity compensation practices andas well as the impact of the grants on equity incentive plan share usage, share dilution, the Company’s compensation expense and employee retention concerns.
When making LTI awards, the Compensation Committee first determines the total grant date value of the award, and then delivers that value in three components: performance-based restrictedPSUs representing 35%, stock unitsoptions representing 35%, and TSUs representing 30%, respectively, of the total grant date value of the award, stock options representing 35% of the value of the award, and time-based restricted stock units representing 30% of the value of the award. Performance-based restricted stock units
PSUs reward performance and the execution of our goal to deliver year-over-year and long-term growth in earnings and to increase the operating profit we generate relative to the capital we invest in our businesses. Stock options are performance-based because no value is created unless the value of our common stock appreciates after grant and they encourage employee retention through the use of a time-based vesting schedule. Time-based restricted stock unitsTSUs encourage employee retention by providing some level of value to executives who remain employed for three years. RestrictedPSUs, stock unitsoptions and TSUs also support an ownership culture and thereby encourage our executives to take actions that are best for Cabot’s long-term success. The multi-year vesting conditions applicable to all of these awards also encourage employee retention. Importantly, although each of these equity awards provides a competitive economic value on the date of grant, their ultimate value to an executive will depend upon the degree to which we achieve objectively measurable performance metrics andand/or the market value of our common stock after the end of the relevant vesting period. That value will be largely dependent upon our performance, our stock price appreciation and market dynamics. The principal terms
PSUs
Each award of these awards are described below.
Performance-based restricted stock units
The units issued in our performance-based restricted stock unit awards arePSUs is allocated evenly into three tranches, with each tranche having aone-year performance periods withinperiod and the three yearentire award having a three-year vesting periodperiod. When the award vests at the end of the award. When the awards vest,applicable three-year period, the number of shares
of stock issuable, if any, will depend on the degree of achievement of corporate performance metrics for each year within the three-year vestingperformance period. Based on the degree to which we achieve the performance metrics, an executive may earn between 0% andto 200% (0% to 150% for awards granted before November 2015), of the number of stock units allocated to each annual portiontranche of his award.
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Executive Compensation(continued)
Threshold, target, stretch and maximum goals wereare established for thesethe corporate performance metrics at or before the time of grant for each year in the three-year performance cycle, and will beare used to calculate the number of shares that will be issuable for a particular year when the award vests in accordance with the following payout curve.
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vests. The payout on performance between the nearest reference pointstwo performance levels is interpolated on a straight-line basis. In valuing performance-based restricted stock unitsPSUs for purposes of determining the amount to be granted in any given year, the Committee assumes that the Company will achieve target performance against the financial goals.performance.
The two financial metrics we have used to measure corporate performance since we began granting performance-based restricted stock units have beenare adjusted EPS, with a 65%an 80% weighting, and adjusted ROIC,RONA, with a 35%20% weighting. InDividend equivalents are not paid on PSUs granted in fiscal 2013 we changed the return metric to adjusted RONA, which we believe is a better measure of operational effectiveness and is more closely aligned with our business metrics. At the same time, we changed the weightings of the metrics, increasing the weighting of adjusted EPS to 80% and weighing adjusted RONA 20%.2016.
Stock options
Stock options are granted with an exercise price equal to 100% of the closing price of Cabot’s common stock on the date of grant. They generally vest over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant) and have aten-year term.
Time-based restricted stock unitsTSUs
Time-based stock unitsTSUs generally vest in their entirety at the end of three years. When the TSUs vest, they are converted to shares of Cabot common stock. During the restrictedvesting period, participants receive dividend equivalents are paid in cash on each restricted
CABOT CORPORATION 31
Executive Compensation(continued)
stock unit when and if dividends are declared and paid on the Company’s outstanding shares of common stock. The objective of providing such dividend equivalent payments is to help focus our executives on, and to reward them for, managing the business so as to produce cash that is capable of being distributed to shareholders in the form of a dividend. Dividend equivalents also mirror the income generation associated with stock ownership. When the stock units vest, they are converted to shares of Cabot common stock.
34 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
LTI Awards for Fiscal 2013PSUs Realized under PSU Award that Vested in 2016
The aggregate valuescharts below show the overall percentage of the LTI awards made for fiscal 2013 are set forth in the table below.
| Name | Fiscal 2013 LTI Award Value | |||
Patrick M. Prevost | $ | 3,800,000 | ||
Eduardo E. Cordeiro | $ | 1,000,000 | ||
David A. Miller | $ | 800,000 | ||
Brian A. Berube | $ | 700,000 | ||
Sean D. Keohane | $ | 750,000 | ||
The number of time-based restricted stock units, stock options, and performance-based restricted stock units issued to reflectearned under PSU awards granted in November 2013 that vested in November 2016. The performance periods of these awards were our 2014, 2015 and 2016 fiscal years. Overall, the foregoing award values are included in the compensation tables that follow this discussion. The
valuesnumber of stock units earned under these awards was 41.5% of the performance-based restricted stock units reflected in the table above assume performance at the target level.awards.
Performance-Based Restricted Stock UnitsPSUs Earned on Outstanding Awards on the Basis of Fiscal 20132016 Performance
The Committee believes that the number of sharesstock units earned under our performance-based restricted stock unitsoutstanding PSUs on the basis of our fiscal 20132016 performance properly aligned executive pay with that performance, consistent with the role of these awards in our overall compensation mix. In each year,mix, with the threshold level for each performance measure was set based on a levelpercentage of performance that was believedstock units earned under outstanding PSU awards ranging from 17.6% to be achievable. The target level for each performance measure was set based on a level of performance that was believed to be aggressive, but obtainable. The maximum level for each performance measure was set based on a level of performance that was believed to be realizable, but only as a result of exceptional performance.
Our adjusted EPS performance for fiscal 2013 fell short124.5% of the aggressive earnings growth objectives that underpinned our LTI program, and our adjusted ROIC performance has been negatively affected by the additional debt we issued to fund our acquisition of the Norit activated carbon business. Our plan payouts reflect these facts.target award.
32 CABOT CORPORATION 35
Executive Compensation(continued)
The following tables show the financial goalsperformance metrics and theirthe relative weighting of each metric that the Committee set for the fiscal 20132016 performance period of thePSUs granted in fiscal 2011, 2012,2014, 2015 and 2013 awards,2016, our degree of attainment of these goalsmetrics and the percentpercentage of the awards earned.earned, measured against the target award. As the performance targetsmetrics for the fiscal 20132016 performance period of these awards were established at a different period,times, they each reflect the long-term goals in place when the awards were granted.
Company Targets and Results for Performance Year Three3 of Performance-Based Restricted Stock Unitsthe PSUs granted forin Fiscal 2011 (2011-2013)2014 (Performance Period 2014-2016) that Vested in November 2016
| Threshold Level | Target Level | Maximum Level | Fiscal 2013 Results | Percent Earned | ||||||||||||||||
Adjusted EPS (65%) | $ | 2.45 | $ | 3.35 | $ | 4.25 | $ | 2.91 | 76 | % | ||||||||||
Adjusted ROIC (35%) | 11 | % | 13 | % | 16 | % | 7.5 | % | 0 | % | ||||||||||
Composite | 49 | % | ||||||||||||||||||
| Threshold Level (50% payout) | Target Level (100% payout) | Maximum Level (150% payout) | Fiscal 2016 Results | Percent Earned | ||||||||||||||
Adjusted EPS (80%) | $ | 3.50 | $ | 4.50 | $ | 6.00 | $ | 3.14 | 0.0% | |||||||||
Adjusted RONA (20%) | 9.5 | % | 12.0 | % | 15.5 | % | 11.4 | % | 88.0% | |||||||||
Composite | 17.6% | |||||||||||||||||
Company Targets and Results for Performance Year Two2 of Performance-Based Restricted Stock Unitsthe PSUs granted forin Fiscal 2012(2012-2014)2015 (Performance Period 2015-2017) that Vest in November 2017
| Threshold Level | Target Level | Maximum Level | Fiscal 2013 Results | Percent Earned | ||||||||||||||||
Adjusted EPS (65%) | $ | 2.85 | $ | 3.85 | $ | 4.85 | $ | 2.91 | 53 | % | ||||||||||
Adjusted ROIC (35%) | 10 | % | 14 | % | 18 | % | 7.5 | % | 0 | % | ||||||||||
Composite | 34 | % | ||||||||||||||||||
| Threshold Level (50% payout) | Target Level (100% payout) | Maximum payout) | Fiscal 2016 Results | Percent Earned | ||||||||||||||
Adjusted EPS (80%) | $ | 3.00 | $4.00 | $ | 5.50 | $ | 3.14 | 57.0% | ||||||||||
Adjusted RONA (20%) | 8.5 | % | 10.75 | % | 14.0 | % | 11.4 | % | 110.0% | |||||||||
Composite | 67.6% | |||||||||||||||||
Company Targets and Results for Performance Year One1 of Performance-Based Restricted Stock Unitsthe PSUs granted forin Fiscal 2013(2013-2015)2016 (Performance Period 2016-2018) that Vest in November 2018
| Threshold Level | Target Level | Maximum Level | Fiscal 2013 Results | Percent Earned | ||||||||||||||||
Adjusted EPS (80%) | $ | 3.00 | $ | 3.90 | $ | 4.80 | $ | 2.91 | 0 | % | ||||||||||
Adjusted RONA (20%) | 10 | % | 12 | % | 15 | % | 9.3 | % | 0 | % | ||||||||||
Composite | 0 | % | ||||||||||||||||||
Risk Assessment
We believe our approach of setting goals based on multiple performance criteria, setting of targets with payouts at multiple levels of performance, capping payments under our STI program and for our performance-based restricted stock units, evaluating performance results and having discretion to reduce the amount of an STI award assist in mitigating excessive risk-taking that could harm our value or reward poor judgment by our executives. Several features of our programs reflect sound risk management practices. We believe we have allocated our compensation among base salary and short- and long-term compensation target opportunities in such a way as to not encourage excessive risk-taking. Further, we use different financial
metrics to determine award amounts under our STI and LTI programs. Although the corporate performance metrics that determine payouts under these programs for certain business segment leaders are based in part on the achievement of business segment metrics, the metrics that determine payouts for our named executive officers are Company-wide metrics only. This is based on our belief that applying Company-wide metrics encourages decision-making that is in the best long-term interests of Cabot and our shareholders as a whole. Our Compensation Committee reviews and approves the design, goals and payouts under our STI and LTI plans and approves each named executive officer’s compensation. In addition, the Committee retains discretion to reduce STI awards in appropriate
| Threshold Level (50% payout) | Target Level (100% payout) | Stretch Level (150% payout) | Maximum Level (200% payout) | Fiscal 2016 Results | Percent Earned | |||||||||||||||||
Adjusted EPS (80%) | $ | 2.70 | $ | 3.00 | $ | 3.40 | $ | 4.50 | $ | 3.14 | 117.5% | |||||||||||
Adjusted RONA (20%) | 8.0 | % | 9.5 | % | 11.25 | % | 14.0 | % | 11.4 | % | 152.7% | |||||||||||
Composite | 124.5% | |||||||||||||||||||||
36CABOT CORPORATION 33
Executive Compensation(continued)
Fiscal 2016 Compensation Decisions
The compensation decisions the Committee made in the ordinary course for 2016 are described below. Earlier in the CD&A, we described compensation decisions the Committee made in connection with our executive transitions and management changes in fiscal 2016.
In considering each executive’s individual performance in fiscal 2016 and determining his STI award payout for fiscal 2016 and making the other compensation decisions discussed herein, the Committee specifically considered the following:
Sean D. Keohane, President and CEO (since March 2016), previously EVP and President, Reinforcement Materials segment.
Fiscal 2016 Performance Summary
The Committee believes that Mr. Keohane performed extremely well in 2016 and that his transition to the role of President and CEO was effective and seamless. The Committee also specifically recognized:
In addition, in connection with his previous role of President of the Reinforcement Materials segment, the Committee recognized Mr. Keohane’s role in:
Compensation Decisions for Fiscal 2016
| • | Base Salary — Mr. Keohane’s annual base salary remained at $470,000 for calendar 2016 consistent with the decision to not increase base salaries for the Management Executive Committee. Mr. Keohane’s base salary was later increased to $850,000 in connection with his election as President and CEO of the Company as described above under “Compensation Decisions Relating to Our CEO Transition”. |
| • | LTI Award —In November 2015, Mr. Keohane was granted LTI awards with a grant date value of $800,000, consisting of 7,081 PSUs (assuming target level achievement of applicable performance metrics), 6,069 TSUs and 25,617 stock options. He also received an additional 7,105 PSUs (assuming target level achievement of applicable performance metrics), 6,090 TSUs and 26,455 stock options in connection with his election as President and CEO as further are described above under the heading “Compensation Decisions relating to CEO Transition”. |
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| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Eduardo E. Cordeiro, EVP and Chief Financial Officer, and President, Americas and EMEA regions.Mr. Cordeiro’s responsibilities as President of the EMEA region were assumed by Mr. Cross effective January 1, 2017, when Mr. Cross relocated back to Switzerland.
Fiscal 2016 Performance Summary
Among Mr. Cordeiro’s key achievements that the Committee considered were the following:
| �� | his commitment to disciplined financial policies and maintenance of a strong balance sheet to support our overall strategy, which included refinancing $300 million in debt; |
Compensation Decisions for Fiscal 2016
| • | LTI Award — Mr. Cordeiro was granted LTI awards with a grant date value of $1,000,000, consisting of 8,851 PSUs (assuming target level achievement of applicable performance metrics), 7,587 TSUs and 32,021 stock options. He also received an additional 16,425 TSUs as described above under the heading “Compensation Decisions Relating to CEO Transition”. |
Nicholas S. Cross, EVP and President, Performance Chemicals and Specialty Fluids segments.Effective January 1, 2017, Mr. Cross assumed responsibility as President of the EMEA region.
Fiscal 2016 Performance Summary
Among Mr. Cross’s key achievements that the Committee considered were the following:
38 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Compensation Decisions for Fiscal 2016
Brian A. Berube, SVP and General Counsel and, since July 2016, Interim Chief Human Resources Officer.
Fiscal 2016 Performance Summary
Among Mr. Berube’s key achievements that the Committee considered were the following:
Compensation Decisions for Fiscal 2016
| • | LTI Award— Mr. Berube was granted an LTI award with a grant date value of $700,000 in fiscal 2016, consisting of 6,196 PSUs (assuming target level achievement of applicable performance metrics), 5,311 TSUs and 22,415 stock options. He also received an additional 10,000 TSUs as described above under the heading “Compensation Decisions relating to CEO Transition”. |
Hobart C. Kalkstein, SVP and President, Reinforcement Materials segment (since April 2016), previously VP, Corporate Development and Strategy, and VP, Global Business Operations, Purification Solutions segment.
Fiscal 2016 Performance Summary
Among Mr. Kalkstein’s key achievements that the Committee considered were the following:
CABOT CORPORATION 39
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
circumstances. The mixhis role in product development activities using our elastomer composites manufacturing process;
Compensation Decisions for Fiscal 2016
Friedrich von Gottberg, SVP and President, Purification Solutions segment.
Fiscal 2016 Performance Summary
Among Mr. von Gottberg’s key achievements that the Committee considered were the following:
Compensation Decisions for Fiscal 2016
Patrick M. Prevost, former President and CEO.Mr. Prevost’s annual base salary remained at $1,060,000 for calendar 2016, consistent with the decision to not increase base salaries for the Management Executive Committee. His target STI award for fiscal 2016 was $1,166,000 and his fiscal 2016 LTI award had a grant date value of $3,800,000, and consisted of 33,636 PSUs (assuming target level of achievement of applicable performance metrics), 28,831 TSUs and 121,683 stock options. A description of Mr. Prevost’s arrangements in connection with his termination of employment are described above under our annual STI program and our performance-based restricted stock units and impose multi-year vesting on our equity awards. “Compensation Decisions Relating to Our CEO Transition”.
Risk Assessment
We monitor the risks associated with our executive compensation programs and policies on anon-going basis. In May 2013,2016, management presented the Committee with the results of a study it conducted of our compensation programs to assess the potential risks arising from our compensation policies and practices. TheWe believe the following policies and
40 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
practices reflect sound risk management practices and mitigate excessive risk-taking that could harm our value or reward poor judgment by our executives:
Based on these mitigating factors, the Committee agreed with the study’s findings that theseour compensation programs and policies do not encourage inappropriate or unacceptable risk to the Company, and that any risks wereare within our ability to effectively monitor and manage and that these risks are not reasonably likely to have a material adverse effect on the Company.
Share Ownership Guidelines
To further align the interests of our executives and our stockholders,shareholders, in November 2008 we adopted share ownership guidelines for members of our managementManagement Executive Committee. Under our guidelines, we expect our CEO to own equity in the Company ofin an amount equal to five times base salary, and each other officer who reports directly to the CEO to own equity ofin an amount equal to three times base salary. Officers who were members of the Executive Committee at the time these guidelines were adopted were expected to achieve these ownership levels by November 2013,Each executive has five years after their adoption. All of those officers have achieved these levels. New members offrom the Executive Committee are expecteddate he or she becomes subject to achieve thesethe share ownership levels within a five-year period.guidelines to meet his or her target. The Compensation Committee reviews compliance with these guidelines on an annual basis.annually. At the time of this filing, all of the members of the Management Executive Committee who have been subject to these guidelines for five years or longer had satisfied such share ownership guidelines.
Recoupment of Compensation
The Company adopted a recoupment (clawback) policy in 2012. The policy applies to performance-based compensation, such as our STI and LTI compensation, paid to participants in our LTI program (which includes our named executive officers), and covers awards made for fiscal 2013 and thereafter. Under the policy, if the Company is required to restate its financial statements due to materialnon-compliance with financial reporting requirements under the securities laws, and the amount of performance-based compensation awarded or paid would have been lower had the achievement of applicable financial performance been calculated based on the restated financial results, the amount of the excess compensation awarded or paid during the three-year period preceding the date on which the Company is required to prepare the
restatement is subject to recoupment, in the discretion of the Compensation Committee. In addition, if a participant knowingly engages in misconduct that is a material factor in the Company’s obligation to restate its financial statements, the Company will have the right to seek recoupment of the proceeds from the sale of shares issued upon the exercise of stock options or upon the vesting of restricted stock units occurring during the twelve-month period following the filing with the SEC of the financial statements required to be restated, in an amount deemed appropriate by the Compensation Committee under the circumstances.
Other Information
Retirement and Other Benefit Programs
TheExcept as described below, our named executive officers participate in the full range of benefitsbenefit programs and are covered by the same retirement plans and on the same terms as are generally provided to allour full-time U.S. salaried employees (with certain exceptions for employees covered by collective bargaining agreements and, prior to January 2014, for most of the employees who work in the Purifications Solutions Segment, who until that time continued to have retirement benefits that were provided to them prior to our acquisition of Norit). In addition, our named executive officers and certain other eligible employees, are eligible to participate in and/or receive benefits under aour Deferred Compensation Plan aand our Death Benefit Protection Plan, and aparticipate in our Senior Management Severance Protection Plan. As a result of the termination of his employment with the Company, Mr. Prevost no longer participates in these benefit programs, although he is entitled to receive payment of compensation he deferred under our Deferred Compensation Plan and his accrued benefits under our retirement plans. Mr. Cross is a participant in our Senior Management Severance Protection Plan, but as a Swiss-based employee, does not participate in these retirement and benefit programs. These plans are described in the footnotes and text that accompany the compensation tables that follow this CD&A.
CABOT CORPORATION 41
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Mr. Cross participates in the same pension plan that is provided to full-time Cabot employees in Switzerland and in the insurance and other benefit programs provided to other employees under our international assignment program. These benefits or their costs to Cabot are described in the footnotes and text that accompany the compensation tables that follow this Compensation Discussion and Analysis.
Health and Welfare Plans
The health and welfare plans offered to our named executive officers are the same as those offered to all other employees working in the same country. While on international assignment, Mr. Cross is also covered by the health and welfare plans and life and disability benefits offered to our employees on an international assignment.
Perquisites
We provide our named executive officers a modest level of perquisites, consisting principally of financial planning services and an executive physical examination. We provide these benefits to help our executives maintain their health and manage their finances, in both caseseach case so that they are able to focus their attention on Cabot’s business. Mr. Cross receives certain benefits as a result of his international assignment consistent with Cabot’s International Assignment Policy, as described below.
Employment Arrangements
Our named executive officers, other than Mr. Cross, each serve without an employment agreement and their compensation is set by the Compensation Committee as described above.
Mr. Cross entered into a standard form of employment agreement with Cabot Switzerland when his employment with the Company was transferred to that entity. That agreement was amended in May 2015 to set forth the compensation and relocation benefits related to his international assignment. Consistent with Cabot’s International Assignment Policy, while he was on an international assignment, the Company provided Mr. Cross with, or paid the cost of: furnished housing, including utilities; cost of living adjustments (positive or negative); a taxable annual car allowance of $15,000; one home leave per year; and a payment in the amount of $25,000 annually for the cost of travel necessitated by his assignment. Mr. Cross is also covered by the tax equalization provisions of Cabot’s International Assignment Policy under which Mr. Cross’s tax obligations are equal to the taxes he would have paid had he remained resident in Switzerland and the Company pays all other United States and Swiss taxes associated with the income Mr. Cross earns while on assignment. Mr. Cross relocated back to Switzerland effective January 1, 2017.
