![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x22x2.jpg)
| | | | | | | | | | H. PATRICK SWYGERTChairman, T. Rowe Price Group Age: 60 Director Since 2016 Committees: Compensation and Executive Development Finance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MR. ROGERShas been Chairman of T. Rowe Price Group (investment management) since 2007 and has also served as Chief Investment Officer of that company since 2004. He has been a director of the Price Group since 1997. In addition, he was portfolio manager of one of the firm’s largest funds, the T. Rowe Price Equity Income Fund, from its inception until October 2015. Mr. Rogers has held a variety of other senior leadership roles with T. Rowe Price since beginning his career there in 1982 and has been involved in investment management for the company since 1983. Mr. Rogers is a member of the Johns Hopkins University and Johns Hopkins School of Medicine Boards of Trustees, chairman of the finance committees for the Archdiocese of Baltimore and a board member of the Greater Baltimore Committee. He also serves on the investment committee for Vanderbilt University. | | Mr. Swygert servedKey Skills and Expertise
| | HIGH LEVEL OF FINANCIAL EXPERTISE | | Chartered Financial Analyst and Chartered Investment Counselor. | | | | EXTENSIVE KNOWLEDGE OF COMPANY’S BUSINESS, INDUSTRY AND OPERATIONS | | Based on his extensive experience as Presidentan investment manager, provides unique expertise and perspective on large public company performance, opportunities and investor expectations. | | | | RISK MANAGEMENT/OVERSIGHT | | Significant knowledge of Howard University from 1995 to 2008. He served as Presidentrisk management and oversight, acquired through his broad experience in investment management, including Chief Investment Officer of the University at Albany, State University of New York from 1990 to 1995, and as Executive Vice President of Temple University from 1987 to 1990. He also serves on the Board of Directors of The Hartford Financial Services Group Inc. He is a member of the Advisory Council for the Smithsonian Institution’s National Museum of African American History and Culture, the D.C. Emancipation Commemoration Commission, and the Eisenhower Fellowship Foundation.large investment management firm. |
8 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
PROPOSAL 1:Election of Directors H. PATRICK SWYGERT | | | | | | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x23x1.jpg)
President Emeritus, Howard University Age: 72 Director Since 2001 Committees: Audit Compensation and Executive Development Nominations and Governance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MR. SWYGERTserved as President of Howard University from 1995 to 2008. Prior to that, he was President of the University at Albany, State University of New York (1990 to 1995), and Executive Vice President of Temple University (1987 to 1990). Mr. Swygert is a director of The Hartford Financial Services Group Inc. He is also a member of the Advisory Council for the Smithsonian Institution’s National Museum of African American History and Culture and Professor Emeritus at the Howard University School of Law. | | Key Skills and Expertise | | •HIGH LEVEL OF FINANCIAL LITERACY Demonstrated | | Experience in leadership roles at major educational institutions, as well as service on board audit and risk committees at two public companies, has given him extensive knowledge of financial and disclosure considerations. | | | | GOVERNMENT AND GEOPOLITICAL | | Based upon his experience in senior leadership skills at twothree major universities• Provides and participation in other civic and government advisory organizations, provides important perspectives on organizational transformation, government relations, and cultural and civic issues
issues. | | | | •RISK MANAGEMENT/OVERSIGHT Insights into | | Through experience in strategic planning, risk management talent developmentand governance, provides important insights into risk management and governance in diverse economic conditionsconditions. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 9 |
PROPOSAL 1:Election of Directors ANDRÉ VILLENEUVE | | | | | | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x24x1.jpg)
Chairman, ICE Benchmark Administration Limited Age: 71 Director Since 1997 Committees: Audit Finance Public Issues Review | | | | | | | President Emeritus,
Howard University
| | | | | | | | Age:70
Director since2001
| | | | | | Committees:
Audit
Compensation & Executive
Development
Nominations & Governance
| | | | | | | | | |
| | | | | | | | | | ANDRÉ VILLENEUVE | | | | Mr. Villeneuve is Chairman of ICE Benchmark Administration Limited (part of The ICE Group). He was Chairman of the City of London’s International Regulatory Strategy Group, which works closely with the U.K. government on financial services regulatory issues, from 2007 to 2013. He is an independent director of Lloyd’s of London Franchise Board and a member of the Advisory Council of TheCityUK. He was Chairman of NYSE Euronext LIFFE from 2003 to 2009. Mr. Villeneuve joined Reuters in 1967, was based in London, Belgium, Latin America and the U.S., and served as President, Reuters America from 1980 to 1990 and Executive Director of Reuters PLC from 1989 to 2000. He was Chairman of Instinet Corporation, an electronic brokerage subsidiary of Reuters, from 1990 to 1999, and Executive Chairman from 1999 to 2002. He was Chairman of Promethee, the French think tank, from 1998 to 2002, and Non-Executive Director of Aviva PLC from 1996 to 2006. He was a member of the U.K. Chancellor’s High Level Financial Services Group, a non-executive director of IFSL (International Financial Services London), IFRI (Institut Francais des Relations Internationales) and Euroarbitrage.MR. VILLENEUVEhas been Chairman of ICE Benchmark Administration Limited (part of The ICE Group) since January 2014. From 2007 to 2013 he was Chairman of the City of London’s International Regulatory Strategy Group (which works closely with the U.K. government on financial services regulatory issues), and was also Chairman of NYSE Euronext LIFFE from 2003 to 2009. Prior to that, Mr. Villeneuve was Executive Director of Reuters PLC (1989 to 2000) and served as President, Reuters America (1980 to 1990). He also served as Chairman of Instinet Corporation, an electronic brokerage subsidiary of Reuters, from 1990 to 1999. Mr. Villeneuve first joined Reuters in 1967 and over the course of his career was based in London, Belgium, Latin America and the U.S. Mr. Villeneuve is a member of the Advisory Council of TheCityUK. He is also a former Chairman of Promethee, the French think tank, and a former non-executive director of Aviva PLC, the Lloyd’s of London Franchise Board, IFSL (International Financial Services London), IFRI (Institut Français des Relations Internationales) and Euroarbitrage. He is a Grand Officer of the Order of Leopold II of Belgium.
| | Key Skills and Expertise | | •BROAD INTERNATIONAL EXPOSURE Broad international perspective | | Extensive business and financial experience in the U.K., Europe, Latin America and the U.S. | | | | •HIGH LEVEL OF FINANCIAL LITERACY | | Extensive expertise onin financial markets and complex securities• Auditsecurities. Qualifies as audit committee financial expert
expert. | | | | •GOVERNMENT AND GEOPOLITICAL Insights | | As a participant in several government advisory boards, has acquired significant insights into financial market and economic trendstrends. |
CHRISTINE TODD WHITMAN | | | | | | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x24x2.jpg)
President, The Whitman Strategy Group Age: 69 Director Since 2003 Committees: Finance Nominations and Governance Public Issues Review | | | | |
| | | | | | Chairman, ICE Benchmark
Administration Limited
| | | | | | | | Age:69
Director since1997
| | | | | | Committees:
Audit
Finance
Public Issues Review
| | | | | |
| | | 8 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
PROPOSAL 1GOVERNOR WHITMAN ELECTION OF DIRECTORS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
| | | | | | | | | | CHRISTINE TODD WHITMAN | | | | Governor Whitman served as Administrator of the U.S. Environmental Protection Agency from January 2001 through June 2003. She was Governor of the State of New Jersey from 1994 through 2001. Governor Whitman has served ashas been President of The Whitman Strategy Group (environmental and public policy consulting) since December 2004. She served as Administrator of the U.S. Environmental Protection Agency from January 2001 through June 2003 and as Governor of the State of New Jersey from 1994 through 2001. Governor Whitman is a director of Texas Instruments Incorporated and S.C. Johnson & Son, Inc. (private company). She is a member of the Council on Foreign Relations and Chair of the Board of the American Security Project. In addition, she is a trustee and the Executive Committee chair at the Eisenhower Fellowship Foundation and a member of the Senior Advisory Committee of Harvard University’s Institute of Politics. Governor Whitman also is Co-Chair of the Clean Safe Energy Coalition and a board member of the Board of Directors of Texas Instruments Incorporated, S.C. Johnson & Son, Inc., the Council on Foreign Relations and the American Security Project. In addition, she serves on the Board of Trustees of the Eisenhower Fellowship Foundation and as Chair of its Executive Committee, the Senior Advisory Committee of the Institute of Politics at Harvard University and the Steering Committee of The Cancer Institute of New Jersey. Governor Whitman also is Co-Chair of the Clean Safe Energy Coalition and a member of the Board of Directors of the Center for Sustainable Shale Development.
| | Key Skills and Expertise | | •GOVERNMENT AND GEOPOLITICAL | | Extensive senior leadership experience in U.S. and state executive functions. Provides important perspectives on environmental, public policy and government relations issues• Extensive leadership experience in U.S. and state executive functions
• Insights into current and developing environmental and public policy issues
|
| issues. | | |
| President, The WhitmanRISK MANAGEMENT/OVERSIGHTStrategy Group
| | Through her career in government and private industry, has acquired extensive expertise in management and oversight of complex environmental and other risks and public policy matters. | | | | EXTENSIVE GOVERNANCE EXPERIENCE | | Age:67
Director since2003
| | | | | | Committees:
Finance
Nominations & Governance
Public Issues Review
| | | Based on experience as a director of several large companies, as well as her service in government, provides important insights into effective governance and leadership structures. |
10 | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | |
Corporate Governance ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Our Commitment to Sound Corporate Governance OUR COMMITMENT TO SOUND CORPORATE GOVERNANCE
UTC is committed to strong corporate governance practices designed to maintain high standards of oversight, integrity and ethics, while promoting growth in long-term shareowner value. Our governance structure enables independent, experienced and accomplished directors to provide advice, insight and oversight to advance the interests of the Company and our shareowners. UTC has long maintainedstrived to maintain sound governance standards, as reflected in our Code of Ethics and Governance Guidelines and in our systematic approach to risk management, and ismanagement. We are committed to transparent financial reporting and strong internal controls. | | | | | | | We encourage you to visit the Governance section of our website (www.utc.com/governanceWe encourage you to visit the Corporate Governance section of our website (http://www.utc.com/Our-Company/Corporate-Governance/Pages/default.aspx), where you will find detailed information about corporate governance at UTC, including:
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| | | | | | | T | • | Our Governance Guidelines | | | | | | T | • | Charters for our Board Committees | | | | | | T | • | Our Code of Ethics | | | | | | T | • | Our Certificate of Incorporation and Bylaws | | | | | | T | • | Information about our Ombudsman/DIALOG program, which allows UTC employees to raise questions confidentially and outside the usual management channels | | | | • | | T | | HowInformation on how shareowners and other interested persons may address concerns to the Board of Directors
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Board Leadership Structure In November 2014, the Board elected Edward A. Kangas, an independent director, to serve as non-executive Chairman of the Board. POLICY ON CHAIRMAN AND CEO ROLES The Committee on Nominations and Governance periodically reviews our governance practices and board leadership structure. As provided in UTC’s Governance Guidelines, the Board has no fixed policy on whether or not the Company’s Chief Executive Officer also is permitted simultaneously to serve as Chairman of the Board. Instead, the Board believes this determination should be based on the Company’s best interests in light of the circumstances, which may vary over time. The Board therefore reserves the authority to choose the structure that it believes will provide the most effective leadership and oversight for the Company, while also facilitating the effective functioning of both the Board and management. In making this decision, the Board considers a range of factors, including: the Company’s operating and financial performance under the then-existing structure; any recent or anticipated changes in the CEO role; the effectiveness of then-current processes and structures for Board interaction with and oversight of management; and the importance of maintaining a single voice in leadership communications and Board oversight, both internally and with investors. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 11 |
CORPORATE GOVERNANCE Taking these considerations into account, the Board has concluded that the separation of the roles of Chairman and Chief Executive Officer best serves the interests of shareowners and the Company at this time. However, the Board has combined and separated the Chairman and CEO positions in the past and will continue to exercise its judgment on this matter going forward. In February 2015, the Board amended UTC’s Bylaws and Governance Guidelines to more fully define the responsibilities of a non-executive Chairman. These responsibilities include: • | presiding at meetings of the Board of Directors and shareowners; | | | • | presiding at executive sessions of the non-management directors and providing feedback to the CEO; | | | • | the authority to call meetings of the directors and of shareowners; | | | • | at the request of the Board of Directors, serving as liaison between the Board and the CEO; | | | • | in conjunction with the CEO, planning and organizing the activities of the Board, including agendas and schedules for meetings; and | | | • | communicating annually to the CEO, the Board’s evaluation of his or her performance. |
DIRECTOR INDEPENDENCE
POLICY ON NON-MANAGEMENT LEADERSHIP ROLE The Board firmly supports maintaining a non-management director in a leadership role at all times, whether as non-executive Chairman or as Lead Director. In February 2015, the Board amended UTC’s Bylaws and Governance Guidelines to require the election by the Board of a non-management director to serve as Lead Director whenever the role of Chairman is held by the CEO or another UTC executive. In those circumstances, the Lead Director would be charged with, among other duties, coordinating the activities of the independent directors and serving as a liaison between the Board and management. The Board believes that the presence of a Lead Director will enhance the effectiveness of the independent directors and provide a channel for non-management directors to candidly raise issues or concerns for Board consideration. The Board believes that the existence of an independent, non-executive Chairman or Lead Director, with defined responsibilities that include participation in planning meeting agendas, also enhances oversight of risk management. The Chairman or a Lead Director, and any of the other non-management directors, are free at any time to raise matters at Board and committee meetings. UTC’s non-management directors meet in regularly scheduled executive sessions without any members of management present and in additional executive sessions as requested by directors. In practice, these executive sessions occur before or after most Board meetings. The purpose of these executive sessions is to promote open and candid discussion among the non-management directors. Director Independence The Board has adopted independence standards for directors that satisfy the corporate governance requirements for companies listed on the New York Stock Exchange (“NYSE”). You can find more details about these standards in our Governance Guidelines. The Board has determined that each of the nominees for election at the Annual Meeting, other than Mr. Chênevert, isHayes, qualifies as independent of UTC under thesethe independence standards. Specifically, none of the nominees, other than Mr. Chênevert,Hayes, has a business, financial, family or other relationship with UTC that is considered to be material under UTC’s independence standards (other than their relationship as a director and shareowner). 12 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
CORPORATE GOVERNANCE standards. In determining the independence of our directors, the Board considered the relevant facts and circumstances bearing on the independence of each of the nominees, including charitable contributions that UTC made to non-profit organizations with which some nominees are or have been associated. It also considered sales and purchases of products and services, in the ordinary course of business, between UTC (or its subsidiaries) and companies where some nominees are or have been employed as executive officers. In all cases thateach of 2013, 2014 and 2015, the Board considered for 2011, 2012 and 2013, theannual payments UTC made or received for products and services or the charitable contributions it made by UTC fell well below the thresholds in our independence standards (the greater of $1 million or 2% of total gross revenues of the other organization). NoneIn particular, none of the payments made or received by UTC exceeded the greater of $1 million or 0.5% of the other organization’s totalconsolidated gross revenues. The following table shows the 2015 relationships that existed in 2013 and were considered by the Board in determining the independence of nominees. | | | 10 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
CORPORATE GOVERNANCE
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
DIRECTOR INDEPENDENCE DETERMINATIONS: RELATIONSHIPS CONSIDERED | | | | Type of Transaction, Relationship | | | Total 2015 | Director | | Organization and Director’s Relationship | | or Arrangement of Organization with UTC | | | Payments | JOHN V. FARACI | | International Paper(Corporation) Chairman & CEO (until his retirement from those positions in 2014) | | Sales to UTC of paper products; purchases from UTC of services and products for aircraft engines, elevators and air conditioning equipment. | | $ $ | 5,163,683; 2,178,770 | EDWARD A. KANGAS | | Tenet Healthcare(Corporation) Non-Executive Chairman | | Purchases from UTC of services and products for elevators and air conditioning equipment. | | $ | 361,129 | ELLEN J. KULLMAN | | DuPont(Corporation) Chair & Chief Executive Officer (until her retirement from those positions in October 2015) | | Sales to UTC of materials; purchases from UTC of elevator and air conditioning services and products. | | $ $ | 30,772,768; 3,549,085 | HAROLD MCGRAW III | | McGraw Hill Financial, Inc.(Corporation) Chairman (until his retirement from that position in April 2015) | | Fees paid by UTC for credit ratings in connection with debt securities issued by UTC and fees for industry statistics and reports. | | $ | 537,042 | RICHARD B. MYERS | | United Services Organization (USO) (Non-profit supporting U.S. troops and families) Chairman through October 2015 | | Charitable contributions received from UTC. | | | (1) | | | Kansas State University Foundation (support for university) Chairman (through September 2015) | | Charitable contributions received from UTC. | | | (1) | BRIAN C. ROGERS | | T. Rowe Price(Corporation) Chairman & Chief Investment Officer | | Purchases from UTC of elevator services and products. | | $ | 177,230 | H. PATRICK SWYGERT | | Howard University(Educational Institution) Professor Emeritus, former President | | Purchases from UTC of elevator maintenance services; charitable contributions and recruiting fees received from UTC. | | $ | 808,416 | CHRISTINE T. WHITMAN | | Eisenhower Fellowship Foundation (Non-profit providing fellowships to mid-career emerging leaders) Board member | | Charitable contributions received from UTC. | | | (1) |
(1) | | | | | | | | | | | | | | | | | Director
| | Organization
| | Type of
Organization
| | Director’s
Relationship
to Organization
| | Type of Transaction,
Relationship or Arrangement
of Organization with UTC
| | Total 2013
Payments
| | | | | | | John V. Faraci
| | International Paper | | Corporation | | Chairman & Chief Executive Officer | | Sales to UTC of paper products; purchases from UTC, principally elevator and air conditioning services and products.
| | $4,875,000;
$2,201,000
| | | | | | | | | Denison University | | Educational institution | | Board member | | Contributions received from UTC.
| | (1) | | | | | | | Jean-Pierre Garnier
| | Actelion Ltd. | | Corporation | | Chairman | | Purchases from UTC, principally air conditioning services and products.
| | $1,000 | | | | | | | Edward A. Kangas
| | Tenet Healthcare | | Corporation | | Non-Executive Chairman | | Purchases from UTC of elevator services and products.
| | $225,000 | | | | | | | Ellen J. Kullman
| | DuPont | | Corporation | | Chair & Chief Executive Officer | | Sales to UTC of materials; purchases from UTC, principally elevator and air conditioning services and industrial products.
| | $30,824,000;
$2,313,000
| | | | | | | Harold McGraw III
| | McGraw Hill Financial, Inc. | | Corporation | | Chairman | | Fees paid by UTC for credit ratings in connection with debt securities issued by UTC and fees for industry statistics and reports.
| | $1,475,000 | | | | | | | | | Carnegie Hall | | Music-related arts institution
| | Board member | | Contributions received from UTC. | | (1) | | | | | | | Richard B. Myers
| | United Services Organization (USO) | | Non-profit supporting U.S. troops and families
| | Chairman | | Contributions received from UTC. | | (1) | | | | | | | | | Kansas State University (KSU) Foundation | | Fund-raising to support KSU
| | Chairman | | Contributions received from UTC. | | (1) | | | | | | | H. Patrick Swygert
| | Howard University | | Educational institution | | Professor; Former President | | Purchases from UTC, principally elevator services and products; contributions and recruiting fees received from UTC.
| | $687,000;
$97,000(1)
| | | | | | | | | Eisenhower Fellowship Foundation | | Non-profit providing fellowships tomid-career emerging leaders
| | Board member | | Contributions received from UTC. | | (1) | | | | | | | Christine Todd
Whitman
| | Eisenhower Fellowship Foundation | | Non-profit providing fellowships tomid-career emerging leaders
| | Board member | | Contributions received from UTC. | | (1) |
(1) | The total amount of UTC’s charitable contributions for 20132015 to any individual non-profit organization identified in this table did not exceed $300,000 and the average contribution was approximately $93,333.$132,000. |
BOARD LEADERSHIP STRUCTURE
CHAIRMAN
The Committee on Nominations and Governance reviews our governance practices and leadership structure. Under UTC’s Governance Guidelines, the decision as to whether the roles of Chairman of the Board and Chief Executive Officer should be separate or combined is made based on the Company’s best interests in light of the circumstances at the time, rather than under a fixed policy. Currently these roles are combined, with Mr. Chênevert serving as both the Chairman of the Board and the Chief Executive Officer. Given UTC’s strong financial performance over extended periods, the Board considers that the Company has been well served by this combined leadership structure over the years. In view of UTC’s complex and diverse operations, the Board believes that the current combined leadership structure enables us to act quickly, efficiently and decisively as we face challenges and opportunities. This structure also fosters consistent internal and external communication of critical strategies and business priorities.
| | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 13 |
CORPORATE GOVERNANCE ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Majority Voting for Directors INDEPENDENT LEAD DIRECTOR AND NON-MANAGEMENT DIRECTORS
The Board believes that UTC’s unitary leadership structure is appropriately balanced by the role of the Lead Director and the fact that all members of the Board, other than Mr. Chênevert, are independent. Our non-management directors meet in regularly scheduled executive sessions without any members of management present. The purpose of these executive sessions is to promote open and candid discussion among the non-management directors.
| | | | | | | The Lead Director is selected by the other non-management directors. In April 2013, the non-management directors selected Edward A. Kangas, an independent director, to succeed Richard D. McCormick as Lead Director. The Lead Director’s duties include:
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| | | | | | | T | | presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the non-management directors; | | | | | | T | | serving as liaison between the Chairman and the non-management directors; | | | | | | T | | calling meetings of the non-management directors; | | | | | | T | | participating with the Chairman in planning and setting schedules and agendas for Board meetings; | | | | | | T | | determining with the Chairman the quantity, quality and timeliness of information to be provided to the directors to allow them to perform their duties; | | | | | | T | | annually communicating to the CEO the Board’s evaluation of his or her performance; and | | | | | | T | | performing such other functions as the Board may direct.
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The Board believes that the existence of an independent Lead Director, with defined responsibilities that include participation in planning meeting agendas, facilitates its oversight of risk management and its communication with members of management. The Lead Director or any of the other non-management directors is free at any time to raise matters at Board and committee meetings.
MAJORITY VOTING FOR DIRECTORS
Under UTC’s Bylaws, in order for a director to be elected at the annual meeting in an uncontested election, a majority of the votes cast with respect to the director’s election must be castvoted “for” the director. Abstentions and broker non-votes are not considered votes cast. In an uncontested election, of directors, any incumbent director who receives a greater number of votes “against” his or her election than votes “for” his or her election must, under UTC’s Governance Guidelines, promptly tender his or her resignation to the Board’s Committee on Nominations and Governance. The Committee must then recommendsrecommend to the Board, within 90 days after the election, whether to accept or reject the resignation, a decision the Board must make within 90 days after the date of the meeting at which the election took place.resignation. The director who tendered his or hera resignation may not participate in this decision. TheRegardless of whether the Board accepts or rejects the resignation, the Company must then promptly file a Report on Form 8-K with the Securities and Exchange Commission (“SEC”) in which it publicly discloses and explains the Board’s decision on the resignation.decision. If a director’s resignation is accepted, the Committee also will recommend to the Board whether the vacancy should be filled or whether the size of the Board should be reduced. | | | 12 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
CORPORATE GOVERNANCE Under the Bylaws, a vacancy arising in these circumstances may be filled, at the discretion of the Board, by a majority vote of the directors or at a special meeting of shareowners called by the Board.
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Board Committees BOARD COMMITTEES
The five standing committees of the Board include:are: the Audit Committee, the Committee on Nominations and Governance, the Committee on Compensation and Executive Development, the Finance Committee and the Public Issues Review Committee. Each of these committees, other than the Finance Committee, is composed exclusively of directors determined by the Board to be independent.independent, and in the case of the Audit Committee, the Committee on Nominations and Governance and the Committee on Compensation and Executive Development, satisfy the corporate governance requirements imposed by the NYSE. The Chairchairperson of each Committeecommittee reports to the Board on actions taken at each meeting. The charter
Each committee has authority to retain independent advisers to assist in the fulfillment of eachits responsibilities, to approve the fees paid to those advisers and to terminate their engagements. All committee ischarters are available on UTC’s website at:http://www.utc.com/Governance/Board+of+DirectorsOur-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx. AUDIT The Audit Committeeassists the Board in overseeing the reliability and integrity of UTC’s financial statements, the qualifications and independence of the Independent Auditor, and UTC’s policies and practices to assess and manage exposure to risk. Each year the Committee nominates, for appointment by shareowners, an accounting firm to serve as Independent Auditor and is responsible for the compensation, retention and oversight of the Independent Auditor. The Board has determined that Directors Kangas, Kullman and Villeneuve each are “audit committee financial experts”, as that term is defined in SEC rules. | | | | | | | | | AUDIT COMMITTEEEdward A. Kangas (Chair)
Ellen J. Kullman Richard B. Myers Fredric G. Reynolds(1) H. Patrick Swygert André Villeneuve | 2015 Meetings:8 |
NOMINATIONS AND GOVERNANCE The Committee on Nominations and Governanceidentifies and periodically reviews the qualifications that the Board uses to select director candidates and, when there is a vacancy on the Board, the Committee identifies, evaluates and recommends candidates to be nominated by the Board for election by our shareowners (or to be elected by the Board, if it chooses to fill a vacancy arising between shareowner meetings). The Committee also reviews and assesses the effectiveness of UTC’s nomination policies on an annual basis. For more information about how the Committee identifies candidates, see the discussion of Board membership criteria and the nomination process in Proposal 1—Election of Directors on pages 1 and 2 of this Proxy Statement. | | The Audit Committee assists the Board in its oversight of the integrity of UTC’s financial statements, the qualifications and independence of the Independent Auditor, and UTC’s policies and practices to assess and manage exposure to risk. Each year the Committee nominates, for appointment by shareowners, an accounting firm to serve as Independent Auditor. The Committee is responsible for the compensation, retention and oversight of the Independent Auditor. The Board has determined that Directors Faraci, Kangas, Kullman and Villeneuve are audit committee financial experts within the meaning of the rules of the Securities and Exchange Commission.
| | | | | 2013 Meetings: 8
| | | | | | Edward A. Kangas (Chair)
John V. Faraci
Ellen J. Kullman
Richard B. Myers
H. Patrick Swygert André Villeneuve
| | | | | | | | | | | | | COMMITTEE ON (Chair)
NOMINATIONS AND
GOVERNANCE
| | The Committee on Nominations and Governance identifies and periodically reviews the qualifications that the Board uses to select candidates for service as a director. When there is a vacancy on the Board, the Committee identifies, evaluates and recommends candidates to be nominated by the Board for election by our shareowners (or to be elected by the Board if it chooses to fill a vacancy arising between shareowner meetings). The Committee also reviews and recommends to the Board appropriate governance practices and compensation for directors. When a Board vacancy arises, the Committee seeks to identify the most capable candidates available who meet the Board’s criteria for nomination and will be able to serve the best interests of all shareowners. The Committee assesses the effectiveness of UTC’s nomination policies on an annual basis, as part of the Board’s evaluation of its effectiveness as a group. For more information about how the Committee identifies candidates, see the discussion of Board membership criteria and the nomination process in Proposal 1 — Election of Directors on pages 1 and 2 of this Proxy Statement.
| | | | | 2013 Meetings: 4
| | | | | | H. Patrick Swygert (Chair)
John V. Faraci
Jean-Pierre Garnier
Edward A. Kangas
Harold McGraw III
Richard B. Myers
Christine Todd Whitman
| | | | | | | | | | | | | COMMITTEE ON
COMPENSATION AND
EXECUTIVE DEVELOPMENT
| | The Committee on Compensation and Executive Development has the responsibilities described in the Compensation Discussion and Analysis that begins on page 21 of this Proxy Statement. These include reviewing and overseeing executive compensation and development programs, determining what corporate goals and objectives are relevant to CEO compensation and setting the CEO’s compensation based on an evaluation of performance in light of these goals and objectives. In addition, the Committee is responsible for the review and administration of long-term incentive plans and annual incentive compensation and oversees compensation policies and practices as they relate to risk management.