34 CABOT CORPORATION
Executive Compensation(continued)
Practices Regarding the Grant of Equity Awards
Annual equity grants are made at the Compensation Committee’s regularly scheduled meeting in November to align the timing of grants with our fiscal year, most importantly for the performance-based restricted stock units,PSUs, which are measuredearned based on a fiscal year basis.performance period. The November meeting usually occurs two weeks following our release of earnings for our fourth fiscal quarter. The Compensation Committee determines the exercise price of stock options, which is the closing price of Cabot stock on the NYSE on the date the options are granted. From time to time, the Committee makes equity awards outside of the annual grant program are made for recruiting or retention purposes.purposes or in connection with promotions or to recognize specific achievements or performance. These awards are effective on the later of the Compensation Committee approval of the grant or the date the employee’s employment commences. We do not have a program, plan, or practice to time “off-cycle”“off-cycle” awards in coordination with the release of materialnon-public information.
Hedging Policy
The Company has a policy that prohibits executives and directors from engaging in any transaction in which they may profit from short-term speculative swings in the value of the Company’s securities. This includes “short sales” (selling
42 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
borrowed securities whichthat the seller hopes can be purchased at a lower price in the future) or “short sales against the box” (selling owned, but not delivered securities), and “put” and “call” options. In addition, this policy is designed to ensure compliance with all insider trading rules.
Tax and Accounting Information
We consider the tax and accounting rules associated with various forms of compensation when designing our com-
pensationcompensation programs. However, to maintain flexibility to compensate our executive officers in a manner designed to promote short- and long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible or have the most favorable accounting treatment to the Company.
Section 162(m) of the Internal Revenue Code limits to $1 million the amount a company may deduct for compensation paid to its Chief Executive Officer and any of its other three named executive officers (excluding the Chief Financial Officer). This limitation does not, however, apply to compensation meeting the definition of “qualifying performance-based compensation.” The Compensation Committee believes that its primary responsibility is to provide a compensation program that attracts, retains and rewards the executive talent necessary for our success. Consequently, the Compensation Committee may pay or provide, and has paid or provided, compensation in excess of $1 million that is not exempt from the deduction limitations under Section 162(m). For fiscal 2013,2016, our stock options and STI payments to those officers covered by Section 162(m) were intended to betax-deductible compensation under Section 162(m). Our restricted stock units,PSUs, as currently structured, are not considered performance-based for purposes of Section 162(m) of the Internal Revenue Code. Therefore, the value of those equity awards at the time they vest or are settled, in combination with the amount of salary and certain other elements of compensation, in excess of $1,000,000 paid to our Chief Executive Officer and the three highest paid executive officers, other than the Chief Executive Officer and the Chief Financial Officer, is not tax deductible by us.
CABOT CORPORATION 35 43
Executive Compensation(continued)
The following table and footnotes describe the compensation for Patrick M. Prevost, our Chief Executive Officer; Eduardo E. Cordeiro, our Chief Financial Officer; and the other three most highly compensatednamed executive officers who were serving as executive officers as of September 30, 2013,for the last day of ourthree most recently completed fiscal year (collectively, the “named executive officers”).years. A description of each component of our executive compensation package is described under the heading “Compensation Discussion and Analysis,” which begins on page 21.24.
| Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||
| Patrick M. Prevost | 2013 | 990,000 | 2,379,793 | 1,330,420 | 746,000 | 106,479 | 229,106 | 5,781,798 | ||||||||||||||||||||||||
| President and CEO | 2012 | 967,500 | 2,312,991 | 1,295,110 | 1,333,000 | 161,497 | 257,754 | 6,327,852 | ||||||||||||||||||||||||
| 2011 | 887,500 | 2,710,845 | 1,119,537 | 1,300,000 | 121,729 | 368,843 | 6,508,454 | |||||||||||||||||||||||||
| Eduardo E. Cordeiro | 2013 | 476,250 | 626,245 | 350,101 | 218,000 | 8,134 | 105,828 | 1,784,558 | ||||||||||||||||||||||||
| Executive Vice | 2012 | 453,750 | 562,593 | 315,021 | 376,000 | 108,304 | 115,689 | 1,931,357 | ||||||||||||||||||||||||
| President and CFO | 2011 | 412,500 | 471,272 | 262,389 | 372,000 | 44,589 | 104,706 | 1,667,456 | ||||||||||||||||||||||||
| David A. Miller | 2013 | 392,500 | 500,989 | 280,079 | 143,000 | 18,250 | 84,779 | 1,419,597 | ||||||||||||||||||||||||
| Executive Vice President and President, Reinforcement Materials Segment and Americas Region |
| 2012 2011 |
|
| 382,500 371,250 |
|
| 500,068 471,272 |
|
| 280,020 262,389 |
|
| 297,000 322,000 |
|
| 44,507 33,482 |
|
| 95,579 83,655 |
|
| 1,599,674 1,544,048 |
| ||||||||
| Brian A. Berube | 2013 | 367,500 | 438,361 | 245,067 | 144,000 | 4,680 | 85,512 | 1,285,120 | ||||||||||||||||||||||||
| Senior Vice President and General Counsel |
| 2012 2011 |
|
| 357,500 346,250 |
|
| 406,329 345,593 |
|
| 227,519 192,420 |
|
| 271,000 273,000 |
|
| 89,038 38,393 |
|
| 88,919 95,730 |
|
| 1,440,305 1,291,386 |
| ||||||||
| Sean D. Keohane | 2013 | 377,500 | 469,642 | 262,580 | 158,000 | — | 92,230 | 1,359,952 | ||||||||||||||||||||||||
| Senior Vice President and President, Performance Materials Segment |
| 2012 2011 |
|
| 365,000 343,750 |
|
| 468,822 345,593 |
|
| 262,520 192,420 |
|
| 305,000 298,000 |
|
| 68,771 28,778 |
|
| 95,161 97,630 |
|
| 1,565,274 1,306,171 |
| ||||||||
Name and Principal Position | Year | Salary ($)(4) | Stock Awards ($)(5) | Option Awards ($)(6) | Non-Equity Incentive Plan Compensation ($) | Change in Value and | All Other Compensation ($)(8) | Total ($) | ||||||||||||||||||||||||
| Sean D. Keohane | 2016 | 681,161 | 1,133,052 | 630,096 | 710,000 | 20,143 | 159,278 | 3,333,730 | ||||||||||||||||||||||||
President and CEO |
| 2015 2014 |
|
| 460,900 395,000 |
|
| 503,974 474,265 |
|
| 279,909 262,579 |
|
| 85,000 295,000 |
|
| 4,334 26,013 |
|
| 68,846 89,386 |
|
| 1,402,963 1,542,243 |
| ||||||||
| Eduardo E. Cordeiro | 2016 | 550,000 | 1,376,912 | 350,182 | 424,000 | 43,613 | 116,970 | 2,861,677 | ||||||||||||||||||||||||
| Executive Vice | 2015 | 544,800 | 630,024 | 349,883 | — | 14,574 | 72,240 | 1,611,521 | ||||||||||||||||||||||||
| President and CFO, and President, Americas Region | 2014 | 502,500 | 632,353 | 350,111 | 388,000 | 47,143 | 108,736 | 2,028,843 | ||||||||||||||||||||||||
| Nicholas S. Cross(1) | 2016 | 437,711 | 501,540 | 280,148 | 277,895 | 95,800 | 498,768 | 2,091,862 | ||||||||||||||||||||||||
Executive Vice President and President, Performance Chemicals and Specialty Fluids Segments and EMEA Region | 2015 | 442,691 | 503,974 | 279,909 | 85,821 | 131,400 | 347,699 | 1,791,494 | ||||||||||||||||||||||||
| Brian A. Berube | 2016 | 405,000 | 895,477 | 245,132 | 253,000 | 33,358 | 82,340 | 1,914,307 | ||||||||||||||||||||||||
| Senior Vice President and | 2015 | 398,750 | 441,017 | 244,924 | 75,000 | 10,051 | 61,693 | 1,231,435 | ||||||||||||||||||||||||
General Counsel, and Interim Chief Human Resources Officer | 2014 | 377,500 | 442,620 | 245,076 | 246,000 | 36,997 | 80,522 | 1,428,715 | ||||||||||||||||||||||||
| Hobart C. Kalkstein(2) | 2016 | 346,091 | 297,602 | 115,513 | 226,000 | 13,389 | 58,709 | 1,057,304 | ||||||||||||||||||||||||
| Senior Vice President and President, Reinforcement Materials Segment | ||||||||||||||||||||||||||||||||
| Friedrich von Gottberg(2) | 2016 | 390,000 | 438,877 | 245,132 | 240,000 | 34,843 | 79,324 | 1,428,176 | ||||||||||||||||||||||||
| Senior Vice President and President, Purification Solutions Segment | ||||||||||||||||||||||||||||||||
| Patrick M. Prevost(3) | 2016 | 835,546 | 7,059,331 | 2,739,358 | — | 77,432 | 1,700,874 | 12,412,541 | ||||||||||||||||||||||||
| Former President | 2015 | 1,050,000 | 2,394,268 | 1,329,571 | — | 46,107 | 130,771 | 4,950,717 | ||||||||||||||||||||||||
| and CEO | 2014 | 1,012,500 | 2,403,204 | 1,330,433 | 1,224,000 | 79,951 | 259,317 | 6,309,405 | ||||||||||||||||||||||||
| 1. | During fiscal 2015 and 2016, Mr. Cross was on an international assignment from Switzerland to the U.S. His base salary and annual short-term incentive award are paid in Swiss Francs. For purposes of the disclosure in this proxy statement, all amounts that were paid and recorded in Swiss Francs with respect to his fiscal 2015 compensation have been translated to U.S. Dollars using the average daily exchange rate during the12-month period ended September 30, 2015 of U.S.$1.0466 per Swiss Franc (and $1.029018 per Swiss Franc for the pension values), and with respect to his fiscal 2016 compensation have been translated to U.S. Dollars using the average daily exchange rate during the12-month period ended September 30, 2016 of U.S.$1.017932 per Swiss Franc. Mr. Cross’s equity-based compensation is awarded in U.S. Dollars. |
| 2. | For Messrs. Kalkstein and von Gottberg, information is only provided for fiscal 2016 as neither was a named executive officer in either fiscal 2014 or 2015. |
| 3. | Mr. Prevost stepped down from his position as President and CEO of the Company effective March 11, 2016 and his employment terminated effective July 15, 2016. |
| 4. | We review base salaries annually in November and any changes are generally effective |
44 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
| 5. a. | The amounts reported in this column for each of the fiscal years reflect the aggregate grant date fair value |
| to be achieved under the performance-based restricted stock unit awards made for |
| b. | The amounts reported in this column for fiscal 2016 for Messrs. Keohane and Kalkstein also include the grant date fair value of the supplemental award of time-based and performance-based restricted stock units each received when they assumed their new positions with the Company, and the amounts for Messrs. Cordeiro and Berube also include the grant date fair value of the supplemental award of time-based restricted stock units they received in recognition of the increased job responsibilities they assumed during the period of Mr. Prevost’s medical leave of absence and in connection with the transition of CEO responsibilities to Mr. Keohane, all as described in further detail in the Compensation Discussion and Analysis section above. |
| c. | As further described in the Compensation Discussion and Analysis section, in connection with the termination of Mr. Prevost’s employment with the Company, the Compensation Committee accelerated the vesting of Mr. Prevost’s fiscal 2014, 2015 and 2016 time-based and performance-based restricted stock unit awards. This resulted in a revaluation of those outstanding awards under applicable accounting guidance as if they were re-granted to Mr. Prevost at the time of acceleration. Accordingly, the amounts for Mr. Prevost in fiscal 2016 consist of (i) the grant date fair value of the time-based and performance-based restricted stock units, assuming the target level of performance, awarded to him for fiscal 2016 of $2,382,492 and (ii) $4,676,839 associated with the acceleration of the time-based and performance-based restricted stock units previously awarded to him for fiscal 2014, 2015 and 2016. |
| 6. a. | The amounts reported in this column reflect the |
| b. | As further described in the Compensation Discussion and Analysis section, in connection with the termination of Mr. Prevost’s employment with the Company, the Compensation Committee accelerated the vesting of Mr. Prevost’s outstanding unvested stock options and extended the exercise period of all outstanding stock options to the earlier of (i) October 15, 2019 and (ii) the original expiration date of the stock options. Accordingly, the amounts for Mr. Prevost in fiscal 2016 consist of (i) $1,330,726, the grant date fair value of the stock options awarded to Mr. Prevost for fiscal 2016, and (ii) $1,408,632, the incremental fair value associated with the modification of his outstanding stock option awards. No amount has been included with respect to the modification of the stock option award granted to Mr. Prevost in fiscal 2016 as there was no incremental value associated with the modification of that award. |
| c. | The amounts for Mr. Keohane and Mr. Kalkstein in fiscal 2016 include the grant date fair value of the supplemental stock option awards each received when they assumed their new positions with the Company, as described further in the Compensation Discussion and Analysis section above. |
| 7. | The amounts reported in this column consist of: |
| a. | The aggregate change in the actuarial present value of each named executive officer’s (other than Mr. Cross) accumulated pension benefits under the |
36 CABOT CORPORATION
Executive Compensation(continued)
| b. | The aggregate change in the actuarial present value of Mr. Cross’s accumulated pension benefits attributable to employer contributions under the Swiss Pension Plan measured from October 1 to September 30 as follows: $131,400 in 2015 and $95,800 in 2016. These figures are presented in accordance with SEC rules which require the use of the same assumptions as required by FASB ASC Topic 715. In 2015, approximately 68% of the increase in the PVAB was due to (i) one less year to accumulate benefits to normal retirement resulting in a shorter discounting period; (ii) a change in discount rate from 1.75% to 1.0%; and (iii) an increase in Mr. Cross’s base salary. 32% of the increase in PVAB was attributable to the Company contribution made during the year. In 2016, approximately 51% of the increase in PVAB was due to the Company contribution made during the year and the remaining increase was due primarily to the change in discount rate from 1.0% to 0.25%. Details on the pension plan and the actuarial assumptions can be found below under the heading “Pension Benefits”. |
CABOT CORPORATION 45
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
| c. | Above-market interest (the portion exceeding 120% of the applicable long-term rate) credited to deferrals under Cabot’s deferred compensation plan as follows: Mr. |
| The table below identifies the amounts shown for fiscal |
| Company Contributions to Retirement Savings Plan ($)(a) | Company Contributions to Supplemental Retirement Savings Plan ($)(a) | Financial ($) | Other ($)(b) | Total ($) | Company Contributions to 401(k) Plan ($)(a) | Company Contributions to Supplemental 401(k) Plan ($)(a) | Company ($)(a) | Financial ($) | Severance Related Benefits ($)(b) | International ($)(c) | Other ($)(d) | Total ($) | ||||||||||||||||||||||||||||||||||||||||
S.D. Keohane | 26,500 | 114,646 | — | 13,662 | — | — | 4,470 | 159,278 | ||||||||||||||||||||||||||||||||||||||||||||
E.E. Cordeiro | 26,500 | 41,215 | 31,800 | 13,819 | — | — | 3,636 | 116,970 | ||||||||||||||||||||||||||||||||||||||||||||
N.S. Cross | — | — | — | 10,550 | — | 482,737 | 5,481 | 498,768 | ||||||||||||||||||||||||||||||||||||||||||||
B.A. Berube | 26,500 | 34,533 | 6,325 | 13,961 | — | — | 1,021 | 82,340 | ||||||||||||||||||||||||||||||||||||||||||||
H.C. Kalkstein | 31,346 | 21,372 | 5,115 | — | — | — | 876 | 58,709 | ||||||||||||||||||||||||||||||||||||||||||||
F. von Gottberg | 26,500 | 37,685 | 315 | 13,841 | — | — | 983 | 79,324 | ||||||||||||||||||||||||||||||||||||||||||||
P.M. Prevost | 34,744 | 166,298 | 25,626 | 2,438 | 229,106 | 26,500 | 61,154 | 116,600 | 15,624 | 1,478,896 | — | 2,100 | 1,700,874 | |||||||||||||||||||||||||||||||||||||||
E.E. Cordeiro | 35,018 | 56,089 | 13,521 | 1,200 | 105,828 | |||||||||||||||||||||||||||||||||||||||||||||||
D.A. Miller | 35,792 | 35,220 | 10,328 | 3,439 | 84,779 | |||||||||||||||||||||||||||||||||||||||||||||||
B.A. Berube | 36,019 | 35,643 | 12,924 | 926 | 85,512 | |||||||||||||||||||||||||||||||||||||||||||||||
S.D. Keohane | 35,928 | 39,089 | 12,812 | 4,401 | 92,230 | |||||||||||||||||||||||||||||||||||||||||||||||
| a. | The |
| b. |
| c. | Mr. Cross received benefits equal to $482,737, pursuant to our international assignment policy, to minimize the financial impact to him associated with his international assignment to the U.S. and equalize his standard of living to Switzerland. This includes a net amount of $99,346 for expenses and cost of living adjustments related to his international assignment to the U.S., consisting of $111,970 for rent and utilities for housing in Massachusetts, $36,282 for home leaves for the year, and a negative cost of living adjustment equal to ($48,906) representing the difference between the cost of living in Switzerland and the U.S. The tax equalization benefit associated with Mr. Cross’s international assignment is approximately $372,611 with respect to fiscal 2016, which reflects the higher actual taxes due in Switzerland and the U.S. compared to the amount that he would have paid in taxes in Switzerland if he were not on an international assignment. Mr. Cross also received tax preparation services amounting to $10,780. |
| d. | Consists of the amount paid by Cabot for an annual physical exam for Messrs. |
| The table does not include any amounts for the use of |
46CABOT CORPORATION 37
Executive Compensation(continued)
Grant of Plan-Based Awards Table
The following table reports all plan-based awards granted to the named executive officers during fiscal 2013.2016. The material terms of our short- and long-term incentive compensation awards are described in “Compensation Discussion and Analysis — Short-Term Incentive Compensation”Our Performance-based Compensation Philosophy” beginning on page 28 and “Compensation Discussion and Analysis — Long-Term Incentive Compensation” on page 30.31.
| Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(3) | Grant Date Fair Value of ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant Date | Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of ($)(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
P.M. Prevost | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time Based Restricted Stock Unit (“RSU”) | 11/09/12 | — | — | — | — | — | — | 32,340 | — | — | 1,139,985 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Based RSU | 11/09/12 | — | — | — | 18,865 | 37,730 | 56,595 | — | — | — | 1,239,808 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of ($)(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based Restricted Stock Unit (“RSU”) | 11/12/15 | — | — | — | — | — | — | 6,069 | — | — | 239,968 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/12/15 | — | — | — | 3,541 | 7,081 | 14,162 | — | — | — | 261,572 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/12/15 | — | — | — | — | — | — | — | 25,617 | 39.54 | 280,148 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 3/21/16 | — | — | — | — | — | — | 6,090 | — | — | 299,993 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 3/21/16 | — | — | — | 3,553 | 7,105 | 14,210 | — | — | — | 331,519 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 11/09/12 | — | — | — | — | — | — | — | 106,741 | 35.25 | 1,330,420 | 3/21/16 | — | — | — | — | — | — | — | 26,455 | 49.26 | 349,948 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Short-Term Incentive Compensation (“STI”) | — | 346,500 | 990,000 | 1,980,000 | — | — | — | — | — | — | — | — | 242,200 | 692,000 | 1,020,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
E.E. Cordeiro | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time Based RSU | 11/09/12 | — | — | — | — | — | — | 8,510 | — | — | 299,978 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Based RSU | 11/09/12 | — | — | — | 4,965 | 9,929 | 14,894 | — | — | — | 326,267 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 7,587 | — | — | 299,990 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/12/15 | — | — | — | 4,426 | 8,851 | 17,702 | — | — | — | 326,956 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 11/09/12 | — | — | — | — | — | — | — | 28,089 | 35.25 | 350,101 | 11/12/15 | — | — | — | — | — | — | — | 32,021 | 39.54 | 350,182 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 6/30/16 | — | — | — | — | — | — | 16,425 | — | — | 749,966 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STI | — | 100,800 | 288,000 | 576,000 | — | — | — | — | — | — | — | — | 134,750 | 385,000 | 770,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
D.A. Miller | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time Based RSU | 11/09/12 | — | — | — | — | — | — | 6,808 | — | — | 239,982 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Based RSU | 11/09/12 | — | — | — | 3,972 | 7,943 | 11,915 | — | — | — | 261,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| N.S. Cross | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 6,069 | — | — | 239,968 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/12/15 | — | — | — | 3,541 | 7,081 | 14,162 | — | — | — | 261,572 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 11/09/12 | — | — | — | — | — | — | — | 22,471 | 35.25 | 280,079 | 11/12/15 | — | — | — | — | — | — | — | 25,617 | 39.54 | 280,148 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STI | — | 82,950 | 237,000 | 474,000 | — | — | — | — | — | — | — | — | 91,919 | 262,626 | 525,253 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B.A. Berube | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time Based RSU | 11/09/12 | — | — | — | — | — | — | 5,957 | — | — | 209,984 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Based RSU | 11/09/12 | — | — | — | 3,475 | 6,950 | 10,425 | — | — | — | 228,377 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 5,311 | — | — | 209,997 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/12/15 | — | — | — | 3,098 | 6,196 | 12,392 | — | — | — | 228,880 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/12/15 | — | — | — | — | — | — | — | 22,415 | 39.54 | 245,132 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 6/30/16 | — | — | — | — | — | — | 10,000 | — | — | 456,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STI | — | 85,050 | 243,000 | 486,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| H.C. Kalkstein | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 2,655 | — | — | 104,979 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/12/15 | — | — | — | 1,328 | 2,655 | 5,310 | — | — | — | 98,076 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/12/15 | — | — | — | — | — | — | — | 5,763 | 39.54 | 63,025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 4/7/16 | — | — | — | — | — | — | 952 | — | — | 44,963 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 4/7/16 | — | — | — | 556 | 1,111 | 2,222 | — | — | — | 49,584 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 11/09/12 | — | — | — | — | — | — | — | 19,662 | 35.25 | 245,067 | 4/7/16 | — | — | — | — | — | — | — | 4,251 | 47.23 | 52,488 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STI | — | 77,700 | 222,000 | 444,000 | — | — | — | — | — | — | — | — | 73,500 | 210,000 | 420,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
S.D. Keohane | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time Based RSU | 11/09/12 | — | — | — | — | — | — | 6,382 | — | — | 224,966 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Based RSU | 11/09/12 | — | — | — | 3,723 | 7,446 | 11,169 | — | — | — | 244,676 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| F. Von Gottberg | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/12/15 | — | — | — | 5,311 | — | — | 209,997 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/12/15 | 3,098 | 6,196 | 12,392 | — | — | — | 228,880 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 11/09/12 | — | — | — | — | — | — | — | 21,067 | 35.25 | 262,580 | 11/12/15 | — | — | — | — | 22,415 | 39.54 | 245,132 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STI | — | 79,800 | 228,000 | 456,000 | — | — | — | — | — | — | — | — | 81,900 | 234,000 | 468,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| P.M. Prevost | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/12/15 | — | — | — | — | — | — | 28,831 | — | — | 3,523,236 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/12/15 | — | — | — | 16,818 | 33,636 | 67,272 | — | — | — | 3,536,095 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/12/15 | — | — | — | — | — | — | — | 121,683 | 39.54 | 2,739,358 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STI | — | 408,100 | 1,166,000 | 2,332,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CABOT CORPORATION 47
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
| 1. | The amounts in these columns represent award opportunities under our Short-Term Incentive Compensation Plan and assume that adjusted EBITDA and adjusted NWC days, the financial |
| performance. |
| 2. | The amounts in these columns represent performance-based restricted stock unit awards. The November 12, 2015 performance-based restricted stock unit awards vest three years after the date of grant, generally subject to the executive’s continued employment through the vesting date, and the number of shares issuable, if any, when the award vests will depend on the degree of achievement of corporate performance metrics for each year within the three-year performance period. The supplemental awards made to Mr. Keohane on March 21, 2016 and Mr. Kalkstein on April 7, 2016 have the same vesting dates as the performance-based restricted stock unit awards granted on November 12, 2015. For fiscal |
38 CABOT CORPORATION
Executive Compensation(continued)
| performance |
| 3. | The amounts in these columns represent time-based restricted stock unit awards. The November 12, 2015 time-based restricted stock unit awards vest three years after the date of grant, generally subject to the executive’s continued employment through the vesting date. The supplemental awards made to Mr. Keohane on March 21, 2016 and Mr. Kalkstein on April 7, 2016 have the same vesting dates as the time-based restricted stock unit awards granted on November 12, 2015. The supplemental awards made to Mr. Cordeiro and Mr. Berube on June 30, 2016 vest on March 11, 2018 and March 11, 2019, respectively, assuming their continued employment with Cabot through the vesting date. |
| 4. | All stock options were granted with an exercise price equal to the closing price of our common stock on the date of grant. |
| Reflects the fair value of time-based and performance-based restricted stock units and option awards on the grant date, calculated |
| in accordance with FASB ASC Topic |
| b. | The grant date fair value per unit of time-based and performance-based restricted stock units is equal to the closing price of Cabot common stock on the date of grant ($ |
48CABOT CORPORATION 39
Executive Compensation(continued)
Outstanding Equity Awards at FiscalYear-End Table
The following table shows information regarding outstanding equity awards held by our named executive officers as of September 30, 2013.2016.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
P. M. Prevost | 270,000 | — | 16.90 | 5/6/2019 | 27,714 | 1,183,665 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
S.D. Keohane | 15,909 | — | 34.64 | 11/11/2020 | 4,724 | 247,585 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 151,000 | — | 23.15 | 11/12/2019 | 20,741 | 885,848 | — | — | 22,561 | — | 32.95 | 11/10/2021 | 5,213 | 273,213 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 55,537 | 37,025 | 34.64 | 11/11/2020 | 33,687 | 1,438,772 | — | — | 21,067 | — | 35.25 | 11/8/2022 | 6,069 | 318,076 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33,391 | 77,911 | 32.95 | 11/10/2021 | 32,340 | 1,381,241 | — | — | 8,578 | 5,719 | 47.62 | 11/7/2023 | 6,090 | 319,177 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 106,741 | 35.25 | 11/8/2022 | 32,300 | (2) | 1,379,533 | — | — | 5,357 | 12,500 | 46.03 | 11/13/2024 | 2,285 | (2) | 119,757 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16,716 | (3) | 713,940 | 6,551 | 279,793 | — | 25,617 | 39.54 | 11/11/2025 | 2,636 | (3) | 138,153 | 2,230 | (6) | 116,874 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | (4) | — | 12,577 | 537,164 | — | 26,455 | 49.26 | 3/20/2026 | 2,938 | (4) | 153,981 | 9,442 | (7) | 494,855 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
E. E. Cordeiro | 33,500 | — | 23.15 | 11/12/2019 | 6,495 | 277,401 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2,948 | (4) | 154,505 | 9,474 | (7) | 496,532 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
E.E. Cordeiro | 28,089 | — | 35.25 | 11/8/2022 | 6,299 | 330,131 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13,016 | 8,678 | 34.64 | 11/11/2020 | 8,194 | 349,966 | — | — | 11,438 | 7,625 | 47.62 | 11/7/2023 | 6,517 | 341,556 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8,122 | 18,951 | 32.95 | 11/10/2021 | 8,510 | 363,462 | — | — | 6,696 | 15,625 | 46.03 | 11/13/2024 | 7,587 | 397,635 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 28,089 | 35.25 | 11/8/2022 | 7,571 | (2) | 323,357 | — | — | — | 32,021 | 39.54 | 11/11/2025 | 16,425 | 860,834 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4,066 | (3) | 173,659 | 1,594 | 68,080 | 3,048 | (2) | 159,746 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | (4) | — | 3,310 | 141,370 | 3,295 | (3) | 172,691 | 2,788 | (6) | 146,119 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
D.A. Miller | 45,000 | — | 21.07 | 9/13/2019 | 6,495 | 277,401 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3,673 | (4) | 195,502 | 11,802 | (7) | 618,543 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
N.S. Cross | 8,006 | 5,338 | 47.62 | 11/7/2023 | 4,409 | 231,076 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33,500 | — | 23.15 | 11/12/2019 | 7,283 | 311,057 | — | — | 5,357 | 12,500 | 46.03 | 11/13/2024 | 5,213 | 273,213 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13,016 | 8,678 | 34.64 | 11/11/2020 | 6,808 | �� | 290,770 | — | — | — | 25,617 | 39.54 | 11/11/2025 | 6,069 | 318,076 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7,220 | 16,845 | 32.95 | 11/10/2021 | 7,571 | (2) | 323,357 | — | — | 2,133 | (2) | 111,791 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 22,471 | 35.25 | 11/8/2022 | 3,614 | (3) | 154,354 | 1,416 | 60,477 | 2,636 | (3) | 138,153 | 2,230 | (6) | 116,874 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | (4) | — | 2,648 | 113,096 | 2,938 | (4) | 153,981 | 9,442 | (7) | 494,855 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. A. Berube | 10,080 | — | 23.15 | 11/12/2019 | 4,763 | 203,428 | — | — | 19,553 | — | 32.95 | 11/10/2021 | 4,409 | 231,076 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9,545 | 6,364 | 34.64 | 11/11/2020 | 5,918 | 252,758 | — | — | 19,662 | — | 35.25 | 11/8/2022 | 4,562 | 239,094 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5,866 | 13,687 | 32.95 | 11/10/2021 | 5,957 | 254,423 | — | — | 8,006 | 5,338 | 47.62 | 11/7/2023 | 5,311 | 278,350 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 19,662 | 35.25 | 11/8/2022 | 5,552 | (2) | 237,126 | — | — | 4,687 | 10,938 | 46.03 | 11/13/2024 | 10,000 | 524,100 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2,937 | (3) | 125,439 | 1,151 | 49,159 | — | 22,415 | 39.54 | 11/11/2025 | 2,133 | (2) | 111,791 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | (4) | — | 2,317 | 98,959 | 2,306 | (3) | 120,857 | 1,952 | (6) | 102,304 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
S.D. Keohane | 25,000 | — | 16.90 | 5/6/2019 | 4,763 | 203,428 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2,571 | (4) | 134,746 | 8,262 | (7) | 433,011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
H.C. Kalkstein | 16,300 | — | 16.90 | 5/6/2019 | 2,204 | 115,512 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25,200 | — | 23.15 | 11/12/2019 | 6,828 | 291,624 | — | — | 1,205 | 2,812 | 46.03 | 11/13/2024 | 2,281 | 119,547 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9,545 | 6,364 | 34.64 | 11/11/2020 | 6,382 | 272,575 | — | — | — | 5,763 | 39.54 | 11/11/2025 | 2,655 | 139,149 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6,768 | 15,793 | 32.95 | 11/10/2021 | 5,552 | (2) | 237,126 | — | — | — | 4,251 | 47.23 | 4/6/2026 | 952 | 49,894 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 21,067 | 35.25 | 11/8/2022 | 3,388 | (3) | 144,701 | 1,328 | 56,719 | 914 | (2) | 47,903 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | (4) | — | 2,482 | 106,006 | 988 | (3) | 51,781 | 836 | (6) | 43,815 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,102 | (4) | 57,756 | 3,540 | (7) | 185,531 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 461 | (4) | 24,161 | 1,482 | (7) | 77,672 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
40 CABOT CORPORATION 49
Executive Compensation(continued)
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||||||||||||||||||||||
F. Von Gottberg | 15,909 | — | 34.64 | 11/11/2020 | 4,409 | 231,076 | — | — | ||||||||||||||||||||||||||||
| 19,553 | — | 32.95 | 11/10/2021 | 4,562 | 239,094 | — | — | |||||||||||||||||||||||||||||
| 19,662 | — | 35.25 | 11/8/2022 | 5,311 | 278,350 | — | — | |||||||||||||||||||||||||||||
| 8,006 | 5,338 | 47.62 | 11/7/2023 | 2,133 | (2) | 111,791 | — | — | ||||||||||||||||||||||||||||
| 4,687 | 10,938 | 46.03 | 11/13/2024 | 2,306 | (3) | 120,857 | 1,952 | (6) | 102,304 | |||||||||||||||||||||||||||
| — | 22,415 | 39.54 | 11/11/2025 | 2,571 | (4) | 134,746 | 8,262 | (7) | 433,011 | |||||||||||||||||||||||||||
P. M. Prevost | 101,000 | — | 23.15 | 10/15/2019 | — | — | — | — | ||||||||||||||||||||||||||||
| 92,562 | — | 34.64 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
| 111,302 | — | 32.95 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
| 106,741 | — | 35.25 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
| 72,440 | — | 47.62 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
| 84,821 | — | 46.03 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
| 121,683 | — | 39.54 | 10/15/2019 | — | — | — | — | |||||||||||||||||||||||||||||
| 1. |
| 2. | Reflects the portion of the fiscal |
| 3. | Reflects the portion of the fiscal |
| the three-year performance period of the award. These units will vest on |
| 4. |
| 5. | The value of shares of unvested restricted stock units was calculated by multiplying the closing price of our common stock on September 30, |
| 6. | The number of shares shown for each named executive officer’s performance-based restricted stock unit award |
| 7. | The number of shares shown for each named executive officer’s performance-based restricted stock unit award assumes the |
50 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Option Exercises and Stock Vested Table
The following table shows the options exercised by each of our named executive officers and the restricted stock units that vested for each officer during fiscal 2013.2016. The value of options realized on exercise is the difference between the market price of the shares at exercise and the exercise price, multiplied by the number of shares acquired on exercise. The value of stock realized on the vesting of time-based restricted stock units is the product of the number of shares vested and the closing price of our common stock on the vesting date. The value of stock realized on the vesting of performance-based restricted stock units is the product of the number of shares vested and the closing price of our common stock on the settlement date.
| Option Awards | Stock Awards | Option Awards | Stock Awards(1) | |||||||||||||||||||||||||||||
| Name | Number of Shares Acquired On Exercise (#) | Value Realized on Vesting ($) | Number of Shares Acquired On Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired On Exercise (#) | Value Realized on Exercise ($) | Number of Settlement | Value Realized on Vesting/ Settlement ($) | ||||||||||||||||||||||||
S.D. Keohane | — | — | 6,639 | 273,228 | ||||||||||||||||||||||||||||
E.E. Cordeiro | 27,073 | 461,107 | 8,852 | 364,305 | ||||||||||||||||||||||||||||
N.S. Cross | 21,584 | 348,461 | 6,197 | 255,037 | ||||||||||||||||||||||||||||
B.A. Berube | 8,489 | 129,406 | 6,197 | 255,037 | ||||||||||||||||||||||||||||
H.C. Kalkstein | — | — | 3,080 | 126,786 | ||||||||||||||||||||||||||||
F. Von Gottberg | — | — | 6,197 | 255,037 | ||||||||||||||||||||||||||||
P.M. Prevost | — | — | 92,386 | 3,345,297 | 170,000 | 4,772,004 | 189,340 | 9,044,887 | ||||||||||||||||||||||||
E.E. Cordeiro | 28,000 | 646,800 | 20,462 | 740,929 | ||||||||||||||||||||||||||||
D.A. Miller | — | — | 20,462 | 740,929 | ||||||||||||||||||||||||||||
B.A. Berube | 46,620 | 1,019,279 | 15,363 | 556,294 | ||||||||||||||||||||||||||||
S.D. Keohane | 25,000 | 641,410 | 15,363 | 556,294 | ||||||||||||||||||||||||||||
| 1. | Includes the vesting of Mr. Prevost’s outstanding time-based and performance-based restricted stock unit awards in connection with the termination of his employment with the Company, as further described in the Compensation Discussion and Analysis section above. |
The following narrative and table provide information onCabot’s salaried employees in the U.S. who were employees prior to January 1, 2014 (including each of our named executive officers other than Mr. Cross) participate in Cabot’s Cash Balance Plan and, in certain cases, our Supplemental Cash Balance Plan. The Cash Balance Plan and the Supplemental Cash Balance Plan as of September 30, 2013, the defined benefit retirement plans in which Cabot’s named executive officers and other full-time U.S. salaried employees participate (excluding most of the employees who work in the Purification Solutions Segment, who until January 1, 2014 continued to have retirement benefits that were provided to them prior to our acquisition of Norit). The Cash Bal-
ance Plan waseach frozen effectiveon December 31, 2013, and no further accrualsbenefits will be madeaccrue under that plan orthose plans.
Cabot’s salaried employees in Switzerland (including Mr. Cross) participate in the Supplemental Cash Balance Plan.AXA Foundation for Occupational BenefitsAXA-Winterthur (the Swiss Pension Plan).
The benefits provided under these plans are described below.
Cash Balance Plan
The Cash Balance Plan is a funded,tax-qualified defined benefit plan under whichplan. Prior to January 1, 2014, participants in the Cash Balance Plan accrued benefits in the form of account balances, with a guaranteed rate of return andfrom defined notional contributions (“(“pay-based credits”). Participants received annual pay-based credits of in an amount equal to 3% of eligible compensation during thetheir first five years of service, 3.5% for theduring their next five years of service and 4% for years after ten years of service, plus additionalservice. Additional credits of 2% of earnings were provided on eligible compensation in excess of the Social Security wage base. Eligible compensation under the Cash Balance Plan included base salary and any short-term incentive bonus.bonus payments. Participants also received a guaranteed rate of return (“interest-based credits”) on their account balances.
AllWhile the plan is frozen, interest-based credits are earned on account balances in the accounts of participants during a calendar year are credited with interest at theone-year U.S. Treasury bill rate determined as of November of the previous year until the participants beginparticipant begins receiving benefit payments. For calendar year 2013,2016, the interest rate was 0.18%0.48%. At retirement at any age or other termination of employment, participantsa participant eligible for benefits may receive theirhis or her vested account balance in a lump sum payment or in a monthly pension having an equivalent actuarial value.
CABOT CORPORATION 51
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Participants are 100% vested in Cabot’s contributions to their accounts after three years of employment with Cabot. As of September 30, 2013,2016, all of theour named executive officers were fully vested in their accrued account balances under the Cash Balance Plan.
CABOT CORPORATION 41
Executive Compensation(continued)
Supplemental Cash Balance Plan
The Supplemental Cash Balance Plan is an unfunded,non-qualified plan created to provide benefits to executive officers and other Cabot employees in circumstances where maximum limits established under the Internal Revenue Code prevent participants from receiving some of the benefits that would otherwise be provided under the Cash Balance Plan. The Internal Revenue Code limits the amount of compensation that can be usedtaken into account annually to annually accruedetermine benefits under the tax-
qualifiedtax-qualified Cash Balance Plan. The Supplemental Cash Balance Plan iswas intended to provide eligible employees the same benefits that they would earnhave earned under the Cash Balance Plan if this compensation limit did not apply.
The material terms and conditions of the Supplemental Cash Balance Plan are the same as those of the Cash Balance Plan except that benefits otherwise payable from the Supplemental Cash Balance Plan will be forfeited if a participant’s employment is terminated for cause.
Swiss Pension Plan
The Swiss Pension Plan is a cash balance pension plan that provides benefits upon retirement and upon death or disability. Employees and the Company both make contributions to the plan according to anage-related contribution scale. Since the time Mr. Cross became an employee of Cabot’s subsidiary in Switzerland, he has been required to make an annual contribution of a percentage of his base salary depending on his age during the year (equal to 6% in 2015 and 7.6% in 2016) to fund retirement benefits plus an amount equal to 1% of his base salary to fund approximately 50% of the cost of his death and disability benefits and administrative expenses. In addition, the Company has made an annual contribution to Mr. Cross’s account in an amount equal to a percentage of his base salary based on his age (9% in 2015 and 11.4% in 2016) to fund his retirement benefits plus an amount equal to approximately 1% of his base salary to fund the balance of the costs for his death and disability benefits and administrative expenses. Employees, including Mr. Cross, may elect to contribute additional amounts in excess of their minimum required contribution without affecting the Company contributions. Interest is credited to the total retirement account balance annually at a rate determined by the Board of Trustees of AXA Foundation for Occupational BenefitsAXA-Winterthur, the administrator of the Swiss Pension Plan. The interest rate for calendar year 2016 was 1.25%. The amount of the annual retirement pension is based on the accrued retirement account balance on the retirement date and is calculated using the applicable pension conversion rate. At retirement, the employee may choose to draw part or all of the retirement benefit in a lump sum with any balance paid in an annual pension. The death and disability benefits, which are funded by insurance in the plan purchased with the employee and Company contributions described above, are paid as an annual pension as described under the heading “Potential Payments Under Termination or Change in Control”.
The plan also provides for monthly disability and death benefits as described below under the heading “Potential Payments Under Termination or Change in Control”.