The Committee also makes compensation decisions affecting the executive officers and the members of UTC’s Executive Leadership Group (the “ELG”), consisting of approximately 25 to 30 of UTC’s most senior executives. The CEO and the Senior Vice President, Human Resources & Organization determine the compensation of other executives and oversee compensation program administration. The Committee also reviews our programs and policies for management development and succession.
While the Chairman & CEO and the Senior Vice President, Human Resources & Organization attend Committee meetings regularly by invitation, the Committee, subject to Board oversight, is the final decision maker regarding the compensation paid to each of the named executive officers listed in UTC’s proxy statement and the other members of the ELG. It also oversees compensation practices for other executive officers. The Committee considers certain matters in executive session.
The Committee has authority to retain independent advisers to assist it in fulfillment of its responsibilities, to approve the advisor’s fees and to terminate their engagements.
| | | | | 2013 Meetings: 6
| | | | | | Jean-Pierre Garnier (Chair)
Jamie S. Gorelick
Edward A. Kangas
Harold McGraw III
Richard B. Myers
H. Patrick Swygert
John V. Faraci Jean-Pierre Garnier Edward A. Kangas Harold McGraw III Richard B. Myers Fredric G. Reynolds(1) Christine T. Whitman | 2015 Meetings:4 |
(1) | | | Appointed a member of Committee effective February 8, 2016. |
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CORPORATE GOVERNANCE COMPENSATION AND EXECUTIVE DEVELOPMENT The Committee on Compensation and Executive Developmentreviews and oversees executive compensation and development programs, determines what corporate goals and objectives are relevant to CEO compensation and sets the CEO’s compensation based on an evaluation of performance in light of these goals and objectives. In addition, the Committee reviews and oversees the design of the long-term incentive plans and annual incentive compensation, as well as compensation policies and practices and their associated risks. The Committee makes compensation decisions for UTC’s Executive Leadership Group (“ELG”) members, which include each of the Named Executive Officers (“NEOs”) listed in this Proxy Statement, and also reviews UTC’s programs and policies for management development and succession. While the President and CEO makes recommendations to the Committee on the type and amount of compensation for each ELG member, the Committee, subject to Board oversight, is the final decision-maker regarding the compensation paid to those executives. However, the President and CEO is not at any time involved in the determination of his own compensation. The President and CEO and the Executive Vice President & Chief Human Resources Officer determine the compensation of other executives and oversee compensation program administration. While the President and CEO and the Executive Vice President & Chief Human Resources Officer attend Committee meetings regularly by invitation, the Committee considers certain matters in private executive sessions. For additional information as to the functions and processes overseen by the Committee, see the Compensation Discussion and Analysis that begins on page 27 of this Proxy Statement. | | Jean-Pierre Garnier (Chair) John V. Faraci Edward A. Kangas Harold McGraw III Richard B. Myers Brian C. Rogers(1) H. Patrick Swygert | 2015 Meetings:United Technologies Corporation6 |
FINANCE The Finance Committeereviews and, as appropriate, makes recommendations to the Board on the management of the Company’s financial resources and strategies.It considers plans for significant acquisitions and divestitures and their potential financial impact, and monitors progress on pending and completed transactions. The Committee also reviews significant financing programs in support of business objectives; policies on investments and uses of cash; significant capital appropriations; dividend policies; share repurchase programs; risks and exposures related to capital structure, liquidity, financing, pension funding and investment performance; insurance programs; and investment of pension assets and other significant transactions. | | John V. Faraci (Chair)Gregory J. Hayes Ellen J. Kullman Marshall O. Larsen Harold McGraw III Brian C. Rogers(1) André Villeneuve Christine T. Whitman | 2015 Meetings:4 |
(1) | Appointed a member of Committee effective February 8, 2016. |
Proxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 15 |
CORPORATE GOVERNANCE ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) PUBLIC ISSUES REVIEW The Public Issues Review Committeereviews and monitors UTC’s positions on and responses to significant public policy issues, including: our policies and objectives with respect to safety and the environment and our compliance with related laws and regulations in the U.S. and other countries; plans and performance related to ensuring equal employment opportunities; significant legislative and regulatory issues that may affect UTC and its operations; actions and objectives to further corporate social responsibility; policies and priorities for contributions to charitable, educational and other tax-exempt organizations involved in the arts, civic and community affairs, education and health and human services; community relations programs; and our conduct of public policy and government relations activities, including the activities of UTC’s political action committee. The Committee also reviews UTC’s annual Corporate Responsibility Report and oversees risk management policies and practices with regard to social responsibility, reputation, safety and the environment. | | | | | | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x30x1.jpg) | | FINANCE COMMITTEEChristine T. Whitman (Chair)
| | The Finance Committee monitors, and as appropriate makes recommendations to the Board on, the management of the Company’s financial resources, strategies and plans for significant acquisitions and divestitures and their financial impact, and progress on pending and completed transactions. The Committee also reviews significant financing programs in support of business objectives; policies with respect to investments and uses of cash; significant capital appropriations; dividend policies; share repurchase programs; risks and exposures related to capital structure, liquidity, financing, pension funding and investment performance; insurance programs; investment of pension assets and other significant transactions.
| | | | | 2013 Meetings: 4
| | | | | | John V. Faraci (Chair)
Louis R. Chênevert
Jamie S. Gorelick
Jean-Pierre Garnier Ellen J. Kullman Marshall O. Larsen
Harold McGraw III
André Villeneuve
Christine Todd Whitman
| | | | | | | | | | | | | PUBLIC ISSUES
REVIEW COMMITTEE
| | The Public Issues Review Committee reviews and monitors UTC’s positions and responses to significant public policy issues, including: our policies and objectives with respect to safety and the environment and the Company’s compliance with related laws and regulations in the U.S. and other countries; plans and performance in furtherance of ensuring equal employment opportunities; significant legislative and regulatory issues that may affect the Company and its operations; actions and objectives to further corporate social responsibility; policies and priorities for contributions to charitable, educational and other tax-exempt organizations involved in the arts, civic and community affairs, education and health and human services; community relations programs; and our conduct of public policy and government relations activities, including the activities of UTC’s political action committee. The Committee also reviews UTC’s annual Corporate Responsibility Report and oversees risk management policies and practices with regard to social responsibility, reputation, safety and the environment.
| | | | | 2013 Meetings: 4
| | | | | | Christine Todd Whitman (Chair)
Jean-Pierre Garnier
Jamie S. Gorelick
Ellen J. Kullman
Marshall O. Larsen
André Villeneuve
| | | 2015 Meetings:3 |
MEETING ATTENDANCE
Meeting Attendance The Board met seventen times during 2013.2015. Each director attended 75% or more of the aggregate number of meetings of the Board and committees on which he or she served. The Board’s policy is that each director, if standing for re-election, should attend the Annual Meeting of Shareowners if his or her schedule permits.unless there is an unavoidable scheduling conflict. All of the current directors other than Ms. Gorelick (who was unable to attend due to a broken ankle) attended the last2015 Annual Meeting, held in April 2013.except Messrs. Reynolds and Rogers, who were elected to the Board effective January 1, 2016. DIRECTOR STOCK OWNERSHIP REQUIREMENTS
Director Stock Ownership Requirements To strengthen alignment with the interests of shareowners, each non-management directors aredirector is required to own shares of Common Stock, deferred stock units or other Common Stock equivalents having a value equal to at least five times the annual base cash retainer. In 2015, the base cash retainer amount.was $112,000, thereby establishing an ownership requirement of at least $560,000. Non-management directors must achieve this ownership level within five years after first becoming a member of the Board. In 2013, the base cash retainer was $104,000, thereby establishing an ownership requirement of at least $520,000. Each of the non-management directors is in compliance with this ownership requirement.requirement or additional time remains available within the five year period. HOW WE MANAGE RISK
How We Manage Risk OUR RISK MANAGEMENT FRAMEWORK During 2014, UTC has adoptedrevised its enterprise risk management (“ERM”) program and policies based onto conform to the Integratedcriteria established in the Internal Control-Integrated Framework ofissued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) issued in 1992.2013. Under our policies, the presidents of major business units are responsible for identifying risks that could affect achievement of business goals and strategies, assessing the likelihood and potential impact of significant risks, and prioritizing thethese risks that are identified and the actions to be taken to address these risks.them. The presidents of major business units report to the CEO on actions to monitor and manage significant risks in order to remain within UTC’s range of risk tolerance.tolerance ranges. 16 | | |
United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
CORPORATE GOVERNANCE ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
BOARD RISK OVERSIGHT The CEO, Chief Financial Officer and General Counsel periodically report on UTC’s risk management policies and practices to relevant Board committees and to the full Board. The Audit Committee annually reviews major financial risk exposures and a number of operational, compliance, reputational and strategic risks, as well as practices to monitor and manage those risks. The Audit Committee also reviews UTC’s overall policies and practices for enterprise risk management, including the delegation of oversight for particular areas of risk to the appropriate Board committees. As a whole, the Board also reviews risk management practices and a number of significant risks in the course of their reviewsits review of corporate strategy, business plans, reports of Board committee meetings and other presentations. BOARD AND COMMITTEE RISK OVERSIGHT RESPONSIBILITIES
Board and Committee Risk Oversight Responsibilities | | | Board/Committee | | Primary Areas of Risk Oversight | | | Full Board | | Risk management process and structure, strategic risks associated with UTC’s business plan and other significant risks, such as major litigation, business development risks and succession planning. | | | Audit Committee | | Major financial risk exposures; significant operational, compliance, reputational, strategic and strategiccyber security risks; and overall policies and practices for enterprise risk management. | | | Committee on Nominations and Governance | | Risks and exposures related to corporate governance, leadership structure, effectiveness of Board and committee oversight; and review of director candidates, conflicts of interest and director independence. | | | Committee on Compensation and Executive Development | | Risks related to executive recruitment, assessment, development, retention and succession policies and programs; and risks associated with compensation policies and practices, including incentive compensation. | | | Finance Committee | | Risks and exposures related to capital structure, liquidity, financing, pension funding and investment performance and significant capital transactions, including acquisitions and divestitures. | | | Public Issues Review Committee | | Risks related to the environment and workplace safety, equal employment opportunity, responses to important public issues, government relations and other matters involving reputational risks. |
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COMPENSATION AND RISK MITIGATION The Committee on Compensation and Executive Development (the “Committee”) believes that executive compensation should be contingent on performance relative to pre-established targets and objectives. Our executives must however, achieve these targets and objectives in a manner consistent with UTC’s ethical standards and internal policies. The Committee alsofirmly believes that executive compensation should not reward accomplishments however impressive in the short-term, that compromise UTC’s standards or long-term shareowner value. Compensation arrangements, if not properly designed and administered, can encourage excessive risk taking and jeopardize long-term Company performance and shareowner value. Therefore, one of the goals of UTC’s executive compensation program is to motivate executives in a manner that appropriately balances financial opportunity and risk. Enterprise Risk Management (“ERM”) Program.UTC mitigates compensation-related risksrisk to its long-term performance, ethical standards and reputation in the following ways: | | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 15 |
CORPORATE GOVERNANCE
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
Monitor Risk under our Enterprise Risk Management Program (“ERM”).by monitoring these risks as part of UTC’s ERM program. The Board of Directors annually reviews the ERM program to identify, monitor and manage risk throughout the Company and its business units. The ERM program recognizes executive compensation as a potential risk factor.factor, which UTC seeks to mitigatemitigates in the following ways:
Emphasizing Long-Term Performance.Long-term incentives are the cornerstone of UTC’s executive compensation program. As shown in the chart on page 37, 79% of the value of Mr. Hayes’ 2015 compensation derived from long-term incentives, compared to the 8% that is attributable to his annual cash bonus. A significant stake in future performance and share value reduces the likelihood that our executives might pursue short-term opportunities that create undue risk through the following:to future Company performance. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 17 |
CORPORATE GOVERNANCE • | | Emphasis on Long-Term Performance. Long-term incentives serve as the cornerstone of UTC’s compensation program. As shown in the chart on page 36, 70% of the value of Mr. Chênevert’s compensation derives from long-term incentives, compared to the 20% from his annual cash bonus. A significant stake in future performance and share value helps mitigate the risk that our executives will pursue short-term opportunities that create undue risk to future Company performance. |
• | | Alignment ofAligning Employee and Shareowner Interests.The Committee’s selection of performance metrics is also designed to set an appropriate balance between short- and long-term objectives. Our long-termLong-term incentive awards, which include Stock Appreciation Rights (“SARs”) and Performance Share Units (“PSUs”), make up the largest portion of annual compensation for our senior executives. Our SARs have a three-year vesting period and a ten-year term. Executives receiveterm, with compensation from these awards only if ourdelivered contingent on share price appreciates after the third and before the tenth year from the grant date. Ourappreciation. The vesting of our PSUs have a three-year vesting period and corresponding three-yeargranted in 2015 is based on two metrics: earnings per share (“EPS”) growth and relative total shareowner return (“TSR”) metrics., both measured over a three-year period. The Committee believes these metrics provide an appropriate measure of long-term financial performance and sustainable growth. WhileWe believe these broad-based measures correlate with shareowner value theyand, by design, do not reward selective or narrow objectives that maycould be achieved independent of the Company’s overall best interests. | | | • | Maintaining Rigorous Executive Share Ownership Requirements.To further encourage a long-term focus on sustainable performance and shareowner value creation, we require our senior executives to own a significant amount of UTC Common Stock or stock units. Our CEO, Mr. Hayes, has a share ownership requirement equal to six times his base salary. Share holdings of other ELG members must equal at least three times their base salary within five years of appointment to the ELG. Non-employee directors are also required to own shares or stock units equal to five times the cash portion of the annual base retainer. | | | • | Prohibiting Hedging.To avoid undermining the goals of our share ownership policy, UTC prohibits directors and executive officers from entering into short sales of our securities or similar transactions where potential gains are linked to a decline in the value of our Common Stock. Recipients of equity awards may not enter into any agreement that has the effect of transferring or exchanging any economic interest in an award for any other consideration. | | | • | Maintaining a Comprehensive Clawback Policy.UTC has a comprehensive policy on recoupment (“clawback”) of executive compensation. This policy applies to both our annual and long-term incentive compensation programs. In the event of a financial restatement or recalculation of a financial metric applicable to an award, the Company has the right to recover annual bonus payments, as well as gains realized from vested long-term incentive awards from any executive (including all NEOs) involved in an action found to have caused the restatement or recalculation. Clawbacks of bonuses, long-term incentive awards and compensation realized from prior awards may all be triggered by violations of our Code of Ethics, failure to meet employee health and safety standards or exposing UTC to excessive risk, as determined under the ERM program. Our policy provides the Company the right to recover compensation when an executive’s negligence (including the negligent supervision of a subordinate) causes significant harm to UTC. The policy also permits public disclosure of the circumstances surrounding the Committee’s decision to seek recoupment where appropriate. | | | • | Upholding Strict Post-Employment Covenants.ELG members may not engage in activities after termination or retirement that are detrimental to UTC, such as disclosing proprietary information, soliciting UTC employees or engaging in competitive activities. Violations can result in a clawback of annual and long-term incentive awards. |
Executive Share Ownership Requirements. To further encourage a long-term focus on sustainable performance and shareowner value creation, we also require our senior executives to own a significant amount of Common Stock or stock units. Our CEO, Mr. Chênevert, has a share ownership requirement equal to six times his base salary; however, his actual holdings substantially exceed this requirement. Share holdings of other ELG members must equal at least three times their base salary within five years of appointment to the ELG. Non-employee directors are also required to own shares or stock units equal to five times their annual cash retainer.
Prohibition of Hedging. To avoid undermining the goals of our share ownership policy, UTC prohibits directors and executive officers from entering into short sales of our securities or similar transactions where potential gains are linked to a decline in our Common Stock. Recipients of equity awards may not enter into any agreement that has the effect of transferring or exchanging any economic interest in any award for any other consideration.
Clawback Policy. UTC currently has a comprehensive policy on recoupment (“clawback”) of executive compensation. This policy applies to both our annual and long-term compensation programs. Clawbacks can result in significant financial penalties and award forfeitures. In the event of a financial restatement or recalculation of a financial metric applicable to an award, annual bonus payments and gains realized from vested long-term incentive awards can be recouped from any executive (including all NEOs) involved in an action found to have caused the restatement or recalculation. The amount subject to recoupment will, at a minimum, equal the difference between what the executive received and what he or she would have received under the corrected financial metrics over at least the three-year period before the restatement. Clawbacks of bonuses, long-term incentive awards and compensation realized from prior awards also may result from violations of our Code of Ethics, failure to meet employee health and safety standards or exposing the Company to excessive risk, as determined under the ERM program. In Proposal 3 of this Proxy Statement, we are asking shareowners to approve amended language to clarify and further strengthen our clawback policy. This language clarifies the Company’s right to clawback compensation when an executive’s negligence (including the negligent supervision of a subordinate) causes significant harm to the Company’s interests. The policy also permits public disclosure of the circumstances surrounding the Committee’s decision to seek recoupment where the Committee determines such disclosure is appropriate and would not expose the Company to legal risk.
Post-Employment Covenants. These arrangements prohibit ELG members from engaging in activities after termination or retirement that are detrimental to UTC, such as disclosing proprietary information, soliciting UTC employees and engaging in competitive activities. Violations can result in a clawback of long-term incentive awards.
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Corporate Responsibility Corporate Sustainability We have a strong commitment to setting aggressive targets to minimize adverse environmental impacts of our products, operations and supply chain. Since 1992, UTC has established challenging and aggressive environmental, health and safety (“EH&S”) goals, which we monitor and periodically reset. These goals are essential tools in our efforts to continuously reduce our global footprint. Our performance surpassed all 2006 to 2015 environmental sustainability goals PERFORMANCE VS. ENVIRONMENTAL SUSTAINABILITY GOALS (2006 vs. 2015) Goal #1: Reduce absolute greenhouse gas (“GHG”) emissions by 27 percent. Through energy conservation, co-generation and process improvement projects across our enterprise, UTC is reducing both the climate change impacts and cost of our operations. These actions, and a commitment to continued reduction in absolute greenhouse gases, support UTC continuing on a path that is consistent with the United Nation’s Intergovernmental Panel on Climate Change 2050 GHG emissions target. Goal #2: Reduce absolute water consumption by 40 percent. UTC operates in many parts of the world challenged by extreme water scarcity or limited water supply. By continuously reducing our own water use and implementing water management best practices, we reduce our risk of business disruption while also freeing up water resources that can then be used in surrounding communities. Additionally, by reducing our water use we also reduce the energy, and associated GHG emissions, needed to pump and treat water. Goal #3: Reduce absolute air emissions (non-greenhouse gases) by 68 percent. UTC aggressively targets the reduction of air toxics or hazardous air pollutants from our manufacturing processes that could potentially impact worker health or contribute to the creation of ground-level ozone or other ambient air pollution. Goal #4: Reduce absolute total industrial process waste by 45 percent. By continuously reducing our process waste generation, UTC addresses process and cost inefficiencies, and alleviates the burden on land and community resources at the local level. Goal #5: Reduce absolute non-recycled industrial process waste by 54 percent. UTC targets the elimination of the portion of our industrial process waste that is currently not recycled, as our operations increasingly participate in an evolving circular waste economy. The U.S. EPA estimates that 42% of U.S. GHG emissions are attributable to materials management, so increased recycling contributes to a reduction in GHG emissions associated with our business operations. | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x33x1.jpg)
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(1) | Actual levels of EH&S metrics reflect data reported quarterly by UTC sites through a centralized EH&S Reporting System under common reporting and quality assurance standards. Reported data are reviewed and consolidated by UTC business units and Corporate staff. UTC annually submits site energy use and GHG emissions data to an independent verification review based on International Standards Organization (“ISO”) standard 14064, Part 3 criteria for the validation and verification of GHG assertions. | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x33x5.jpg) | 16(2) | Consistent with The Green House Gas Protocol, UTC’s EH&S goals and targets are adjusted to reflect the impacts of acquired companies at the time of acquisition and to remove divested companies from UTC’s measured performance. For example, goals and actual performance were recalibrated beginning in 2013 to account for the impact of the Goodrich acquisition and for 2015 to reflect the sale of Sikorsky. UTC’s goals and targets are not adjusted for the opening of new facilities due to organic growth or for closures of facilities without a divestiture. |
United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 19 |
CORPORATE RESPONSIBILITY2015 Recognition for World Class Sustainability Practices Climate A List The Carbon Disclosure Project named UTC among the top 5% of nearly 2,000 companies in 2015 for its actions and performance to reduce greenhouse gas emissions and mitigate climate change. Industry Promotion Award UTC was recognized byInternational Science Magazine for outstanding contributions to the growth of sustainable cities in China through the creation of innovative technologies and energy-efficient products. 2020 ENVIRONMENTAL SUSTAINABILITY GOALS* Building on our 2015 achievements, our new 2020 environmental sustainability goals are as follows: -15% | | -25% | | -10% | | 90% | | -100% | | Greenhouse gas emissions | | Water use | | Hazardous waste | | Waste recycled | | Chlorinated and brominated solvent emissions | |
* Relative to 2015 baseline year. UTC SUSTAINABLE TECHNOLOGIES UTC is a leader in the development of cutting-edge, sustainable aerospace and building technologies. Some of our most groundbreaking, sustainable products include: • | Carrier Transicold and Refrigeration Systems’ cold-chain solutions preserve food from field to point of sale, helping reduce global food waste and its resulting environmental impact. | | | • | Carrier’s NaturaLINE uses a natural refrigerant combined with energy-efficient technology to reduce the carbon footprint of marine container refrigeration by 28% compared to conventional synthetic refrigerants. | | | • | Carrier’s CO2OLtec technologies replace HFC refrigerants with naturally occurring CO2to reduce global warming impacts. | | | • | Carrier’s Infinity Control energy-efficient geothermal solutions can reduce heating and cooling costs by up to 70% compared to ordinary heating systems. | | | • | Otis’ ReGen technology captures energy generated during ascent and decent and recycles this energy back into a building’s power grid, reducing energy consumption by up to 75% compared to conventional drives. | | | • | Pratt & Whitney’s GTF engine decreases fuel burn by almost 16%, noise by 75% and nitric oxide emissions by 50%, as compared to conventional engines. |
Corporate Citizenship As part of our commitment to corporate responsibility, we take great pride in building a diverse work environment, supporting lifelong learning for our employees and contributing to charitable and social causes in the communities where we do business. In the same way that we set the highest standards for our business operations, we apply the highest corporate responsibility standards and rigorous performance measurements to these efforts. 20 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
CORPORATE RESPONSIBILITY DIVERSITY AND INCLUSION We value the diversity of our people and their ideas. Our success as a global technology leader rests on unlocking the innovative potential of our employees. We are committed to building an inclusive, high-performing environment which allows everyone to contribute to their fullest potential. 2015 Diversity and Inclusion Employee Inclusion and Engagement Over 19,000 UTC employees belong to our nine* Employee Resource Groups, which provide employees at all organizational levels networking, development and leadership opportunities. Best Places to Work for Latinas In 2015, UTC was ranked as the 10thbest place to work for Latinas byLatina Style Magazine, continuing our improvement from #13 in 2014 and #35 in 2013. Diversity in Our Suppliers In 2015,DiversityBusiness.com named UTC the 29thbest organization for multicultural business opportunities; an award that recognizes UTC’s efforts to expand our diversity framework to our suppliers. 2015 marked the 10thconsecutive year in which UTC made the Top 50. *Includes African-American, Asian-American, Employment Disability, Hispanic, InterGenerational, LGBT, Military/Veterans, Women and Professionals. COMMUNITY INVOLVEMENT Our people lead in their communities, volunteering time, talent and expertise everywhere across the globe. In 2015, UTC continued to support a number of leading nonprofit organizations around the globe. We focused contributions in areas including STEM education (through grants toFIRST Robotics) and sustainable cities (through grants to the U.S. Green Building Council’s Center for Green Schools). From major investments in the United Way and the American Red Cross to significant support for health, artistic and cultural institutions in the communities where we do business, UTC and its employees are committed to making the world a better place. EMPLOYEE SCHOLAR PROGRAM We support and pursue lifelong learning to expand our employees’ knowledge and capabilities and to engage with the world outside UTC. We want to have the best-educated workforce on the planet. Our Employee Scholar Program, which has been in place since 1996, is one of the most comprehensive company-sponsored employee education programs in the world. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 21 |
Compensation of Directors ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Annual Retainer Annual Retainer
In 2013,2015, the compensation of non-employee directors consisted of an annuala retainer that was paid partially in cash and partially in deferred stock unit retainer. units (“DSUs”). Following termination of a non-employee director’s service on the Board, DSUs are converted into shares of Common Stock, which can be distributed either in a lump-sum payment upon retirement or in ten- or fifteen-year installments. The following table shows the annual retainer amounts in effect for non-employee directors for service from April 2015 to April 2016: Role | | Cash | | | Deferred Stock Units | | | Total | | Non-Executive Chairman of the Board | | $ | 192,000 | | | $ | 288,000 | | | $ | 480,000 | | Audit Committee Chair | | $ | 128,000 | | | $ | 192,000 | | | $ | 320,000 | | Audit Committee Member | | $ | 124,000 | | | $ | 186,000 | | | $ | 310,000 | | Committee on Compensation and Executive Development Chair | | $ | 122,000 | | | $ | 183,000 | | | $ | 305,000 | | Finance Committee Chair | | $ | 122,000 | | | $ | 183,000 | | | $ | 305,000 | | Committee on Nominations and Governance Chair | | $ | 120,000 | | | $ | 180,000 | | | $ | 300,000 | | Public Issues Review Committee Chair | | $ | 120,000 | | | $ | 180,000 | | | $ | 300,000 | | Non-Employee Director | | $ | 112,000 | | | $ | 168,000 | | | $ | 280,000 | |
If a director served in multiple roles, his or her annual cash retainer and annual deferred stock unit (“DSU”)DSU award was based on the capacity for which the level of compensation was the highest. Non-employee directors received amounts for the following services in 2013: | | | | | | | | | | | | | | | | | | | | | | | | | Element | | | Base Retainer | | | | Lead Director | | | | Audit Committee Chair | | | | Committee on Compensation and Executive Development Chair | | |
| Committee
Chair |
| | | Audit Committee Member | | Annual Cash | | | $104,000 | | | | $120,000 | | | | $120,000 | | | | $112,000 | | | | $110,000 | | | | $116,000 | | Deferred Stock Units | | | $156,000 | | | | $180,000 | | | | $180,000 | | | | $168,000 | | | | $165,000 | | | | $174,000 | | Total | | | $260,000 | | | | $300,000 | | | | $300,000 | | | | $280,000 | | | | $275,000 | | | | $290,000 | |
Effective April 29, 2013, the total compensation amounts for all positions increased by $20,000, with an additional $5,000 increase for the Chairman of the Committee on Compensation and Executive Development. These increases were made to better align director compensation with the market and are reflected in the table above.
Non-employee directors receive 40% of their totalthe annual retainer in cash and 60% in deferred stock units. Alternatively,DSUs, unless they may elect to receive theirthe entire retainer fee in DSUs. The number of DSUs credited to each director in 2013 was calculated by dividing the cash value of the director’s compensation by $91.62, the NYSE closing price of Common Stock on April 29, 2013, the date of the 2013 Annual Meeting. Directors do not receive additional compensation for attending regularly scheduled Board and Committee meetings. However, non-employee directors do receive an additional $5,000 for each special meeting they attend in person.attended in-person. There were no special Board or Committee meetings of the Board in 2013.attended by directors in-person during 2015.
Following termination of a non-employee director’s service, DSUs are converted into shares of Common Stock. The distribution of shares of Common Stock can be made in either a lump sum upon retirement or in ten- or fifteen-year installments.