52 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Pension Benefits Table
The following table shows the actuarial present value of each named executive officer’s accumulated benefits under the pension plansplan(s) in which he participated as of September 30, 2013,2016, the last day of our most recent fiscal year and the pension plan measurement date used for financial statement reporting purposes for our fiscal 20132016 financial statements. None of the named executive officers received a payment under these plans during fiscal 2013.2016.
|
| |||||||||
|
| |||||||||
|
| |||||||||
|
| |||||||||
|
| |||||||||
| Name | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2), (3) | |||||||
S.D. Keohane | Cash Balance Plan Supplemental Cash Balance Plan |
| 11 11 |
|
| 121,733 132,051 |
| |||
E.E. Cordeiro | Cash Balance Plan Supplemental Cash Balance Plan |
| 15 15 |
|
| 166,287 242,398 |
| |||
N.S. Cross | Swiss Pension Plan | 7 | 507,700 | |||||||
B.A. Berube | Cash Balance Plan Supplemental Cash Balance Plan |
| 19 19 |
|
| 216,463 205,140 |
| |||
H.C. Kalkstein | Cash Balance Plan Supplemental Cash Balance Plan |
| 9 9 |
|
| 92,290 25,075 |
| |||
F. Von Gottberg | Cash Balance Plan Supplemental Cash Balance Plan |
| 16 16 |
|
| 157,628 141,021 |
| |||
P.M. Prevost | Cash Balance Plan Supplemental Cash Balance Plan |
| 6 6 |
|
| 62,785 500,013 |
| |||
| 1. | Credited service for the Cash Balance Plan and Supplemental Cash Balance Plan represents years of service with Cabot as of December 31, 2013, the date the plans were frozen, rounded to the nearest whole year. Credited service for the Swiss Pension Plan represents years of service with Cabot Switzerland as of September 30, |
| 2. | For Mr. Cross, the present value of the accumulated benefit excludes his contributions to the plan. The present value of the accumulated benefit attributable to Mr. Cross’s contributions to the plan amounts to $895,984. |
| 3. | The following assumptions were used in the calculations: |
| ||||
| ||||
| ||||
| ||||
| Cash Balance Plan | Supplemental Cash Balance Plan | Swiss Pension Plan | ||||||||||
Measurement Date | 9/30/2016 | 9/30/2016 | 9/30/2016 | |||||||||
Discount Rate (for present value calculation) | 3.38 | % | 2.96 | % | 0.25 | % | ||||||
Form of benefit | Lump sum | Lump sum |
| 80% pension 20% lump sum |
| |||||||
Retirement Date | Age 65 | Age 65 | Age 65 | |||||||||
42 CABOT CORPORATION 53
Executive Compensation(continued)
Nonqualified Deferred Compensation
The following narrative and table describe benefits provided under Cabot’s Deferred Compensation Plan, 401(k) Plan and Supplemental 401(k) Plan.
Deferred Compensation Plan
We maintain a non-qualified deferred compensation plan thatOur Deferred Compensation Plan permits certain employees in the U.S. to voluntarily defer in any year up to 50% of their base salary and up to 100% of any short-term incentive and sales incentive bonuses.bonus awarded. Under this plan, participants receive a credit equal to 10% of the amount they defer, which is intended to account for the fact that any compensation that is deferred is not eligible compensation for purposes of Company contributions under the 401(k) Plan or the Supplemental 401(k) Plan. All of our named executive officers are eligible to participate in the deferred compensation plan.Deferred Compensation Plan, except for Mr. Cross, who is not a U.S.-based employee. Messrs. Cordeiro, Berube, Kalkstein, von Gottberg, and Prevost Cordeiro and Miller contributedmade contributions to the plan in calendarfor fiscal year 2013.2016.
In any year, theAll deferred amounts are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable calendar year. This earnings measure has been specified by the plan administrator. Amounts that are deferred in a particular year are credited to a participant’s account as if they were invested in the account on the first day of the applicable calendar year and notional interest is applied as if the participant had earned the deferred amount on the first day of the calendar year. Earnings are compounded annually.daily. The Moody’s rate under the planused to calculate interest payable for calendar year 20132016 was 3.92%4.62%. Participants in the deferred compensation planDeferred Compensation Plan can elect to defer receipt of their eligible compensation foruntil a period of at least three yearsspecified date (“in service election”) or until they cease to be employees of Cabot (“termination/retirement election”). For a retirement election, participantsParticipants may elect to receive deferred amounts either in the form of a lump sum payment, in installments over a period of up to five years in the case of anin-service election or, if athe participant’s account balance is at least $50,000, in installments over a period of three, five orup to ten years.years for a termination/retirement election.
Retirement Savings401(k) Plan and Supplemental Retirement Savings401(k) Plan
The following narrative and table provide information as of September 30, 2013 on Cabot’s Retirement SavingsUnder the 401(k) Plan, and Supplemental Retirement Savings Plan, theatax-qualified defined contribution plansplan in which Cabot’s U.S.-based named executive officers and other employees in the U.S. participate (with variations for employees covered by collective bargaining agreementsagreements), Cabot makes a retirement contribution equal to 4% of a participant’s eligible compensation (consisting of base salary and excluding most of the employees who work in the Purifications Solutions Segment, who until January 1, 2014 continued to have retirement benefits that were provided to them prior to our acquisition of Norit).
The Retirement Savings Plan is a tax qualified defined contribution plan that contains a 401(k) portion under which Cabot madecash bonuses) and a matching contribution of 75%100% of a participant’s contribution, on up to 7.5%6% of the participant’s eligible compensation (including base salary and
cash bonuses), makingcompensation. These Company contributions are allocated to the maximum matching contribution an amount equal to 5.625% of a participant’s eligible compensation. This matching contribution was madeaccount in the form of Cabot stock. In addition, the plan contained an employee stock ownership plan (“ESOP”), which was 100% funded by Cabot. Under the ESOP, participants received contributions in the form of Cabot stock each quarter based on a pre-determined formula. The ESOP contemplated a minimum and maximum contribution percentage of total eligible pay of 4% and 8%, respectively. The actual amount of the contribution in any given quarter varied, depending primarily on our stock price. The ESOP expired by its terms on December 31, 2013 and no further ESOP allocations will be made.accordance with his or her investment elections.
The Supplemental Retirement Savings401(k) Plan is an unfunded,non-qualified defined contribution plan under which we provide credits to executive officers and certain other employees in the U.S. that cannot be made inunder the Retirement Savings401(k) Plan due to limitations imposed by the Internal Revenue Code. Credits to the Supplemental Retirement Savings401(k) Plan are made at the same percentage of pay that Company contributions would have been made tounder the Retirement Savings401(k) Plan were it not for the limitations imposed by the Internal Revenue Code. Amounts credited to the Supplemental Retirement Savings401(k) Plan are treated as if invested in Cabot common stock. Participants may elect to receive distributions in a lump sum payment after separation from service or, if a participant’s account balance is at least $50,000, in installments over a period of three, five or ten years beginning after separation from service. All distributions are made within shares of Cabot common stock, with the exception of those for certain grandfathered accounts, which are made in cash. None of our named executive officers have grandfathered accounts.
Under both the Retirement Savings401(k) Plan and Supplemental Retirement Savings401(k) Plan, participants were 20%are immediately vested in Cabot’sthe matching contributions or credits to their accountsand vested in the retirement contributions after two years of employment with Cabot, 40% vested after three years, 60% vested after four years and 100% vested after five years.Cabot.
On December 31, 2013, Cabot froze its Cash Balance Plan and the ESOP expired by it terms. Effective January 1, 2014, Cabot amended its Retirement Savings Plan and renamed it the Cabot 401(k) Plan. In connection with these changes, Cabot increased the matching contribution under the 401(k) Plan to 6% of a participant’s eligible compensation (including base salary and cash bonuses) and introduced a Company-funded retirement contribution equal to 4% of a participant’s eligible compensation, each
54CABOT CORPORATION 43
Executive Compensation(continued)
to be allocated to the participant’s account in accordance with his or her investment elections. In addition, Cabot amended the vesting schedule for the plan such that
matching contributions immediately vest and the retirement contribution vests after a participant is employed with Cabot for two years.
Nonqualified Deferred Compensation Table
The following table provides information with respect to the Supplemental Retirement Savings401(k) Plan (“Supplemental RSP”) for all of our named executive officers and with respect to the Deferred Compensation Plan for Messrs. Prevost, Cordeiro, Miller and Berube.fiscal 2016.
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate ($)(3) | Aggregate ($)(4) | ||||||||||||
P.M. Prevost Deferred Compensation Plan Supplemental RSP |
| 746,000 — |
|
| — 166,298 |
|
| 151,708 192,443 |
| | 4,114,939 1,379,402 | | ||||
E.E. Cordeiro Deferred Compensation Plan Supplemental RSP |
| 109,000 — |
|
| — 56,089 |
|
| 30,790 79,926 |
| | 823,649 568,732 | | ||||
D.A. Miller Deferred Compensation Plan Supplemental RSP |
| 71,500 — |
|
| — 35,220 |
|
| 21,544 26,983 |
| | 575,013 214,665 | | ||||
B.A. Berube Deferred Compensation Plan Supplemental RSP |
| — — |
|
| — 35,643 |
|
| 17,704 80,968 |
| | 456,605 553,585 | | ||||
S.D. Keohane Supplemental RSP | — | 39,089 | 49,488 | 362,008 | ||||||||||||
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate ($)(3) | Aggregate Distributions ($) | Aggregate ($)(4) | |||||||||||||||
S.D. Keohane Supplemental 401(k) Plan | — | 114,646 | 235,533 | — | 685,111 | |||||||||||||||
E.E. Cordeiro Deferred Compensation Plan Supplemental 401(k) Plan |
| 318,000 — |
|
| 31,800 41,215 |
|
| 38,663 349,219 |
|
| 123,936 — |
|
| 945,080 884,078 |
| |||||
N.S. Cross | — | — | — | — | — | |||||||||||||||
B.A. Berube Deferred Compensation Plan Supplemental 401(k) Plan |
| 63,250 — |
|
| 6,325 34,533 |
|
| 31,678 321,746 |
|
| — — |
|
| 746,680 816,721 |
| |||||
H.C. Kalkstein Deferred Compensation Plan Supplemental 401(k) Plan |
| 51,154 — |
|
| 5,115 21,372 |
|
| 7,100 41,731 |
|
| — — |
|
| 170,478 125,691 |
| |||||
F. von Gottberg Deferred Compensation Plan Supplemental 401(k) Plan |
| 3,150 — |
|
| 315 37,685 |
|
| 30,213 218,463 |
|
| — — |
|
| 694,188 568,296 |
| |||||
P.M. Prevost Deferred Compensation Plan Supplemental 401(k) Plan |
| 1,166,000 — |
|
| 116,600 61,154 |
|
| 214,035 846,462 |
|
| 848,222 — |
|
| 5,037,185 2,103,247 |
| |||||
| 1. | The amounts contributed by Messrs. |
| 2. | These amounts represent credits by Cabot accrued under the Deferred Compensation Plan and the Supplemental |
| 3. | For the Deferred Compensation Plan, earnings represent the |
| 4. | The aggregate balance |
Potential Payments Upon Termination or Change in Control
Our named executive officers are eligible to receive certain benefits upon a change in control or if their employment is terminated, including following a change in control. This section describes various change in control and termination of employment scenarios and the payments and benefits payable under those scenarios. A table quantifying the estimated payments and benefits assuming a termination of employment or a change in control occurred on September 30, 2013,2016 follows this narrative description. For Mr. Prevost, the table reflects the amounts payable to him upon his termination of employment on July 15, 2016.
CABOT CORPORATION 55
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
Potential Payments Following a Change in Control
Severance Plan
Participants in our Senior Management Severance Protection Plan (the “Severance Plan”) are determined by our Compensation Committee and include sixteenas of September 30, 2016 consisted of twelve of our senior managers, including all of our named executive officers.
Under the Severance Plan, participants are entitled to severance payments if their employment with Cabot terminates within two years following a change in control (for any reason other than cause, disability, death, or a termination initiated by the participant without good reason). Under the Severance Plan, Mr. PrevostKeohane is entitled to a lump sum payment
44 CABOT CORPORATION
Executive Compensation(continued)
equal to three times the sum of his base salary plusand bonus and continued health and welfare benefits for a period of three years (i.e., medical, dental and prescription drug benefits; long-term disability coverage; and life insuranceinsurance) and other death benefits coverage). Thethe other named executive officers are each entitled to a lump sum payment equal to two times the sum of their base salary plusand bonus and continued health and welfare benefits for a period of two years. In addition, under the Severance Plan, aeach participant is entitled to receive apro-rated bonus with respect to the fiscal year in which the termination occurs and outplacement services in an amount up to 15% of his or her salary.
Base salary under the Severance Plan is calculated at the greater of the rate in effect (i) immediately before the change in control or (ii) as of the officer’sparticipant’s employment termination date. The bonus is calculated at the greater of (i) the officer’sparticipant’s target annual incentive bonus for the fiscal year in which the change in control occurs or the fiscal year in which the officer’sparticipant’s employment is terminated, whichever was greater or (ii) the highest annual incentive bonus amount paid or payable to the participant for any of the three fiscal years preceding the fiscal year in which the change in control occurs.
The Severance Plan also includes a “better of” provision. Under this provision, a participant will be entitled to receive either the full amount of payments (and pay any applicable excise tax imposed by Section 4999 of the Internal Revenue Code) or such lesser amount that is not subject to the excise tax, whichever results in the greaterafter-tax benefit to him or her.
The provision of benefits under any other plan or program provided by Cabot or its affiliates, or pursuant to any agreement with Cabot or its affiliates, or by law, counts toward our obligation to provide the benefits under the Severance Plan so that the benefits are not duplicative.
Retirement and Equity Incentive Plans
The accrued account balances under the Cash Balance Plan, Supplemental Cash Balance Plan, Retirement Savings401(k) Plan and Supplemental Retirement Savings401(k) Plan immediately vest and become payable upon a change in control of Cabot.
Under the terms of our equity incentive plans, different provisions apply to awards granted before March 8, 2012 and awards granted on or after March 8, 2012. For awards granted before March 8, 2012, unvested restricted stock, unvested restricted stock units and stock options held by a participant (including the named executive officers)
immediately vest uponUpon a change in control of Cabot, (commonly referred to as “single trigger” vesting). In the case of performance-based restricted stock units, the total number of units that vests is the sum of the units that have been earned or “banked” based upon performance as of the date of the change in control and the number of unbanked units assuming target performance is achieved.
For awards granted on or after March 8, 2012, upon a merger or a transaction involving the sale of Cabot or all or substantially all of its assets, the Compensation Committee, as administrator of our equity incentive plan,2009 Long-Term Incentive Plan, will have discretion to provide for the assumption or continuation of some or all outstanding awards or any portion of an award, the grant of a new awardawards in substitution by the acquirer or survivor, or thecash-out of some or all awards. Further, the Compensation Committee retains authority to accelerate the vesting of awards. For awards granted after March 8, 2012, theThe Compensation Committee has provided, and intends to continue to provide, for “double trigger” vesting upon a change in control. This means that if an award remains outstanding following a change in control, such as if the acquiring company assumes the award, vesting would be accelerated only if the participant’s employment was involuntarily terminated without cause or by the participant for good reason within two years offollowing the change in control.
Termination of Employment Upon Disability or Death
For Cabot’s full-time employees based in the U.S., including the named executive officers,Messrs. Keohane, Cordeiro, Berube, Kalkstein and von Gottberg, termination of employment upon disability is determined under the terms of Cabot’s long-term disability plan and occurs one year following the date of disability. A U.S.-based employee who becomes disabled would receive (i) benefits under our long termlong-term disability plan, and (ii) continued participation in our medical, dental, and life insurance plans in accordance with the terms of those plans if the employee has completed ten years of service; and (iii) until January 1, 2014, continued accruals in the retirement plans in accordanceservice with the terms of those plans if the employee has completed five years of service.Cabot. We have not included a value for these benefits in the table on page 4758 because the plans do not discriminate in scope, terms or
56 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
operation in favor of our named executive officers compared to the benefits offered to all salaried U.S. employees. In addition, the accrued account balances under the Cash Balance Plan, Supplemental Cash Balance Plan, Retirement Savings401(k) Plan and Supplemental Retirement Savings401(k) Plan immediately vest and become payable upon termination of employment by reason of death or disability. Messrs. Keohane, Cordeiro, Berube, Kalkstein and von Gottberg are vested in their account balances under these plans. Mr. Cross would receive disability and death benefits under the Swiss Pension Plan. 50% of these benefits are funded by employee contributions and 50% are funded by employer contributions. In the event of disability due to sickness, after 24 months the Swiss Pension Plan provides benefits to the employee equal to 50% of his pensionable salary and to the employee’s eligible children equal to 5% of the disabled parent’s pensionable salary. Children are eligible to receive this benefit up to age 18, or up to age 25 if still in education. The pension is paid to the employee until death. In the event of death the Swiss Pension Plan provides an annuity benefit to surviving spouses or partners equal to 30% of pensionable salary and to such employee’s children on the same eligibility criteria described above equal to 5% of the pensionable salary. This benefit is payable for the lifetime of the surviving spouse or partner and, in the case of children, while they meet the eligibility criteria.
CABOT CORPORATION 45
Executive Compensation(continued)
Under the terms of Cabot’s equity incentive plans,2009 Long-Term Incentive Plan, if any participant (including a named executive officer) ceases to be an employee because of disability or death, his or her unvested stock options and unvested restricted stock units and restricted stock would immediately vest. In the case of performance-based restricted stock units, the total number of units that vests is the sum of the units that have been earned or “banked” based upon performance as of the date of the termination of employment.
We provide the U.S.-based named executive officers with a death benefit under our Death Benefit Protection Plan equal to three times their base salary up to a maximum benefit of $3,000,000, which is payable to their beneficiary at the time of their death. Mr. Cross is provided with life insurance coverage under the life insurance plan for international assignees that provides a benefit equal to two times base salary up to a maximum benefit of $300,000, which is payable to his designated beneficiary in a lump sum in the event of his death.
Termination of Employment Upon Retirement
Upon retirement, participants (includingin the named executive officers) are entitled to receive benefits payable under our Cash Balance Plan and Supplemental Cash Balance Plan are entitled to receive benefit payments, and participants in the 401(k) Plan and the Supplemental 401(k) Plan may receive a distribution of balancestheir account balances. Participants in the Swiss Pension Plan are entitled to receive benefits under our Retirement Savings Plan and Supplemental Retirement Savings Plan.that plan upon retirement. As of the last business day of fiscal 2013,September 30, 2016, none of our
named executive officers met the eligibility criteria for retirement or early retirement, as applicable, under these plans.
Under our current arrangements, a named executive officer may also be eligible to receive retiree welfare benefits provided to comparably situatedcomparably-situated employees. These retiree welfare benefits are not included in the table on page 4758 because these benefit plans do not discriminate in scope, terms or operation in favor of our named executive officers compared to the benefits offered to all salaried employees.
Termination for Cause or Voluntarily Without Good Reason
As described above, a named executive officer would not receive severance payments under the terms of the Severance Plan if his employment is terminated for cause or if he terminates his employment without good reason. He also would not receive benefits under the terms of our Supplemental Retirement Savings401(k) Plan or Supplemental Cash Balance Plan.Plan if his employment is terminated for cause.
46 CABOT CORPORATION 57
Executive Compensation(continued)
Potential Payments Upon Termination or Change in Control Table
The following table and footnotes present potential payments to each named executive officer other than Mr. Prevost under various circumstances as if the officer’s employment had been terminated on September 30, 2013,2016, the last business day of fiscal 2016 or if a change in control had occurred on such date. For Mr. Prevost, the disclosure in the table below shows only the payments made to him in connection with his termination of employment on July 15, 2016.
| Severance Pay(1)($) | Accelerated Unvested Equity(2)($) | Pension Plan Benefits not reported in Pension Plan Table(3)($) | Benefits and Perquisites(4)($) | Supplemental Retirement Savings Plan Benefits(5)($) | Total($)(6) | Severance Pay(1)($) | Accelerated Unvested Equity(2)($) | Incremental Value of Modified Vested Stock Options(2) ($) | Pension Plan Benefits not reported in Pension Plan Table(3)($) | Benefits and Perquisites(4)($) | Total($)(5) | |||||||||||||||||||||||||||||||||||||
P.M. Prevost | ||||||||||||||||||||||||||||||||||||||||||||||||
S.D. Keohane | ||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 8,838,491 | 32,744 | 2,970,000 | — | 11,841,235 | — | 2,244,614 | — | 1,677 | 2,550,000 | 4,796,291 | ||||||||||||||||||||||||||||||||||||
Disability | — | 8,838,491 | 32,744 | — | — | 8,871,235 | — | 2,244,614 | — | 1,677 | — | 2,246,291 | ||||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary Termination (without cause) | — | �� | — | 32,744 | — | — | 32,744 | — | — | — | 1,677 | — | 1,677 | |||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | 3,805 | — | — | 3,805 | — | — | — | 1,677 | — | 1,677 | ||||||||||||||||||||||||||||||||||||
Termination if Change in Control | 7,770,000 | 10,472,362 | 32,744 | 193,624 | — | 18,468,730 | 4,626,000 | 2,846,543 | — | 1,677 | 191,841 | 7,666,061 | ||||||||||||||||||||||||||||||||||||
Change in Control | — | 7,220,505 | 32,744 | — | — | 7,253,249 | — | — | — | 1,677 | — | 1,677 | ||||||||||||||||||||||||||||||||||||
E.E. Cordeiro | ||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 1,952,383 | 60,674 | 1,440,000 | — | 3,453,057 | — | 3,003,416 | — | 2,264 | 1,650,000 | 4,655,680 | ||||||||||||||||||||||||||||||||||||
Disability | — | 1,952,383 | 60,674 | — | — | 2,013,057 | — | 3,003,416 | — | 2,264 | — | 3,005,680 | ||||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary Termination (without cause) | — | — | 60,674 | — | — | 60,674 | — | — | — | 2,264 | — | 2,264 | ||||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | 26,128 | — | — | 26,128 | — | — | — | 2,264 | — | 2,264 | ||||||||||||||||||||||||||||||||||||
Termination if Change in Control | 1,868,000 | 2,371,197 | 60,674 | 111,381 | — | 4,411,252 | 1,876,000 | 3,445,494 | — | 2,264 | 125,066 | 5,448,824 | ||||||||||||||||||||||||||||||||||||
Change in Control | — | 1,515,493 | 60,674 | — | — | 1,576,167 | — | — | — | 2,264 | — | 2,264 | ||||||||||||||||||||||||||||||||||||
D.A. Miller | ||||||||||||||||||||||||||||||||||||||||||||||||
N.S. Cross | ||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 1,759,012 | 11,599 | 1,185,000 | 85,866 | 3,041,477 | — | 1,661,299 | — | 428,500 | 300,000 | 2,389,799 | ||||||||||||||||||||||||||||||||||||
Disability | — | 1,759,012 | 11,599 | — | 85,866 | 1,856,477 | — | 1,661,299 | — | 81,000 | — | 1,742,299 | ||||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary Termination (without cause) | — | — | 11,599 | — | — | 11,599 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | 4,183 | — | — | 4,183 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Termination if Change in Control | 1,590,000 | 2,106,116 | 11,599 | 98,208 | 85,866 | 3,891,789 | 1,400,674 | 2,014,962 | — | — | 141,395 | 3,557,031 | ||||||||||||||||||||||||||||||||||||
Change in Control | — | 1,421,563 | 11,599 | — | 85,866 | 1,519,028 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
B.A. Berube | ||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 1,404,795 | 47,519 | 1,110,000 | — | 2,562,314 | — | 2,023,848 | — | 1,992 | 1,215,000 | 3,240,840 | ||||||||||||||||||||||||||||||||||||
Disability | — | 1,404,795 | 47,519 | — | — | 1,452,314 | — | 2,023,848 | — | 1,992 | — | 2,025,840 | ||||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary Termination (without cause) | — | — | 47,519 | — | — | 47,519 | — | — | — | 1,992 | — | 1,992 | ||||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | 25,270 | — | — | 25,270 | — | — | — | 1,992 | — | 1,992 | ||||||||||||||||||||||||||||||||||||
Termination if Change in Control | 1,470,000 | 1,700,989 | 47,519 | 94,332 | — | 3,312,840 | 1,302,000 | 2,333,329 | — | 1,992 | 102,585 | 3,739,906 | ||||||||||||||||||||||||||||||||||||
Change in Control | — | 1,101,969 | 47,519 | — | — | 1,149,488 | — | — | — | 1,992 | — | 1,992 | ||||||||||||||||||||||||||||||||||||
S.D. Keohane | ||||||||||||||||||||||||||||||||||||||||||||||||
Death | — | 1,512,111 | 37,957 | 1,140,000 | — | 2,690,068 | ||||||||||||||||||||||||||||||||||||||||||
Disability | — | 1,512,111 | 37,957 | — | — | 1,550,068 | ||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary Termination (without cause) | — | — | 37,957 | — | — | 37,957 | ||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | 19,291 | — | — | 19,291 | ||||||||||||||||||||||||||||||||||||||||||
Termination if Change in Control | 1,506,000 | 1,837,519 | 37,957 | 95,883 | — | 3,477,359 | ||||||||||||||||||||||||||||||||||||||||||
Change in Control | — | 1,195,771 | 37,957 | — | — | 1,233,728 | ||||||||||||||||||||||||||||||||||||||||||
58 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
| Severance Pay(1)($) | Accelerated Unvested Equity(2)($) | Incremental Value of Modified Vested Stock Options(2) ($) | Pension Plan Benefits not reported in Pension Plan Table(3)($) | Benefits and Perquisites(4)($) | Total($)(5) | |||||||||||||||||||
H.C. Kalkstein | ||||||||||||||||||||||||
Death | — | 719,833 | — | 1,502 | 1,125,000 | 1,846,335 | ||||||||||||||||||
Disability | — | 719,833 | — | 1,502 | — | 721,335 | ||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | 1,502 | — | 1,502 | ||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | 1,502 | — | 1,502 | ||||||||||||||||||
Termination if Change in Control | 1,170,000 | 891,266 | — | 1,502 | 97,163 | 2,159,931 | ||||||||||||||||||
Change in Control | — | — | — | 1,502 | — | 1,502 | ||||||||||||||||||
F. von Gottberg | ||||||||||||||||||||||||
Death | — | 1,499,748 | — | 2,379 | 1,170,000 | 2,672,127 | ||||||||||||||||||
Disability | — | 1,499,748 | — | 2,379 | — | 1,502,127 | ||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | 2,379 | — | 2,379 | ||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | 2,379 | — | 2,379 | ||||||||||||||||||
Termination if Change in Control | 1,260,000 | 1,809,229 | — | 2,379 | 99,627 | 3,171,235 | ||||||||||||||||||
Change in Control | — | — | — | 2,379 | — | 2,379 | ||||||||||||||||||
P.M. Prevost | 1,529,253 | 9,019,987 | 778,702 | — | 66,243 | 11,394,185 | ||||||||||||||||||
| 1. | For Mr. Prevost, severance pay is the amount payable under the terms of his transition and separation agreement, including his 2016 short-term incentive award which was deferred under the Deferred Compensation Plan. For Mr. Keohane, severance pay is equal to three times the sum of (x) base |
CABOT CORPORATION 47
Executive Compensation(continued)
| officers, severance pay is equal to two times the sum of (x) base |
| 2. a. | In connection with the termination of Mr. Prevost’s employment with the Company, the Compensation Committee accelerated the vesting of Mr. Prevost’s outstanding time-based and performance-based restricted stock unit awards, accelerated the vesting of Mr. Prevost’s outstanding unvested stock options and extended the exercise period of all outstanding stock options to the earlier of (i) October 15, 2019 and (ii) the original expiration date of the stock options. Accordingly, for Mr. Prevost, amounts include the following: (i) $1,960,656 and $778,702, representing the fair value associated with the modification of his unvested outstanding stock options and vested outstanding stock options, respectively, and (ii) $7,059,331, representing the fair value associated with the modification of the performance-based and time-based restricted stock units awarded to him for fiscal 2014, 2015 and 2016. |
| b. | For |
| 3. |
| a. | For Messrs. Keohane, Cordeiro, Berube, Kalkstein, and von Gottberg, the amounts that would be payable under the Cash Balance Plan |
CABOT CORPORATION 59
| 2017 PROXY STATEMENT |
Executive Compensation(continued)
| b. | For Mr. Cross, the |
| 4. | Continued perquisites and benefits include only those benefits provided to a named executive |
| 5. |
| Payments do not take into account the “better of” provision in the Severance Plan described above on page |
4860 CABOT CORPORATION
Proposal 2 — Advisory Approval of Executive Compensation
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, we are providing stockholders the opportunity to vote on anon-binding, advisory resolution to approve the compensation of our named executive officers as disclosed on pages 21-4824 - 60 of this proxy statement (commonly referred to as “say-on-pay”“say-on-pay”).
The compensation we paid toFor our named executive officers forother than Mr. Prevost, the compensation they received in fiscal year 20132016 appropriately aligned executive pay with our corporate performance. The portion of the short-term incentive awards paid on the basis of our corporate performance paid out at 99.5% of target awards. The performance-based restricted stock unit awards issued under our long-term incentive program are designed to produce the greatest rewards when strong results are sustained over time. Specifically, the number of shares issuable upon their vesting depends on the degree of achievement of financial performance metrics for each year within a three-year performance cycle. On the basis of our level of achievement against the adjusted EPS and our performance. During fiscal 2013,adjusted RONA goals applicable to the performance-based restricted stock unit awards that were granted in 2014 and vested in 2016, our named executive officers continuedreceived shares of stock equal to provide outstanding leadership in the execution41.5% of our strategic goals, and we continued to strengthen our global leadership position in specialty chemicals andtheir target awards. Our fiscal 2016 performance materials. Our important accomplishments are highlightedis summarized in the Executive Summary of our Compensation Discussion and Analysis. Despite our achievements, our financial performance for the year fell short of the aggressive earnings growth objectives that were established for our short-term incentive and long-term incentive programs and the payouts made under these programs reflect this performance. Under our short-term incentive plan, the portion of the payment based on the level of achievement of adjusted EBITDA was 52% of the target award. Under our long-term incentive award, on the basis of our level of achievement of adjusted EPS, adjusted ROIC and adjusted RONA, our three outstanding cycles of performance-based restricted stock units (2011, 2012 and 2013 awards) earned payouts at 49%, 34% and 0% of the target award.
The types of performance goals that we use for establishing the metrics for our executive compensation programs are the same as the ones we use when setting our business plan and the strategic objectives of the Company. The use of these metrics is intended to motivate behavior and executive decisions that will lead to the successful execution of our strategy. Our executive compensation programs also align the
interests of our shareholders and executives by tying compensation to the Company’s short- and long-term financial and strategic growth objectives. We believe this will create value for our shareholders over time as reflected in long-term total shareholder returns.time.
For these reasons, the Board is asking stockholders to support this proposal.
The text of the resolution is as follows:
“VOTED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and the narrative discussion, is hereby APPROVED.”
Vote Required
Because the vote we are asking you to cast isnon-binding, there is no minimum vote required for approval. Our Board and the Compensation Committee value the views of our shareholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers. We believe that Cabot benefits from constructive dialog with our shareholders. We will continue to reach out to our shareholders on these and other important issues and we encourage our shareholders to contact us. Shareholders who wish to communicate with our Board should refer to “Communications with the Board” in this proxy statement for additional information on how to do so.
Recommendation
The Board of Directors believes that the compensation of our named executive officers is appropriate and recommends a vote “FOR” the approval of the compensation of our named executive officers.
CABOT CORPORATION 49 61
Beneficial Stock OwnershipProposal 3 — Advisory Vote on Frequency of Directors, Executive Officers and Persons Owning More Than Five Percent of Common StockSay-on-Pay Vote
The following table showsIn Proposal 2, we are asking shareholders to cast an advisory vote for the amount of Cabot common stock beneficially owned as of January 17, 2014 (unless otherwise indicated) by each person known by Cabot to own beneficially more than 5% of our outstanding common stock, by each director of Cabot, by eachcompensation of our named executive officers as disclosed in this proxy statement (commonly referred to as a“say-on-pay” vote). In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, in this Proposal, we are providing stockholders the opportunity to cast an advisory vote on whether a“say-on-pay” vote should occur once every one, two or three years. This vote, like thesay-on-pay vote, is not binding on the Board.
Our Board of Directors recommends that futuresay-on-pay votes be conducted every year to provide stockholders with an opportunity to regularly evaluate the Company’s overall executive compensation program. As described in detail in the Compensation Discussion and Analysis section above, our executive compensation program is designed to provide a competitive level of total compensation necessary to attract and retain executives qualified to execute our business strategy and to motivate them to contribute to our short- and long-term success. An annual vote will provide us with regular stockholder input on our executive compensation program, and allow us to engage with stockholders to understand and respond to prior voting results and implement any appropriate changes to our program.
Vote Required
Because this proposal seeks the input of our stockholders and provides our stockholders with the option to vote to hold asay-on-pay vote once every one, two or three years, there is no minimum vote requirement for this proposal. Although our Board recommends holding asay-on-pay vote every year, you have the option to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. You are not voting to approve or disapprove of the Board’s recommendation.
The text of the resolution is as follows:
“VOTED, that the option of once every one, two or three years that receives the highest number of votes properly cast for this resolution will be determined to be the preferred frequency recommended by all directors, nominees for director andthe stockholders of the Company with which the Company is to hold anon-binding, advisory stockholder vote to approve the compensation of the Company’s named executive officers in accordance with Section 14A of Cabot asthe Securities Exchange Act of 1934.”
Recommendation
The Board of Directors recommends that you vote to conduct a group. Unless otherwise indicated, each person has sole investmentnon-binding, advisory vote on executive compensation “EVERYYEAR.”
Although this advisory vote isnon-binding on our Board, our Board and the Compensation Committee will review the voting power overresults and take them into consideration when determining the securities listed in the table.frequency of futuresay-on-pay votes.
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50 CABOT CORPORATION
Proposal 4 — Approval of 2017 Long-Term Incentive Plan
We are asking stockholders to approve the Cabot Corporation 2017 Long-Term Incentive Plan (the “2017 Plan”). The Board, upon the recommendation of the Compensation Committee (the “Committee”), approved the 2017 Plan, subject to stockholder approval, to replace the Cabot Corporation 2009 Long-Term Incentive Compensation Plan (the “2009 Plan”). The 2009 Plan was approved by our stockholders on March 12, 2009 and amended on March 8, 2012. The 2017 Plan will not become effective unless it is approved by our stockholders. If the 2017 Plan is approved by our stockholders, we will no longer make grants under the 2009 Plan. The material features of the 2017 Plan are described under “Summary of the 2017 Plan” below.
The Board believes that the 2017 Plan will promote the interests of our stockholders and is consistent with principles of good corporate governance, including the following:
| • |
| No Liberal Share Recycling.Shares underlying stock options and other awards delivered under the |
| Limitations on |
| Performance Awards.Under the |
| No Discounted Stock Options or SARs.All stock options and SARs granted under the 2017 Plan must have an exercise or base price that is not less than the fair market value of |
| • | No Repricing.Other than in connection with certain corporate transactions or changes to our capital structure, the 2017 Plan prohibits the repricing of stock options or SARs without obtaining stockholder approval. |
| • | No Single-Trigger Vesting upon a |
Reasons for Seeking Stockholder Approval
The Board believes that equity awards are a critical part of our overall compensation program and allow us to attract and retain key talent, incentivize sustainable growth and long-term value creation, and align the interests of our employees with those of our stockholders. The Board approved the 2017 Plan because it believes, based in part on input from Pearl Meyer, the independent compensation consultant to the Committee, that we will not have a sufficient number of shares available under the 2009 Plan following our annual grant of equity awards in November 2017 to continue to provide equity incentives at our current levels. As of September 30, 2016, there were 2,036,109 shares available for grant under the 2009 Plan. In setting the size of the share pool under the 2017 Plan, the Board considered the historical amounts of equity awards granted by Cabot in the last three years. In fiscal 2014, 2015 and 2016, we made equity awards under the 2009 Plan totalling 525,240 shares, 590,032 shares, and 827,660 shares, respectively (with performance-based awards measured at target). Our three-year average burn rate — the number of shares granted in each fiscal year divided by the weighted shares of our common stock outstanding at fiscal year end — is 1.02%. The 2009 Plan has a fungible share design under which each stock option and SAR granted under the 2009 Plan counts against the share pool as one share and each other equity award counts against the share pool as 2.1 shares. Applying the 2.1 fungible ratio contained in the 2009 Plan, these equity awards over the last three years, on average, have counted each year as 1,304,326 shares against the share pool available for issuance under the 2009 Plan (with performance-based awards measured at maximum). In setting the size of the share pool under the 2017 Plan, the Board also considered the total amount of
CABOT CORPORATION 51 63
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
equity awards outstanding under existing grants as of September 30, 2016, as further shown in the chart below. In November 2016, we made equity awards under the 2009 Plan totalling 548,422 shares (with performance-based awards measured at target), which counted as 1,113,837 shares against the share pool available for issuance under the 2009 Plan (with performance-based awards measured at maximum). Based on an analysis by Pearl Meyer of the remaining shares available for grant under the 2009 Plan, the number of equity awards outstanding under the 2009 Plan, our historic burn rate, current and proposed plan features and the equity plan guidelines established by proxy advisory firms, the Board approved the 2017 Plan and the share pool authorized under it to ensure that we continue to have the ability to provide industry competitive long-term incentive compensation. Based on these same factors, we estimate that the availability of 5,375,000 shares, plus certain shares that would otherwise have become available again for grant under the 2009 Plan under its terms, will provide a sufficient additional number of shares to enable us to continue to make equity awards at our historical average annual rates for the next five years.
In addition, stockholder approval of the 2017 Plan will allow us to grant, if desired, performance-based compensation that is exempt from the deduction limitations under Section 162(m). Section 162(m) generally provides that compensation paid by a publicly-held corporation to its “covered employees” (the corporation’s chief executive officer and its three most highly-paid named executive officers (other than its chief executive officer or chief financial officer)) is not deductible by the corporation for U.S. federal income tax purposes for any taxable year to the extent it exceeds $1 million. This limitation does not apply to compensation that qualifies as exempt performance-based compensation by meeting certain requirements under Section 162(m), including the requirement that the material terms of the related performance goals be disclosed to and approved by the corporation’s stockholders not less frequently than every five years. Under Section 162(m), the material terms include the class of eligible employees, a description of the business criteria on which the performance goals may be based and the maximum amount that can be paid to any participant for a specified period. For the 2017 Plan, these terms are described below under “Eligibility,” “Performance Criteria,” and “Individual Limits,” respectively. Although stockholder approval is one of the requirements for exemption under Section 162(m), even with stockholder approval, there can be no guarantee that compensation will be treated as exempt performance-based compensation. Furthermore, the Committee will continue to have the authority under the 2017 Plan to provide compensation that is not exempt from the limits on deductibility under Section 162(m).
If the 2017 Plan is not approved by our stockholders, the 2017 Plan will not become effective and we will continue to make awards under the 2009 Plan, but the shares that remain available would be insufficient following our annual grant of equity awards in November 2017 to continue to provide equity incentives at our current levels, and will materially affect our ability to attract and retain key talent. We believe that the terms of the 2017 Plan, including its share pool, are reasonable, appropriate, and in the best interests of our stockholders.
Existing Equity Plan Information
The 2009 Plan is the only current long-term incentive plan of the Company under which equity awards may be granted to our employees and other service providers (not includingnon-employee directors). As of September 30, 2016, 2,036,109 shares were available for grant under the 2009 Plan. If the 2017 Plan is approved by our stockholders, we will cease granting awards under the 2009 Plan and the 2017 Plan will be our only equity plan under which we may grant future equity awards to our employees. Awards tonon-employee directors will continue to be made under the Company’s 2015 Directors’ Stock Compensation Plan.
64 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
The table below includes aggregated information regarding awards outstanding under the 2009 Plan as of September 30, 2016, the number of shares available for future awards under each of our 2009 Plan and the 2015 Directors’ Stock Compensation Plan as of September 30, 2016, and the proposed number of shares issuable under the 2017 Plan.
| Number of shares (as of September 30, 2016) | As a of stock | |||||||
Outstanding stock options | 1,522,269 | 2.4 | % | |||||
Outstanding restricted stock units (with performance-based restricted stock units measured at target performance) | 731,646 | 1.2 | % | |||||
Total shares subject to outstanding awards | 2,253,915 | 3.6 | % | |||||
Total shares available for future awards under 2009 Plan(1) | 2,036,109 | 3.3 | % | |||||
Total shares available for future awards under the 2015 Directors’ Stock Compensation Plan | 330,363 | 0.5 | % | |||||
Total overhang (total shares outstanding under existing equity awards and total shares available under existing plans) | 4,620,387 | 7.4 | % | |||||
Proposed shares available for future awards under 2017 Plan(2) | 5,375,000 | 8.6 | % | |||||
Total shares outstanding under existing equity awards and proposed to be reserved for issuance under 2017 Plan | 7,959,278 | 12.8 | % | |||||
| (1) | We will cease granting new awards under our 2009 Plan if the 2017 Plan is approved by our stockholders and, except as described below under “Authorized Shares,” the shares remaining available for issuance under the 2009 Plan will not be rolled into, or otherwise available for delivery, under the 2017 Plan. |
| (2) | For purposes of determining shares available under the 2017 Plan, each share subject to a stock option or SAR will count as one share and each share subject to any other award will count as 2.4 shares. Because the 2017 Plan does not specify a mix of stock options and SARs, on the one hand, and other awards, on the other, it is not possible to determine the amount of subsequent dilution that may ultimately result from such awards. Other share-counting provisions, including adjustments to the numbers of shares available under the 2017 Plan, are described below under “Authorized Shares.” |
Summary of the 2017 Plan
The following is a brief summary of the material features of the 2017 Plan. A copy of the 2017 Plan is attached as Appendix A to this Proxy Statement, and we urge stockholders to read it in its entirety. The following summary is qualified in its entirety by reference to the full text of the 2017 Plan.
Administration.The 2017 Plan is administered by the Committee, which has the discretionary authority to, among other things, interpret the 2017 Plan, determine eligibility for and grant awards, determine, modify or waive the terms and conditions of any award, determine the form of settlement of awards, prescribe forms, rules and procedures for awards and otherwise do all things necessary to carry out the purposes of the 2017 Plan. Determinations of the Committee under the 2017 Plan will be conclusive and bind all parties. The Committee may delegate certain of its powers under the 2017 Plan to one or more of its members or members of the Board, officers of the Company or other employees or persons. As used in this summary, the term “Committee” refers to the Committee or its authorized delegates, as applicable.