One-Time RSU Awards for New Directors Non-employee directors receive a one-time $100,000 restricted stock unit award (“RSU”) award when first elected to the Board. This award vests ratablyin equal portions over five years and is distributed to the director in shares of UTC Common Stock upon retirement, termination or death. No director received an RSU award in 2013.2015. Treatment of Dividends When UTC pays a dividend on Common Stock, each director’s DSU and RSU balancedirector is credited with additional DSUs and RSUs respectively, having aequal in value equal to the dividend paid on the corresponding number of shares of Common Stock. 22 | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | |
COMPENSATION OF DIRECTORS ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) 2015 DIRECTOR COMPENSATION(1) | 2013 Director Compensation | | Name | | Fees Earned or Paid in Cash ($) (1) | | Stock Awards ($) (2) | | All Other Compensation ($) | | Total ($) | | Fees Earned or Paid in Cash ($) | (2) | | Stock Awards ($) | (3) | | All Other Compensation ($) | | | Total ($) | | Louis R. Chênevert | | $0 | | $0 | | $0 | | $0 | | Edward A. Kangas | | | $ | 192,000 | | | $ | 288,000 | | | $ | 1,107 | | | $ | 481,107 | | John V. Faraci | | $0 | | $290,000 | | $0 | | $290,000 | | $ | 0 | | | $ | 305,000 | | | $ | 1,107 | | | $ | 306,107 | | Jean-Pierre Garnier | | $0 | | $280,000 | | $0 | | $280,000 | | $ | 0 | | | $ | 305,000 | | | $ | 1,107 | | | $ | 306,107 | | Jamie S. Gorelick | | $104,000 | | $156,000 | | $0 | | $260,000 | | Edward A. Kangas | | $0 | | $300,000 | | $223(3) | | $300,223 | | Ellen J. Kullman | | $116,000 | | $174,000 | | $1,247(3) | | $291,247 | | $ | 0 | | | $ | 310,000 | | | $ | 1,107 | | | $ | 311,107 | | Marshall O. Larsen | | $0 | | $260,000 | | $2,363(3) | | $262,363 | | $ | 0 | | | $ | 280,000 | | | $ | 1,144 | | | $ | 281,144 | | Harold McGraw III | | $0 | | $260,000 | | $0 | | $260,000 | | $ | 112,000 | | | $ | 168,000 | | | $ | 1,107 | | | $ | 281,107 | | Richard B. Myers | | $116,000 | | $174,000 | | $0 | | $290,000 | | $ | 124,000 | | | $ | 186,000 | | | $ | 1,107 | | | $ | 311,107 | | H. Patrick Swygert | | $0 | | $290,000 | | $16,533(4) | | $306,533 | | $ | 124,000 | | | $ | 186,000 | | | $ | 17,640 | (4) | | $ | 327,640 | | André Villeneuve | | $0 | | $290,000 | | $0 | | $290,000 | | $ | 0 | | | $ | 310,000 | | | $ | 1,107 | | | $ | 311,107 | | Christine T. Whitman | | $110,000 | | $165,000 | | $0 | | $275,000 | | $ | 120,000 | | | $ | 180,000 | | | $ | 1,107 | | | $ | 301,107 | |
(1) | Messrs. Reynolds and Rogers were elected to the Board of Directors effective January 1, 2016. No compensation was paid to either director for services performed in 2015. | | | (2) | Consists of the 2015 annual cash retainer fees paidthat directors did not elect to receive in cash in 2013.DSUs. |
(2) | | (3) | Consists of the grant date fair value of DSU awards credited to the account of the director, including the portion, if any, of the director’s annual cash retainer that the director elected to receive in DSUs, in each case calculated in accordance with the Compensation—Stock Compensation Topic of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”ASC”). The assumptions made in the valuation of these awards can be found in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20132015 Annual Report on Form 10-K. The number of DSUs credited to each director in 2015 was calculated by dividing the cash value of the DSU portion of the director’s annual retainer by $115.74, the NYSE closing price per share of UTC Common Stock (“Common Stock”) on April 27, 2015, which was the date of the 2015 Annual Meeting. As of December 31, 2013,2015, non-employee directors held the following: |
| Name | | Number of Unvested RSUs Attributable to Initial $100,000 RSU Grant | | Number of Deferred Stock Units, Restricted Stock and Vested RSUs | | Number of Outstanding Stock Options | | Number of Unvested RSUs from One-Time $100,000 RSU Grant | | Number of DSUs, Restricted Stock and Vested RSUs | | Edward A. Kangas | | | | — | | | | 32,994 | | John V. Faraci | | - | | 34,719 | | - | | | — | | | | 41,575 | | Jean-Pierre Garnier | | - | | 70,740 | | 6,000 | | | — | | | | 78,877 | | Jamie S. Gorelick | | - | | 41,793 | | 13,400 | | Edward A. Kangas | | - | | 25,991 | | - | | Ellen J. Kullman | | 506 | | 6,495 | | - | | | — | | | | 11,595 | | Marshall O. Larsen | | 1,015 | | 6,306 | | - | | | 254 | | | | 12,170 | | Harold McGraw III | | - | | 42,230 | | 13,000 | | | — | | | | 47,042 | | Richard B. Myers | | - | | 22,070 | | - | | | — | | | | 26,268 | | H. Patrick Swygert | | - | | 49,755 | | - | | | — | | | | 55,231 | | André Villeneuve | | - | | 66,146 | | - | | | — | | | | 74,277 | | Christine T. Whitman | | - | | 26,718 | | 13,000 | | | — | | | | 30,997 | |
(3)(4) | Reflects the value of dividend equivalents credited on unvested RSUs. |
(4) | Consists of a premium payment on a life insurance policy used to fund Mr. Swygert’s participation in the Directors’ Charitable Gift Program. Mr. Swygert is the only non-employee director participating infor whom UTC still pays a premium, as this legacy program which was closed to directors elected after February 2003. Mr. Swygert derives no financial benefit from this program. All insurance proceeds are payable to aup to four charitable organizationorganizations designated by him and tax deductions accrue solely to UTC. |
| | | 18 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 23 |
Stock Ownership Information ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Directors and Executive Officers This section contains required information about certain “beneficial owners” of our Common Stock as that term is defined under SEC rules.
DIRECTORS, BOARD NOMINEES, AND EXECUTIVE OFFICERS
The following table shows the number of shares of Common Stock beneficially owned, as of March 1, 2014,February 29, 2016, by each of our current directors, each of whom is a nominee for election as a director, by each of the named executive officersNamed Executive Officers listed in the Summary Compensation Table on page 4857 of this Proxy Statement and by allour directors and executive officers as a group. Each director and executive officer, and the directors and executive officers as a group, beneficially owned less than 1% of the outstanding shares of Common Stock as of that date. Except as explained in the footnotes to the following table, each person listed, and the members of the group, had sole voting power and sole investment power with respect to the shares shown. | | | Name | | Shares Beneficially Owned | Louis R. Chênevert John V. Faraci | | 2,897,956(1)41,575 | John V. Faraci Jean-Pierre Garnier | | 34,71990,587 | Jean-Pierre Garnier Gregory J. Hayes(1) | | 88,450230,881 | Jamie S. Gorelick Edward A. Kangas | | 73,10032,994 | Edward A. Kangas Ellen J. Kullman | | 25,99111,595 | Ellen J. Kullman Marshall O. Larsen | | 7,00117,856 | Marshall O. Larsen Harold McGraw III | | 12,75350,647 | Harold McGraw III Richard B. Myers | | 56,23026,268 | Richard B. Myers Fredric G. Reynolds | | 22,07015,254 | Brian C. Rogers | | 2,511 | H. Patrick Swygert | | 50,75555,231 | André Villeneuve | | 66,14674,277 | Christine T. Whitman | | 37,368 37,847 | Alain Bellemare Paul Adams(2) | | 355,909 44,803 | Geraud Darnis Alain M. Bellemare(3) | | 1,149,585(2) 82,724 | Gregory Hayes Geraud Darnis(4) | | 459,752(3)365,220 | David Hess Charles D. Gill, Jr.(5) | | 227,077 173,597 | Akhil Johri | | 43,864 | Directors & Executive Officers as a group (22(23 in total)(6) | | 6,436,437(4)1,238,922 |
(1) | In addition to these shares, Mr. Chênevert holds 12,318 deferred stock units, credited to his account under the UTC Deferred Compensation Plan, that have a value equal to a corresponding number of shares of Common Stock. These units will be settled by payment in cash upon distribution from the UTC Deferred Compensation Plan. Includes 18,120 shares held in a family charitable foundation. Mr. Chênevert shares with family members voting and dispositive power with respect to such shares. |
(2) | Includes 5,8502,103 shares of Common Stock for which Mr. Darnis’ spouse holds voting and investment power. |
(3) | In addition to these shares, Mr. Hayes holds 6,525 deferred stock units, credited to his account under the UTC Deferred Compensation Plan, that have a value equal to a corresponding number of shares of Common Stock. These units will be settled by payment in cash upon distribution from the UTC Deferred Compensation Plan. Includes 2,043 shares of Common Stock as to which Mr. Hayes’ spouse holds voting and investment power. |
(4) | | (2) | Paul Adams retired from the Company effective February 29, 2016. | | | (3) | Alain M. Bellemare retired from the Company effective January 31, 2015. | | | (4) | Geraud Darnis retired from the Company effective January 31, 2016. | | | (5) | Includes 1,546 shares of Common Stock as tofor which theMr. Gill’s spouse of an officer who is not a Named Executive Officer holds voting and investment power. | | | (6) | Consists of holdings of those directors and executive officers who continue to serve in such positions as of February 29, 2016, and, therefore, excludes the holdings of Messrs. Adams, Bellemare and Darnis. This line includes holdings of eight current executive officers in addition to those required to be listed by name in this table. |
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STOCK OWNERSHIP INFORMATION The preceding table includes shares as to which the listed person or the members of the group had the right to acquire beneficial ownership at any time within 60 days after March 1, 2014February 29, 2016 by exercising stock options or stock appreciation rights (“SARs”) or stock options and, in the case of non-management directors, upon the settlement of restricted stock units (“RSUs”) or deferred stock units (“DSUs”) as a result of their resignation or retirement from the Board, as set forth in the following table. The amounts in the preceding table also include, for all but two of the executive officers, stock units credited to the account of the officer under the Savings Restoration Plan that are attributable to Company contributions to match 60% of the officer’s payroll contributions to his or her account under the Plan, and which are settled in shares of Common Stock following the officer’s retirement or other termination of employment. Name | | Shares as to which listed person has right to acquire beneficial ownership within 60 days by exercise of stock options or SARs | (1) | | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of RSUs | | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of DSUs | J. Faraci | | — | | | 2,191 | | 39,384 | J. Garnier | | — | | | — | | 72,477 | G. Hayes | | 135,534 | | | — | | — | E. Kangas | | — | | | 2,465 | | 30,529 | E. Kullman | | — | | | 1,422 | | 10,173 | M. Larsen | | — | | | 1,365 | | 11,059 | H. McGraw III | | — | | | 2,926 | | 44,116 | R. Myers | | — | | | 1,934 | | 24,334 | F. Reynolds | | — | | | 1,046 | | 983 | B. Rogers | | — | | | 1,046 | | 1,465 | H. Swygert | | — | | | 3,665 | | 51,566 | A. Villeneuve | | — | | | — | | 69,477 | C. Whitman | | — | | | 2,926 | | 28,071 | P. Adams | | 39,724 | | | — | | — | A. Bellemare | | 45,246 | | | — | | — | G. Darnis | | 214,357 | | | — | | — | C. Gill, Jr. | | 126,275 | | | — | | — | A. Johri | | 26,813 | | | — | | — | Directors & Executive Officers as a group (23 in total)(2) | 453,554 | | | 20,986 | | 383,634 |
(1) | | For the executive officers, includes the net number of shares of Common Stock issuable upon exercise of vested SARs. Following vesting, each SAR is exercisable for a number of shares of Common Stock having a value equal to the increase in value of a share of Common Stock from the date the SAR was granted through the date of exercise. For purposes of this table, the net number of shares of Common Stock issuable upon exercise has been calculated using the NYSE closing price for a share of Common Stock on December 31, 2015, which was $96.07. | United Technologies Corporation | | (2) | Consists of holdings of those directors and executive officers who continue to serve in such positions as of February 29, 2016, and, therefore, excludes holdings of Messrs. Adams, Bellemare and Darnis. This line includes holdings of eight current executive officers in addition to those required to be listed by name in this table. |
Proxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 25 |
STOCK OWNERSHIP INFORMATION ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Beneficial Owners of More Than 5% of UTC Common Stock | | | | | | | | | | | | | Name | | Shares as to which listed person has right to acquire beneficial ownership within 60 days by exercise of stock options or SARs | | | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of RSUs | | | Shares as to which listed person has right to acquire ownership within 60 days upon conversion of DSUs | | L. Chênevert | | | 2,322,000 | | | | - | | | | - | | J. Faraci | | | - | | | | 2,095 | | | | 32,624 | | J. Garnier | | | 6,000 | | | | - | | | | 64,340 | | J. Gorelick | | | 13,400 | | | | - | | | | 37,793 | | E. Kangas | | | - | | | | 2,357 | | | | 23,634 | | E. Kullman | | | - | | | | 1,359 | | | | 5,642 | | M. Larsen | | | - | | | | 1,305 | | | | 6,016 | | H. McGraw III | | | 13,000 | | | | 2,797 | | | | 39,433 | | R. Myers | | | - | | | | 1,848 | | | | 20,222 | | H. Swygert | | | - | | | | 3,503 | | | | 46,252 | | A. Villeneuve | | | - | | | | - | | | | 61,346 | | C. Whitman | | | 6,000 | | | | 2,797 | | | | 23,921 | | A. Bellemare | | | 305,500 | | | | - | | | | - | | G. Darnis | | | 985,000 | | | | - | | | | - | | G. Hayes | | | 389,000 | | | | - | | | | - | | D. Hess | | | 148,500 | | | | - | | | | - | | Directors & Executive Officers as a group (22 in total) | | | 4,934,250 | | | | 18,061 | | | | 361,223 | |
BENEFICIAL OWNERS OF OVER 5% OF UTC COMMON STOCK
The following table shows all holders known to us to be beneficial owners of more than 5% of the outstanding shares of Common Stock as of December 31, 2013.2015. | | | | | Name and Address | | Shares | | Percent of Class | State Street Corporation* State Street Financial Center One Lincoln Street Boston, MA 02111 | | 105,279,543 | | 11.5% | BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | | 61,594,623 | | 6.7% | The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 | | 49,543,861 | | 5.4% |
Name and Address | | Shares | | Percent of Class | | State Street Corporation(1) | | 99,702,863 | | 11.9 | % | State Street Financial Center One Lincoln Street Boston, MA 02111 | | | | | | The Vanguard Group(2) | | 51,558,180 | | 6.2 | % | 100 Vanguard Boulevard Malvern, PA 19355 | | | | | | BlackRock, Inc.(3) | | 48,153,780 | | 5.7 | % | 55 East 52nd Street New York, NY 10022 | | | | | |
*(1) | State Street Corporation, acting in various fiduciary capacities, reported in an SEC filing that as of December 31, 20132015 it held sole voting power with respect to 0zero shares of Common Stock, shared voting power with respect to 105,279,54399,702,863 shares of Common Stock, sole dispositive power with respect to 0zero shares of Common Stock, and shared dispositive power with respect to 105,279,54399,702,863 shares of Common Stock. State Street Corporation also reported that its wholly-owned subsidiary, State Street Bank & Trust Company, held 64,816,57261,441,100 of these shares in its capacity as Trustee for UTC’s Employee Savings Plan Master Trust. State Street Corporation disclaims beneficial ownership of the reported shares, except in its fiduciary capacity. | | | (2) | The Vanguard Group, reporting on behalf of various subsidiaries, reported in an SEC filing that as of December 31, 2015 it held sole voting power with respect to 1,548,916 shares of Common Stock, shared voting power with respect to 83,500 shares of Common Stock, sole dispositive power with respect to 49,916,427 shares of Common Stock, and shared dispositive power with respect to 1,641,753 shares of Common Stock. | | | (3) | BlackRock, Inc., reporting on behalf of various subsidiaries, reported in an SEC filing that as of December 31, 2015 it held sole voting power with respect to 40,104,635 shares of Common Stock, shared voting power with respect to zero shares of Common Stock, sole dispositive power with respect to 48,153,780 shares of Common Stock, and shared dispositive power with respect to zero shares of Common Stock. |
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| | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
Executive CompensationCompensation: Compensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
In this section, we discuss our compensation philosophy and describe the compensation program for our Chairman &President and Chief Executive Officer (“CEO”) and our senior leadership team.Executive Leadership Group (“ELG”). We explain how our Board’s Committee on Compensation and Executive Development (“the Committee”(the “Committee”) determines compensation for our senior executives and its rationale for specific 20132015 pay decisions. We also discuss numerous changes the Committee has made toevolution of our program over the past several yearsand how it is structured to advance its fundamental objective: aligning our executiveexecutives’ compensation with the long-term interests of UTC shareowners. EXECUTIVE SUMMARYExecutive Summary
Our executive compensation
We design our program is designed to reward financial resultsperformance and effective strategic leadership, key elements in building sustainable value for shareowners. We believe that the performance metrics used in our program’s performance measuresincentive plans align the interests of our shareowners and senior executives by correlating the timing and amount of actual pay to our short-, medium- and long-term performance. Our program places significant weight onrequires ethical and responsible conduct in pursuit of these goals. In addition, we carefully benchmark our executive compensation program against a relevant group of peer companies—all of which are potential competitors for the caliber of executive talent required to manage a complex, global and multi-industrial company like UTC. Response to 2015 Say-on-Pay Vote Each year, we consider the voting results of our Say-on-Pay proposal from the preceding year. In 2015, 95% of the votes submitted (excluding abstentions and broker non-votes) supported the Committee’s 2014 executive compensation decisions, a result that exceeded the 93% favorable vote we received in 2014. We interpreted this result, along with our positive four-year voting trend, as an endorsement of our compensation program’s design and direction. Our 2015 Outreach Program We actively seek and highly value feedback from shareowners and their advisors concerning our compensation program. Since our last Annual Meeting of Shareowners, senior management has communicated directly with institutional investors holding overapproximately 300 million shares of UTC Common Stock (“Common Stock”). In addition, we carefully benchmark
Analysis of Shareowner Feedback As it does each year, the Committee considered shareowner feedback in its ongoing assessment of our compensation decisions against a market-relevant groupprogram. This feedback, along with factors such as external market data and staff compensation recommendations, helps the Committee in its review of peer companies that are potential competitors for the caliber of executive talent required to manage a complex, global, multi-industrial company like UTC. Following significant changes made to our compensation programs in 2012, 90% of the votes cast (i.e., excluding abstentions and broker non-votes) supported our Say-on-Pay proposal at the 2013 Annual Meeting.program.
| | In 2013, our Say-on-Pay proposal garnered 90% support,
29 percentage points better than 2012.
|
2013 PERFORMANCE
We experienced strong financial and operating performance in 2013, as evidenced by our earnings growth, cash flow and stock price appreciation. Our 2013 compensation decisions recognize this performance.
We believe that a portion of our executive compensation should reflect and reward current-year performance. However, our program prudently accounts for, and indeed emphasizes, long-term financial performance and actions taken by our senior leadership team to strategically position UTC for future growth. We focus on sustainable performance and, therefore, allocate a significantly greater portion of compensation to longer-term goals and performance.
Our solid operational and financial performance in 2013 reflects senior leadership’s sharp focus on deploying our capital wisely, executing our business strategies effectively and achieving a balanced business mix. This focus enabled us to deliver value to our shareowners in 2013, notwithstanding weak U.S. defense spending and increased pension expense, primarily due to low discount rates.
| | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 27 |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) 2015 PERFORMANCE
During 2015, UTC implemented a significant business transformation, driven by the $9 billion sale of Sikorsky Aircraft and the elimination of UTC Propulsion & Aerospace Systems (“UTC PAS”) and UTC Building & Industrial Systems (“UTC BIS”), as organizational layers within our management structure. UTC is now comprised of four distinct business units reporting directly to the CEO, providing increased transparency and a more direct focus on operational performance (for an illustration of these structural changes, see page ii). We believe this simplified structure better positions us to deliver: | | | | | FLAWLESS PROGRAM | | 2013 Financial ResultsEFFECTIVE ALLOCATION | | | | | | TA CULTURE OF TRUST | EXECUTION | | Sales increased by 9% to $62.6 billion | | | | OF CAPITAL | | TAND ACCOUNTABILITY | | Earnings per share increased by 16% to $6.21 | | | | | | T | | $5.8 billion in free cash flow; in excess of net income | | | | | | T | | Dividends per share increased by 10.3%, marking the 77th consecutive year our shareowners have received dividends | | | | | | T | | Our U.S.-funded pension ratio increased from 84% in 2012 to 98% in 2013
|
FINANCIAL RESULTS (3 AND 10 YEARS)*
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g08u32.jpg) With this renewed focus, we successfully executed on a number of strategic and operational objectives during 2015 that we believe will position us for long-term, sustainable growth, including:
*• | For 2013Pratt & Whitney’s PurePower PW1000G engine with Geared Turbofan (“GTF”) technology obtained FAA and 2011, net incomeEASA certification in 2015 and diluted earnings per share metrics reflect continuing operations, as reportedentered into service with Lufthansa Airlines in early 2016. The GTF is a revolutionary engine that decreases fuel burn by 16%, noise by 75% and air pollutant emissions by 50%. With approximately 7,000 orders to-date (including options), this entry into service is a significant operational accomplishment, which is expected to provide us with revenue streams for decades. | | | • | UTC Aerospace Systems supplies the 2013 Annual Report on Form 10-K. 2004 net incomeelectric power, air supply, landing and diluted earnings per share represent values reportedfuel sensing systems for Boeing’sKC-46A tanker, which made its first flight in 2015. We also supply the 2004 Annual Report on Form 10-K, as subsequently restatedengine controls, fuel metering unit and other accessories for the effecttanker’s Pratt & Whitney PW4062 engines. | | | • | Sale of our Sikorsky Aircraft business unit, which we executed on an accelerated basis, allowing greater focus on our core businesses and future growth potential. | | | • | Otis received orders for significant key projects in China—examples include 133 elevators and escalators to be provided to the Chengdu Metro Line and a contract to supply 174 elevators and escalators to a new accounting standardlandmark commercial building in Ningbo, East China. | | | • | UTC CCS won its largest retrofit contract to date for the CP Tower in Kuala Lumpur, Malaysia. | | | • | Otis was selected to provide elevators and escalators with leading energy-efficient technologies to the 2005 stock split. 2004 amounts have not been adjusted for discontinued operations. For the definitions of net income, earnings, free cash flow and other measures used for our incentive compensation plans and for a reconciliation from cash flow to free cash flow, refer to page 46 of this Proxy Statement.landmark New York City Hudson Yards development project. |
| | | 22 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSISNotwithstanding these strategic and operational accomplishments, significant investments in the GTF engine, adverse foreign exchange rates and slowed growth in China contributed to a decrease in adjusted net income and diluted EPS for continuing operations, as shown in the charts on the following page.
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Despite these near-term pressures, UTC increased dividends paid to shareowners by 8.5% in 2015. This represents the 79thconsecutive year in which UTC has paid dividends. Consistent with our disciplined capital allocation strategy, we also returned $12 billion to shareowners through dividends and share repurchases (including a $6 billion accelerated share buyback program announced in November 2015). In addition, we initiated a $1.5 billion multi-year structural cost reduction plan. These actions are intended to contribute to long-term sustainable growth while responding to near-term economic and financial challenges. 28 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis FINANCIAL RESULTS ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x43x1.jpg)
(1) | Reflects continuing operations, adjusted to exclude restructuring, non-recurring and other significant, defined non-operational items. A reconciliation to these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure for each of the three years shown is set forth in Appendix B on page 86. | (2) | Reflects continuing operations. |
SHAREOWNER VALUE CREATION The Committee believes that long-term incentive goalsincentives should correlate directly correlate with the creation of long-term shareowner value; an essentialvalue. This correlation is a fundamental component of our Guiding Principles, as discussed on pages 26 and 27. Ourpage 33. We believe our ability to generate sustainablestrong TSR over long-term periods has been, in part, driven by the design of our executive compensation program. This can be seen in UTC’s 7.9% annualized TSR over the ten-year period ending on December 31, 2013 is noteworthy and, in our view, correlates with our executive compensation program design. UTC’s 11% annualized TSR over this period significantly outpaced2015, which exceeded the Dow Jones Industrial Average (7%(7.7%), the S&P 500 (7%(7.3%) and our Compensation Peer Group (6%(6.9%) (our (“CPG”) is detailed on page 35). Our Board of Directors and senior management are strongly committed to positioning UTC for long-term sustainable growth even while facing near-term earning headwinds, which have adversely affected TSR over shorter time periods relative to peers. The following chart illustrates UTC’s performance relative to differing comparator groups and time periods. TOTAL SHAREOWNER RETURN: UTC VS. PEER GROUPS* ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g26m36.jpg) ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x43x2.jpg)
*TSR values are provided by S&P Capital IQ and are calculated on an annualized basis as of December 31, 2015. For the CPG composite values, returns are calculated for each peer company and then a weighted average is calculated based on each company’s market capitalization at the beginning of the measurement period. * | TSR values are provided by S&P Capital IQ and are calculated on an annualized basis as of December 31, 2013. For the Compensation Peer Group composite values, returns are calculated individually for each peer company, then a weighted average is calculated based on each company’s market capitalization at the beginning of the measurement period. |
| | | | | | | Response to 2013 Say-On-Pay Vote
| | | Each year, we carefully consider the results of our shareowner Say-on-Pay vote from the preceding year. In 2013, 90% of the votes cast (i.e., excluding abstentions and broker non-votes) supported our 2012 executive compensation decisions. This result was well in excess of the 61% favorable vote we received in 2012 with respect to our 2011 decisions. We interpreted the results of our 2013 vote — and the marked improvement over 2012 — as an endorsement of our compensation program’s improved design and direction.
Our 2013 Outreach Program
In 2013, we continued to engage with our shareowners to solicit their feedback on UTC’s executive compensation program. We also sought input from third-party consultants and proxy advisory firms.
Analysis of Shareowner Feedback
In 2013, the Committee, as it does each year, analyzed shareowner feedback and incorporated it into its ongoing assessment of our compensation elements. This feedback helps the Committee in its review of our program along with other factors, such as external market data and staff compensation recommendations.
Based on the favorable feedback we received from shareowners regarding our significant program changes in 2012, the Committee made less extensive adjustments in 2013:
• We prospectively eliminated the cash severance benefit for ELG members appointed on or after May 2013. These members will continue to receive a restricted stock unit award upon appointment to the ELG that contains restrictive covenants, as described on page 38. The Committee believes that an equity award tied to Common Stock performance has a greater retention value and better aligns our ELG program with the long-term interests of our shareowners.
• We adjusted our annual bonus funding formula to incorporate Company-wide performance for our business unit executives. This change was made to drive strategic goals across the entire organization.
These adjustments, along with the significant modifications made to our program in 2012, have enhanced our executive compensation structure to more closely align with best practices and shareowner feedback received in 2013.
|
| | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 29 |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) For our CEO and other NEOs, the Committee’s 2015 compensation decisions, as described in detail on pages 50 to 53, recognize both the near-term results and the strategic and operational accomplishments previously discussed in this section. CEO PAY HIGHLIGHTSOVERVIEW Consistent with our core belief that pay for performance creates shareowner value, approximately 90% of
Mr. Chênevert’s 2013 compensation consisted of variable, contingent and performance-based annual and long-term incentives, as shown on page 36 of this Proxy Statement. As explained on page 43, the Committee assessed Mr. Chênevert’s 2013 performance favorably. The chart below shows that Mr. Chênevert’s 2013Hayes’ 2015 total direct compensation, increasedas defined on page 47, decreased by 1.8% from $17$10.93 million in 2014 to $18.5$10.73 million approximately a 9% increasein 2015. This decrease was primarily driven by the decrease in the Company’s annual bonus financial performance factor from 112% of target in 2014 to 39% in 2015. This performance resulted in the previous year. This compensation increase resulted fromCommittee approving an $850,000 annual bonus for Mr. Hayes, an amount which substantially aligned with this performance factor, but was below the following Committee actions:CPG median.
• | | A 4.4% base salary increase |
The Committee favorably assessed Mr. Hayes’ 2015 performance (discussed in detail on page 50). Based on this assessment, the Committee increased Mr. Hayes’ 2016 long-term incentive grant to $8.58 million. While this amount was greater than the $8.03 million grant awarded to Mr. Hayes in 2015, his 2016 grant value was below the CPG median, reflecting Mr. Hayes’ brief tenure as CEO. • | | An annual bonus aligned with the Corporation’s 2013 financial performance |
• | | An increase in the value of Mr. Chênevert’s most recent long-term incentive grant (made on January 2, 2014), reflecting the Committee’s favorable assessment of 2013 performance |
The target for Mr. Chênevert’s total direct compensation continues to approximate the median of the market.
CEO TOTAL DIRECT COMPENSATION(1) ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g14v50.jpg) ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x44x1.jpg)
(1) | | The elements of total direct compensation are described in detail on page 47 of this Proxy Statement. 2013 total direct compensation reflects the Committee’s pay decisions with respect to Mr. Hayes’ former role as Senior Vice President & Chief Financial Officer. | 24 | | United Technologies CorporationProxy Statement(2) | Grant date fair value of Mr. Hayes’ January 4, 2016 LTI award, calculated in accordance with the Compensation—Stock Compensation Topic of the FASB ASC, but excluding the effects of estimated forfeitures. This grant consists of 264,000 SARs and Notice53,000 PSUs, and is based on the $95.57 NYSE closing price of 2014 Annual Meetingour Common Stock on the date of Shareownersgrant. |
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EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Our Core Executive Compensation Practices EXECUTIVE COMPENSATION PRACTICES
We continually monitor the evolution of best compensation practices.practices and make changes to our programs as necessary to ensure sound corporate governance. Some of the most important practices incorporated into our program include the following:include: | | | | | | | Our Compensation Practices | | | | | | T | | Review of Pay versusVersus Performance. The Committee continually reviews the relationship between CEO compensation and Company performance. | | | | | | T | | performance, as detailed on pages 46 to 49. Median Compensation Targets.All Each of the principal elements of compensation elements(as discussed on page 36) for our executives areis targeted at the median of our CPG. In 2013, the Committee reduced long-term incentive award targets for ELG members (including all NEOs) from the 65th to the 50th percentile of the CPG. | | | | | | T | | market. Rigorous and Diversified Performance Metrics.The Committee annually reviews performance goals for our annual and long-term incentive awards to assure the use ofconfirm that we are using diversified metrics with rigorous but attainable targets. In an effort toBeginning with the 2016 grant, the addition of ROIC will further diversify performance metrics across our incentive plans, the Committee changed the primary financial metric beginning in 2013used for our annual incentive awards from earnings per share to net income. For our PSUs, the Committee also recently shifted the earnings per share growth metric from a series of three annual targets to a three-year cumulative growth target. | | | | | | T | | PSU awards. Clawback of Compensation. We strengthenedcontinue to monitor our clawback policy inand make enhancements as necessary. In this regard, we have made revisions twice since 2011 and in Proposal 3 of this Proxy Statement, we are seeking shareowner approval to further enhance thisstrengthen our policy. In 2011, we broadened our policy’s definition of “misconduct” and extended the time period covered. In Proposal 3, we are taking further action to reinforce the Committee’s ability to recoup compensation when it determines an executive’s negligence (including negligent supervision of a subordinate) caused significant harm to the Company’s interests. Also, in appropriate cases, we will now publicly disclose circumstances surrounding the Committee’s decision to invoke this policy. | | | | | | T | | MeaningfulSubstantial Share Ownership Guidelines. Our share ownership requirements are rigorous: six timesrobust: 6x base salary for the CEO, three timesCEO; 3x base salary for other members of the ELG (including our other NEOs),; and five times5x the base annual cash retainer for non-employee directors.
| | | | | | T | | No Pledging of Shares. Our directors and executive officers are not permitted to pledge UTC shares as collateral for loans or for any other purpose. |
| | | | | T | | No Hedging. UTC does not allow directors and executive officers to enter into short sales of UTC Common Stock or similar transactions where potential gains are linked to a decline in the price of our shares. Recipients of equity awards also may not enter into any agreement that has the effect of transferring or exchanging any economic interest in an award for any other consideration. | | | | | | T | | No Repricing. Stock option and SAR exercise prices are set to equalat the grant date market price and may not be reduced or replaced with stock options or SARs with a lower exercise price without shareowner approval (except to adjust for stock splits or similar transactions). Use of Double Triggers. Change-in-control severance arrangements, for which only pre-2009 ELG appointees are eligible, as well as the accelerated vesting terms under the UTC Long-Term Incentive Plan, both have a double trigger. This means that a change-in-control will not automatically entitle an executive to severance benefits or equity acceleration; the executive must also lose his or her job or suffer a significant adverse change to employment terms and conditions. Annual Review of Compensation Consultant Independence. On an annual basis, the Committee reviews the independence of its compensation consultant, as required by SEC and NYSE rules. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | | 31 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis No Cash Buyouts of Underwater Stock Options andor SARs. UTC does not allow buyouts of underwater stock options or SARs under any circumstances. Furthermore, awardcircumstance. Award recipients may not sell, assign or transfer their interest in any long-term incentive award (including underwater stock options and SARs) to a third party in exchange for cash or other consideration. | | | | | | T | | Market-Competitive Retirement Programs. We eliminated defined benefit pensions for employeesexecutives hired on or after January 1, 2010. For legacy employees,Also, for executives hired before that date, we discontinued the use of a traditional final average earnings pension formula will sunset as ofon December 31, 2014 and will be replaced byit with a cash balance formula. | | | | | | T | | No Perquisite Allowances. The cashCash perquisite allowance was eliminated for individuals appointed to the ELG after June 2012, and subsequentlyallowances have been eliminated for all ELG members. | | | | | | T | | No Employment Contracts. The Committee believes thatdoes not believe fixed-term executive employment contracts that guarantee certainminimum levels of compensation do notover multiple years enhance shareowner value. Accordingly, none of our NEOs do notexecutives have employment contracts. |
| | | United Technologies CorporationProxy Statement and Noticecontracts, except in instances where it is required by practice or regulation outside of 2014 Annual Meeting of Shareowners | | 25 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) the U.S. | | | | | | | Our Compensation Practices (continued) | | | | | | T | | Elimination of Cash Severance. To better align our program with our shareowners’ interests, the Committee prospectively eliminated the cash severance benefit for ELG members appointed after May 2013. Members will continue to receive a RSU award upon appointment to the ELG. | | | | | | T | | Restrictive Covenants.Covenants. Our ELG members must adhereare subject to various restrictive covenants upon separation from UTC, including non-compete, non-solicitation and non-disclosure obligations. | | | | |
| T | | Prospective Elimination of Change-in-Control Arrangements.Supplemental ELG Life Insurance. ELG members appointed after January 31, 2015 no longer receive an ELG life insurance benefit.
Limitations on Personal Use of Aircraft. In 2009, we closed our change-in-control program2015, UTC adopted an aircraft policy that limits the CEO’s personal use of the Corporate aircraft to new50 hours annually. No other employees may use the Company aircraft for personal reasons. Elimination of Cash Severance. We eliminated the 2.5x base salary ELG cash severance arrangement for ELG members and substantially reduced benefitsappointed on or after May 2013. Instead, ELG RSU awards will vest for existing ELG members. | | | | | | T | | Use of Double Triggers. All change-in-control severance arrangements for pre-2009these ELG members now have a double, rather than a single trigger for benefit eligibility. This means that a change-in-control will not automatically entitle an executive to severance benefits; the executive must also lose his or her job or suffer a significant adverse change to employment terms and conditions. | | | | | | T | | No Tax Gross-Ups. Parachute excise tax reimbursements and gross-ups will not be provided in the eventupon mutually agreeable separation with three years of a change-in-control. | | | | | | T | | No ContinuationELG service, regardless of Retirement and Healthcare Benefits. In 2009, the Committee eliminated for both then-existing and future ELG members the three-year continuation of retirement benefit accruals and healthcare benefits which previously had been a feature of our change-in-control arrangements. | | | | | | T | | age at separation. Review of Compensation Peer Group. Our CPG is reviewed periodically by the Committee and adjusted, when necessary, to ensure that its composition remainsmaintain a relevant and appropriate group for comparison forwith our executive compensation program. | | | | | | T | | Review of Committee Charter. The Committee reviews its charter regularly to incorporate best-in-classmaintain strong oversight and governance practices. | |
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EXECUTIVE COMPENSATION:Compensation Discussion and Analysis How We Make Compensation Decisions |
HOW WE MAKE COMPENSATION DECISIONS
OUR EXECUTIVE COMPENSATION PHILOSOPHY The Committee believes that executive compensation opportunities must align with and enhance long-term shareowner value. This core philosophy is embedded in all aspects of our executive compensation program and is reflected in an important set of guiding principles. We believe that the application of these principles enables us to create a meaningful link between compensation outcomes and long-term, sustainable growth for our shareowners.shareowners and compensation outcomes. GUIDING PRINCIPLES | | | 26 | | United Technologies CorporationProxy StatementRESPONSIBILITY Compensation should take into account each executive’s responsibility to act in accordance with our ethical, environmental, health and Noticesafety objectives at all times. Financial and operating performance must not compromise these values. A complete commitment to ethical and corporate responsibility is a fundamental principle incorporated into all aspects of 2014 Annual Meeting of Shareowners our compensation program. |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
GUIDING PRINCIPLES
| | | | | | | | Pay for performance
A substantial portion of compensation should be variable, contingent and directly linked to individual, Company and business unit performance.
| | Shareowner alignment
The financial interests of executives should be aligned with the long-term interests of our shareowners through stock-based compensation and performance metrics that correlate with long-term shareowner value.
| | Long-term focus
For our most senior executives, long-term stock-based compensation opportunities should significantly outweigh short-term cash-based opportunities. Annual objectives should complement sustainablelong-term performance.
| | | | CompetitivenessCOMPETITIVENESS
Total compensation should be sufficiently competitive to attract, retain and motivate a leadership team capable of maximizing UTC’s performance. Each element should be benchmarked relative to peers. | |
BalancePAY-FOR-PERFORMANCE
A substantial portion of compensation should be variable, contingent and directly linked to individual, Company and business unit performance. |
BALANCE The portion of total compensation contingent on performance should increase with an executive’s level of responsibility. Annual and long-term incentive compensation opportunities should reward the appropriate balance of short- and long-term financial, strategic and strategicoperational business results. | |
ResponsibilityLONG-TERM FOCUS
CompensationFor our most senior executives, long-term, stock-based compensation opportunities should take into account each executive’s responsibility to act in accordancesignificantly outweigh short-term, cash-based opportunities. Annual objectives should complement sustainable, long-term performance.
|
SHAREOWNER ALIGNMENT The financial interests of executives should be aligned with our ethical, environmental, health and safety objectives at all times. Financial and operating performance must not compromise these values. The need for complete commitment to ethical and corporate responsibility is a fundamental belief underlying all aspectsthe long-term interests of our shareowners through stock-based compensation program, from setting targets to conducting annualand performance assessments. metrics that correlate with long-term shareowner value. |
ROLE OF THE COMMITTEE ON COMPENSATION AND EXECUTIVE DEVELOPMENT The Committee, which currently consists of sixseven independent directors, is responsible for overseeing the development and administration of our executive compensation program. In this role, the
Responsibilities.The Committee makes all compensation decisions concerning our CEO and the other members of our Executive Leadership Group (“ELG”)., subject to review by the other independent directors. The ELG is made up of betweenapproximately 25 to 30 of our most senior executives, and includes each ofincluding the Named Executive Officers (“NEOs”) listed in the Summary Compensation Table on page 4857 of this Proxy Statement. The Committee’s other responsibilities include: • | à | DesigningReviewing executive compensation plans and programsprograms; |
• | | Assessing | | à | Considering input from UTC’s shareowners regarding executive compensation decisions and policiespolicies; |
• | | | | à | Reviewing and approving incentive plan targets and objectivesobjectives; |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | •33 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis | à | Assessing the Company and each ELG member’s performance relative to these targets and objectivesobjectives; |
• | | | | à | Evaluating the competitiveness of each ELG member’s total compensation packagepackage; and |
• | | | | à | Approving changes to ancompensation elements for ELG member’s compensation elements,members, including base salary and annual and long-term incentive opportunities and awardsawards. |
The SeniorExecutive Vice President & Chief Human Resources & Organization,Officer, along with UTC’s Human Resources staff and an independent compensation consultant, assist the Committee with these tasks. The Committee’s charter, which sets out the Committee’s responsibilities, can be found on our website at: http://www.utc.com/StaticFiles/UTC/StaticFiles/compensation_charter.pdfOur-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx | | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 27 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS.
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
THE COMMITTEE’S PROCESS
Performance Evaluation Process.The Committee has established a process for evaluating the performance of the Company, the President and CEO and the other ELG members. At theits first meeting of every year, the Committee setsreviews financial, strategic and financialoperational objectives, for the CEO, both for the upcoming year and for a longer-term period. At this meeting, itthe Committee also evaluates the performance of the CEOCEO’s and other NEOsELG members’ performance for the previous year. We use
The Committee uses a combination of qualitative and quantitative factors to conduct a broad and balanced assessment of performance relative to both internal and external performance. PERFORMANCE EVALUATION PROCESSmeasures.
| | | Internal Performance
ROLE OF THE CEO | | External Performance | Achievement versus previously established strategic,
financial and operational goals
| | Relative financial performance using key
financial metrics and share price performance versus peers over varying time periods
|
Our CEO Mr. Chênevert, does not play anyhas no role in the Committee’s determination of his own compensation. For the other members of the ELG, including the NEOs, hethe CEO presents the Committee with recommendations for each element of compensation. He bases these recommendations upon his assessment of each individual’s performance, the performance of their relevanteach executive’s business unit and/or function, benchmark information and retention risk. The Committee reviews the CEO’s recommendations, makes appropriate adjustments and approves compensation changes at its discretion, subject to the review ofby the other independent directors. ROLE OF THE COMPENSATION CONSULTANT The Committee retained Pearl Meyer & Partners (“Pearl Meyer”) to serve as its executive compensation consultant for 2013.2015. While Pearl Meyer may make recommendations on the form and amount of compensation, the Committee continues to makemakes all decisions regarding the compensation of our NEOs subject to the review of theand other independent directors.ELG members. During 2013,2015, Pearl Meyer advised the Committee on a variety of subjects, such asincluding compensation plan design and trends, pay for performancepay-for-performance analytics, benchmarking norms and other suchsimilar matters. Pearl Meyer reports directly to the Committee, participates in meetings as requested and communicates with the Committee Chair between meetings as necessary. In 2013,A Pearl Meyer representative attended threefour meetings in person.person in 2015. Prior to engaging Pearl Meyer, the Committee reviewed the firm’s qualifications, as well as its independence and any potential conflicts of interest. Pearl Meyer does not perform other services for or receive other fees from UTC, other than incidental amounts (less than $6,000$9,000 in 2013)2015) related to participation in certain business-related surveys. The Committee, therefore, made the determination that Pearl Meyer qualified as an independent consultant. The Committee has the sole authority to modify or approve Pearl Meyer’s compensation, determine the nature and scope of its services, evaluate its performance, terminate the engagement and hire a replacement or additional consultant at any time. The Committee also utilizes market data provided by Willis Towers Watson and Aon Hewitt for benchmarking and other purposes. This benchmark data consists of information that is generally available to other Willis Towers Watson and Aon Hewitt clients. Neither Towers Watson nor Aon Hewittfirm made recommendations to the Committee or management on peer group composition or on the form, amount or design of executive compensation in 2013.2015. 34 | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
28 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) OUR COMPENSATION PEER GROUP COMPETITIVE POSITIONING
PEER GROUP BENCHMARKING
We compare our executive compensation program to compensationprograms at the 2426 companies that make up our Compensation Peer Group (“CPG”). The Committee believes that these companies provide a relevant comparison based on their similarity to UTC in size and complexity, taking into account factors such as revenue, market capitalization, global scope of operations and diversified product portfolios. Like UTC, 1211 of these 2426 companies are Dow Jones Industrial Average components. The CPG servesis constructed to serve the specific purpose of benchmarking executive compensation. ItsWe do not use the relative financial performance of the CPG as a performance metric in our incentive compensation awards. The CPG’s composition reflects a mix of both industry and non-industry peers that arewe view as realistic competitors for the potential senior executive talent UTC seeks. The CPG has not been constructed or utilized for the purpose of benchmarking financial performance. For 2013, the Committee reviewed the composition of the CPG and determined no adjustments were necessary.talent. We also look atuse other Fortune 100 companies and data from a broader samplerange of over 400 companies. This information provides usefulcompanies for insight on general compensation trends and supplementsto supplement CPG data when appropriate. The Compensation Peer Group includes the following companies:
THE COMPENSATION PEER GROUP INCLUDES THE FOLLOWING COMPANIES: | | | PEER GROUP COMPOSITION | 3M Co.(1) AEROSPACE & | | Honeywell International Inc.
| AT&T Inc.(1)
| | Intel Corp.(1)
| CONSUMER | Boeing Co.(1) DEFENSE | | IBM Corp.(1)
| Caterpillar Inc.(1) CHEMICALS | | PACKAGED GOODS | Boeing | Northrop | | DuPont | | Johnson & Johnson(1) | Deere & Co. General | Grumman | | Johnson Controls, Inc.
| Dow Chemical Co. | | Lockheed Martin Corp. Procter & Gamble | E. I. du Pont de Nemours
& Co.(1) Dynamics | Raytheon | | Northrop Grumman Corp.
| | | | | Lockheed | | | | | | | | Martin | | | | | | | | | Pfizer Inc.(1)
| Emerson Electric Co.
| | Procter & Gamble Co.(1)
| FedEx Corp.
| | Siemens AG
| General Dynamics Corp.
| | Raytheon Co.
| General Electric Co.(1) DIVERSIFIED | | Verizon
| Hewlett-Packard Co. EQUIPMENT & | | Communications Inc.(1)
| | INDUSTRIALS | | MACHINERY | | LOGISTICS | Danaher | Honeywell | | 3M | Emerson | | FedEx | General | Siemens | | Caterpillar | Electric | | | | Electric | | | Deere | Johnson | | | | | | | Eaton | Controls | | | | | | | | | | | | | | | | | | TECHNOLOGY/ | OIL & GAS | | PHARMACEUTICALS | | COMMUNICATIONS | Chevron | | Pfizer | | AT&T | IBM | | | | | | | HP | Verizon |
(1) | Included in the Dow Jones Industrial Average as of 12/31/2013. |
Companies inBlue represent Dow Jones Industrial Average components. | | | | | | | | | | | | | | | Revenue (millions) | | | Market Capitalization (millions) | | | Employees | | | | | | 25th Percentile | | | $36,994 | | | | $46,935 | | | | 90,792 | | | | | | 50th Percentile | | | $52,146 | | | | $65,932 | | | | 124,550 | | | | | | 75th Percentile | | | $84,781 | | | | $151,711 | | | | 193,440 | | | | | | UTC | | | $62,626 | | | | $104,319 | | | | 212,400 | | | | | | UTC Rank | | | 63% | | | | 66% | | | | 76% | |
PEER GROUP DATA(1) | | | | | Market | | | | | | | Revenue | | | Capitalization | | | | | | | (in millions) | | | (in millions) | | | Employees | | 25thPercentile | | $ | 26,996 | | | $ | 34,164 | | | | 71,112 | | 50thPercentile | | $ | 38,581 | | | $ | 58,054 | | | | 107,850 | | 75thPercentile | | $ | 59,463 | | | $ | 133,507 | | | | 155,800 | | UTC | | $ | 56,450 | (2) | | $ | 80,540 | | | | 197,180 | | UTC Rank | | | 74% | | | | 63% | | | | 83% | |
(2)(1) | Peer company data provided by S&P Capital IQ. Revenue and employee data reflect the most recent publicly-availablepublicly available information (as of February 21, 2014)19, 2016). In certain cases, S&P Capital IQ has made adjustments to revenue to reflect non-operating income or expense, equity in earnings of unconsolidated subsidiaries, interest income, and non-recurring special items such as discontinued operations or gains on the sale of securities. Market capitalization for peer companies is calculated based on publicly available shares outstanding as of December 31, 2013.2015. | | | (2) | UTC revenue is adjusted for discontinued operations, restructuring and other significant, defined non-operational items. For a reconciliation to U.S. GAAP see Appendix B on page 86. |
| | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 35 |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) HOW WE BENCHMARK OUR COMPENSATION COMPENSATION BENCHMARKS
To ensure that our executive compensation program is sufficiently competitive, the Committee believes that the value of each UTC compensation element should generally be targeted to align with market benchmarks. Historically, we targeted our Therefore, UTC targets base salary, and annual bonus and long-term incentive awards at the median of the CPG. We supplement Fortune 100 and general industry data for benchmarking purposes when CPG while maintaining a 65th percentile CPG target for long-term incentive awards. However, in response to shareowner feedback and to better align with competitive market practice, the Committee reduced the long-term incentive target from the 65th to the 50th percentile of the CPG, effective for grants beginning in January 2013.data is not sufficient or available.
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g55r46.jpg)
All compensation targets now alignare aligned with the market median. The Committee annually evaluates each element of our Compensation Peer Group median executive population’s compensation relative to the market. Individual awards can fall above or below these targetscompensation varies from market benchmarks based on the Committee’s discretion. In exercising its discretion, the Committee may considerassessment of Company and individual performance, job scope, retention risk and any other factors that it determines are relevant to be relevant and consistent with program objectives.its evaluation. HOW WE STRUCTURE OUR COMPENSATIONOur Principal Elements of Compensation
PRINCIPAL ELEMENTS OF COMPENSATION
The following table summarizes the principal elements make upof our executive compensation program: ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g63x99.jpg)
LINKING PAY TO PERFORMANCE
program for 2015. The Committee uses a combination of metrics and time horizonsstructures these elements to promote and reward superior financial performance. PERFORMANCE METRICS AND TIME HORIZONS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g32u14.jpg) performance through a variety of performance metrics and time horizons.
| | | 30 | | United Technologies CorporationProxy Statement | Time Horizon (in years) | | Performance Metrics | | Purpose | | Base Salary | | n | | None | | Attract and Notice of 2014 retain | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x50x1.jpg) | Annual Meeting of ShareownersBonus | | n | | Earnings(1) | | Drive near-term performance goals | | | | | Free cash flow to net income ratio(1) | | | | | | | Individual achievement | | | | | | | | | | Performance Share Units(2) | | nnn | | Earnings per share(1) | | Drive medium-term performance goals | | | | | Total Shareowner Return vs. S&P 500 | | | Stock Appreciation Rights | | nnnnnnnnnn | | Share price appreciation | | Drive long-term performance goals |
(1) | Financial performance measures are subject to adjustments by the Committee in certain circumstances. Refer to page 55 for more details on how these metrics are calculated. | | | (2) | Beginning in 2016, PSUs will include a return on invested capital (“ROIC”) metric, as discussed in more detail on page iv. |
EXECUTIVE
EMPHASIS ON “AT RISK” COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) “At risk” compensation—meaning pay that is directly contingent on performance—made up 87% of our CEO’s and 88% of our other NEOs’ compensation for 2015 (based on the base salary, annual bonus and long-term incentives disclosed in the Summary Compensation Table on page 57). Annual bonus and long-term incentive awards are subject to the achievement of pre-established performance targets and link to shareowner value. Although base salary and other fixed elements of compensation are essential to any compensation program and necessary for the recruitment and retention of top talent, we believe that “at risk” compensation for our most senior executives should significantly outweigh their base salaries. The Committee’s 2015 compensation decisions reflect this philosophy. 36 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis The following charts show the basic pay mix for our CEO and other NEOs for 2015 and illustrate the significant portion of compensation that is “at risk.” PAY MIX
* | Charts reflect the value for the base salary and annual and long-term incentive awards shown in the Summary Compensation Table on page 57. The Other NEOs chart excludes Mr. Bellemare who retired effective January 31, 2015. |
BASE SALARY To help UTC attract and retain the mosttalented and qualified executive talent,executives, we provide competitive base salaries to our executives targeted at either the CPG median.median or a blend of the CPG and Fortune 100 medians, as appropriate. Base salary constitutes a significant portion of our NEOs’ fixed compensation (which also includes pension benefits and other benefits such as health, life and disability insurance). Each year the Committee reviews recommendations from the CEO regarding base salary adjustments for ELG members, including the other NEOs.members. The Committee has complete discretion to modify or approve the CEO’s base salary recommendationsthese recommendations. The CEO has no input and the CEO does not participate in the Committee’s determination of his own base salary. Actual salaries will vary from the CPG median targetand market medians based on factors such as job scope and responsibilities, experience, tenure, individual performance, retention risk external market data and internal pay equity. ANNUAL INCENTIVE COMPENSATIONBONUS Overview Our NEOs’ actual2015 annual incentivebonus awards arewere determined based on three distinct elements:through the following process: ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g02w90.jpg)
![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x51x2.jpg) | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x51x3.jpg) | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x51x4.jpg) | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x51x5.jpg) | | | | | | | | | | Target Annual Bonus is based | | Financial Performance Factor: | | Individual Performance Factor: | | Award Delivery: | on market benchmarks: | | • Earnings* vs. pre-established targets(weighted at 60%); plus • Free Cash Flow* as a percentage of Net Income(weighted at 40%); and • Discretionary adjustments by the Committee. | | Discretionary adjustments based on individual performance relative to 2015 strategic, financial and operational goals. | | Awards for 2015 performance are delivered in the first quarter of 2016. These amounts are displayed under the “Bonus” column in the Summary Compensation Table. | President and CEO | 165 | % | | President & CEO, UTC BIS | 110 | % | | EVP & CFO | 100 | % | | President, Pratt & Whitney | 95 | % | | EVP & General Counsel | 85 | % | |
* Earnings under the Annual Incentive Plan is defined for both the Corporate Office and our business units on page 46.
Target Annual Incentive Award
The Committee approves the target annual incentive award for each ELG member’s position, including the positions held by our NEOs. Target annual incentive awards equal a percentage of base salary and vary based on specific roles and responsibilities within the organization. Actual award payouts are determined based on both financial and individual performance factors. Target performance generally results in incentive compensation values that approximate the median of the CPG.
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 31 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
Financial Performance Factor
For purposes of our annual incentive awards, the Committee measures Company and business unit performance relative to two pre-established financial metrics:
• | | Ratio of free cash flow to net income |
Performance relative to these pre-set metrics generates a financial performance factor for the Corporate Office and for each business unit. Each financial performance factor, which is expressed as a percentage of the target annual incentive award, determines the initial size of the bonus funding pools for the Corporate Office and each business unit. This factor is then reviewed by the Committee, which retains the discretion to make further adjustments, as appropriate (see “Use of Discretion” on page 33).