Eligibility.Key employees, consultants and advisors of the Company or its affiliates, and certain other individuals who are reasonably anticipated to begin providing direct services to the Company or its affiliates within twelve (12) months after the date of grant of an award, are eligible to participate in the 2017 Plan. Eligibility for stock options intended to be incentive stock options (“ISOs”) is limited to employees of the Company or certain affiliates.Non-employee directors are not eligible to participate in the 2017 Plan for so long as the Company’s 2015 Directors’ Stock Compensation Plan is in effect. As of January 18, 2017, we estimate that approximately 140 employees and no consultants or advisors would be eligible to participate in the 2017 Plan.
CABOT CORPORATION 65
| 2017 PROXY STATEMENT |
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
Authorized Shares.Subject to adjustment as described below, the maximum number of shares of our common stock that may be delivered in satisfaction of awards under the 2017 Plan is 5,375,000, plus the number of shares that are subject to awards under the 2009 Plan (which shall not exceed 2,769,538 shares) and expire or are terminated, surrendered or cancelled without the delivery of shares, or are forfeited or reacquired by the Company under the terms of the 2009 Plan (the “Share Pool”). The following rules apply in respect of the Share Pool:
Shares that may be delivered under the 2017 Plan may be authorized but unissued shares or previously issued shares acquired by the Company. The closing price of our common stock as reported on the New York Stock Exchange on January 18, 2017 was $53.82 per share.
Individual Limits.With respect to any person in any fiscal year, the maximum number of shares for which stock options may be granted, the maximum number of shares subject to SARs that may be granted, and the maximum number of shares subject to awards other than stock options, SARs and cash awards that may be granted is, in each case, 500,000 shares. The maximum amount that may be paid to any person in any fiscal year in respect of cash awards is $10 million.
Types of Awards.The 2017 Plan provides for the grant of stock options, SARs, restricted and unrestricted stock and stock units, performance awards, cash awards and other awards that are convertible into or otherwise based on our common stock. Dividend equivalents may also be provided in connection with awards under the 2017 Plan.
| • | Stock Options and SARs.The Committee may grant stock options, including ISOs, and SARs. A stock option is a right entitling the holder to acquire shares of our common stock upon payment of the applicable exercise price. A SAR is a right entitling the holder upon exercise to receive an amount (payable in cash or shares of equivalent value) equal to the excess of the fair market value of the shares subject to the right over the base value from which appreciation is measured. The exercise price of each stock option, and the base value of each SAR, granted under the 2017 Plan shall be no less than 100% of the fair market value of a share of our common stock on the date of grant (110% in the case of certain ISOs). Other than in connection with certain corporate transactions or changes to our capital structure, stock options and SARs granted under the 2017 Plan may not be repriced or substituted for by new stock options or SARs having a lower exercise price or base value, nor may any consideration be paid upon the cancellation of any stock options or SARs that have a per share exercise or base price greater than the fair market value of a share of our common stock on the date of such cancellation, in each case, without stockholder approval. Each stock option and SAR will have a maximum term not more than ten years from the date of grant (or five years, in the case of certain ISOs). |
| • | Restricted and Unrestricted Stock and Stock Units.The Committee may grant awards of stock, stock units, restricted stock and restricted stock units. A stock unit is an unfunded and unsecured promise, denominated in shares, to deliver shares or cash measured by the value of shares in the future, and a restricted stock unit is a stock unit that is subject to the satisfaction of specified performance or other vesting conditions. Restricted stock is stock subject to restrictions requiring that it be redelivered or offered for sale to us if specified conditions are not satisfied. |
| • | Performance Awards.The Committee may grant performance awards, which are awards subject to performance criteria. The Committee may grant performance awards that are intended to qualify as exempt performance-based compensation under Section 162(m) and awards that are not intended to so qualify. |
| • | Other Stock- and Cash-Based Awards.The Committee may grant other incentives payable in cash or in shares of our common stock, subject to such terms and conditions as are determined by the Committee. |
| • | Substitute Awards.The Committee may grant Substitute Awards, which may have terms and conditions that are inconsistent with the terms and conditions of the 2017 Plan. |
66 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
Vesting; Terms of Awards.The Committee determines the terms of all awards granted under the 2017 Plan, including the time or times an award will vest or become exercisable, the terms on which awards will remain exercisable and the effect of termination of a participant’s employment or service on awards. The Committee may at any time accelerate the vesting or exercisability of an award.
Transferability of Awards.Except as the Committee may otherwise determine, awards may not be transferred other than by will or by the laws of descent and distribution.
Performance Criteria. The 2017 Plan provides for grants of performance awards subject to “performance criteria.” Performance criteria with respect to those awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) are limited to objectively determinable measure(s) of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices or a peer group of select group of companies): sales; revenues; assets; costs; earnings before or after deduction for all or any portion of interest, taxes, depreciation or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios or metrics; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; productivity measures; one or more working capital measures; stock price; or stockholder return or shareholder value; sales of particular products or services; customer acquisition or retention; collection of outstanding accounts or debts; safety, health or environmental affairs performance; compliance; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs,split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity); or refinancings.
Performance criteria and any related targets need not be based on an increase, a positive or improved result or avoidance of loss. To the extent consistent with the requirements of Section 162(m), the Committee may establish, by the deadline that otherwise applies to the establishment of the terms of an award, that one or more of the applicable performance criteria will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, other unusual or infrequently occurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the applicable performance period that affect the applicable performance criteria.
Effect of Certain Transactions.In the event of a consolidation, merger or similar transaction in which the Company is not the surviving corporation, the sale of all or substantially all of the Company’s assets or common stock, or a dissolution or liquidation of the Company, the Committee may, with respect to outstanding awards, provide for:
Adjustment Provisions.In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in our capital structure, the Committee shall make appropriate adjustments to the maximum number of shares that may be delivered under the 2017 Plan; the individual award limits; the number and kind of securities subject to, and, if applicable, the exercise price of, outstanding awards; and any other provisions affected by such event.
Clawback.The Committee may cancel, rescind or otherwise limit or restrict awards if a participant is not in compliance with the provisions of the 2017 Plan or the applicable award agreement or if the participant breaches any restrictive covenant agreement with the Company, and may recover any awards or payments or shares received in respect of awards or gain in respect of any award in accordance with any applicable Company clawback or recoupment policy or as otherwise required by applicable law or stock exchange listing standards.
Effective Date, Amendments and Termination.If the 2017 Plan is approved by our stockholders, the 2017 Plan will become effective as of the date of such approval. No awards will be granted after the tenth anniversary of such approval. The Committee may at any time amend the 2017 Plan or any outstanding award and may at any time termi-
CABOT CORPORATION 67
| 2017 PROXY STATEMENT |
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
nate the 2017 Plan as to future grants. However, except as expressly provided in the 2017 Plan, the Committee may not alter the terms of an award so as to materially and adversely affect a participant’s rights without the participant’s consent (unless the Committee expressly reserved the right to do so at the time of the award). Any amendments to the 2017 Plan will be conditioned on stockholder approval to the extent required by law or applicable stock exchange requirements.
Certain Federal Income Tax Consequences
The following is a summary of certain U.S. federal income tax consequences associated with certain awards granted under the 2017 Plan. The summary does not purport to cover federal employment tax or other U.S. federal tax consequences that may be associated with the 2017 Plan, nor does it cover state, local ornon-U.S. taxes, except as may be specifically noted.
Stock Options (other than ISOs).In general, a participant has no taxable income upon the grant of a stock option that is not intended to be an ISO (an “NSO”) but realizes income in connection with the exercise of the NSO in an amount equal to the excess (at the time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price. A corresponding deduction is generally available to the Company. Upon a subsequent sale or exchange of the shares, any recognized gain or loss is treated as a capital gain or loss for which the Company is not entitled to a deduction.
ISOs.In general, a participant realizes no taxable income upon the grant or exercise of an ISO. However, the exercise of an ISO may result in an alternative minimum tax liability to the participant. Generally, a disposition of shares purchased pursuant to an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the participant (and generally a deduction to the Company) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is treated as a capital gain for which the Company is not entitled to a deduction. If the participant does not dispose of the shares until after the expiration of theseone- andtwo-year holding periods, any gain or loss recognized upon a subsequent sale of shares purchased pursuant to an ISO is treated as a long-term capital gain or loss for which the Company is not entitled to a deduction.
SARs.The grant of a SAR does not itself result in taxable income, nor does taxable income result merely because a SAR becomes exercisable. In general, a participant who exercises a SAR for shares of stock or receives payment in cancellation of a SAR will have ordinary income equal to the amount of any cash and the fair market value of any stock received. A corresponding deduction is generally available to the Company.
Unrestricted Stock Awards.A participant who purchases or is awarded unrestricted stock generally has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company.
Restricted Stock Awards.A participant who is awarded or purchases shares subject to a substantial risk of forfeiture generally does not have income until the risk of forfeiture lapses. When the risk of forfeiture lapses, the participant has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company. However, a participant may make an election under Section 83(b) of the Code to be taxed on restricted stock when it is acquired rather than later, when the substantial risk of forfeiture lapses. A participant who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of acquisition less any price paid for the shares. A corresponding deduction will generally be available to the Company. If a participant makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions.
For purposes of determining capital gain or loss on a sale of shares awarded under the 2017 Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. The participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. However, if a participant makes an effective 83(b) election and later forfeits the shares, the tax loss realized as a result of the forfeiture is limited to the excess of what the participant paid for the shares (if anything) over the amount (if any) realized in connection with the forfeiture.
68 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Proposal 4 — Approval of 2017 Long-Term Incentive Plan(continued)
Restricted Stock Units.The grant of a restricted stock unit does not itself generally result in taxable income. Instead, the participant is generally taxed upon vesting (and a corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is cash settled) under Section 409A of the Code. If the shares delivered are restricted for tax purposes, the participant will instead be subject to the rules described above for restricted stock.
Section 162(m). Stock options, SARs, and certain performance awards under the 2017 Plan may be eligible for exemption from the deductibility limits of Section 162(m). However, the Compensation Committee will have discretionary authority to provide compensation that is not exempt from the limits on deductibility under Section 162(m).
Certain Change in Control Payments.Under Section 280G of the Code, the vesting or accelerated exercisability of options or the vesting and payments of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards may be subject to an additional 20% federal tax and may benon-deductible to the Company.
New Plan Benefits
Because awards under the 2017 Plan will be granted in the discretion of the Committee, the type, number, recipients and other terms of such awards cannot be determined at this time.
Vote Required
The 2017 Plan will be approved upon the affirmative vote of a majority of the votes cast on the proposal.
Recommendation
The Board recommends that you vote “FOR” the approval of the Cabot Corporation 2017 Long-Term Incentive Plan.
CABOT CORPORATION 69
| 2017 PROXY STATEMENT |
The Audit Committee of the Board of Directors is comprised of seven fivenon-employee directors. The Board has determined that all of the members of the Audit Committee satisfy the requirements of the New York Stock Exchange (“NYSE”) as to independence and financial literacy. TheIn addition, the Board has determined that Mr. Kaji, Mr. MacLeod, Mr. McGillicuddy Ms. Rataj and Dr. Thomas are audit committee financial experts as defined by SEC rules. TheOur responsibilities of the Audit Committee are set forth in itsour written charter and are described above under the heading “The Board of Directors and its Committees — Audit Committee” on page 4. 5.
We have sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm. We have appointed Deloitte & Touche LLP (“D&T”) Cabot’s independent registered public accounting firm annually since 2007. In accordance with SEC rules and D&T’s policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide services to us. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. In fiscal 2016, the Audit Committee, after consultation with management, approved the appointment of a new lead audit partner pursuant to this policy.
One of the Committee’sour primary responsibilities is to assist the Board in its oversight of the quality and integrity of Cabot’s financial statements. The following report summarizes certain of the Committee’s activities in this regardWe met ten times during fiscal 2013.2016. A number of those meetings included individual meetings in executive session with D&T and with Cabot’s Chief Financial Officer, Corporate Controller, Director of Internal Audit, and General Counsel. We took numerous actions to discharge our oversight responsibility with respect to the audit process, which are summarized below.
Review of Audited Financial Statements with Management
The Audit CommitteeWe reviewed and discussed with management Cabot’s audited consolidated financial statements for the fiscal year ended September 30, 2013.2016.
Review of Financial Statements and Other Matters with Independent Registered Public Accounting Firm
The Audit CommitteeWe discussed with Deloitte & Touche LLP (“D&T”)&T Cabot’s audited consolidated financial statements for the fiscal year ended September 30, 2013,2016, including the matters required to be communicated by the standards of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit CommitteeThis included a discussion of accounting policies and practices critical to our financial statements. We also received the written disclosures and the letter from D&T required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and discussed with D&T its independence from Cabot. In addition, the Audit Committeewe discussed Cabot’s internal controls over financial reporting and management’s assessment of the effectiveness of those controls with management, Cabot’s internal auditors and D&T. We reviewed with both D&T and Cabot’s internal auditors their audit plans, audit scope and identification of audit risks. We also discussed the results of the internal audit examinations with and without management present. In addition, any reports or concerns the Company receives relating to financial matters are communicated directly to the Chair of the Audit Committee.
Recommendation that Financial Statements be Included in Annual Report
Based on the reviews and discussions referred to above, the Audit Committeewe recommended to the Board of Directors that the audited financial statements be included in
Cabot’s Annual Report on Form10-K for the fiscal year ended September 30, 20132016 for filing with the SEC.
|
|
SEC, and appointed D&T was Cabot’sas our independent registered public accounting firm for fiscal 2013 and 2012. 2017.
John K. McGillicuddy (Chair)
Juan Enriquez
William C. Kirby
Roderick C.G. MacLeod
Lydia W. Thomas
70 CABOT CORPORATION
| 2017 PROXY STATEMENT |
Audit Committee Matters(continued)
Fees for professional services rendered by D&T for fiscal 20132016 and 20122015 were as follows:
| Fiscal 2013 | Fiscal 2012 | Fiscal 2016 | Fiscal 2015 | |||||||||||||
Audit Fees | $ | 4,814,000 | $ | 6,077,000 | $ | 4,619,000 | $ | 5,304,000 | ||||||||
Audit-Related Fees | $ | 363,000 | $ | 1,203,000 | $ | 118,000 | $ | 40,000 | ||||||||
Tax Fees | $ | 369,000 | $ | 274,000 | $ | 10,000 | $ | 12,000 | ||||||||
All Other Fees | $ | 0 | $ | 494,000 | $ | 0 | $ | 0 | ||||||||
The audit services for each of fiscal 20132016 and 20122015 include professional services for the audit of Cabot’s consolidated financial statements included in the Annual Report on Form10-K (including audit of internal control over financial reporting) and review of financial statements included in Cabot’s Quarterly Reports on Form10-Q, consultations regardingon-going financial accounting matters, and services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. Statutory audit fees in foreign jurisdictions are billed in local currency.
The audit-related services for each of fiscal 2013 and 20122016 consisted primarily of fees for: (i) auditscertain agreed upon procedures performed and related to regulatory compliance matters; (ii) comfort letter procedures; and (iii) other attest services. During fiscal 2015, audit-related services consisted of employee pension and other benefit plans; (ii)fees for (i) certain agreed upon procedures performed and related to regulatory compliance matters; and (iii) due diligence matters.(ii) other attest services
For fiscal 20132016 and 2012,2015, tax services consisted primarily of fees for tax advisory services. During fiscal 2015, tax services also included fees for tax compliance and preparation services and tax advisory services.
For fiscal 2012, other fees consisted primarily of fees for advisory services related to acquisition integration activities.
Audit CommitteePre-Approval Policy
The Audit Committee has adopted a policy requiring thepre-approval of audit andnon-audit services to be provided by Cabot’s independent registered public accounting
52 CABOT CORPORATION
Audit Committee Matters(continued)
firm. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the auditor’s independence is not impaired; describes the audit, audit-related, tax and other services that may be provided and thenon-audit services that are prohibited; and sets forthpre-approval requirements for all permitted services. In some cases,pre-approval is provided by the full Audit Committee for the applicable fiscal year for a particular category or group of services, subject to an authorized amount. In other cases, the Audit Committee specificallypre-approves services. To ensure compliance with the policy, the Audit Committee
requires the independent registered public accounting firm to report on actual fees charged for each category of services at least quarterly. The Audit Committee has delegated authority to the Chair of the Committee topre-approve additional services that need to be approved between scheduled Audit Committee meetings, provided that the estimated fee for any such services does not exceed $100,000, and any suchpre-approvals must then be communicated to the full Audit Committee.
All of the services described above for fiscal 20132016 and 20122015 werepre-approved by the Audit Committee or Committee Chair.
CABOT CORPORATION 53 71
Proposal 35 — Ratification of Appointment of Independent Registered Public Accounting Firm
Introduction
The Audit Committee has appointed Deloitte & Touche LLP (“D&T”) to serve as Cabot’s independent registered public accounting firm for its fiscal year ending September 30, 2014.2017. The Sarbanes-Oxley Act of 2002 requires the Audit Committee to be directly responsible for the appointment, compensation and oversight of the audit work of the independent registered public accounting firm. However, the Board of Directors is submitting the appointment of D&T to the stockholders for ratification as a matter of good corporate practice. Should the stockholders fail to ratify the appointment of D&T, the Audit Committee may reconsider the appointment and may retain D&T or another accounting firm without resubmitting the matter to stockholders. Even if the stockholders ratify the appointment of D&T, the Audit Committee may select another firm if it determines such selection to be in the best interest of Cabot and its stockholders.
Representatives from D&T are expected to be present at the 20142017 Annual Meeting. The representatives will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from Cabot’s stockholders.
Vote Required
Approval of this proposal requires the affirmative vote of a majority of the votes properly cast on the proposal.
Recommendation
The Board of Directors recommends that you vote “FOR” the ratification of the Audit Committee’s appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for fiscal 2014.2017.
5472 CABOT CORPORATION
Equity Compensation Plan Information
The following table provides information as of September 30, 2016 about: (i) the number of shares of common stock that may be issued upon exercise of outstanding options and vesting of restricted stock units; (ii) the weighted-average exercise price of outstanding options; and (iii) the number of shares of common stock available for future issuance under our active plans: the 2009 Long-Term Incentive Plan and the 2015 Directors’ Stock Compensation Plan. All of our equity compensation plans have been approved by our stockholders.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) | �� | Weighted- exercise outstanding warrants (b)(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)(3) | ||||||||
Equity compensation plans approved by security holders | 2,373,042 | $ | 37.72 | 2,366,472 | ||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||||
| (1) | Includes (i) 1,522,269 shares issuable upon exercise of outstanding stock options, (ii) 443,258 shares issuable upon vesting of time-based restricted stock units, (iii) 151,115 shares issuable upon vesting of performance-based restricted stock units based upon the achievement of the annual financial performance metrics for the three years within the three-year performance period of the fiscal 2014 awards, the first two years within the three-year performance period of the fiscal 2015 awards, and the first year within the three-year performance period of the fiscal 2016 awards; and (iv) 256,400 shares issuable upon vesting of the performance-based restricted stock units attributable to year three of the fiscal 2015 awards and years two and three of the fiscal 2016 awards, assuming Cabot performs at the maximum performance level in each of those years. If, instead, Cabot performs at the target level of performance in those years, a total of 137,273 shares would be issuable for year three of the fiscal 2015 awards and years two and three of the fiscal 2016 awards. |
| (2) | The weighted-average exercise price includes all outstanding stock options but does not include restricted stock units which do not have an exercise price. |
| (3) | Of these shares, (i) 2,036,109 shares remain available for future issuance under our 2009 Long-Term Incentive Plan, and (ii) 330,363 remain available for future issuance under our 2015 Directors’ Stock Compensation Plan. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC and to furnish us with copies of the forms they file. Based on our review of filings made with the SEC and representations made by our directors and executive officers, we believe that all of our directors and executive officers timely filed all reports that were required to be filed under Section 16(a) during the fiscal year ended September 30, 2013.2016, other than a report by Mr. Prevost reporting his diversification out of the Cabot stock fund under our 401(k) Plan.