Based on feedback from shareowners and the Committee’s evaluation of external market trends, the Committee modified the formula used to determine the financial performance factors, beginning with 2013 awards, as follows:
• | | For the Corporate Office, the Committee changed the earnings metric from earnings per share (“EPS”) to net income. Although net income and EPS are closely correlated, they differ in that net income is not impacted by the Company’s share repurchases. The Committee believes that net income is a more appropriate measurement of the Company’sannual operating performance. This change also enhances the diversification of our performance metrics, since we use EPS for our long-term incentive awards. The Committee believes EPS is a more relevant metric for the measurement of long-term performance. |
• | | To better align executives with our Company-wide strategic goals, the Committee modified the calculation of the financial performance factor for business unit executives. The factor for business unit executives had previously been based exclusively on their business unit’s performance. As modified, 40% of their annual bonus is now based on the Company’s performance as a whole and 60% on the financial performance of the executive’s business unit. |
• | | We also changed the way cash flow affects the financial performance factor. Previously, the free cash flow score was multiplied by the earnings score to determine the financial performance factor. We now score earnings and free cash flow independently of each other, with earnings weighted at 60% and the ratio of free cash flow to net income at 40%.under the UTC Annual Executive Incentive Compensation Plan are determined separately for UTC and our business units, as detailed on page 38. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | | | | | | 37 |
FINANCIAL PERFORMANCE FACTOR (1)
| Metric (2)
| | Corporate NEOs |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis How We Determine Target Annual Bonus Levels The Committee approves the target annual bonus level for each position held by ELG members. These target levels are expressed as a percentage of base salary and vary among executives based on specific roles and responsibilities within the organization. While target award levels generally reflect values that approximate the CPG and Fortune 100 medians, actual award payouts are based on financial and individual performance factors, as assessed by the Committee. As part of its annual review of executive compensation, the Committee determines if any adjustments to annual bonus target percentages are appropriate. How We Determine Financial Performance Factors To determine the financial performance factors for the Company and each of its business units, the Committee measures performance annually relative to two pre-established financial metrics: Corporate
• | | Earnings | | 60% weight | | 24% weight. For the Company, the earnings goal is an adjusted net income goal that the Committee sets to align with the performance expectations the Company communicates externally to investors for the year. For our business units, the earnings goal is defined as growth in adjusted earnings before interest and taxes and is based on each business’ anticipated opportunities and challenges for the upcoming year. For a definition on how we calculate earnings for UTC and our business units, refer to page 55. | | | • | Free Cash Flow to Net Income | | 40% weight | | 16% weight | Business Unit(3)
| | Earnings | | - | | 36% weight | | | Free Cash Flow (“FCF / NI”) Ratio. For the Company, this ratio is set to Net Income
| | - | | 24% weightgenerally align with the performance expectations communicated to investors for the year. A target FCF / NI ratio is also established for each business unit based on its strategic business plan for the year and contributes to the overall goal set for the Company. The Committee believes that cash flow performance is a relevant measure of the overall quality and sustainability of earnings. For the definition of how we calculate the ratio of FCF / NI for both UTC and our business units, refer to page 55 of this Proxy Statement. |
Performance relative to these targets determines the financial performance factors for UTC and each business unit. The Committee reviews these financial performance factors and, if appropriate, makes adjustments to these calculated factors (see “Use of Committee’s Discretion in Annual Bonus Awards” on page 39). Each executive’s target annual bonus value (base salary x target bonus percentage) is multiplied by his or her applicable financial performance factor. Aggregated, these amounts generate separate award pools for UTC and each business unit that are then allocated among eligible executives based on individual performance. See page 39 for details on the individual performance factor. The metrics and weightings used to determine the financial performance factors for 2015 are as follows:
(1) | Subject to discretionary adjustments by the Committee. |
(2) | Refer to page 4655 to see how we calculate earnings and the ratio of free cash flow to net incomeFCF / NI for our CorporateUTC and business unit executives’executives. | | | (2) | The 40% consists of UTC Earnings weighted at 24% and UTC FCF / NI weighted at 16%. |
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EXECUTIVE COMPENSATION:Compensation Discussion and Analysis The Committee believes this methodology for arriving at the financial performance factors accomplishes the following objectives: • | Aligns incentives with our annual incentive awards.strategic business plan; | | | • | Establishes challenging but achievable bonus targets for our executives; and | | | • | Sets targets that are consistent with the Committee’s assessment of opportunities and risks for the upcoming year, as communicated to our investors. |
How We Determined the Financial Performance Factors for 2015 (3)• | MeasurementEarnings. The 2015 expected EPS range we communicated to investors in January 2015 was $6.85 to $7.05, resulting in the Committee setting a $6.282 billion net income target for 2015 annual bonus awards, an amount which corresponded to EPS of $7.00. The Committee also approved specific earnings growth goals for each business unit financial performance reflects UTC’sranging from -10% to +10%, which reflected the Committee’s assessment of each business unit segment reporting. Otisunit’s external market conditions and UTC Climate, Controls & Security (“UTC CCS”)the specific challenges and opportunities anticipated for 2015. | | | • | Free Cash Flow to Net Income Ratio. For 2015, the Committee approved a FCF / NI goal of 100% for the Company and each continue to report their financial and operational results as separate segments, which is consistent with how we allocate resources and measure performance of these businesses.the business units. |
2015 Results.For 2015, the Company reported net income attributable to common shareowners of $7.608 billion. Because this amount included gains realized from the sale of Sikorsky Aircraft and such gains would have substantially increased annual bonus payouts, the Committee decided to measure net income based on continuing operations, which excluded Sikorsky Aircraft. The Committee also adjusted for the impact of restructuring, non-recurring and other significant, defined non-operational items. After these adjustments, which the Committee believed were necessary to preserve the integrity of the original bonus targets, adjusted net income of $5.563 billion was utilized to determine the annual bonus financial performance factor for the Company. This net income result generated a 0% payout factor for the UTC earnings portion of the annual bonus award. The vesting of the earnings portion for our business units ranged from 0% to 112%. Refer to Appendix B on page 86 for a detailed reconciliation of this adjusted net income measure to U.S. GAAP. 2015 free cash flow from continuing operations was 126% of net income. Adjustments for annual bonus purposes were made for the impact of certain restructuring and non-operational gains, and a non-recurring charge unrelated to operational performance that predated the performance period. This resulted in a 99% FCF / NI ratio vesting factor for the Company. The FCF / NI ratio for our business units ranged from 69% to 106% for the year. In combination, the Company generated an overall financial performance factor of 39% of target. The blended factors for our business units ranged from 34% to 73% of target. Individual Performance Factor Our NEOs also begin the year with a set of individual strategic, andoperational and/or financial performance objectives. Based on Mr. Chênevert’sour CEO’s assessment of the performance of each NEO’s performance against these objectives,NEO, he may recommend that the Committee make a discretionary adjustment to increase or decrease the amount of bonus determined by the financial performance factor. The Committee considers these recommendations and makes adjustments as it deems appropriate. Mr. Chênevert does not at any time play aHayes plays no role in the Committee’s determination of his own annual incentive award. | | | 32 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSISbonus.
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
Financial Performance Goals and Results for 2013
Each year the Committee establishes financial performance goals for our annual incentive awards. Its practice has been to set the target performance levels for both earnings and the ratio of free cash flow to net income to align with the financial performance expectations that UTC publicly communicates to investors in December for the upcoming year.
We believe our methodology for determining financial performance targets for annual incentive awards accomplishes the following objectives:
• | | Aligns incentives with our annual strategic business plan |
• | | Establishes challenging yet achievable bonus targets for our executives |
• | | Sets targets that are consistent with the assessment of opportunities and risks for the upcoming year, as communicated to our investors |
Earnings. In prior years, we have generally set the Corporate earnings metric to align with the midpoint of the EPS range communicated to investors in December for the upcoming year. Given the change from an EPS to a net income earnings metric, the Committee set the net income goal at the level that corresponded to the midpoint of the EPS range communicated to investors.
In December 2012, UTC announced a projected EPS range of $5.85 to $6.15 for 2013. The midpoint of this range was $6.00 per share. The Committee set the 2013 net income target for the annual incentive awards to correspond with this midpoint. The corresponding net income target for 2013 equaled $5.485 billion. For 2013, actual net income performance equaled $5.686 billion, well in excess of target.
The Committee also approved specific earnings growth goals for each business unit. These goals ranged between 7% and 20% and reflected the Committee’s assessment of each business unit’s end-market conditions and the specific challenges and opportunities anticipated for 2013.
Free Cash Flow to Net Income Ratio. In December 2012 the Committee, consistent with past practice, approved a free cash flow goal equal to 100% of net income for the Corporate Office and each business unit. This goal aligned with the 2013 expectations communicated to investors in December 2012 and represents the Committee’s belief that cash flow performance correlates with the quality and sustainability of earnings performance. For 2013, UTC’s free cash flow equaled 102% of net income.
Use of Committee’s Discretion in Annual Bonus Awards The Committee sets annual individual bonus targets with the objective of offering payout opportunities that align with Company, business unit and individual performance. However, theThe Committee retains the authority to make upward or downward adjustments if it determines that performance relative to pre-established metricstargets does not accurately reflect the overall quality of actual performance for the year. While the financial metrics remain the primary basis for determining actual bonus amounts, the Committee has made such discretionary adjustments in the past.past to both financial performance factors and individual performance factors. Examples of factorssituations that could result in a positive or negative adjustment include: Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | •39 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis • | Material, unforeseen circumstances beyond management’s control that have a positive or negative effect on financial performance relative to the established targets or certain non-recurring charges or credits unrelated to measured performance; |
• | | • | Tax or accounting rule adjustments which positively or negatively impact performance; | | | • | Changes to the Company’s capital structure; | | | • | An executive’s performance relative to specific individual annual objectivesobjectives; or |
• | | • | An executive’s adherencefailure to adhere to UTC’s Code of Ethics, Enterprise Risk Management program andor other Company policiespolicies. |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 33 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
LONG-TERM INCENTIVE COMPENSATIONAWARDS Annually, our
Types of Incentives Used Our NEOs receive two types of annual equity-based long-term incentive awards: Performance Share Units (“PSUs”) and Stock Appreciation Rights (“SARs”). For 2013, PSUs comprisedmade up slightly more than half of ELG members’ total long-term incentive awards. The remaining portion of their2015 annual long-term incentive award wasawards with the remaining portion granted in the form of SARs. The number of PSUs and SARs awarded areis based on an accounting value.a value approved by the Committee. These awards are subject to a three-year vesting period and other terms and conditions, as describedset forth in UTC’s 2005the award statements and as provided under the terms of the UTC Long-Term Incentive Plan (see Appendix A)(“LTIP”). Long-term incentive targets for our ELG members align with the CPG median. The Committee also, issuesfrom time to time, may approve special equity grants from time-to-time for purposes such as recruitment, retention, recognition or to drive the achievement of certainspecific strategic performance goals. These special grants canmay be issued in different forms, as appropriate, includingthe form of SARs, PSUs, restricted stock, restricted stock units (“RSUs”) or performance-based SARs. No suchIn 2015, special equity grantssign-on RSU and SAR awards were madegranted to our NEOsMr. Johri as an offset to compensation forfeited upon leaving his former employer. Mr. Adams also received a special RSU award in 2013.recognition of achieving 2015 FAA and EASA certification of the GTF engine. Performance Share Units PSUs vest at the end of a three-year performance measurement period, if and to the extent, that the Company has met the performance goals establishedpre-established by the Committee. Each vested PSU converts into one share of Common Stock. Unvested PSUs do not earn dividends.dividend equivalents. Metrics The Committee believes both absolute and relative metrics provide appropriate goals for our long-term incentive awards.
2015 PSU awards currently use both an absoluteused two metrics: earnings per share (“EPS”) growth metric and a relative total shareowner return (“TSR”) metric versus the S&P 500. Each metric receives a 50% weighting500 (see page 4655 for details on how we calculate these metrics). Each metric received a 50% weighting, with vesting calculated separately for each metric. Beginning in 2016, our PSU awards also incorporate a return on invested capital (“ROIC”) metric. The Committee does not make discretionary adjustments to measured performanceROIC metric is weighted at 35%, while the EPS growth metric and the relative to the pre-established targets.TSR metric are now weighted at 35% and 30%, respectively. Setting Performance Goals Earnings Per Share.EPS Growth. The Committee approved a three-year EPS compound annual growth rate target of 10% as the target6% for the 20132015 PSU grant. This goal is based on our three-year strategic business plan and represents a challenging yetbut attainable goal that aligns with the expectations we have communicated to investors. Structurally, below-targetshareowners in December 2014, prior to the beginning of the performance period. When setting EPS targets for our PSU awards, the Committee accounts for various long-term, business-related expectations, including planned share buybacks, macroeconomic market trends, pension headwinds, cost reduction plans, etc. The Committee retains discretion to exclude certain items (e.g., unplanned share buybacks, restructuring, non-recurring, non-operational items, etc.) from the EPS growth results in below-median compensationcalculation, as necessary to preserve the integrity of the original performance target.
40 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
EXECUTIVE COMPENSATION:Compensation Discussion and above-target EPS growth results in above-median compensation.Analysis In previous years (i.e., 2010, 2011 and 2012), the Committee set EPS growth targets annually over the three-year award period. This annual recalibration of earnings growth targets was driven by the volatile economic and financial market environment created by the recession that began in 2008. With more stable conditions returning following the recession, the Committee determined that three-year EPS growth targets could once again be set.
Relative Total Shareowner Return. For the 20132015 PSU grant, consistent with past practice, the Committee again chose to set a cumulative three-year TSR performance target at the 50thpercentile relative to the S&P 500. 500 for the remaining 50% of the award. The Committee believes that a median level of performance versus the S&P 500 should equate to a median level of compensation. By design, below-median TSR relative to the S&P 500 results in below-median compensation and above-median relative TSR results in above-median compensation. We believe that comparing UTC’s TSR to companies within the S&P 500 provides an appropriate benchmark for measuring theour share price performance ofas a large-capitalization company, such as UTC. We dolarge capitalization company. The Committee does not set TSR goals relative to the performance of our Compensation Peer Group,CPG, which servesis constituted for the specific purpose of measuring the competitiveness of our compensation program. We believe theThe S&P 500 provides a more comprehensive and relevant comparison for our share price performance. Also,performance and, unlike the CPG, the S&P 500 is not a self-selected, customized benchmark.
| | | 34 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Our PSUs are designed to deliver market median compensation at target levels of EPS growth and relative TSR performance. As a result, below-target performance levels will generate below-market median payouts and above-target performance levels will generate above-market median payouts. The following table showscharts show the percentage of 2013the 2015 PSUs that will vest based on the levels of performance achieved. No PSUs will vest ifachieved for each metric: EPS GROWTH (WEIGHTED 50%) | | TSR VS. S&P 500 (WEIGHTED 50%)* | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x55x1.jpg) | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x55x2.jpg) | EPS Growth Achieved (%) | | TSR Rank Achieved (Percentile) |
* | In the event of negative TSR over the three year performance period, the payout for the TSR portion of the award will be capped at 100% of target, regardless of UTC’s performance relative to the S&P 500. |
PSU Vesting 2015 EPS results of $8.61 per share included discontinued operations and the gain realized from the sale of Sikorsky Aircraft. The Committee excluded discontinued operations from EPS, which includes this gain, for PSU vesting measurement purposes. This resulted in an EPS from continuing operations of $4.53. The Committee made additional adjustments to exclude restructuring, non-recurring charges, and other significant, defined items unrelated to operational performance does not exceed(see Appendix B on page 86 for details), resulting in an adjusted EPS of $6.30 and a vesting factor of 88%. UTC’s cumulative TSR relative to the S&P 500 for the performance period between 2013 and 2015 was below the threshold performance level and resulted in a 0% vesting is capped at 200% in the case ofabove-target performance:factor. | | | | | | | | | | | | | | | | | | | 2013 PERFORMANCE SHARE UNITS | | | | EPS Growth (50% of award) | | | Relative TSR vs. S&P 500 (50% of award) | | | | Level of Performance Achieved | | | Percentage of EPS Portion Vesting | | | Level of Performance Achieved | | | Percentage of TSR Portion Vesting | | Threshold | | | 7% | | | | 0% | | | | 37.5th percentile | | | | 0%* | | Target | | | 10% | | | | 100% | | | | 50th percentile | | | | 100% | | Maximum | | | 13% | | | | 200% | | | | 75th percentile | | | | 200% | |
* Beginning withThe Committee believes the 2014final PSU grant, for thevesting result of 44%, based on 88% EPS growth and 0% relative TSR portion of the award, 50% will vest if threshold performance is achieved.
Vesting of 2011 PSUs
Performance share units granted at the start of 2011 vested at 136% of target. We believe this above-target vesting for the 2011-2013 performance periodscores, fairly aligns with the strong financialoverall performance of the Company over this period andduring the corresponding benefit to our shareowners.2013-2015 performance period.
Stock Appreciation Rights SARs entitle the award recipient to receive, at the time of exercise, shares of UTC Common Stock with a market value equal to the difference between the exercise price (the closing price of Common Stock on the date of grant) and the market price of Common Stock on the date the SARs are exercised. SARs have a ten-year term, and vest and become exercisable after three years afterand expire ten years from the date of grant (or sooner in the event of a qualifying retirement).grant. If the employment of the executive terminates prior to the vesting date, the award will be forfeited.is forfeited, except in cases of death, disability, qualifying retirement or qualifying separation following a change-in-control. We believe prior SAR
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 41 |
EXECUTIVE COMPENSATION:Compensation Discussion and stock option awards have provided an important stock-based incentive for management’s successful achievement of objectives that are aligned with shareowners’ long-term interests, including productivity, innovation, growth and business balance. Analysis SAR awards directly link NEO compensation to share price appreciation, reflectingaligning shareowner and executive interests with long-term value creation. The Committee believes the creationten-year term of valuethese awards has been a driving force behind UTC’s 115% ten-year cumulative TSR for both executives and shareowners. UTC’s ten-year TSR has consistently outpaced both the Dow Jones Industrial Average and the S&P 500. For the ten-year period ending on December 31, 2013, UTC’s cumulative TSR equaled 197%, significantly exceeding2015, which exceeded the performance of the Dow Jones Industrial Average at 105%111% and the S&P 500 at 104%102%. | | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 35 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSISOther Compensation Elements
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) RETIREMENT AND DEFERRED COMPENSATION BENEFITS EMPHASIS ON “AT RISK” PAY
90% of our CEO’s and 86% of our NEOs’ actual compensation (i.e., base salary, annual bonus and long-term incentives) is “at risk” compensation directly contingent on performance. Actual annual bonuses and long-term incentive awards are subject to the achievement of pre-established performance targets and designed to link directly to shareowner value. Base salary and other fixed elements of compensation are essential to any compensation program and relevant to the recruitment and retention of top talent. However, we believe that “at risk” compensation for our most senior executives should significantly outweigh base salaries.
Our 2013 compensation reflects this philosophy. The following charts illustrate the basic pay mix for our CEO and other NEOs for 2013. Note the significant portion of compensation that is “at risk.”
PAY MIX
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g78y60.jpg)
* For both pay mix charts, the base salary and annual and long-term incentive awards shown reflect the values disclosed in the Summary Compensation Table on page 48.
| | | 36 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
OTHER COMPENSATION ELEMENTS
Retirement and Deferred Compensation Benefits The Committee maintains retirement and deferred compensation benefits toplans help UTC attract and retain the most highly talented senior executives. Over the years, the Committee has modified these programs to ensuremaintain a competitive alignment withposition within an evolving market. We believe the overall valuedesign of our retirement and deferred compensation programs is consistent with the current marketplace and approximatesapproximate the CPG median.
The Pension Benefits table on page 5363 and the Nonqualified Deferred Compensation table on page 5565 detail the retirement benefits and deferred compensation values for each ofamounts provided to our NEOs. All of the NEOs participate in or are eligible to participate in the following retirement and deferred compensation plans: | | | Plan Plan* | | Description | UTC Employee Retirement Plan | | Tax-qualified, defined benefit retirement plan that isEmployees hired prior to January 1, 2010, are eligible to participate in transition from a traditionalthis tax-qualified pension plan. Effective December 31, 2014, participating employees who were covered by the final average earnings (“FAE”) formula of this plan transitioned to a cash balance formula. TheAs a result, the cash balance formula, iswhich had already been in effect for newer plan participants, and will applynow applies to all participants who were previously covered by the NEOs beginning in 2015. FAE. | UTC Pension Preservation Plan | | Unfunded,An unfunded, non-qualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. It provides our senior executives with pension benefits not provided byunder the qualifiedtax-qualified pension plan because of Internal Revenue Code limits.
| UTC 401(k) Savings Plan | | Employees may contribute to this Plan andA tax-qualified plan where employees receive aan employer stock matching contribution inof 60% of the formfirst 6% of Common Stock. Employeespay (base salary plus annual bonus) contributed by the employee. Salaried employees hired on or after January 1, 2010 are not eligible to participate in a pension plan,the UTC Employee Retirement Plan and instead receive an additional age-based Company automatic contribution (ranging from 3% to 5.5% of earnings) to their UTC 401(k) Savings Plan.
| UTC Savings RestorationCompany Automatic Contribution Excess Plan
| | Unfunded programAn unfunded, non-qualified plan for which salaried employees hired on or after January 1, 2010 may receive an additional age-based Company automatic contribution (ranging from 3% to 5.5% of earnings) for amounts above the Internal Revenue Code limits applicable to the qualified UTC 401(k) Savings Plan. Participants receiving benefits under this plan are ineligible to accrue a benefit under the UTC Pension Preservation Plan described above.
| UTC Savings Restoration Plan | | An unfunded, non-qualified plan that permitscredits employee andcontributions with Company matching contributions in UTC stock units at the same rate as the UTC 401(k) Savings Plan, to the extent such contributions would exceed Internal Revenue Code limits applicable to the UTC 401(k) Savings Plan.limits. | UTC Deferred Compensation Plan | | Non-qualified,An unfunded, non-qualified, deferred compensation arrangement that offers participants the opportunity to defer up to 50% of annual base salary and up to 70% of annual bonus. Executives may also
| UTC PSU Deferral Plan | | An unfunded, non-qualified, deferred compensation plan that allows executives to defer receiptbetween 10% and 100% of their vested PSU awards.award. Upon vesting, the deferred portion of the PSU award is converted into deferred stock units that accrue dividend equivalents. |
*Detailed descriptions of each of these plans and the benefits they provide can be found on pages 64 to 66. 42 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
PerquisitesEXECUTIVE COMPENSATION:Compensation Discussion and Other BenefitsAnalysis
PERQUISITES AND OTHER BENEFITS We provide various forms ofthe following insurance coverage and limited perquisitesother benefits to our senior executives. Theexecutives which the Committee believes that these benefits are consistent with market practice and contribute to recruitment and retention. | | | Perquisite/Benefits | | Description | ELG Life Insurance | | Current and former ELG members appointed prior to January 31, 2015 may receive Company-funded life insurance coverage equalup to three times their base salary at age 62 (projected or actual). This benefit is not available to ELG members appointed after January 31, 2015. | ELG Long-Term Disability | | The ELG long-term disability program provides an annual benefit equal to 80% of target total cash compensation (basebase salary plus target annual bonus)bonus following disability. | Healthcare | | ELG members are covered undereligible to participate in the same health benefit program we offer to our other employees. | Executive Physical | | ELG members are eligible for a comprehensive annual executive physical. | Perquisite Allowance Executive Leased Vehicle | | UTC provides ELG members received a perquisitewith an annual allowance equal to 5% of their annual base salaries. The perquisite allowance was eliminated for individuals appointed to the ELG after June 2012, and for all ELG members effective for the 2014 calendar year. | Executive-Leased
Vehicle
| | ELG members may havetowards the use of a Company-provided leased vehicle, which has been funded through the ELG perquisite allowance. Following the eliminationvehicle. The value of the perquisite allowance this program will continue, subjectfor ELG members varies with position. Leased vehicle costs above the annual allowance are paid directly by the executive.
| Financial Planning | | Beginning in 2016, ELG members are eligible to receive an annual cost limitationfinancial planning benefit up to $16,000 per participant.year. | Aircraft Usage | | In accordanceAs of January 2015, the Committee modified its policy on personal use of Corporate aircraft. Mr. Hayes may now use the Corporate aircraft for up to 50 hours per year. Personal use of the Corporate aircraft by our President and CEO aligns with our security policy, and the Committee believes that it optimizes the most efficient use of Mr. Chênevert uses corporateHayes’ time. Under this policy, Mr. Hayes may also fly commercially, subject to review by UTC security personnel. No other UTC employees are permitted to use the Corporate aircraft for personal travel. reasons. |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 37 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSIONSEVERANCE AND ANALYSISRETENTION ARRANGEMENTS
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Severance and Retention Arrangements
ELG members participate in severance and retention arrangements consistent with practices in effect at the majority of CPG companies. We believecompanies in our CPG. The Committee believes such arrangements help UTC maintain a competitive compensation program. In addition to the market competitive nature of ourOur severance arrangements this program requires our executives to adhere toincorporate post-employment restrictive covenants designed to protect UTC’s interest,interests, including non-compete, non-solicitation and non-disclosure obligations. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 43 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Severance Program Over the years, the Committee has made a number of modifications to the ELG severance program to both align with market best practices and to serve the evolving needs of the Company. The following chart outlines these modifications: | | ELG Appointment Date | | | Prior to January 2006 | | Between January 2006 and April 2013 | | On or after May 2013 | Cash Separation Benefit | | 2.5x base salary | | 2.5x base salary | | No cash benefit | Conditions to Receive CashSeparation Benefit | | • Mutually agreeable separation • 3+ years as an ELG member | | • Mutually agreeable separation prior to age 62 • 3+ years as an ELG member | | N/A | ELG RSU Award | | No award granted | | Grant value equal to 2x base salary at time of grant | | Grant value up to $2 million, depending on role | Conditions to Vest in theELG RSU Award | | N/A | | • Mutually agreeable separation on or after age 62 • 3+ years as an ELG member | | • Mutually agreeable separation • 3+ years as an ELG member | NEO Participation | | Gregory Hayes Alain Bellemare Geraud Darnis | | Charles Gill, Jr. Paul Adams | | Akhil Johri |
As originally designed and currently applicable forshown in the table above, ELG members appointed prior to January 2006 the ELG severance program providesmay receive a cash separation payment of 2.5 timesequal to 2.5x base salary in the event of a mutually agreed upon separation following three or more years of ELG participation. For ELG appointments between January 2006 and April 2013, the ELG severance arrangement was modified by eliminating this cash benefit for separations occurring on or after age 62. Instead these individuals are eligible to vest in a retention award of restricted stock units (“RSUs”) upon a mutually agreeable separation occurring on or after age 62, with at least three years of ELG membership. For these individuals, the retention RSU award was granted upon ELG appointment, with a value equal to two times base salary on the date of grant. In 2013, as part of its annual review of the ELG program, the Committee evaluated ELG severance arrangements against market standards and determined that further adjustments were appropriate. Based on this review, the Committee eliminated cash severance entirely, effective for members appointed on or after May 2013. These executives are now eligible to vest in the ELG retention RSU award, regardless of age, in the event of a mutually agreeable separation(defined below) following three years ofas an ELG service. The Committee made this changemember.
Beginning in January 2006, ELG RSU awards have been granted upon appointment to further strengthen the alignment of Company performance withELG. These awards receive dividend equivalents during the ELG retention program.vesting period that are reinvested as additional RSUs. Ÿ | ELG Appointments between January 2006 and April 2013: ELG RSU awards are eligible to vest after three years of ELG service followed by a mutually agreeable separation on or after age 62 or following a change-in-control (as defined on page 45). Alternatively, if a mutually agreeable separation occurs prior to age 62 with three years as an ELG member, a cash separation payment equal to 2.5x base salary will be paid in lieu of vesting in the ELG RSU award. | | | Ÿ | ELG Appointments on or after May 2013: ELG RSU awards will vest in cases of either mutually agreeable separation after three years of ELG service or following a change-in-control (as defined on page 45). While post-May 2013 appointees have no age requirement for vesting in their ELG RSU awards, they are not eligible for a cash severance payment upon separation. | | | A mutually agreeable separation occurs when: | | | Ÿ | An ELG member’s position with UTC has been eliminated or diminished by a divestiture, restructuring, shift in priorities or similar event; | | | Ÿ | An executive retires between age 62 and 65 with the Company’s consent; or | | | Ÿ | An executive retires at age 65 or older. |
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EXECUTIVE COMPENSATION:Compensation Discussion and Analysis Change-in-Control Benefits We have maintained a senior executive
Our Senior Executive Severance Plan (“SESP”) provides change-in-control severance protection program since 1981. This program is designed to help ensure continuity of management in a potential change-in-control situation. However, insituations. In response to changing market practices, we closed this program to new participants effective June 2009. For those who are still eligible to participate, the program includes a cash severance benefit of 2.99x the sum of base salary and the executive’s target bonus for the year in which termination occurs. Executives appointed to the ELG on or after June 2009 do not participate in our Change-in-Control program and eliminatedare instead covered by the following for existing participants:standard ELG severance benefit (2.5x base salary and/or the vesting of ELG RSU awards) in the event of a change-in-control. ELG members may receive the greater of the SESP or ELG cash severance benefits, but not both. A change-in-control generally occurs upon: • | (i) | the acquisition of 20% of UTC’s outstanding shares by a person or a group; | | Excise tax gross-ups(ii) | if incumbent directors no longer constitute a majority of the Board; or | | (iii) | a merger or similar event where UTC shareowners own less than 50% of the voting shares of the new organization. |
• | | Three-year continuation of healthcare and other benefits |
• | | Crediting of three additional years of service under our qualified and supplemental pension plans |
• | | Unilateral right to voluntarily resign with benefits |
The program as currentlyBenefits under both the legacy SESP and the UTC Long-Term Incentive Plan (“LTIP”) are subject to a “double trigger” where benefits are provided only if a change-in-control is followed by an involuntary termination or termination for “good reason” within two years of the change-in-control event. “Good reason” generally includes material adverse changes in effect includesan executive’s compensation, responsibilities, authority, reporting relationship or work location. Accelerated vesting under the following elements:LTIP in a change-in-control event will include performance-based awards at target levels.
• | | A cash severance benefit of 2.99 times the sum of base salary and the executive’s current target bonus for the year in which termination occurs |
• | | Accelerated vesting of long-term incentive awards, including PSUs at target levels |
• | | Benefits under the program are subject to a “double trigger,” meaning they are provided only if a change-in-control is followed by involuntary termination or termination for “good reason.” “Good reason” generally includes material adverse changes in an executive’s compensation, responsibilities, authority, reporting relationship or work location |
Role of Severance and Retention Benefits in Compensation Program The Committee believes that with the program modifications previously described, above, the terms and conditions of our severance arrangements and change-in-control agreements for ELG members are market-competitive relative to our CPGCompensation Peer Group and provide participating executives with a reasonable level of financial security. Because severance and change-in-control benefits are contingent on future events, they operate as a form of insurance rather than as a principal component of compensation strategy. The Committee, therefore, does not take these benefits into account when setting other elements of pay or measuring total direct compensation. The Potential Payments on Termination or Change-in-Control table on page 5767 sets forth the estimated values and details of the termination benefits each NEO would receive under various hypothetical scenarios. | | | 38 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 45 |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) How We View Executive Compensation HOW WE VIEW COMPENSATION
The Summary Compensation Table on page 48 sets forth57 provides annual compensation data presented in accordance with SEC requirements. This uniformSEC-mandated format is helpful for cross-company comparisons. However, the Committee feels that the SEC-mandated formatit does not fully represent all of itsthe Committee’s annual compensation decisions and, in particular, does not provide the basis for a valid CEO pay for performancepay-for-performance assessment. Therefore, when reviewing annual compensation, the Committee uses several alternative calculation methodologies, as described in this section and summarized in the chart below:table on page 49. | | | | | | | | | | | Summary Compensation Table | | Total Direct Compensation | | Realizable Compensation | | Realized Compensation | Basic concept | | Uses SEC methodology, which includes a mix of both compensation actually earned during 2015 and some future contingent pay opportunities | | Includes only pay that is directly linked to 2015 performance | | 3-year average compensation measure which captures how our current share price would affect previously granted equity awards | | Includes only pay that was actually earned during 2015 | Purpose | | SEC-mandated compensation disclosure | | Reflects the Committee’s compensation decisions based on 20132015 performance | | Used to evaluate pay forpay-for- performance alignment | | Used to evaluate pay forpay-for- performance alignment | Pay Elements How it is calculated | | Mix of actual pay received during year:Sum of:
-• Base salary paid in 20132015
-• Annual bonus earned for 20132015 performance
performance
-• Dividend equivalents
-• All other compensation
plus Future pay opportunities that may or may not be realized, such as: -• Accounting value of equity
awards (SARs and PSUs) granted in 20132015 -• Change in the actuarial value of pension benefits
pension benefit• Above market earnings of non-qualified deferred compensation
| | -Sum of:
• Base salary paid in 2013set for 2015 -• Annual bonus earned for 20132015 performance
-• Accounting value of equity awards (SARs and PSUs) granted in January 2014, reflective of 20132016, reflecting 2015 performance
Excludes: Pay elements outside the scope of the Committee’s annual compensation decisions, such as: -• Change in the actuarial value of pension benefitbenefits
-• Dividend equivalents
-• All other compensation
• Above market earnings of non-qualified deferred compensation | | Three-year average of: -• Base salary paid
-• Annual bonus earned
-• Dividend equivalents
-• In-the-money value(1)of equity awards (SARs and PSUs) granted during the prior three fiscal years (calculated based on the stock price at the end of the third year)
-• Other direct(1)(2) compensation
Excludes: -• Change in the actuarial value of pension benefitbenefits
-• Other indirect(2)(3)compensation
• Above market earnings of non-qualified deferred compensation | | Single year measure of compensation earned:Sum of:
-• Base salary paid in 20132015
-• Annual bonus earned for 20132015 performance
-• Dividend equivalents
-• Gains in 2015 on options / options/SARs exercised and PSUs vested PSUs
-• Other direct(1)(2)compensation
Excludes: -• Change in the actuarial value of pension benefitbenefits
-• Other indirect(2)(3) compensation
• Above market earnings of non-qualified deferred compensation |
(1) | For a definition of in-the-money value refer to page 47. | | | (2) | Other direct compensation includes personal use of the Corporate aircraft, leased-vehicleleased vehicle payments the ELG perquisite allowance and other miscellaneous compensation elements. |
(2) | | (3) | Other indirect compensation includes insurance premiums and Company contributions to nonqualifiednon-qualified deferred compensation plans and the UTC 401(k) Savings Plan.defined contribution retirement plans. |
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EXECUTIVE COMPENSATION:Compensation Discussion and Analysis TOTAL DIRECT COMPENSATION Unlike the amounts reported in the Summary Compensation Table, total direct compensation includes only pay elements that directly reflect the Committee’s assessment of Company and individual performance for the current year.2015. For example, the Summary Compensation Table values includeshows the grant date fair value of long-term incentive awards granted in January 2013, reflecting2015, which reflects the Committee’s assessment of 20122014 performance. TotalIn contrast, total direct compensation however, reflects 20132015 performance by instead including the grant date fair value of awards granted in January 2014.2016. Other elements included in the Summary Compensation Table — Table—changes in pension values, dividend equivalent payments and other formulaic compensation elements — elements—are outside the scope of the Committee’s annual pay decisions. Therefore, the Committee believes excluding these elements from total direct compensation renders a more accurate and currentup-to-date assessment of executive compensation at UTC. | | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 39 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSISthe Committee’s performance evaluation for the year.
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CEO 2013MR. HAYES: 2015 SUMMARY COMPENSATION TABLE VS. TOTAL DIRECT COMPENSATION
| Compensation Element | | 2013 Summary Compensation Table (in thousands) | | 2013 Total Direct Compensation (in thousands) | | Compensation Element (in thousands) | | | 2015 Summary Compensation Table | | 2015 Total Direct Compensation | | Base Salary | | $1,756 | | $1,775 | | $ | 1,300 | | | $ | 1,300 | | Annual Bonus | | $3,400 | | $3,400 | | $ | 850 | | | $ | 850 | | Stock Awards | | $6,381 (1/2/13 grant date) | | $7,111 (1/2/14 grant date) | | $ | 4,752 (1/2/15 grant | ) | | $ | 4,869 (1/4/16 grant | ) | Option Awards | | $5,387 (1/2/13 grant date) | | $6,175 (1/2/14 grant date) | | $ | 3,280 (1/2/15 grant) | | | $ | 3,707 (1/4/16 grant) | | Non-Equity Incentive Compensation* | | $697 | | | | Change in Pension Value | | $2,078 | | N/A | | Change in Pension Value + Non-Qualified Deferred Compensation Earnings | | | $ | 231 | | | | N/A | | All Other Compensation | | $575 | | | | $ | 355 | | | | N/A | | Total | | $20,274 | | $18,461 | | $ | 10,768 | | | $ | 10,726 | |
* | Reflects dividend equivalents paid in cash under the legacy Continuous Improvement Incentive Program. |
REALIZABLE COMPENSATION The Committee does not believe that the Summary Compensation Table or total direct compensation values adequately measure CEO compensation for the purpose of assessing the alignment of pay with performance.pay-for-performance alignment. Both methods utilizeestimated accounting conventions to estimate values of long-term incentive awards at the time of grant. As might be expected, however,these estimated values can differ significantly from theactual value paid.that is ultimately earned from these awards. Therefore,
For this reason, the Committee also takes into consideration realizable compensation,considers “realizable compensation” which measures compensation based on thea three-year average annual amount of salary, annual bonus, long-term incentive awards, non-equity incentive compensation and other direct compensation elements overelements. Realizable compensation plays an important role in helping the preceding three years. Further and most importantly, realizableCommittee assess our compensation program’s alignment with shareowners’ long-term interests. It captures the impact of UTC’s current share price performance on previously granted long-term incentive awards by using the “in-the-money” value for these awards, rather than a grant date fair value. The “in-the-money” value is defined as the difference between the closing price of our Common Stock at the end of the third yearthree-year measurement period and the grantexercise price (if any) multiplied by the number of the award. The use of anshares underlying SAR and PSU awards. By using this end-of-year stock price, realizable compensation directly correlates the executive’s benefit with the return our shareowners receivereceived from investing in our Common Stock over the same period. The Committee, therefore, views realizable compensation as relevant to its assessment of our compensation program’s alignment with shareowners’ long-term interests. An exampleillustration of this alignment is shown in the year-over-year increase in Mr. Chênevert’s realizable compensation between 2012 and 2013 which was primarily driven by the significant appreciation in our Common Stock in 2013.charts on page 49. Unlike the values reported in
Also, unlike the Summary Compensation Table, the calculation of realizable compensation excludes theany change if any, in the value of thean executive’s pension benefits during the year. InThe change in pension value shown in the Summary Compensation Table the change in pension value is an actuarial valuation that reflects the change from the preceding year’s present value of future potential pension payments, and does not represent theactualpayments to be received upon retirement. This valuation is only anIt merely reflects the change between the current Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 47 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis and prior year’s actuarial estimate of future value and is heavily impacted bypension benefits, based on actuarial assumptions and external economic factors such as the fluctuation offluctuating interest rates. These calculations do not necessarily correlate with the value of actual benefits received. In addition, Mr. ChênevertHayes and some of the other NEOs participate in a broad-based pension plan with the same benefit formula applicablethat applies to all U.S. salaried employees.employees hired prior to January 1, 2010. This pension plan is not related to our executive compensation program and does not measure individual or Company performance as assessed by the Committee and is therefore, in ourthe Committee’s view, irrelevant to the pay for performancepay-for-performance assessment. Realizable compensation also excludes other indirect compensation elements, such as Company contributions to the UTC 401(k) Savings Plan nonqualifiedand our non-qualified deferred compensation plans, andas well as ELG life insurance premiums. Since these elements are also not based on performance, the Committee does not consider them relevant to the assessment of the CEO’s pay relative to his performance. | | | 40 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
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MR. HAYES: THREE-YEAR HISTORY OF CEO REALIZABLE COMPENSATION | Pay Elements | | Calculation Methodology | | 2011* | | | 2012* | | | 2013* | | | Calculation Methodology | | 2013* | | 2014* | | 2015* | | Base Salary | | Average annual base salary for the year shown and the preceding two years. | | | $1,569 | | | | $1,657 | | | | $1,713 | | | Average annual base salary for the year shown and the preceding two years. | | $ | 805 | | | $ | 883 | | | $ | 1,040 | | Annual Bonus | | Average annual bonus for the year shown and the preceding two years. | | | $3,400 | | | | $4,000 | | | | $3,800 | | | Average annual bonus earned for the year shown and the preceding two years. | | $ | 1,173 | | | $ | 1,300 | | | $ | 1,183 | | Stock Awards | | Average annual value of vested and unvested PSU awards granted in the year shown and the preceding two years, calculated based on the share price at the end of the year shown. For the completed three-year performance cycle, the calculation is based on the actual number of shares vested. For each of the two uncompleted three-year performance cycles, the calculation assumes that the target number of shares is earned. | | | $6,310 | | | | $8,255 | | | | $10,894 | | | Average annual value of vested and unvested PSU awards granted in the year shown and the preceding two years, based on UTC’s share price at the end of the year shown. For the completed three-year performance cycles, the calculation is based on the actual number of shares vested. For the two uncompleted three-year performance cycles, the calculation assumes that the target number of shares is earned. | | $ | 2,917 | | | $ | 2,269 | | | $ | 2,230 | | Option Awards | | Average annual in-the-money value of stock option and SAR awards (vested and unvested) granted in the year shown and the preceding two years, calculated based on the share price at the end of the year shown. | | | $2,795 | | | | $2,266 | | | | $11,502 | | | Average annual in-the-money value of SAR awards (vested and unvested) granted in the year shown and the preceding two years, calculated based on UTC’s share price at the end of the year shown. | | $ | 3,850 | | | $ | 2,806 | | | $ | 430 | | Non-Equity Incentive Compensation | | Average annual value of dividend equivalents paid in cash for the year shown and preceding two years for awards granted prior to 2006 under the legacy Continuous Improvement Incentive Program. This legacy program will expire in 2014. | | | $1,252 | | | | $1,220 | | | | $1,012 | | | Average annual value of dividend equivalents paid in cash for the year shown and the preceding two years, under a legacy long-term incentive program that expired at the end of 2014. | | $ | 324 | | | $ | 236 | | | $ | 121 | | Other Direct Compensation | | Average annual value of other direct compensation for the year shown and the preceding two years. Excludes indirect compensation elements such as life insurance premiums, Company contributions to the UTC 401(k) Savings Plan and our nonqualified deferred compensation plans. | | | $182 | | | | $203 | | | | $204 | | | Average annual value of other direct compensation for the year shown and the preceding two years. Includes personal use of the Corporate aircraft, leased vehicle payments, and other miscellaneous compensation items. Excludes other indirect compensation, as defined on page 46. | | $ | 49 | | | $ | 46 | �� | | $ | 66 | | Total Realizable Compensation | | | | | $15,508 | | | | $17,601 | | | | $29,125 | | Total Realizable Compensation | $ | 9,118 | | | $ | 7,540 | | | $ | 5,070 | |
*Compensation values shown in thousands. * | Compensation values shown in thousands. |
The following table shows the actual or assumed vesting levels used for Mr. Chênevert’sHayes’ PSUs in the preceding table: | | | | | Grant Date | | Actual Shares Vested | | Vesting (as % of target) | 1/2/2009 | | 51,510 | | 51% | 1/4/2010 | | 84,390 | | 97% | 1/3/2011 | | 123,080 | | 136% | 1/3/2012 | | Awards not yet vested; target number of shares reflected | 1/2/2013 | |
Grant Date | | Actual Shares Vested | | | Vesting (as % of target) | | 1/3/2011 | | | 36,312 | | | | 136 | % | 1/3/2012 | | | 29,070 | | | | 90 | % | 1/3/2013 | | | 11,528 | | | | 44 | % | 1/2/2014 | | | Awards not yet vested; target number of shares assumed | | | | | | 1/2/2015 | | | | | | | | |
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EXECUTIVE COMPENSATION:Compensation Discussion and Analysis REALIZED COMPENSATION When assessing CEO pay for performance alignment, the
The Committee also reviews realized“realized compensation” for purposes of assessing CEO pay-for-performance alignment. Realized compensation which representsincludes the amount of compensationactually paid earned during the year, as opposed tobut excludes amounts that may or may not be paid in the future. Realized compensation also incorporates theany gainsactually receivedearned during the year uponfrom the vesting of PSUs andor the exercise of stock options or SARs. Evaluating realizedRealized compensation provides the Committee with an additional relevant measure to assess the robustness of our pay for performance relationship. Realized compensation demonstratespay-for-performance relationship by focusing on the strength of the correlation between highthe level of cash and equity payouts in years of strong performance and low cash and equity payouts in years of weakUTC’s performance. Although the decision to exercise stock options and SARs resides with the executive and therefore may not always correlate with Company performance, the timing of exercises often aligns with stock price appreciation. Changes in pension values and other indirect compensation elements are excluded from realized compensation for the same reasons noted in the discussion of realizable compensation on page 40. | | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 41 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS48.
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MR. HAYES: THREE-YEAR HISTORY OF CEO REALIZED COMPENSATION | Pay Elements | | Calculation Methodology | | 2011* | | | 2012* | | | 2013* | | | Calculation Methodology | | 2013* | | 2014* | | | 2015* | | Base Salary | | Base salary paid during the year shown. | | | $1,681 | | | | $1,700 | | | | $1,756 | | | Base salary paid during the year shown. | | $ | 870 | | | $ | 950 | | | $ | 1,300 | | Annual Bonus | | Annual bonus paid for performance during the year shown. | | | $4,500 | | | | $3,500 | | | | $3,400 | | | Annual bonus earned for performance during the year shown. | | $ | 1,100 | | | $ | 1,600 | | | $ | 850 | | Stock Awards | | Realized gains on PSUs which vested during the year shown. | | | $3,748 | | | | $4,150 | | | | $7,562 | | | Realized gains on PSUs that vested during the year shown. | | $ | 2,156 | | | $ | 4,052 | | | $ | 3,469 | | Option Awards | | Realized gains on stock options and SARs exercised during the year shown. | | | $3,699 | | | | $8,423 | | | | $10,686 | | | Realized gains on stock options and SARs exercised during the year shown. | | $ | 15,387 | | | $ | 2,990 | | | $ | 0 | | Non-Equity Incentive Compensation | | Value of dividend equivalents paid in cash during the year shown on awards granted prior to 2006 under the legacy Continuous Improvement Incentive Program. This legacy program will expire in 2014. | | | $1,154 | | | | $1,186 | | | | $697 | | | Value of dividend equivalents paid in cash during the year shown, under a legacy long-term incentive program that expired at the end of 2014. | | $ | 308 | | | $ | 54 | | | $ | 0 | | Other Direct Compensation | | Value of other direct compensation for the year shown. Excludes indirect compensation elements such as life insurance premiums, Company contributions to the UTC 401(k) Savings Plan and our nonqualified deferred compensation plans. | | | $207 | | | | $213 | | | | $191 | | | Other Direct | | | Value of other direct compensation for the year shown. Includes personal use of the Corporate aircraft, leased vehicle payments, and other miscellaneous compensation items. Excludes other indirect compensation, as defined on page 46. | | $ | 56 | | | $ | 34 | | | $ | 106 | | Total Realized Compensation | Total Realized Compensation | | | $14,989 | | | | $19,172 | | | | $24,292 | | Total Realized Compensation | $ | 19,877 | | | $ | 9,680 | | | $ | 5,725 | |
*Compensation values shown in thousands. * | Compensation values shown in thousands. |
SUMMARY COMPENSATION TABLE VS. REALIZABLE AND REALIZED COMPENSATION The following chart comparescharts compare the Summary Compensation Table values reported for Mr. Hayes for the CEO forpast three years 2011 through 2013, to Mr. Chênevert’shis realizable and realized compensation for the same time period. As shown in the chart shows,charts below, the correlation between TSR and realizable and realized compensation is much stronger than the correlation between TSR and Summary Compensation Table values. CEO Pay*(in thousands)
Summary Compensation Table | | Realizable Compensation* | | Realized Compensation* | | Total Shareowner Return | (thousands) | | (thousands) | | (thousands) | | (1-Year TSR) | | | | | | | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x63x1.jpg) |
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*Refer to the table on page 4148 to see how we calculate realizable compensation and to the chart above table for the calculation ofhow realized compensation.compensation is calculated. | | | 42 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 49 |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Pay Decisions for Named Executive Officers (NEOs) PAY DECISIONS FOR NAMED EXECUTIVE OFFICERS (NEOs)
In this section, we review and explain the Committee’s 2013The Committee makes compensation decisions for each of our NEOs.
LOUIS CHÊNEVERT, CHAIRMAN & CHIEF EXECUTIVE OFFICER
Mr. Chênevert’s total direct compensation for 2013 equaled $18.5M, approximately a 9% increase from 2012. Under his leadership, UTC exhibited strong financial, operational and strategic performance in 2013. The increase in Mr. Chênevert’s total direct compensation was driven by this high level of performance.
CEO TOTAL DIRECT COMPENSATION DECISIONS, 2011-2013
| | | | | | | | | Year-End Decisions(in millions) | Compensation Element | | 2011 | | 2012 | | 2013 | Base Salary 4.4% increase from prior year | | $1.7 | | $1.7 | | $1.775 | Annual Incentive Award 2013 performance generated an annual bonus opportunity equal to 120% of target | | $4.5 | | $3.5 | | $3.4 | Long-Term Incentive Award Stock Appreciation Rights and Performance Share Units | | Reflects 1/3/12 Grant $7.0 SARs | | Reflects 1/2/13 Grant $5.4 SARs | | Reflects 1/2/14 Grant $6.2 SARs | | | + $7.8 PSUs | | + $6.4 PSUs | | + $7.1 PSUs | | | $14.8 | | $11.8 | | $13.3 | Total | | $21.0 | | $17.0 | | $18.5 |
In his role as Lead Director, Mr. Kangas led the Board’s assessment of Mr. Chênevert’s performance in 2013. This assessment included a review of UTC’s performance relative to pre-established financial goals (see page 46 for a discussion of these metrics), as well as Mr. Chênevert’s individual performance and leadership.
With respect to annual bonus performance metrics, UTC achieved net income of $5.686 billion in 2013, a 17% increase from 2012 and in excess of the $5.485 billion pre-established target. The ratio of free cash flow (see page 46 for how we compute free cash flow) to net income equaled 102%. In combination, these results generated an annual bonus factor for the Corporation of 120% of target. In addition to our pre-established annual bonus goals, UTC generated a TSR of 42% for 2013.
Several noteworthy strategic accomplishments in 2013 led to the Committee’s very positive evaluation of Mr. Chênevert’s individual performance. Among them was his leadership in the successful integration of Goodrich and International Aero Engines (“IAE”) into UTC Propulsion & Aerospace Systems (“UTC PAS”). These transformational acquisitions are delivering strong results, allowing us to leverage tremendous new capabilities, technologies and talent. The benefits of the combined UTC Propulsion & Aerospace Systems structure were evidenced in 2013 when Embraer selected UTC PAS to provide a fully integrated propulsion system—engine, nacelle and controls—and to serve as the sole supplier of wheels, brakes and electrical systems for its new second generation E-Jet aircraft family.
UTC Climate, Controls & Security (“UTC CCS”) achieved its 2015 earnings target two years ahead of schedule, while continuing to create additional cost and revenue synergies driven by the combination of our Carrier and UTC Fire & Security businesses. Commercial portfolio transformation continued in 2013 with the creation of UTC Building & Industrial Systems (“UTC BIS”) which combined UTC CCS and Otis. The newly-formed organization positions UTC to better capitalize on accelerating urbanization in emerging markets, to provide enhanced support to our global commercial customers, and to serve as a growth engine for UTC.
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 43 |
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
This continued portfolio transformation, coupled with strong financial performance of 16% EPS growth and 42% total shareowner return, were the primary factors in the Committee’s favorable assessment of CEO performance for 2013. In recognition of these accomplishments, and in combination with UTC’s exceptional performance against pre-established financial goals, the Committee awarded Mr. Chênevert a $3.4 million bonus. This award value aligns directly with the Corporation’s financial performance factor of 120%.
OTHER NAMED EXECUTIVE OFFICERS
The Committee bases compensation decisions for NEOs based on their individual performance and the overall performance of the Company, and business unit performanceand/or function, where applicable. After reviewing these factors, the Committee determines each NEO’s awards under the annual and long-term incentive plans and also sets salaries for the upcoming year.
2013 NEO TOTAL DIRECT COMPENSATION
The following table summarizesAs discussed on page 47, total direct compensation represents the Committee’s 2015 pay decisions for each of the 2013 performance year.principal elements of compensation (i.e., base salary, annual bonus, long-term incentives). Unlike the Summary Compensation Table, which includes the long-term incentive award (PSUs and SARs) granted in January 2015 reflecting 2014 performance, total direct compensation includes the PSU and SAR awards granted in calendar year 2013,January 2016 reflecting the Committee’s assessment of 2015 performance.
The charts shown for each NEO in the following pages display the total direct compensation value delivered in each of the principal elements of compensation. These charts do not include amounts paid to Mr. Johri to offset compensation he forfeited upon leaving his former employer. Additionally, as a result of Mr. Darnis’ retirement on January 31, 2016, the total direct compensation shown on the chart on page 52 does not include 2016 PSU and SAR awards. GREGORY HAYES ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x64x1.jpg)
![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x64x2.jpg)
President and Chief Executive Officer The Committee assessed Mr. Hayes’ performance favorably in his first full year as President and CEO. Under his leadership, UTC successfully executed its strategic objectives intended to drive sustained, long-term growth and increased shareowner value. Total direct compensation decreased slightly from $10.93 million in 2014 to $10.73 million in 2015, directly attributable to a decrease in the following table instead includesCompany’s 2015 annual bonus financial performance factor compared to the prior year. 2015 adjusted net income of $5.563 billion fell short of the $6.282 billion annual bonus target set for the year, resulting in a vesting factor of 0% for the earnings portion of the annual bonus award. The 2015 ratio of free cash flow to net income used to calculate the annual bonus performance factor equaled 99%, compared to a target of 100%. In combination, these factors resulted in a 39% financial performance factor for purposes of determining 2015 annual bonus awards. The Committee utilized these results, along with the favorable individual performance considerations noted here, and awarded Mr. Hayes an $850,000 annual bonus, an amount that closely aligns with the Company’s 39% financial performance factor. Mr. Hayes’ 2016 long-term incentive awards grantedaward recognizes his 2015 performance. The value of his 2016 award equals $8.58 million, an amount exceeding the $8.03 million award made in January 2014,2015 but below the CPG median, reflecting a more appropriate assessment of 2013 performance.his brief tenure in the role. | | | | | | | | | Compensation Element (in thousands) | | Hayes | | Darnis | | Bellemare | | Hess* | Base Salary | | $880 | | $1,000 | | $825 | | $675 | Annual Incentive Award | | $1,100 | | $1,100 | | $1,050 | | $625 | Stock Appreciation Rights | | $2,030 | | $5,897 | | $1,959 | | $0 | Performance Share Units | | $2,333 | | $2,257 | | $2,257 | | $0 | Total Direct Compensation | | $6,343 | | $10,254 | | $6,091 | | $1,300 |
Age:55 UTC Experience:26 years Individual Performance Highlights • | Effectively driving UTC’s portfolio transformation, including the accelerated completion of the sale of Sikorsky Aircraft and the acquisition of a number of businesses better aligned with UTC’s core markets and segments | | | • | Simplification of UTC’s organizational structure, providing greater transparency and more direct accountability | | | • | Rigorous commitment to a disciplined capital allocation strategy, evidenced by the $12 billion we returned to shareowners in 2015 through dividends and share repurchases (including the $6 billion accelerated share buyback program announced in November 2015) | | | • | Efficient transition to a new senior leadership team with a strong focus on operational excellence and a renewed emphasis on succession planning | | | • | Achievement of aggressive pre-established environmental goals | | | • | Listed as one of the 2016 Best CEOs in the aerospace and defense electronics category byInstitutional Investor Magazine for his effective communication with shareowners and analysts |
*50 | Mr. Hess retired from UTC effective January 15, 2014 and, therefore, did not receive a 2014 long-term incentive award.![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
Gregory Hayes, SeniorEXECUTIVE COMPENSATION:Compensation Discussion and Analysis
AKHIL JOHRI ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x65x1.jpg)
![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x65x2.jpg)
Executive Vice President & Chief Financial Officer The Committee approved a base salary of $700,000 for Mr. Johri upon his return to UTC on January 1, 2015. For purposes of annual bonus determination, the performance ofCommittee considered the Corporation generated aUTC financial performance factor of 120%39%, as discussed on the prior page, his effective leadership of target. The Committee considered this factor, along withthe finance organization and the individual performance elements listed below, andconsiderations noted here. Based on these factors, the Committee awarded Mr. HayesJohri a $1.1 million$375,000 annual bonus. Thisbonus, an amount was slightly above the Corporation’s financial performance factor.factor but below the market median. Reflecting its favorable assessment of Mr. Johri’s 2015 performance, the Committee granted him a 2016 long-term incentive award valued at $2.79 million. The value of this award falls below the market median, reflecting Mr. Johri’s brief tenure as CFO. Age:54 UTC Experience:27 years Individual Performance Highlights • | His role in the negotiations and transition efforts related to the successful sale of Sikorsky Aircraft, which closed on an expedited timeline | | | His key role in supporting the Corporation’s portfolio transformation with the sale of Rocketdyne and Pratt & Whitney Power Systems |
• | | His key role in delivering EPS of $6.21, free cash flow in excess of net income, and an increase in Common Stock dividends |
• | | His leadership in paying down approximately half of the debt associated with the 2012 acquisition of Goodrich Corporation |
• | | His recognition byInstitutional Investor magazine as the bestRanked #1 2016 Best CFO in the aerospace and defense sectorelectronics category byInstitutional Investor Magazine | | | • | His efforts towards the implementation of the announced multi-year $1.5 billion cost reduction plan, which included $400 million in restructuring in 2015 | | | • | Successful execution of UTC’s disciplined capital allocation strategy, including the $12 billion returned to shareowners in 2015 through dividends and share repurchases (including the $6 billion accelerated share buyback program announced in November 2015) | | | • | Strategic financial leadership in positioning UTC to maximize future growth opportunities through $538 million in acquisitions and $3.9 billion in Company and customer-funded research and development investments made in 2015 |
• | | His effective supervision of our internal financial and accounting functions and adoption of emerging accounting and financial reporting standards |
In 2013, Mr. Hayes also received a salary increase from $840,000 to $880,000 to better align with competitive market practice.
| | | 44 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 51 |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) GERAUD DARNIS Geraud Darnis, ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x66x1.jpg)
![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x66x2.jpg)
President & Chief Executive Officer, UTC Building & Industrial Systems For purposes of annual bonus determination, the performance of the Corporation and of UTC CCS generated a financial performance factor of 106% of target. The Committee considered this factor, along with the individual performance elements listed below, and awarded Mr. Darnis an annual bonus of $1.1 million. This amount was slightly above Mr. Darnis’ financial performance factor.