Future Stockholder Proposals and Director Nominations
AnyA stockholder proposal intended for inclusion in Cabot’s proxy statement for the 2015 Annual Meeting of Stockholders must be received by Cabot at its offices at Two Seaport Lane, Suite 1300, Boston, Massachusetts02210-2019, by October 1, 2014 and should be sent to the attention of the Corporate Secretary. If a stockholder of the Companywho intends to present a proposal at the 20152018 Annual Meeting of Stockholders without including it in Cabot’s proxy statement, such stockholder must comply with the advance notice provisions of Cabot’s By-Laws. Those provisions require that Cabot receiveand who wishes the proposal to be included in our proxy materials for that meeting must submit the proposal in writing to us so that we receive it no later than October 2, 2017. A stockholder who intends to present a proposal at its offices at Two Seaport Lane, Suite 1300, Boston, Massachusetts 02210-2019, attention Corporate Secretary,the 2018 Annual Meeting of Stockholders but does not wish the proposal to be included in our proxy materials for that meeting must provide written notice of the proposal to us no earlier than December 14, 2014,9, 2017 and notno later than January 13, 2015.8, 2018. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements. Ourby-laws, which are available on our website, describe the requirements for submitting proposals at the Annual Meeting. A stockholder who wishes to nominate a director at the 2018 Annual Meet-
CABOT CORPORATION 73
| 2017 PROXY STATEMENT |
Other Information(continued)
ing of Stockholders must notify us in writing no earlier than December 9, 2017 and no later than January 8, 2018. The notice must be given in the manner and must include the information and representations required by ourby- laws.
We are providing without charge, to each person from whom a proxy is solicited, a copy of our Annual Report on
Form10-K, including the financial statements and schedules, for fiscal 2013.2016. To request an additional copy of the Form10-K, please write to Corporate Secretary, Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, MA 02210-2019.
The cost of soliciting proxies in the enclosed form will be borne by Cabot. In addition to solicitation by mail, officers and other employees of Cabot may solicit proxies personally, by telephone and by facsimile. Cabot may request banks and brokers or other similar agents or fiduciaries to transmit the proxy material to the beneficial owners for their voting instructions and will reimburse them for their expenses in so doing. D.F. King & Co., Inc., New York, New York, has been retained to assist Cabot in the solicitation of proxies atfor a fee estimated not to exceed $14,000.of $13,500.
Management does not know of any matters to be presented at the 20142017 Annual Meeting other than those set forth in the Notice of Annual Meeting of Stockholders. However, if any other matters properly come before the 20142017 Annual Meeting that require a vote, the persons named in the enclosed form of proxy intend to vote the shares to which the proxy relates on such matters in accordance with their best judgment unless otherwise specified in the proxy.
By order of the Board of Directors,
Jane A. Bell
Secretary
Boston, Massachusetts
January 28, 201427, 2017
74CABOT CORPORATION 55
Non-GAAP Financial Measures2017 Long-Term Incentive Plan
The discussion of our results in the CD&A section of this proxy statement includes a discussion of our adjusted EPS, adjusted EBITDA, adjusted ROIC and adjusted RONA.Cabot Corporation
Adjusted EPS2017 LONG-TERM INCENTIVE PLAN
Adjusted EPS (earnings per share) is a non-GAAP financial measure because it excludes from net income certain items of expense or income that management does not consider representative of our ongoing performance. For 2013, the certain items were primarily for global restructuring activities, acquisition and integration-related charges, and certain tax matters.(effective March , 2017)
A reconciliation of adjusted EPS to EPS from continuing operations, the most directly comparable GAAP financial measure, is set forth below.
| (per share) | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||
Net income (loss) per diluted common share attributable to Cabot Corporation | $ | (1.25 | ) | $ | 2.35 | $ | 3.57 | $ | 5.99 | $ | 2.36 | |||||||||
Less: Net income (loss) per diluted common share from discontinued operations | $ | (0.04 | ) | $ | 0.41 | $ | 0.80 | $ | 3.16 | $ | 0.04 | |||||||||
Net income (loss) per diluted common share from continuing operations | $ | (1.21 | ) | $ | 1.94 | $ | 2.77 | $ | 2.83 | $ | 2.32 | |||||||||
Less: Certain items per share | $ | (1.06 | ) | $ | (0.46 | ) | $ | 0.34 | $ | (0.49 | ) | $ | (0.59 | ) | ||||||
Adjusted earnings per share | $ | (0.15 | ) | $ | 2.40 | $ | 2.43 | $ | 3.32 | $ | 2.91 | |||||||||
Adjusted EBITDA*
A calculation of adjusted EBITDA (earnings before interest, tax, depreciation and amortization) is set forth below.
| (dollars in millions) | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||
Total Segment EBIT** | $ | 61 | $ | 314 | $ | 354 | $ | 409 | $ | 384 | ||||||||||
Less: adjustments to depreciation | $ | 36 | $ | 11 | $ | 1 | $ | 4 | $ | (4 | ) | |||||||||
Plus: unallocated corporate costs | $ | (36 | ) | $ | (48 | ) | $ | (53 | ) | $ | (56 | ) | $ | (49 | ) | |||||
Plus: depreciation and amortization | $ | 169 | $ | 143 | $ | 142 | $ | 154 | $ | 190 | ||||||||||
Adjusted EBITDA | $ | 158 | $ | 398 | $ | 442 | $ | 503 | $ | 529 | ||||||||||
Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets forth certain operational rules related to those terms.
| 2. | PURPOSE |
The Plan has been established to advance the interests of the Company and its stockholders by providing for the grant to Participants of Stock-based and other incentive Awards to (i) enhance the Company’s ability to attract and retain employees, consultants, advisors and others who are in a position to make significant contributions to the success of the Company and its subsidiaries and (ii) encourage Participants to take into account the long-term interests of the Company and its stockholders through ownership of shares of Stock.
| 3. | ADMINISTRATION |
The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; determine the form of settlement of Awards (whether in cash, shares of Stock or other property); prescribe forms, rules and procedures under the Plan and for Awards; and otherwise do all things necessary to carry out the purposes of the Plan. Determinations of the Administrator made under the Plan will be conclusive and will bind all parties.
| 4. | LIMITS ON AWARDS UNDER THE PLAN |
(a) Number of Shares.Subject to the provisions of Section 7(b), the maximum number of shares of Stock that may be delivered in satisfaction of Awards under the Plan shall be 5,375,000, plus the number of shares of Stock that as of the effective date of the Plan are subject to awards under the Company’s 2009 Long-Term Incentive Plan (the “2009 Plan”) (which shall not exceed 2,769,538 shares) and that on or after the effective date of the Plan expire or are terminated, surrendered or canceled without the delivery of any shares of Stock, or are forfeited or reacquired by the Company, in accordance with the terms of such plan. Up to 5,375,000 shares of Stock set forth in the preceding sentence may be issued in satisfaction of ISOs, but nothing in this Section 4(a) will be construed as requiring that any, or any fixed number of, ISOs be awarded under the Plan. For purposes of this Section 4(a), the number of shares of Stock delivered in satisfaction of Equity Awards will be determined (i) by including shares of Stock withheld by the Company in payment of the exercise price or purchase price of the Award or an award granted under the 2009 Plan or in satisfaction of tax withholding requirements with respect to the Award or an award granted under the 2009 Plan, (ii) by including the full number of shares covered by a SAR any portion of which is settled in Stock (and not only the number of shares of Stock delivered in settlement of such Award), and (iii) by excluding any shares of Stock underlying Awards settled in cash or that otherwise expire or become unexercisable without having been exercised or that terminate or are forfeited to or repurchased by the Company due to failure to vest. For the avoidance of doubt, the number of shares of Stock available for delivery under the Plan will not be increased by any shares of Stock subject to Equity Awards that are withheld by the Company in payment of the exercise price or purchase price of the Award or in satisfaction of tax withholding requirements with respect to the Award, any shares of Stock covered by a SAR any portion of which is settled in stock, or any shares of Stock that have been delivered under the Plan and that are subsequently repurchased using proceeds directly attributable to Stock Option exercises. The limits set forth in this Section 4(a) shall be construed to comply with Section 422. To the extent consistent with the requirements of Section 422 and the regulations thereunder, and other
Adjusted ROICCABOT CORPORATION A-1
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
applicable legal requirements (including applicable stock exchange requirements), Stock issued under Substitute Awards will not reduce the number of shares available for Awards under the Plan. The number of shares of Stock that may be delivered under Substitute Awards will be in addition to the limitations set forth in this Section 4(a) on the number of shares available for issuance under the Plan, and such Substitute Awards will not be subject to theper-Participant Award limits described in Section 4(c) below.
(b)Fungible Share Plan. Each share of Stock subject to an Award consisting of Stock Options and/or SARs shall be counted against the limits set forth in Section 4(a) as one share. Each share of Stock subject to any other Award to be settled in Stock shall be counted against the limits set forth in Section 4(a) as 2.4 shares.
(c)Type of Shares.Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be delivered under the Plan.
(d)Individual Limits. The following additional limits will apply to Awards of the specified type granted or, in the case of Cash Awards, payable to any person in any fiscal year:
(1) Stock Options: 500,000 shares of Stock.
(2) SARS: 500,000 shares of Stock.
(3) Awards other than Stock Options, SARS or Cash Awards: 500,000 shares of Stock.
(4) Cash Awards: $10 million.
In calculating adjusted ROIC (return on invested capital)applying the foregoing limits, (i) all Awards of the specified type granted to the same person in the same fiscal year will be aggregated and made subject to one limit; (ii) the limits applicable to Stock Options and SARs refer to the number of shares of Stock underlying such Awards; (iii) the share limit under clause (3) refers to the maximum number of shares of Stock (determined without regard to Section 4(b)) that may be delivered, or the value of which could be paid in cash or other property, under an Equity Award or Awards of the type specified in clause (3) assuming a maximum payout; (iv) Awards other than Cash Awards that are settled in cash will count against the applicable share limit under clause (1), we divide four quarter rolling net income (loss) attributable(2) or (3) and not against the dollar limit under clause (4); and (v) the dollar limit under clause (4) refers to Cabot Corporation (less the maximum dollar amount payable under an Award or Awards of the type specified in clause (4) assuming a maximum payout. The foregoing provisions will be construed in a manner consistent with Section 162(m), including, without limitation, where applicable, the rules under Section 162(m) pertaining to permissible deferrals of exempt awards.
| 5. | ELIGIBILITY AND PARTICIPATION |
The Administrator will select Participants from among those key Employees, consultants and advisors to the Company or its Affiliates who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company and its Affiliates, or to other individuals who would otherwise meet the eligibility conditions set forth above in this Section 5 but for the fact that they are not yet an Employee, consultant or advisor if the Company reasonably anticipates that such individuals will begin providing direct services to the Company or its Affiliates within twelve (12) months after tax impactthe date of noncontrolling interestgrant of the Award to such individual (and such individuals do in net income, net interest expense,fact begin providing such services within that time period);provided, that for so long as the Company’s 2015 Directors’ Stock Compensation Plan (or any successor plan) (the “Directors’ Plan”) is in effect,non-employee members of the Board shall not be eligible to participate in this Plan and certain items)instead shall participate in the Directors’ Plan. Eligibility for ISOs is limited to employees of the Company or of a “parent corporation” or “subsidiary corporation” of the Company as those terms are defined in Section 424 of the Code.
| 6. | RULES APPLICABLE TO AWARDS |
(a)All Awards
(1)Award Provisions. The Administrator will determine the terms of all Awards, subject to the limitations provided herein. By accepting (or, under such rules as the Administrator may prescribe, being deemed to have accepted) an Award, the Participant agrees to the terms of the Award and the Plan. Notwithstanding any provision of this Plan to the contrary, Substitute Awards may contain terms and conditions that are inconsistent with the terms and conditions specified herein, as determined by the most recent four quarters’ averageAdministrator.
A-2 CABOT CORPORATION
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
(2)Term of Cabot Corporation stockholders’ equity plus noncontrolling interest’s equityPlan.No Awards may be made after the tenth anniversary of the date the Plan is approved by the Company’s stockholders, but previously granted Awards may continue beyond that date in accordance with their terms.
(3)Transferability. Neither ISOs nor, except as the Administrator otherwise expressly provides in accordance with the second sentence of this Section 6(a)(3), other Awards may be transferred other than by will or by the laws of descent and debt, less cashdistribution, and cash equivalentsduring a Participant’s lifetime ISOs (and, except as the Administrator otherwise expressly provides in accordance with the second sentence of this Section 6(a)(3), other Awards requiring exercise) may be exercised only by the Participant. The Administrator may permit Awards other than ISOs to be transferred by gift, subject to applicable securities and other laws and such limitations as the Administrator may impose.
(4)Vesting; Termination of Employment. The Administrator may determine the time or times at which an Award will vest or become exercisable, the terms on which an Award requiring exercise will remain exercisable and the four quarter rolling impacteffect of a termination of a Participant’s Employment on Awards then held by the Participant. Without limiting the foregoing, the Administrator may at any time accelerate the vesting or exercisability of an Award, regardless of any adverse or potentially adverse tax consequences resulting from such acceleration. Unless the Administrator expressly provides otherwise, however, the following rules will apply: immediately upon the cessation of the Participant’s Employment, each Award requiring exercise that is then held by the Participant or by the Participant’s permitted transferees, if any, that is then not vested and/or exercisable will terminate, and all other Awards that are then held by the Participant or by the Participant’s permitted transferees, if any, to the extent not already vested will be forfeited.
(5)Taxes. The Administrator will make such provision for the withholding of taxes as it deems necessary. The Administrator may, but need not, hold back shares of Stock from an Award (but not in excess of the maximum withholding amount consistent with the Award being subject to equity accounting treatment under applicable accounting rules (including FASB ASC Topic 718 (or any successor provision))) or permit a Participant to tender previously owned shares of Stock in satisfaction of tax withholding requirements, in each case, to the extent and in such amounts as determined by the Administrator.
(6)Dividend Equivalents, Etc. The Administrator may provide for the payment of amounts (on terms and subject to conditions established by the Administrator) in lieu of cash dividends or other cash distributions with respect to Stock subject to an Award whether or not the holder of such Award is otherwise entitled to share in the actual dividend or distribution in respect of such Award. Any entitlement to dividend equivalents or similar entitlements will be established and administered either consistent with an exemption from, or in compliance with, the requirements of Section 409A. Dividends or dividend equivalent amounts payable in respect of Awards that are subject to restrictions may be subject to such limits or restrictions as the Administrator may impose.
(7)Rights Limited. Nothing in the Plan will be construed as giving any person the right to continued employment or service with the Company or its Affiliates, or any rights as a stockholder except as to shares of Stock actually issued under the Plan. The loss of existing or potential profit in Awards will not constitute an element of damages in the event of termination of Employment for any reason, even if the termination is in violation of an obligation of the Company or any Affiliate to the Participant.
(8)Section 162(m).This Section 6(a)(8) applies to any Performance Award intended to qualify as performance-based for the purposes of Section 162(m) other than a Stock Option or SAR. In the case of any Performance Award to which this Section 6(a)(8) applies, the Plan and such Award shall be construed and administered in a manner consistent with the exemption of such Award as performance-based compensation under Section 162(m). With respect to such Performance Awards, the Administrator will establish, in writing, one or more specific Performance Criteria no later than 90 days after tax certain items. ROICthe commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the Award as performance-based under Section 162(m)). Prior to grant, vesting or payment of the Performance Award, as the case may be, the Administrator shall take such steps as are sufficient to satisfy the certification requirement of the regulations under Section 162(m) as to whether and to what extent, if at all, the Performance Criterion or Criteria applicable to such Performance Award have been satisfied. The Administrator shall then determine the actual payment, if any, under each Performance Award. Notwithstanding the foregoing, the
CABOT CORPORATION A-3
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
Administrator may, subject to the other terms of the Plan, amend a previously granted Performance Award or take any other action that disqualifies such Award from the performance-based compensation exception under Section 162(m).
(9)Coordination with Other Plans. Awards under the Plan may be granted in tandem with, or in satisfaction of or substitution for, other Awards under the Plan or awards made under other compensatory plans or programs of the Company or its Affiliates. For example, but without limiting the generality of the foregoing, awards under other compensatory plans or programs of the Company or its Affiliates may be settled in Stock (including, without limitation, Unrestricted Stock) if the Administrator so determines, in which case the shares delivered shall be treated as awarded under the Plan (and shall reduce the number of shares thereafter available under the Plan in accordance with the rules set forth in Section 4). In any case where an award is made under another plan or program of the Company or its Affiliates and such award is intended to qualify for the performance-based compensation exception under Section 162(m), and such award is settled by the delivery of Stock or another Award under the Plan, the applicable Section 162(m) limitations under both the other plan or program and under the Plan shall be applied to the Plan as necessary (as determined by the Administrator) to preserve the availability of the Section 162(m) performance-based compensation exception with respect thereto.
(10)Additional Restrictions. The Administrator may cancel, rescind, withhold or otherwise limit or restrict any Award at any time if the Participant is not in compliance with all applicable provisions of the Award agreement and the Plan, or if the Participant breaches any agreement with the Company or its Affiliates with respect tonon-competition,non-solicitation, confidentiality or other restrictive covenants. Without limiting the generality of the foregoing, the Administrator may recover Awards made under the Plan and payments or shares of Stock delivered under or gain in respect of any Award in accordance with any applicable Company clawback or recoupment policy, as such policy may be amended and in effect from time to time, or as otherwise required by applicable law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Securities Exchange Act of 1934, as amended.
(b) Awards Requiring Exercise
(1)Time and Manner of Exercise. Unless the Administrator expressly provides otherwise, an Award requiring exercise by the holder will not be deemed to have been exercised until the Administrator receives a measurenotice of financial performanceexercise (in form acceptable to the Administrator), which may be an electronic notice, signed (including electronic signature in a form acceptable to the Administrator) by the appropriate person and accompanied by any payment required under GAAP andthe Award. Any attempt to exercise a Stock Option or SAR by any person other than the Participant will not be given effect unless the Administrator has received such evidence as it may require that the person exercising the Stock Option or SAR has the right to do so.
(2)Exercise Price. The exercise price (or the base value from which appreciation is to be measured) of each Award requiring exercise shall be 100% (in the case of an ISO granted to aten-percent shareholder within the meaning of subsection (b)(6) of Section 422, 110%) of the Fair Market Value of the Stock subject to the Award, determined as of the date of grant, or such higher amount as the Administrator may determine in connection with the grant. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation,split-up,spin-off, combination, or exchange of shares) or as otherwise contemplated by Section 7 below, the Company may not, without obtaining stockholder approval, (A) amend the terms of outstanding Stock Options or SARs to reduce the exercise price or base value of such Stock Options or SARs, (B) cancel outstanding Stock Options or SARs in exchange for Stock Options or SARs with an exercise price or base value that is less than the exercise price or base value of the original Stock Options or SARs, or (C) cancel outstanding Stock Options or SARs that have aper-share exercise price or base value greater than the Fair Market Value of a share of Stock on the date of such cancellation in exchange for cash or other consideration.
(3)Payment of Exercise Price.Where the exercise of an Award is to be definedaccompanied by payment, payment of the exercise price shall be by cash or check acceptable to the Administrator, or, if so permitted by the Administrator and calculatedif legally permissible, (i) through the delivery of shares of Stock that have a Fair Market Value equal to the exercise price, (ii) through a broker-assisted exercise program acceptable to the Administrator, (iii) by other companiesmeans acceptable to the Administrator, or (iv) by any combination of the foregoing permissible forms of payment. The delivery of shares
A-4 CABOT CORPORATION
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
in payment of the exercise price under clause (i) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.
(4)Maximum Term. Awards requiring exercise will have a maximum term not to exceed ten (10) years from the date of grant (or five years from the date of grant in the case of an ISO granted to a10-percent stockholder described in Section 6(b)(2) above).
| 7. | EFFECT OF CERTAIN TRANSACTIONS |
(a)Mergers, Etc.Except as otherwise provided in an Award or by the Administrator, the following provisions shall apply in the event of a Covered Transaction and Awards may be treated as set forth in subsections (1), (2) and/or (3) below, in the discretion of the Administrator:
(1)Assumption or Substitution. If the Covered Transaction is one in which there is an acquiring or surviving entity, the Administrator may provide (A) for the assumption or continuation of some or all outstanding Awards or any portion thereof or (B) for the grant of new awards in substitution therefor by the acquiror or survivor or an affiliate of the acquiror or survivor.
(2)Cash-Out of Awards. Subject to Section 7(a)(5), the Administrator may provide for payment (a “cash-out”), with respect to some or all Awards or any portion thereof, equal in the case of each affected Award or portion thereof to the excess, if any, of (A) the Fair Market Value of one share of Stock times the number of shares of Stock subject to the Award or such portion, over (B) the aggregate exercise or purchase price, if any, under the Award or such portion (in the case of an SAR, the aggregate base value above which appreciation is measured), in each case on such payment terms (which need not be the same as the terms of payment to holders of Stock) and other terms, and subject to such conditions, as the Administrator determines; it being understood that if the exercise or purchase price (or base value) of an Award is equal to or greater than the Fair Market Value of one share of Stock, the Award may be cancelled with no payment due hereunder in respect of such Award.
(3)Acceleration of Certain Awards.Subject to Section 7(a)(5), the Administrator may provide that some or all Awards requiring exercise will become fully exercisable and/or that the delivery of any shares of Stock remaining deliverable under some or all outstanding Awards of Stock Units (including Restricted Stock Units and Performance Awards to the extent consisting of Stock Units) will be accelerated in full and such shares will be delivered, prior to the Covered Transaction, in each case on a basis that gives the holder of the Award a reasonable opportunity, as determined by the Administrator, following exercise of such Award or the delivery of the shares underlying such Award, as the case may be, to participate as a stockholder in the Covered Transaction.