• | | His role in driving the integration of UTC Climate, Controls & Security and Otis to create UTC Building & Industrial Systems |
• | | His leadership in the delivery of $2.6 billion in CCS earnings (as defined on page 46) |
• | | His successful efforts in the divestiture of multiple non-core businesses |
• | | His continued progress in the area of talent management, with the significant realignment of the CCS and Otis leadership teams to support the successful launch of UTC Building & Industrial Systems |
• | | His ongoing role as a global leader in the areas of energy efficiency and green buildings |
Mr. Darnis also received a salary increase in 2013 from $930,000$1,050,000 to $1,000,000 in recognition$1,100,000 effective April 1, 2015, reflecting the Committee’s ongoing favorable assessment of his expanded organizational responsibility.performance leading UTC’s $28.7 billion commercial businesses. Alain Bellemare, President & Chief Executive Officer, UTC Propulsion & Aerospace Systems
For purposes of annual bonus determination, the Committee weighted performance offor the CorporationCompany (39%, as previously discussed) and of UTC PASBuilding & Industrial Systems (73%), which in combination, generated a financial performance factor of 127%59% of target. The Committee considered this factor,Based on these results, along with the individual performance elementsconsiderations listed below, andhere, the Committee awarded Mr. BellemareDarnis an annual bonus of $1.05 million. This$710,000, an amount was equal to Mr. Bellemare’sthat aligns with this blended financial performance factor. Mr. Darnis retired effective January 31, 2016, and therefore, did not receive a 2016 long-term incentive award. Age:56 UTC Experience:32 years Individual Performance Highlights • | Selection of Otis to install elevators and escalators at the landmark New York City Hudson Yards development project | | | His leadership• | Otis’ contract win valued at more than $100 million to provide 370 elevators and 104 escalators to the world’s largest hotel, the Abraj Kudai in Saudi Arabia | | | • | Significant UTC CCS’ contract wins for the continued successful integrationSheikh Jaber Al Ahmad Culture Center in Kuwait and the new Atlanta Braves stadium | | | • | Rollout of Goodrich Corporationupgraded North American Residential HVAC products which meet the 2015 Regional Efficiency Standards | | | • | Launch of a number of new or upgraded products, including the Advanced Diesel Engine truck trailer and Orion container platforms for transportation refrigeration. |
•52 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
His leadership in the successful integration of IAE |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis • | | His role in the selection by Embraer to provide multiple systems on its new second generation E-jet aircraft family |
PAUL ADAMS • | | His leadership in the successful divestitures of Rocketdyne and Pratt & Whitney Power Systems |
![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x67x1.jpg)
• | | His leadership in the certification and first flight of the Bombardier CSeries engine |
Also in 2013,
President, Pratt & Whitney Mr. BellemareAdams received a salary increase from $725,000$550,000 to $825,000 to align$650,000 effective April 1, 2015, recognizing the elevation of his salary more closely with market peers.position in UTC’s revised organizational structure. David Hess, President, Pratt & Whitney
For purposes of annual bonus determination, the weighted performance ofrelative to the CorporationCompany and of Pratt & Whitney targets generated a financial performance factor of 126%73% of target. The Committee considered this factor,result, along with the individual performance elements listed below,considerations noted here, and awarded Mr. Hess anAdams a $450,000 annual bonus, of $625,000. Thisan amount was slightly in excess of his prior year’s award and slightly below Mr. Hess’that aligns with this financial performance factor. Also in consideration of Mr. Adams’ 2015 performance, the Committee granted him a 2016 long-term incentive award valued at $2.56 million. Separately, at the end of 2015, the Committee also awarded Mr. Adams a $1 million special RSU grant in recognition for his role in achieving FAA and EASA certification for the GTF engine, a significant milestone for UTC. Age:54 UTC Experience:16 years Individual Performance Highlights • | Certification by the FAA and EASA of the GTF engine in 2015, well ahead of competitors | | | His leadership in continuing to grow orders• | Certification of the GTF-powered Airbus A320neo and the Bombardier CSeries aircraft | | | • | First flights of the GTF-powered Gulfstream G500 and the Mitsubishi Regional Jet aircraft | | | • | First flights of the Boeing KC-46A tanker and the Embraer KC-390 transport | | | • | Achievement of initial operational capability for the Geared TurbofanJoint Strike Fighter’s F135 engine which has now received over 5,000 orders,for the US Marines | | | • | On-time first engine test for the Irkut MC-21 and Embraer EJet2 programs |
![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) | Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 53 |
EXECUTIVE COMPENSATION:Compensation Discussion and Analysis CHARLES GILL, JR. ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x68x1.jpg)
Executive Vice President & General Counsel Mr. Gill received a salary increase from $685,000 to $725,000 effective April 1, 2015. This increase brings Mr. Gill’s salary to approximately the market median, reflecting the Committee’s favorable assessment of his performance throughout his tenure. For purposes of annual bonus determination, the Committee considered the UTC financial performance factor of 39%, as discussed on prior pages, his effective leadership of the legal organization and the individual performance considerations noted here. Based on these factors, the Committee awarded Mr. Gill a $375,000 annual bonus, an amount above the financial performance factor but below the market median. Reflecting its favorable assessment of Mr. Gill’s 2015 performance, the Committee granted him a 2016 long-term incentive award valued at $2.79 million. The value of this award falls above the market median, recognizing Mr. Gill’s 2015 performance and extended tenure in his role. Age:51 UTC Experience:21 years Individual Performance Highlights • | Successfully managed UTC’s most significant litigation, investigative, contractual, intellectual property and environmental, health and safety matters | | | • | Managed the legal aspects of UTC’s M&A transactions, including optionsthe successful sale of Sikorsky Aircraft, where regulatory approvals and closing were achieved on an expedited basis | | | • | Maintained a “best-in-class” ethics and compliance culture, including strong leadership of UTC’s ongoing efforts to build an effective and sustainable International Trade Compliance program | | | • | Efforts to further enhance the Company’s Enterprise Risk Management program and effectively focus the Board and senior management on UTC’s most significant risks | | | • | Ongoing efforts to assure UTC maintains corporate governance best practices, including proactive implementation of proxy access in 2015 |
•54 | | His leadership in delivering double digit operating profit growth![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
• | | His role in the successful integration of IAE |
• | | His efforts in the successful transition of the role of President, Pratt & Whitney to Paul Adams, who assumed this role effective January 1, 2014 |
Mr. Hess also received a salary increase in 2013 from $650,000 to $675,000 to better align his salary with the market median.
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 45 |
EXECUTIVE COMPENSATIONCOMPENSATION: COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Program Administration PROGRAM ADMINISTRATION
EXPLANATION OF FINANCIAL PERFORMANCE MEASURES USED IN DETERMINING INCENTIVE COMPENSATION(1) PLANS | | | | | | | | | | | | | | | | | | | | | Plan | | Metric | | Corporate Office | | | Business Units | | | Earnings | | Net income, as defined below
|
| | Earnings before interest and taxes less: • Restructuring costs; • Non-recurring items; and • Impact of significant acquisitions/divestitures | | Free Cash Flow | | Consolidated net cash flow provided by operating activities, less capital expenditures (as reported in the 2013 Annual Report onForm 10-K). The reconciliation of cash flow to free cash flow is as follows: | | | Internal measure based on: • Net cash; less • Capital expenditures; • Adjusted for the net cash flow impact of restructuring and other costs and non-recurring items | ANNUAL INCENTIVE | | | | | | (in millions) | | | 2004(2) | | | | 2011 | | | | 2013 | | | | | | | | | | Cash flow from operating activities | | | $3,596 | | | | $6,460 | | | | $7,505 | | | | | | | | | Less: capital
expenditures | | | $795 | | | | $929 | | | | $1,688 | | | | | | | | | Free cash flow | | | $2,801 | | | | $5,531 | | | | $5,817 | | | | | | | | | | | | | | | | | | | | | | | | | Net Income | | UTC net income attributable to common shareowners (as reported in the 2013 Annual Report on Form 10-K) | | | Internal measure consisting of each business unit’s respective share of UTC net income attributable to common shareowners, with adjustments for the net income impact of restructuring and other costs and non-recurring items | LONG-TERM INCENTIVE | | Earnings Per Share | | Diluted earnings per share (as reported in the 2013 Annual Report on Form 10-K) | | Total Shareowner Return | | Total investment return of Common Stock between two points in time, using a trailing 60-day average, calculated to account for share price appreciation and reinvested dividends |
All performance measures are based on performance of continuing operations, unless otherwise noted. (1)Plan | All performance measures are | Metric | | UTC | | Business Units | ANNUAL | | Earnings | | Net income, as defined below. | | Earnings before interest and taxes less: | INCENTIVE | | | | | | • Restructuring costs; | | | | | | | • Non-recurring items; | | | | | | | • Significant, defined non-operational items; and | | | | | | | • Impact of significant acquisitions/divestitures | | | Free Cash Flow | | Consolidated net cash flow provided by operating activities, less capital expenditures (as reported in the 2015 Annual Report on Form 10-K), adjusted for restructuring, non-recurring and other significant, defined non-operational items. | | Internal measure based on consolidated net cash flow provided by operating activities, less capital expenditure (both as reported in the performance2015 Annual Report on Form 10-K), and adjusted for restructuring and other certain significant, non-recurring and non-operational items. | | | Net Income | | UTC’s net income attributable to common shareowners, as reported in the 2015 Annual Report on Form 10-K, but excluding restructuring, non-recurring and other significant, defined non-operational items. For a reconciliation to U.S. GAAP, refer to Appendix B page 86. | | Internal measure consisting of continuing operations, unless otherwise noted.each business unit’s respective share of UTC net income attributable to common shareowners, but excluding restructuring and other significant non-recurring and non-operational items. | LONG-TERM INCENTIVE | | Earnings Per Share | | Diluted earnings per share, subject to adjustments for restructuring, non-recurring and other significant defined non-operational items. For a reconciliation to U.S. GAAP, please refer to Appendix B on page 86. | | | Total Shareowner Return | | Total investment return on Common Stock between two points in time, using a trailing 60-day average, calculated to account for changes in share price and reinvested dividends. |
(2) | 2004 amounts have not been restated for discontinued operations. |
DILUTION AND TAX DEDUCTIBILITY Under the 2005UTC Long-Term Incentive Plan (“LTIP”), as approved by our shareowners, the total number of shares ofunderlying equity-based awards issued in 20132015 was approximately 1% of shares outstanding, andwell within applicable LTIP share limitations. As of the end of 2013,2015, the total number of shares that could be issued under the LTIP, and all predecessor plans, was approximately 8%9% of shares outstanding (calculated on a fully diluted basis), which is approximately at approximately the CPG median. UTC’s diluted earnings per share reflect all such shares. The Committee considers tax deductibility among many other factors when making compensation decisions. To the extent consistent with other compensation objectives, the Committee attemptsseeks to maximize UTC’s tax deduction relative to compensation paid. In this regard, Internal Revenue Code Section 162(m) limits UTC’s deduction to $1 million for annual compensation paid to the CEO and each of the three other most highly compensated NEOs (excluding the CFO). However, this limitation does not apply to compensation that qualifies as “performance-based compensation” within the meaning of Section 162(m). Annual bonuses, SARs and SAR and PSUperformance-based long-term incentive awards are designedgenerally intended to qualify as performance-based compensation exempt from the $1 million deduction limit. Other compensation elements are subject to the $1 million deduction limit. However, there can be no assurance that such compensation will qualify as performance-based compensation under all circumstances. | | | 46 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 55 |
Report of the Committee on Compensation and Executive Development ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
The Committee on Compensation and Executive Development establishes and oversees the design and function of UTC’s executive compensation program. We have reviewed and discussed the foregoing Compensation Discussion and Analysis with the management of the Company and recommended to the Board of Directors that the Compensation Discussion and Analysis be included in UTC’s Proxy Statement for the 20142016 Annual Meeting. | | | Committee on Compensation and Executive Development | Jean-Pierre Garnier, Chair | | Harold McGraw III | Jamie S. Gorelick
| | Richard B. Myers | John V. Faraci | Brian C. Rogers | Edward A. Kangas | | H. Patrick Swygert | Harold McGraw III | |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners56 | | 47 |
Compensation Tables ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
SUMMARY COMPENSATION TABLE | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | | Salary ($) | | | Bonus ($)(1) | | | Stock Awards ($)(2) | | | Option Awards ($)(3) | | | Non-Equity Incentive Plan Compensation ($)(4) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | | | All Other Compensation ($)(6) | | | Total ($) | | | Total Without Change in Pension Value ($) | | Louis Chênevert Chairman & Chief Executive Officer | | | | | | | | | | 2013 | | | $1,756,250 | | | | $3,400,000 | | | | $6,380,580 | | | | $5,387,480 | | | | $697,376 | | | | $2,077,574 | | | | $575,056 | | | | $20,274,316 | | | | $18,196,742 | | 2012 | | | $1,700,000 | | | | $3,500,000 | | | | $7,804,283 | | | | $7,029,000 | | | | $1,185,637 | | | | $5,772,241 | | | | $571,164 | | | | $27,562,325 | | | | $21,790,084 | | 2011 | | | $1,681,250 | | | | $4,500,000 | | | | $7,932,325 | | | | $7,063,760 | | | | $1,153,571 | | | | $4,732,078 | | | | $547,400 | | | | $27,610,384 | | | | $22,878,306 | | Gregory Hayes Senior Vice President & Chief Financial Officer | | | | | | | | | | 2013 | | | $870,000 | | | | $1,100,000 | | | | $2,401,885 | | | | $2,029,790 | | | | $307,972 | | | | $714,459 | | | | $206,967 | | | | $7,631,073 | | | | $6,924,841 | | 2012 | | | $830,000 | | | | $1,200,000 | | | | $2,667,496 | | | | $2,415,600 | | | | $345,486 | | | | $1,581,208 | | | | $192,701 | | | | $9,232,491 | | | | $7,660,595 | | 2011 | | | $716,250 | | | | $1,220,000 | | | | $2,340,255 | | | | $2,084,720 | | | | $317,404 | | | | $1,060,249 | | | | $171,103 | | | | $7,909,981 | | | | $6,858,715 | | Geraud Darnis President & Chief Executive Officer, UTC Building & Industrial Systems | | | | | | | | | | 2013 | | | $982,500 | | | | $1,100,000 | | | | $2,374,383 | | | | $2,001,335 | | | | $548,140 | | | | $670,607 | | | | $253,504 | | | | $7,930,469 | | | | $7,259,862 | | 2012 | | | $922,500 | | | | $1,250,000 | | | | $2,502,326 | | | | $2,267,100 | | | | $797,790 | | | | $2,371,977 | | | | $163,239 | | | | $10,274,932 | | | | $7,902,955 | | 2011 | | | $872,784 | | | | $1,500,000 | | | | $2,007,185 | | | | $1,791,240 | | | | $732,945 | | | | $1,421,615 | | | | $153,567 | | | | $8,479,336 | | | | $7,057,721 | | Alain Bellemare President & Chief Executive Officer, UTC Propulsion & Aerospace Systems | | | | | | | | | | 2013 | | | $816,667 | | | | $1,050,000 | | | | $2,264,373 | | | | $1,906,485 | | | | $68,480 | | | | $408,341 | | | | $228,691 | | | | $6,743,037 | | | | $6,334,696 | | 2012 | | | $712,500 | | | | $1,150,000 | | | | $2,502,326 | | | | $5,996,918 | | | | $150,220 | | | | $877,856 | | | | $127,261 | | | | $11,517,081 | | | | $10,639,225 | | 2011 | | | $606,425 | | | | $800,000 | | | | $1,726,705 | | | | $1,538,240 | | | | $142,260 | | | | $774,577 | | | | $119,256 | | | | $5,707,463 | | | | $4,932,886 | | David Hess President, Pratt & Whitney | | | | | | | | | | 2013 | | | $668,750 | | | | $625,000 | | | | $1,668,485 | | | | $1,413,265 | | | | $333,640 | | | | $383,372 | | | | $125,432 | | | | $5,217,944 | | | | $4,834,572 | | 2012 | | | $643,750 | | | | $600,000 | | | | $1,668,217 | | | | $3,422,945 | | | | $308,560 | | | | $1,231,329 | | | | $144,552 | | | | $8,019,353 | | | | $6,788,024 | | 2011 | | | $606,851 | | | | $650,000 | | | | $1,647,820 | | | | $1,467,400 | | | | $283,480 | | | | $1,298,589 | | | | $117,713 | | | | $6,071,853 | | | | $4,773,264 | |
Year | | Salary ($) | | | Bonus ($) | (1) | | Stock Awards ($) | (2) | | Option Awards ($) | (3) | | Non-Equity Incentive Plan Compensation ($) | (4) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | (5) | | All Other Compensation ($) | (6) | | Total ($) | | | Total Without Change in Pension Value ($) | | GREGORY HAYESPresident and Chief Executive Officer | | | | | | | | | | | | | 2015 | | $ | 1,300,000 | | | $ | 850,000 | | | $ | 4,752,443 | | | $ | 3,280,210 | | | $ | 0 | | | $ | 230,673 | | | $ | 354,502 | | | $ | 10,767,828 | | | $ | 10,547,063 | | 2014 | | $ | 949,583 | | | $ | 1,600,000 | | | $ | 2,332,626 | | | $ | 2,029,885 | | | $ | 54,280 | | | $ | 1,825,890 | | | $ | 193,910 | | | $ | 8,986,174 | | | $ | 7,169,083 | | 2013 | | $ | 870,000 | | | $ | 1,100,000 | | | $ | 2,401,885 | | | $ | 2,029,790 | | | $ | 307,972 | | | $ | 714,459 | | | $ | 206,967 | | | $ | 7,631,073 | | | $ | 6,924,841 | | AKHIL JOHRIExecutive Vice President & Chief Financial Officer | | | | | | | | | | | | 2015 | | $ | 700,000 | | | $ | 1,040,000 | (7) | | $ | 6,770,654 | | | $ | 3,470,482 | | | $ | 0 | | | $ | 1,174 | | | $ | 386,405 | | | $ | 12,368,715 | | | $ | 12,367,541 | | GERAUD DARNISPresident & Chief Executive Officer, UTC Building & Industrial Systems(8) | | | | | | | | | | | | 2015 | | $ | 1,087,500 | | | $ | 710,000 | | | $ | 2,646,930 | | | $ | 1,823,440 | | | $ | 0 | | | $ | 7,916,196 | (9) | | $ | 225,592 | | | $ | 14,409,658 | | | $ | 6,493,462 | | 2014 | | $ | 1,037,500 | | | $ | 1,200,000 | | | $ | 2,257,380 | | | $ | 5,897,475 | | | $ | 177,000 | | | $ | 2,340,071 | | | $ | 200,843 | | | $ | 13,110,269 | | | $ | 10,770,198 | | 2013 | | $ | 982,500 | | | $ | 1,100,000 | | | $ | 2,374,383 | | | $ | 2,001,335 | | | $ | 548,140 | | | $ | 670,607 | | | $ | 253,504 | | | $ | 7,930,469 | | | $ | 7,259,862 | | PAUL ADAMSPresident, Pratt & Whitney(8) | | | | | | | | | | | | 2015 | | $ | 608,172 | | | $ | 450,000 | | | $ | 2,480,720 | | | $ | 1,020,730 | | | $ | 0 | | | $ | 512,146 | (9) | | $ | 140,341 | | | $ | 5,212,109 | | | $ | 4,699,963 | | CHARLES GILL, JR.Executive Vice President & General Counsel | | | | | | | | | | | | 2015 | | $ | 715,000 | | | $ | 375,000 | | | $ | 1,852,851 | | | $ | 1,278,390 | | | $ | 0 | | | $ | 90,103 | | | $ | 154,811 | | | $ | 4,466,155 | | | $ | 4,376,052 | | 2014 | | $ | 676,250 | | | $ | 750,000 | | | $ | 1,655,412 | | | $ | 1,433,695 | | | $ | 0 | | | $ | 1,833,339 | | | $ | 146,588 | | | $ | 6,495,284 | | | $ | 4,661,945 | | ALAIN BELLEMAREFormer President & Chief Executive Officer, UTC Propulsion & Aerospace Systems(8) | | | | | | | | | | 2015 | | $ | 75,000 | | | $ | 0 | | | $ | 1,852,851 | | | $ | 1,278,390 | | | $ | 0 | | | $ | 1,854,613 | (9) | | $ | 2,506,739 | | | $ | 7,567,593 | | | $ | 5,712,980 | | 2014 | | $ | 881,250 | | | $ | 1,000,000 | | | $ | 2,257,380 | | | $ | 1,958,910 | | | $ | 0 | | | $ | 1,663,495 | | | $ | 220,646 | | | $ | 7,981,681 | | | $ | 6,318,186 | | 2013 | | $ | 816,667 | | | $ | 1,050,000 | | | $ | 2,264,373 | | | $ | 1,906,485 | | | $ | 68,480 | | | $ | 408,341 | | | $ | 228,691 | | | $ | 6,743,037 | | | $ | 6,334,696 | |
(1) | Bonus.Cash bonuses are provided under the UTC Annual Executive Incentive Compensation Plan. Bonus payments under this planPayments are primarily based on measured performance against pre-established targets. However, as discussed in the Compensation Discussion and Analysis (“CD&A”) beginning on page 21, the Committee retains the discretion to adjust bonus amounts relative to the formulaic results. We, therefore,amounts. Consequently, we report annual bonuses in the Bonus column of the Summary Compensation Table rather than in the Non-Equity Incentive Plan Compensation column. |
(2) | Amounts in this column reflect the grant | (2) | Stock Awards. Grant date fair value of Performance Share Units (“PSUs”)PSUs and RSUs issued under the 2005 Long-Term Incentive Plan (“LTIP”),LTIP, calculated in accordance with the Compensation—StockCompensation-Stock Compensation Topic 718 of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC, Topic 718”), but excluding the effect of estimated forfeitures. The assumptions made in calculating the fair value of these awards are set forth in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20132015 Annual Report on Form 10-K.10-K (“2015 Form 10-K”). PSU awards are discussed in the CD&A and in footnote (2) to the Grants of Plan-Based Awards table on page 5059 of this Proxy Statement. The grant date fair values ofshown for PSU awards granted to our NEOs in 2013 are based onassume target-level performance. If the assumption that the targethighest level of performance is achieved. Assuming the achievement of the highest level of performance,achieved, the grant date fair values would have been: Mr. Chênevert, $9,083,844;be: Mr. Hayes, $3,419,493;$6,886,035; Mr. Johri, $1,691,001; Mr. Darnis, $3,380,339;$3,835,260; Mr. Gill, $2,684,682; Mr. Adams, $2,144,259 and Mr. Bellemare, $3,223,721$2,684,682. For Mr Johri, amounts shown include a special RSU award and an ELG RSU award granted upon appointment to the ELG, both as an offset to awards Mr. Hess, $2,375,373.Johri forfeited from his former employer. Amounts for Mr. Adams include a special RSU award granted in recognition of the GTF engine receiving FAA and EASA certification. |
(3) | Amounts in this column reflect the grant | (3) | Option Awards. Grant date fair value of Stock Appreciation Rights (“SARs”)SARs granted under the LTIP, calculated in accordance with the Compensation-Stock Compensation Topic of the FASB ASC, Topic 718, but excluding the effect of estimated forfeitures. The assumptions made in the valuation of these awards are set forth in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2013 Annual Report on2015 Form 10-K. For Mr. Johri, amounts shown include a SAR award granted as an offset to awards Mr. Johri forfeited from his former employer. |
(4) | Under | (4) | Non-Equity Incentive Plan Compensation. Quarterly cash dividend payments received in 2014 and 2013, pursuant to awards earned in prior years under the Continuous Improvement Incentive Program, (“CIIP”), a prior cash-basedlegacy long-term incentive plan. The last awards under this program were granted in 2005 and expired on December 31, 2014. Under this program, an executive was entitledcould earn (depending on performance relative to earn, depending on the extent to which pre-established three-year performance targets were achieved,targets) the right to receive up to a seven-year periodseven years of quarterly cash dividend equivalent payments equal to the dividend paid on the number of shares of Common Stock underlying certain unexercised stock options. The last CIIP awards wereoptions previously granted in 2005 and will expire no later than 2015. The amounts in this column consist of quarterly cash payments received in 2013 pursuant to CIIP awards earned in prior years.the executive. |
| | | 48 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 57 |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings.Amounts in this column reflect the increase during 20132015 in the actuarial present value of each executive’s accumulatedaccrued benefit under UTC’s defined benefit plans. Actuarial value computations are based on the assumptions established in accordance with the Compensation—Compensation–Retirement Benefits Topic 715 of the FASB ASC (“FASB ASC Topic 715”) and discussed in Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2013 Annual Report on2015 Form 10-K. UTC does not provide above-market rates of return (defined by SEC rules as a rate that exceeds 120% of the federal long-term rate) under itsthe UTC Deferred Compensation Plan. However, an above-market interest rate is paid under the frozen Sundstrand Corporation Deferred Compensation Plan, which was assumed by UTC upon the acquisition of Sundstrand in 1999. Mr. Hayes accrued $8,227$9,908 in above-market earnings under this plan in 2013.2015. |