(4)Termination of Awards Upon Consummation of Covered Transaction.Each Award will terminate upon consummation of the Covered Transaction, other than the following: (i) Awards assumed pursuant to Section 7(a)(1) above; (ii) outstanding shares of Restricted Stock (which shall be treated in the same manner we calculate ROIC.as other shares of Stock, subject to Section 7(a)(5) below) and (iii) Cash Awards that by their terms, or as a result of action taken by the Administrator, continue following such Covered Transaction.
(5)Additional Limitations.Any share of Stock and any cash or other property delivered pursuant to Section 7(a)(2) or Section 7(a) (3) above with respect to an Award may, in the discretion of the Administrator, contain such restrictions, if any, as the Administrator deems appropriate to reflect any performance or other vesting conditions to which the Award was subject and that did not lapse (and were not satisfied) in connection with the Covered Transaction. For purposes of the immediately preceding sentence, acash-out under Section 7(a)(2) or Section 7(a)(3) will not, in and of itself, be treated as the lapsing (or satisfaction) of a performance or other vesting condition. In the case of Restricted Stock that does not vest in connection with the Covered Transaction, the Administrator may require that any amounts delivered, exchanged or otherwise paid in respect of such Stock in connection with the Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate to carry out the intent of the Plan.
(b)Changes in and Distributions With Respect to Stock
(1)Basic Adjustment Provisions.In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Company’s capital structure that constitutes an equity
Adjusted RONACABOT CORPORATION A-5
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
restructuring within the meaning of FASB ASC Topic 718 (or any successor provision), the Administrator shall make appropriate adjustments to the maximum number of shares specified in Section 4(a) that may be delivered under the Plan and to the maximum share limits described in Section 4(d), and shall also make appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change.
(2) Certain Other Adjustments.The Administrator may also make adjustments of the type described in Section 7(b)(1) above to take into account distributions to stockholders other than those provided for in Section 7(a) and 7(b)(1), or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of Awards made hereunder.
(3) Continuing Application of Plan Terms.References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7.
| 8. | LEGAL CONDITIONS ON DELIVERY OF STOCK |
The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously delivered under the Plan until: (i) the Company is satisfied that all legal matters in connection with the issuance and delivery of such shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of delivery listed on any stock exchange or national market system, the shares to be delivered have been listed or authorized to be listed on such exchange or system upon official notice of issuance; and (iii) all conditions of the Award have been satisfied or waived. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to the exercise or settlement of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act. The Company may require that certificates evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock, and the Company may hold the certificates pending lapse of the applicable restrictions.
| 9. | AMENDMENT AND TERMINATION |
The Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Awards;provided, that except as otherwise expressly provided in the Plan the Administrator may not, without the Participant’s consent, alter the terms of an Award so as to affect materially and adversely the Participant’s rights under the Award, unless the Administrator expressly reserved the right to do so at the time of the Award. Any amendments to the Plan shall be conditioned upon stockholder approval only to the extent, if any, such approval is required by law (including the Code and applicable stock exchange requirements), as determined by the Administrator.
| 10. | OTHER COMPENSATION ARRANGEMENTS |
The existence of the Plan or the grant of any Award will not in any way affect the Company’s right to award a person bonuses or other compensation in addition to Awards under the Plan.
| 11. | MISCELLANEOUS |
(a)Waiver of Jury Trial.By accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim shall be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers.
(b)Limitation of Liability.Notwithstanding anything to the contrary in the Plan, neither the Company, nor any Affiliate, nor the Administrator, nor any person acting on behalf of the Company, any Affiliate, or the Administrator, shall be liable to any Participant or to the estate or beneficiary of any Participant or to any other holder of an Award by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of an Award to satisfy the requirements of Section 422 or Section 409A or by reason of Section 4999 of the Code.
A-6 CABOT CORPORATION
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
(c)Section 409A of the Code.The Plan as well as payments and benefits under the Plan are intended either to be exempt from or, to the extent subject thereto, to comply with, the requirements under Section 409A, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted in accordance therewith. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, the Participant shall not be considered to have terminated employment or service with the Company or any Affiliate for purposes of the Plan until the Participant would be considered to have incurred a “separation from service” from the Company and its Affiliates within the meaning of Section 409A (after giving effect to the presumptions contained therein). Notwithstanding anything to the contrary in the Plan, to the extent that any Awards (or any other amounts payable under any plan, program or arrangement of the Company or any of its Affiliates) are payable upon a separation from service and such payment would result in the imposition of any individual tax and penalty interest charges imposed under Section 409A, the settlement and payment of such Awards (or other amounts) shall instead be made on the first business day after the date that is six (6) months following such separation from service (or death, if earlier). Each amount to be paid or benefit to be provided under the Plan shall be construed as a separate identified payment for purposes of Section 409A and the right to a series of installment payments under the Plan is to be treated as a right to a series of separate payments. The Company makes no representation that any or all of the payments or benefits described in the Plan will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A or any corresponding state or local law.
| 12. | ESTABLISHMENT OFSUB-PLANS |
The Administrator may from time to time establish one or moresub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Administrator will establish suchsub-plans by adopting supplements to the Plan setting forth (i) such limitations on the Administrator’s discretion under the Plan as it deems necessary or desirable and (ii) such additional terms and conditions not otherwise inconsistent with the Plan as it deems necessary or desirable. All supplements so established will be deemed to be part of the Plan, but each supplement will apply only to Participants within the affected jurisdiction (as determined by the Administrator).
| 13. | GOVERNING LAW |
(a)Certain Requirements of Corporate Law.Equity Awards shall be granted and administered consistent with the requirements of applicable Delaware law relating to the issuance of stock and the consideration to be received therefor, and with the applicable requirements of the stock exchanges or other trading systems on which the Stock is listed or entered for trading, in each case as determined by the Administrator.
(d)Other Matters.Except as otherwise provided by the express terms of an Award agreement, under asub-plan described in Section 12 or as provided in Section 13(a) above, the provisions of the Plan and of Awards under the Plan and all claims or disputes arising out of our based upon the Plan or any Award under the Plan or relating to the subject matter hereof or thereof will be governed by and construed in accordance with the domestic substantive laws of the Commonwealth of Massachusetts without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
(e)Jurisdiction.By accepting an Award, each Participant will be deemed to (a) have submitted irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Award; (b) agree not to commence any suit, action or other proceeding arising out of or based upon the Plan or an Award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts; and (c) waive, and agree not to assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that he or she is not subject personally to the jurisdiction of the above-named courts, that his or her property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or an Award or the subject matter thereof may not be enforced in or by such court.
CABOT CORPORATION A-7
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
EXHIBIT A
Definition of Terms
The following terms, when used in the Plan, will have the meanings and be subject to the provisions set forth below:
“Administrator”: The Compensation Committee;provided, that the Compensation Committee may delegate (i) to one or more of its members or to one or more members of the Board such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant rights or options to the extent permitted by Section 157(c) of the Delaware General Corporation Law; (iii) to one or more officers of the Company the authority to allocate other Awards among such persons eligible to receive Awards under the Plan as such delegated officer or officers determine consistent with such delegation;provided, that with respect to any delegation described in this clause (iii) the Compensation Committee (or a properly delegated member or members of such Committee) shall have specified the class of persons eligible under the Plan to receive such Awards, the number of shares of Stock under such Awards and the consideration, if any, to be paid therefor; and (iv) to such Employees or other persons as it determines such ministerial tasks as it deems appropriate. In calculatingthe event of any delegation described in the preceding sentence, the term “Administrator” shall include the person or persons so delegated to the extent of such delegation.
“Affiliate”:Any corporation or other entity that stands in a relationship to the Company that would result in the Company and such corporation or other entity being treated as a single employer under Sections 414(b) or 414(c) of the Code, except that such Sections shall be applied by substituting “at least 50%” for “at least 80%” wherever applicable;provided,however, that in determining eligibility for the grant of a Stock Option or SAR by reason of service for an Affiliate, “Affiliate” shall mean any corporation or other entity in a chain of corporations all of which have a controlling interest in another corporation or other entity in the chain, beginning with the parent entity and ending with the entity for which the Award recipient was providing (or was expected to provide, in accordance with Section 5 of the Plan) services on the grant date of the Award (defining the term “controlling interest” based on “at least 50 percent” rather than “at least 80 percent”). The Company may at any time by amendment provide that different ownership thresholds apply (consistent with Section 409A, where applicable).
“Award”: Any or a combination of the following:
| (i) | Stock Options. |
| (ii) | SARs. |
| (iii) | Restricted Stock. |
| (iv) | Unrestricted Stock. |
| (v) | Stock Units, including Restricted Stock Units. |
| (vi) | Performance Awards. |
| (vii) | Cash Awards. |
| (viii) | Awards (other than Awards described in (i) through (vii) above) that are convertible into or otherwise based on Stock. |
“Board”: The Board of Directors of the Company.
“Cash Award”: An Award denominated in cash.
“Change in Control”:Upon the following event or events:
(A) an event in which any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (iv) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Section 13(d) of the 1934 Act), together with all affiliates and Associates (as such terms are used in Rule12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities;
A-8 CABOT CORPORATION
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
(B) the consummation of the merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 65% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) after which no “person” (with the method of determining “beneficial ownership” used in clause (A) of this definition) owns more than 25% of the combined voting power of the securities of the Company or the surviving entity of such merger or consolidation;
(C) if during any period of two consecutive years (not including any period prior to the execution of the Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has conducted or threatened a proxy contest, or has entered into an agreement with the Company to effect a transaction described in clause (A), (B) or (D) of this definition) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at leasttwo-thirds (2/3) of the directors then still in office, who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; or
(D) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets.
Notwithstanding the foregoing, in any case where the occurrence of a Change in Control could affect the vesting of or payment under an Award subject to the requirements of Section 409A, to the extent required to comply with Section 409A, the term “Change of Control” shall mean an occurrence that both (i) satisfies the requirements set forth above in this definition and (ii) is a “change in control event” as that term is defined in the regulations under Section 409A. If all or a portion of any Award constitutes deferred compensation under Section 409A and such Award (or portion thereof) is to be settled, distributed or paid on an accelerated basis due to a Change in Control that is not a “change in control event” under Section 409A, if such settlement, distribution or payment would result in additional tax under Section 409A, such Award (or portion thereof) shall vest at the time of the Change of Control (provided such accelerated vesting will not result in additional tax under Section 409A), but settlement, distribution or payment, as the case may be, shall only be accelerated to the maximum extent possible without resulting in a violation of Section 409A.
“Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or any successor statute as from time to time in effect.
“Compensation Committee”: The Compensation Committee of the Board.
“Company”: Cabot Corporation.
“Covered Transaction”:Any of (i) a consolidation, merger, or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company’s then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company’s assets, or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction shall be deemed to have occurred upon consummation of the tender offer.
Notwithstanding the foregoing, in any case where the occurrence of a Covered Transaction could affect the vesting of or payment under an Award subject to the requirements of Section 409A, to the extent required to comply with Section 409A, the term “Covered Transaction” shall mean an occurrence that both (i) satisfies the requirements set forth above in this definition and (ii) is a “change in control event” as that term is defined in the regulations under Section 409A. If all or a portion of any Award constitutes deferred compensation under Section 409A and such Award (or portion thereof) is to be settled, distributed or paid on an accelerated basis due to a Covered Transaction that is not a “change in control
CABOT CORPORATION A-9
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
event” under Section 409A, if such settlement, distribution or payment would result in additional tax under Section 409A, such Award (or portion thereof) shall vest at the time of the Covered Transaction (provided such accelerated vesting will not result in additional tax under Section 409A), but settlement, distribution or payment, as the case may be, shall only be accelerated to the maximum extent possible without resulting in a violation of Section 409A.
“Disability”: means the Participant meets one of the following requirements: (1) the Award recipient is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (2) the Award recipient is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits under a disability plan of the Company, or (3) the Award recipient has been determined by the Social Security Administration to be totally disabled.
“Employee”: Any person who is employed by the Company or an Affiliate.
“Employment”:A Participant’s employment or other service relationship with the Company and its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides otherwise, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 5 to, the Company or an Affiliate. If a Participant’s employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the Participant’s Employment will be deemed to have terminated when the entity ceases to be an Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates or the Administrator expressly determines otherwise.
“Equity Award”:An Award other than a Cash Award.
“Fair Market Value”:As of a particular date, (i) the closing price for a share of Stock as reported on the New York Stock Exchange (or on any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was reported or (ii) in the event that the Stock is not traded on a national securities exchange or as otherwise determined by the Administrator, the fair market value of a share of Stock determined by the Administrator consistent with the rules of Section 422 and Section 409A to the extent applicable.
“ISO”: A Stock Option intended to be an “incentive stock option” within the meaning of Section 422. Each option granted pursuant to the Plan will be treated as providing by its terms that it is to be anon-incentive stock option unless, as of the date of grant, it is expressly designated as an ISO.
“Participant”: A person who is granted an Award under the Plan.
“Performance Award”: An Award subject to Performance Criteria. The Committee in its discretion may grant Performance Awards that are intended to qualify for the performance-based compensation exception under Section 162(m) and Performance Awards that are not intended so to qualify.
“Performance Criteria”: Specified criteria, other than the mere continuation of Employment or the mere passage of time, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance-based compensation exception under Section 162(m), a Performance Criterion will mean an objectively determinable measure of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices or a peer group or select group of companies and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof and subject to such adjustments, if any, as the Administrator specifies, consistent with the requirements of 162(m)): sales; revenues; assets; costs; earnings before or after deduction for all or any portion of interest, taxes, depreciation or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios or metrics; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; productivity measures; one or more working capital measures; stock price; or stockholder return or shareholder value; sales of particular products or services; customer acquisition or retention; collection of outstanding accounts or debts; safety,
A-10 CABOT CORPORATION
| 2017 PROXY STATEMENT |
2017 Long-Term Incentive Plan(continued)
health or environmental affairs performance; compliance; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs,split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity); or refinancings. A Performance Criterion and any targets with respect thereto need not be based on an increase, a positive or improved result or avoidance of loss. An Award may specify more than one Performance Goal and, with respect to any Performance Goal, may specify levels of achievement at which different levels of payment may be earned. To the extent consistent with the requirements of Section 162(m), the Administrator may establish, by the deadline that otherwise applies to the establishment of the terms of an Award, that one or more of the Performance Criteria applicable to such Award will be adjusted RONA (return on net assets), we divide four quarter rolling net income (loss) attributablein an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, other unusual or infrequently occurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the applicable performance period that affect the applicable Performance Criterion or Criteria.
“Plan”: The Cabot Corporation (less2017 Long-Term Incentive Plan as from time to time amended and in effect.
“Restricted Stock”: Stock subject to restrictions requiring that it be redelivered or offered for sale to the after tax impactCompany if specified conditions are not satisfied.
“Restricted Stock Unit”: A Stock Unit that is, or as to which the delivery of noncontrolling interestStock or cash in net incomelieu of Stock is, subject to the satisfaction of specified performance or other vesting conditions.
“SAR”:A right entitling the holder upon exercise to receive an amount (payable in cash or in shares of Stock of equivalent value) equal to the excess of the Fair Market Value of the shares of Stock subject to the right over the base value from which appreciation under the SAR is to be measured.
“Section 409A”: Section 409A of the Code.
“Section 422”: Section 422 of the Code.
“Section 162(m)”: Section 162(m) of the Code.
“Stock”: Common Stock of the Company, par value $1.00 per share.
“Stock Option”: An option entitling the holder to acquire shares of Stock upon payment of the exercise price.
“Stock Unit”: An unfunded and certain items)unsecured promise, denominated in shares of Stock, to deliver Stock or cash measured by the most recent five quarters’ averagevalue of Cabot Corporation operating net assets. Operating net assetsStock in the future.
“Substitute Awards”:EquityAwards issued under the Plan in substitution for equity awards of an acquired company that are defined as accounts receivable plus inventory plus net property, plant and equipment plus assets held for rent plus affiliate investment less accounts payable and accruals.converted, replaced or adjusted in connection with the acquisition.
“Unrestricted Stock”: Stock not subject to any restrictions under the terms of the Award.
CABOT CORPORATION A-1 A-11
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Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 p.m., Eastern Time, on March 9, 2017 and by 9:00 a.m., Eastern Time on March
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 |  | Vote by Internet • Go towww.investorvote.com/ • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website | ||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | ☒
| Vote by telephone • Call toll free1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message | ||||||||
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| A | Proposals — The Board of Directors recommends a voteFOR all the nominees listed andFOR Proposals 2, 4 and 5 andFOR “1 YR” on Proposal 3. | |||||||||||||||||||
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| 1. | Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain |  | |||||||||||||||||
| 01 - Juan Enriquez* | 02 - William C. Kirby* | 03 | ||||||||||||||||||||||||||
| ☐ | * Each to be elected to the class of Directors whose term expires in | ||||||||||||||||||||||||||
| For | Against | Abstain | 1 Year | 2 Years | 3 Years | Abstain | ||||||||||||||
2. | To approve, in an advisory vote, Cabot’s executive compensation. | ☐ | ☐ | ☐ | 3. | To recommend, on anon-binding advisory basis, the frequency of shareholder votes on executive compensation. | ☐ | ☐ | ☐ | ☐ | ||||||||||
| For | Against | Abstain | ||||||||||||||||||
| 4. | To approve the Cabot Corporation 2017 Long-Term Incentive Plan. | ☐ | ☐ | ☐ | 5. | To ratify the appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for the fiscal year ending September 30, 2017. | ☐ | ☐ | ☐ | |||||||||||
| 6. | To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. | |||||||||||||||||||
| B | Non-Voting Items | |||||||||||||||||||
Change of Address— Please print your new address below. | Comments— Please print your comments below. | Meeting Attendance | ||||||
| Mark the box to the right if you plan to attend the Annual Meeting. | ☐ |
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| Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||||
| / / |
02I97A
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
Proxy — Cabot Corporation
Annual Meeting of Stockholders — March 13, 20149, 2017
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Brian A. Berube, Jane A. Bell and Karen Abrams,A. Kalita, and each of them, proxies, with power of substitution, to vote the shares of stock of Cabot Corporation that the undersigned is entitled to vote, as specified on the reverse side of this card, and, if applicable, hereby directs the trustees of the employee benefit plans to vote the shares of stock of Cabot Corporation allocated to the account(s) of the undersigned or otherwise that the undersigned is entitled to vote pursuant to such employee benefit plans, at the Annual Meeting of Stockholders of Cabot Corporation to be held on March 13, 20149, 2017 at 4:00 p.m., Eastern Time, at the Corporate Headquarters of Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts, and at any adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED THE SHARES TO WHICH THIS PROXY RELATES WILL BE VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE VOTED “FOR” ALL NOMINEES IN PROPOSAL 1, AND “FOR” PROPOSALS 2, 4 AND 5 AND “FOR” “1 YR” ON PROPOSAL 3 AND IT AUTHORIZES THE ABOVE DESIGNATED PROXIES TO VOTE IN ACCORDANCE WITH THEIR JUDGMENT ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
SEE REVERSE SIDE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE SIDE |
January 28, 2014
Dear Plan Participant:
The Annual Meeting of Stockholders of Cabot Corporation will be held on March 13, 2014. Through your participation in the Cabot Corporation 401(k) Plan (“401(k) Plan”), the Cabot UK Holdings Limited Inland Revenue Approved Employee Share Ownership Plan (“AESOP”), the Cabot Canada Ltd. Employees’ Stock Purchase Plan (“ESPP”) and/or the Cabot Employee Stock Purchase Plan, you are the beneficial owner of Cabot Common Stock and have the right to vote or to instruct the Trustee of the Plan or Plans in which you participate how to vote your shares. You will be able to vote shares allocated to your accounts by following the instructions on the enclosed proxy card.
I encourage you to exercise your right to vote these shares by completing the enclosed proxy card. Your vote is important for two reasons. When you vote your shares, you participate directly in the affairs of the Company equally with all other stockholders. In addition, the Trustees of the 401(k) Plan or ESPP will vote shares for which no instructions are received from other plan participants in the same proportion as the shares for which the Trustees have received timely instructions from others who do vote. If you hold shares through the 401(k) Plan or the ESPP and do not vote, the plan Trustees will vote your shares (along with all other shares in the relevant plan for which votes are not cast) in the same proportion as those shares for which directions are received from other participants in the plans.
The Trustees of each Plan will have the voting instructions of each participant in the Plans tabulated and will vote the shares of the participants by submitting a final proxy card representing each Plan’s shares for inclusion in the tally at the Annual Meeting. Your individual vote will not be disclosed to anyone in the Company.
To vote your shares, please read the Notice of Meeting and Proxy Statement carefully, mark and sign the enclosed proxy card, and return it to the Company’s transfer agent, Computershare, before March 10, 2014 in the enclosed postage-paid envelope. If you prefer, you may vote your shares by telephone or the Internet, as explained on the proxy card, until 1:00 a.m., Eastern Time, on March 11, 2014.
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