(6) | | (6) | All Other Compensation.The 20132015 amounts in this column consist of the following items: |
| Name | | Personal Use of Corporate Aircraft (a) | | | Leased- Vehicle Payments (b) | | | Cash Flexible Perquisite Allowances (c) | | | Insurance Premiums (d) | | | 401(k) Company Match | | | Nonqualified Deferred Compensation Plan Match (e) | | | Miscellaneous (f) | | | Total ($) | | | Personal Use of Corporate Aircraft | (a) | | Leased Vehicle Payments | (b) | | Insurance Premiums | (c) | | 401(k) Plan Company Contributions | (d) | | Company Contributions to Deferred Compensation Plans | (e) | | Severance | (f) | | Relocation | (g) | | Miscellaneous | (h) | | Total | | L. Chênevert | | | $99,459 | | | | $41,469 | | | | $46,343 | | | | $195,000 | | | | $9,180 | | | | $180,045 | | | | $3,560 | | | | $575,056 | | | G. Hayes | | | $0 | | | | $18,803 | | | | $24,697 | | | | $75,980 | | | | $9,180 | | | | $65,340 | | | | $12,967 | | | | $206,967 | | | $ | 78,179 | | | $ | 21,551 | | | $ | 143,741 | | | $ | 9,540 | | | $ | 94,860 | | | $ | 0 | | | $ | 0 | | | $ | 6,631 | | | $ | 354,502 | | A. Johri | | | $ | 0 | | | $ | 17,884 | | | $ | 117,597 | | | $ | 22,373 | | | $ | 25,667 | | | $ | 0 | | | $ | 202,027 | | | $ | 857 | | | $ | 386,405 | | G. Darnis | | | $0 | | | | $49,125 | | | | $0 | | | | $71,973 | | | | $9,180 | | | | $116,092 | | | | $7,134 | | | | $253,504 | | | $ | 0 | | | $ | 53,325 | | | $ | 68,068 | | | $ | 9,540 | | | $ | 89,302 | | | $ | 0 | | | $ | 0 | | | $ | 5,357 | | | $ | 225,592 | | P. Adams | | | $ | 0 | | | $ | 29,027 | | | $ | 63,663 | | | $ | 9,540 | | | $ | 35,754 | | | $ | 0 | | | $ | 0 | | | $ | 2,357 | | | $ | 140,341 | | C. Gill, Jr. | | | $ | 0 | | | $ | 39,157 | | | $ | 57,557 | | | $ | 9,540 | | | $ | 43,200 | | | $ | 0 | | | $ | 0 | | | $ | 5,357 | | | $ | 154,811 | | A. Bellemare | | | $0 | | | | $29,956 | | | | $10,877 | | | | $113,035 | | | | $9,180 | | | | $61,620 | | | | $4,023 | | | | $228,691 | | | $ | 0 | | | $ | 7,159 | | | $ | 0 | | | $ | 2,700 | | | $ | 0 | | | $ | 2,492,288 | | | $ | 0 | | | $ | 4,592 | | | $ | 2,506,739 | | D. Hess | | | $0 | | | | $18,000 | | | | $15,437 | | | | $31,690 | | | | $9,180 | | | | $36,495 | | | | $14,630 | | | | $125,432 | | |
(a) | Mr. Chênevert uses corporate aircraft for personal travel, in accordance with UTC’s security policy. Amounts in this column reflect incremental(a) | Incremental variable operating costs incurred in connection withfor personal travel. Variable operating costs includetravel which includes fuel calculated(calculated on the basis of aircraft-specific average consumption rates and fleet average fuel costs,costs), fleet average landing and handling fees, additional crew lodging and meal allowances, catering and hourly maintenance contract charges.charges, when applicable. Because fleet-wide aircraft utilization is primarily for business purposes (i.e., approximately 99% in 2015), capital and other fixed expenditures are not treated as variable operating costs relative to personal use. Mr. Chênevert’s personalHayes may use the Corporate aircraft amount includes $5,402 for travelup to outside Board meetings. |
(b) | Consists50 hours per year. Personal use of the annual leased-vehicle costCorporate aircraft by Mr. Hayes aligns with our security policy, and the Committee believes that it optimizes the most efficient use of his time. No other executives are permitted to use the Corporate aircraft for personal travel. | | | | | (b) | Annual costs associated with a leased vehicle paid fromby UTC on behalf of the executive’s ELG perquisite allowance (see footnote (c) below).executive. |
(c) | This column shows the amount of cash paid to each executive under the annual ELG perquisite allowance (which equals 5% of base salary) after deducting the amount shown in the Leased-Vehicle Payments column. This payment was made in January 2013. This benefit has been terminated beginning in 2014 for all ELG members who previously participated in this program. | |
(d) | Reflects the premium(c) | Premium paid on behalf of the executive under the ELG life insurance program. Under this program, UTC pays the premiums on a permanent cash value life insurance contract owned by the executive, under which the executive receives a lifeexecutive. Life insurance benefitbenefits equal up to three times his/herthe executive’s actual or projected base salary at age 62. If vested (age 55 or older with fivethree years of service as an ELG member), UTC funds the policy to maintain coverage following retirement. This benefit was eliminated for ELG members appointed after January 31, 2015. |
(e) | Reflects the dollar | | | (d) | Dollar value of UTCcompany stock matching contributions credited under the UTC 401(k) Savings Plan. Employees hired on or after January 1, 2010, including Mr. Johri, receive an additional age-based Company automatic contribution to the UTC 401(k) Savings Plan in lieu of participation in the UTC Employee Retirement Plan. | | | | | (e) | Dollar value of company contributions to the UTC Savings Restoration Plan (“SRP”) and the Company Automatic Contribution Excess Plan (“CACEP”). Under the SRP, participants are credited with a benefit equal to the UTC matching contribution that the executive would have receiveddid not receive under the terms of the UTC 401(k) Savings Plan butdue to Internal Revenue Code (“IRC”) limits. For executives hired on or after January 1, 2010, including Mr. Johri, the CACEP provides an additional age-based Company automatic contribution for compensation earned over IRC limits. Amounts includedshown in this column for Mr. Darnis reflectinclude a SRP match make upmake-up for 2011, 2012 and 2013 previously omitted due2015, credited to an administrative error.his UTC Deferred Compensation Plan account, as detailed in footnote (6) of the Nonqualified Deferred Compensation table on page 65. Details on our nonqualified deferred compensationthese plans are also provided on pages 5565 and 5666 of this Proxy Statement. |
(f) | Consists | | | (f) | ELG cash severance payment (including interest earned during the payment deferral period at a rate of additional vehicle-related3.5%) and a $200,000,18-month consulting arrangement, which UTC entered into with Mr. Bellemare following his retirement on January 31, 2015. Mr. Bellemare’s consulting agreement assured post-employment availability to advise on certain matters related to the Company’s aerospace businesses. | | | | | (g) | Costs associated with Mr. Johri’s relocation include temporary living expenses for him and his family, home sale and purchase closing costs, shipment of personal property and moving-related tax assistance. | | | | | (h) | Costs associated with annual executive physicals and other incidental benefits. The amounts shown include the following: (i) $7,914 for Mr. Hayes and $6,234 for Mr. Hess for property tax, title and registration fees, vehicle maintenance and fuel costs associated with their leased-vehicle used for both business and personal reasons; and (ii) $5,053 for Mr. Hayes and $8,396 for Mr. Hess for expenses related to an executive annual physical. |
(7) | | Includes a cash sign-on bonus of $665,000 made to offset compensation forfeited from Mr. Johri’s former employer. | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 49(8) | Messrs. Bellemare, Darnis and Adams retired from the Company effective January 31, 2015, January 31, 2016 and February 29, 2016, respectively. | | | (9) | Different assumptions for active and retired plan participants are required under the non-qualified UTC Pension Preservation Plan. In this case, early retirement prior to age 62 resulted in an increase in the estimated present value of the accrued benefit. |
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COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
GRANTS OF PLAN-BASED AWARDS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Grant Date | | Approval Date(1) | | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | All Other Option Awards: Number of Securities Underlying Options (#)(3) | | | Exercise or Base Price of Option Awards ($/Sh)(4) | | | Grant Date Fair Value of Stock and Option Awards ($)(5) | | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | | | L. Chênevert | | | | | | | | | | | | | | | | | | | | | | 1/2/2013 | | | 12/12/2012 | | | | 0 | | | | 69,600 | | | | 139,200 | | | | - | | | | - | | | | $6,380,580 | | 1/2/2013 | | | 12/12/2012 | | | | - | | | | - | | | | - | | | | 284,000 | | | | $84.00 | | | | $5,387,480 | | G. Hayes | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2013 | | | 12/12/2012 | | | | 0 | | | | 26,200 | | | | 52,400 | | | | - | | | | - | | | | $2,401,885 | | 1/2/2013 | | | 12/12/2012 | | | | - | | | | - | | | | - | | | | 107,000 | | | | $84.00 | | | | $2,029,790 | | G. Darnis | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2013 | | | 12/12/2012 | | | | 0 | | | | 25,900 | | | | 51,800 | | | | - | | | | - | | | | $2,374,383 | | 1/2/2013 | | | 12/12/2012 | | | | - | | | | - | | | | - | | | | 105,500 | | | | $84.00 | | | | $2,001,335 | | A. Bellemare | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2013 | | | 12/12/2012 | | | | 0 | | | | 24,700 | | | | 49,400 | | | | - | | | | - | | | | $2,264,373 | | 1/2/2013 | | | 12/12/2012 | | | | - | | | | - | | | | - | | | | 100,500 | | | | $84.00 | | | | $1,906,485 | | D. Hess | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2013 | | | 12/12/2012 | | | | 0 | | | | 18,200 | | | | 36,400 | | | | - | | | | - | | | | $1,668,485 | | 1/2/2013 | | | 12/12/2012 | | | | - | | | | - | | | | - | | | | 74,500 | | | | $84.00 | | | | $1,413,265 | |
| | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of | | | All Other Option Awards: Number of Securities Underlying | | | Exercise or Base Price of Option Awards | | | Grant Date Fair Value of Stock and Option | | Grant Date(1) | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | Stock or Units (#) | | | Options (#) | (3) | | ($/Sh) | (4) | | Awards ($) | (5) | G. Hayes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | | 19,750 | | | | 39,500 | | | | 79,000 | | | | — | | | | — | | | | — | | | $ | 4,752,443 | | 1/2/2015 | | | — | | | | — | | | | — | | | | — | | | | 165,500 | | | $ | 115.04 | | | $ | 3,280,210 | | A. Johri | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | | 4,850 | | | | 9,700 | | | | 19,400 | | | | — | | | | — | | | | — | | | $ | 1,167,056 | | 1/2/2015 | | | — | | | | — | | | | — | | | | — | | | | 40,500 | | | $ | 115.04 | | | $ | 802,710 | | 1/2/2015 | | | — | | | | — | | | | — | | | | — | | | | 134,600 | (7) | | $ | 115.04 | | | $ | 2,667,772 | | 1/2/2015 | | | — | | | | — | | | | — | | | | 12,200 | (6) | | | — | | | | — | | | $ | 1,403,488 | | 1/2/2015 | | | — | | | | — | | | | — | | | | 36,510 | (7) | | | — | | | | — | | | $ | 4,200,110 | | G. Darnis | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | | 11,000 | | | | 22,000 | | | | 44,000 | | | | — | | | | — | | | | — | | | $ | 2,646,930 | | 1/2/2015 | | | — | | | | — | | | | — | | | | — | | | | 92,000 | | | $ | 115.04 | | | $ | 1,823,440 | | P. Adams | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | | 6,150 | | | | 12,300 | | | | 24,600 | | | | — | | | | — | | | | — | | | $ | 1,479,875 | | 1/2/2015 | | | — | | | | — | | | | — | | | | — | | | | 51,500 | | | $ | 115.04 | | | $ | 1,020,730 | | 12/1/2015 | | | — | | | | — | | | | — | | | | 10,350 | (8) | | | — | | | | — | | | $ | 1,000,845 | | C. Gill, Jr. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | | 7,700 | | | | 15,400 | | | | 30,800 | | | | — | | | | — | | | | — | | | $ | 1,852,851 | | 1/2/2015 | | | — | | | | — | | | | — | | | | — | | | | 64,500 | | | $ | 115.04 | | | $ | 1,278,390 | | A. Bellemare | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1/2/2015 | | | 7,700 | | | | 15,400 | | | | 30,800 | | | | — | | | | — | | | | — | | | $ | 1,852,851 | | 1/2/2015 | | | — | | | | — | | | | — | | | | — | | | | 64,500 | | | $ | 115.04 | | | $ | 1,278,390 | |
(1) | The Committee approves annual long-term incentive awards for the following year at its December meeting. The Committee specifies the first business day of the calendar year as the award grant date to coincide with calendar year-based performance measurement periods. |
(2) | Consists of the number | (2) | Number of PSUs granted under the LTIP, thatwhich are subject to vesting based on three-year performance targets. Each PSU corresponds to one share of Common Stock. As discussed in the CD&A on page 34, 50% of eachthe PSU award vests subject to ana three-year EPS growth target and 50% vests subject to a cumulative three-year cumulative relative TSR target. The vesting range is between 0%50% and 200% of the target vesting level. Unvested PSUs do not receive dividend equivalent payments. Vested PSUs are forfeited upon terminationsettled in unrestricted shares of employment beforeCommon Stock at the end of the three-year performance cycle, except inperiod following the caseCommittee’s review and approval of retirement or disability.performance achievement levels. PSUs held for at least one year as of the date of qualifying retirement or upon disability, remain eligible to vest at the end of the three-year performance cycle. Vested PSUs are settled in unrestricted shares of Common Stock which are issued toperiod. Post-employment service as a consultant is recognized under the executive following Committee review and approval of performance achievement levels.LTIP for these purposes. Upon death or a termination of employment following a change-in-control, PSUs will vest at target leveltarget-level performance. |
(3) | Consists PSUs are otherwise forfeited upon termination of employment before the end of the numberperformance period. | | | (3) | Number of SARs granted under the LTIP during 2013. The SARs granted on January 2, 20132015 that become exercisable after three years of service from the grant date, or if earlier uponin the case of qualifying retirement (provided that the SARs have been held for at least one year from the grant date), death or death.a change-in-control. Post-employment service is recognized in the case of disability and as a consultant under the LTIP for these purposes. SARs are otherwise forfeited upon termination of employment before the end of the vesting period. |
(4) | | (4) | The exercise price is equal to the NYSE closing price of our Common Stock on the grant date. |
(5) | Reflects the grant date fair value at the target level of the PSU awards described in footnote (2) above and the grant | (5) | Grant date fair value of the SARs describedequity awards granted in footnote (3) above, in each case2015 with vesting assumed at 100% of target, calculated in accordance with the Compensation-Stock Compensation Topic of the FASB ASC, Topic 718, but excluding the effect of estimated forfeitures. | | | (6) | ELG RSU award granted to Mr. Johri upon his appointment to the ELG. This award will vest in the event of a mutually agreeable separation following three years of ELG service, upon death or a change-in-control. ELG RSUs accumulate dividend equivalents that are reinvested as additional RSUs during the vesting period. Vested ELG RSUs are settled in shares of Common Stock. | | | (7) | Consists of supplemental RSU and SAR awards granted to Mr. Johri to offset compensation he forfeited from his former employer. RSU awards accumulate dividend equivalents during the vesting period that are reinvested as additional RSUs. These awards vest three years from the grant date. | | | (8) | Special RSU award granted to Mr. Adams in recognition of the certification by the FAA and the EASA of the PurePower PW1000G engine with Geared Turbofan technology. This award will vest on February 28, 2017, contingent on Mr. Adams’ consulting agreement remaining in effect through this date. Special RSU awards accumulate dividend equivalents during the vesting period that are reinvested as additional RSUs. |
| | | 50 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 59 |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | | | Option Awards(1) | | | Stock Awards | | | Option Awards | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($)(2) | | | Option Expiration Date | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | (1) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | (2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | (3) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | (4) | L. Chênevert | | | | | | | | | | | | | | | G. Hayes | | | | — | | | | 165,500 | (5) | | | — | | | $ | 115.04 | | | 1/1/2025 | | | — | | | | — | | | | 39,500 | | | $ | 3,794,765 | (8) | | | | - | | | | 284,000 | (5) | | | - | | | | $84.00 | | | | 1/1/2023 | | | | 69,600 | (9) | | | $7,920,480 | | | | — | | | | 71,500 | (6) | | | — | | | $ | 112.49 | | | 1/1/2024 | | | — | | | | — | | | | 18,600 | | | $ | 1,786,902 | (9) | | | | - | | | | 355,000 | (6) | | | - | | | | $74.66 | | | | 1/2/2022 | | | | 102,060 | (10) | | | $11,614,428 | | | | — | | | | 107,000 | (7) | | | — | | | $ | 84.00 | | | 1/1/2023 | | | — | | | | — | | | | 11,528 | | | $ | 1,107,495 | (10) | | | | - | | | | 349,000 | (7) | | | - | | | | $78.99 | | | | 1/2/2021 | | | | 123,080 | (11) | | | $14,006,504 | | | | 122,000 | | | | — | | | | — | | | $ | 74.66 | | | 1/2/2022 | | | — | | | | — | | | | — | | | | — | | | | | 302,000 | | | | - | | | | - | | | | $71.63 | | | | 1/3/2020 | | | | - | | | | - | | | | 103,000 | | | | — | | | | — | | | $ | 78.99 | | | 1/2/2021 | | | — | | | | — | | | | — | | | | — | | | | | 438,000 | | | | - | | | | - | | | | $54.95 | | | | 1/1/2019 | | | | - | | | | - | | | | 86,000 | | | | — | | | | — | | | $ | 71.63 | | | 1/3/2020 | | | — | | | | — | | | | — | | | | — | | | | | 360,000 | | | | - | | | | - | | | | $70.81 | | | | 4/8/2018 | | | | - | | | | - | | | | 90,000 | | | | — | | | | — | | | $ | 70.81 | | | 4/8/2018 | | | — | | | | — | | | | — | | | | — | | | | | 217,000 | | | | - | | | | - | | | | $75.21 | | | | 1/1/2018 | | | | - | | | | - | | | | 54,500 | | | | — | | | | — | | | $ | 75.21 | | | 1/1/2018 | | | — | | | | — | | | | — | | | | — | | | | | 174,500 | | | | - | | | | - | | | | $62.81 | | | | 1/2/2017 | | | | - | | | | - | | | | 55,500 | | | | — | | | | — | | | $ | 62.81 | | | 1/2/2017 | | | — | | | | — | | | | — | | | | — | | | | | 300,000 | | | | - | | | | - | | | | $57.84 | | | | 3/7/2016 | | | | - | | | | - | | | | | | 101,500 | | | | - | | | | - | | | | $56.53 | | | | 1/2/2016 | | | | - | | | | - | | | | | | 151,000 | | | | - | | | | - | | | | $51.50 | | | | 1/2/2015 | | | | - | | | | - | | | G. Hayes | | | | | | | | | | | | | | | | | | | - | | | | 107,000 | (5) | | | - | | | | $84.00 | | | | 1/1/2023 | | | | 26,200 | (9) | | | $2,981,560 | | | A. Johri | | | | — | | | | 134,600 | (11) | | | — | | | $ | 115.04 | | | 1/1/2025 | | | 37,421 | (11) | | $ | 3,595,035 | | | | — | | | | — | | | | | - | | | | 122,000 | (6) | | | - | | | | $74.66 | | | | 1/2/2022 | | | | 34,884 | (10) | | | $3,969,799 | | | | — | | | | 40,500 | (5) | | | — | | | $ | 115.04 | | | 1/1/2025 | | | — | | | | — | | | | 9,700 | | | $ | 931,879 | (8) | | | | - | | | | 103,000 | (7) | | | - | | | | $78.99 | | | | 1/2/2021 | | | | 36,312 | (11) | | | $4,132,306 | | | | — | | | | — | | | | — | | | | — | | | – | | | 12,504 | (12) | | $ | 1,201,259 | | | | — | | | | — | | | | | 86,000 | | | | - | | | | - | | | | $71.63 | | | | 1/3/2020 | | | | - | | | | - | | | | 30,500 | | | | — | | | | — | | | $ | 74.66 | | | 1/2/2022 | | | — | | | | — | | | | — | | | | — | | | | | 90,000 | | | | - | | | | - | | | | $70.81 | | | | 4/8/2018 | | | | - | | | | - | | | | 22,500 | | | | — | | | | — | | | $ | 78.99 | | | 1/2/2021 | | | — | | | | — | | | | — | | | | — | | | | | 54,500 | | | | - | | | | - | | | | $75.21 | | | | 1/1/2018 | | | | - | | | | - | | | | 14,500 | | | | — | | | | — | | | $ | 71.63 | | | 1/3/2020 | | | — | | | | — | | | | — | | | | — | | | | | 55,500 | | | | - | | | | - | | | | $62.81 | | | | 1/2/2017 | | | | - | | | | - | | | | 21,900 | | | | — | | | | — | | | $ | 54.95 | | | 1/1/2019 | | | — | | | | — | | | | — | | | | — | | | | | 46,000 | | | | - | | | | - | | | | $51.50 | | | | 1/2/2015 | | | | - | | | | - | | | | 13,600 | | | | — | | | | — | | | $ | 75.21 | | | 1/1/2018 | | | — | | | | — | | | | — | | | | — | | G. Darnis | | | | | | | | | | | | | | | | | — | | | | 92,000 | (5) | | | — | | | $ | 115.04 | | | 1/1/2025 | | | — | | | | — | | | | 22,000 | | | $ | 2,113,540 | (8) | | | | - | | | | 105,500 | (5) | | | - | | | | $84.00 | | | | 1/1/2023 | | | | 25,900 | (9) | | | $2,947,420 | | | | — | | | | 69,000 | (6) | | | — | | | $ | 112.49 | | | 1/1/2024 | | | — | | | | — | | | | 18,000 | | | $ | 1,729,260 | (9) | | | | - | | | | 114,500 | (6) | | | - | | | | $74.66 | | | | 1/2/2022 | | | | 32,724 | (10) | | | $3,723,991 | | | | 65,608 | (13) | | | — | | | | 69,500 | (13) | | $ | 112.49 | | | 1/1/2024 | | | — | | | | — | | | | — | | | | — | | | | | - | | | | 88,500 | (7) | | | - | | | | $78.99 | | | | 1/2/2021 | | | | 31,144 | (11) | | | $3,544,187 | | | | — | | | | 105,500 | (7) | | | — | | | $ | 84.00 | | | 1/1/2023 | | | — | | | | — | | | | 11,396 | | | $ | 1,094,814 | (10) | | | | 85,500 | | | | - | | | | - | | | | $71.63 | | | | 1/3/2020 | | | | - | | | | - | | | | 114,500 | | | | — | | | | — | | | $ | 74.66 | | | 1/2/2022 | | | — | | | | — | | | | — | | | | — | | | | | 142,500 | | | | - | | | | - | | | | $54.95 | | | | 1/1/2019 | | | | - | | | | - | | | | 88,500 | | | | — | | | | — | | | $ | 78.99 | | | 1/2/2021 | | | — | | | | — | | | | — | | | | — | | | | | 120,000 | | | | - | | | | - | | | | $70.81 | | | | 4/8/2018 | | | | - | | | | - | | | | 85,500 | | | | — | | | | — | | | $ | 71.63 | | | 1/3/2020 | | | — | | | | — | | | | — | | | | — | | | | | 95,000 | | | | - | | | | - | | | | $75.21 | | | | 1/1/2018 | | | | - | | | | - | | | | 142,500 | | | | — | | | | — | | | $ | 54.95 | | | 1/1/2019 | | | — | | | | — | | | | — | | | | — | | | | | 102,000 | | | | - | | | | - | | | | $62.81 | | | | 1/2/2017 | | | | - | | | | - | | | | 120,000 | | | | — | | | | — | | | $ | 70.81 | | | 4/8/2018 | | | — | | | | — | | | | — | | | | — | | | | | 200,000 | | | | - | | | | - | | | | $57.84 | | | | 3/7/2016 | | | | - | | | | - | | | | 95,000 | | | | — | | | | — | | | $ | 75.21 | | | 1/1/2018 | | | — | | | | — | | | | — | | | | — | | | | | 101,500 | | | | - | | | | - | | | | $56.53 | | | | 1/2/2016 | | | | - | | | | - | | | | 102,000 | | | | — | | | | — | | | $ | 62.81 | | | 1/2/2017 | | | — | | | | — | | | | — | | | | — | | | | | 100,000 | | | | - | | | | - | | | | $51.50 | | | | 1/2/2015 | | | | - | | | | - | | |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners60 | | 51![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (CONTINUED) | | | Option Awards(1) | | | Stock Awards | | | Option Awards | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($)(2) | | | Option Expiration Date | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | (1) | 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 ($) | (2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | (3) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | (4) | A. Bellemare | | | | | | | | | | | | | | | P. Adams | | | | — | | | | — | | | | — | | | | — | | | – | | | 10,350 | (15) | | $ | 994,325 | | | | — | | | | — | | | | | - | | | | 100,500 | (5) | | | - | | | | $84.00 | | | | 1/1/2023 | | | | 24,700 | (9) | | | $2,810,860 | | | | — | | | | 51,500 | (5) | | | — | | | $ | 115.04 | | | 1/1/2025 | | | — | | | | — | | | | 12,300 | | | $ | 1,181,661 | (8) | | | | - | | | | - | | | | 201,830 | (8) | | | $74.79 | | | | 7/31/2022 | | | | - | | | | - | | | | — | | | | 33,500 | (6) | | | — | | | $ | 112.49 | | | 1/1/2024 | | | — | | | | — | | | | 8,700 | | | $ | 835,809 | (9) | | | | - | | | | 114,500 | (6) | | | - | | | | $74.66 | | | | 1/2/2022 | | | | 32,724 | (10) | | | $3,723,991 | | | | — | | | | 33,000 | (7) | | | — | | | $ | 84.00 | | | 1/1/2023 | | | — | | | | — | | | | 3,520 | | | $ | 338,166 | (10) | | | | - | | | | 76,000 | (7) | | | - | | | | $78.99 | | | | 1/2/2021 | | | | 26,792 | (11) | | | $3,048,930 | | | | 37,946 | | | | — | | | | 38,720 | (14) | | $ | 79.06 | | | 10/31/2022 | | | — | | | | — | | | | — | | | | — | | | | | 80,500 | | | | - | | | | - | | | | $71.63 | | | | 1/3/2020 | | | | - | | | | - | | | | 25,500 | | | | — | | | | — | | | $ | 74.66 | | | 1/2/2022 | | | — | | | | — | | | | — | | | | — | | | | | 79,000 | | | | - | | | | - | | | | $54.95 | | | | 1/1/2019 | | | | - | | | | - | | | | 18,500 | | | | — | | | | — | | | $ | 78.99 | | | 1/2/2021 | | | — | | | | — | | | | — | | | | — | | | | | 38,000 | | | | - | | | | - | | | | $75.21 | | | | 1/1/2018 | | | | - | | | | - | | | | 16,000 | | | | — | | | | — | | | $ | 71.63 | | | 1/3/2020 | | | — | | | | — | | | | — | | | | — | | | | | 32,000 | | | | - | | | | - | | | | $62.81 | | | | 1/2/2017 | | | | - | | | | - | | | | — | | | | — | | | | — | | | | — | | | – | | | 12,926 | (12) | | $ | 1,241,801 | | | | — | | | | — | | | | | 27,500 | | | | - | | | | - | | | | $56.53 | | | | 1/2/2016 | | | | - | | | | - | | | | 22,000 | | | | — | | | | — | | | $ | 54.95 | | | 1/1/2019 | | | — | | | | — | | | | — | | | | — | | D. Hess | | | | | | | | | | | | | | | | | | | 11,300 | | | | — | | | | — | | | $ | 75.21 | | | 1/1/2018 | | | — | | | | — | | | | — | | | | — | | | | | | 11,400 | | | | — | | | | — | | | $ | 62.81 | | | 1/2/2017 | | | — | | | | — | | | | — | | | | — | | C. Gill, Jr. | | | | — | | | | 64,500 | (5) | | | — | | | $ | 115.04 | | | 1/1/2025 | | | — | | | | — | | | | 15,400 | | | $ | 1,479,478 | (8) | | | | - | | | | 74,500 | (5) | | | - | | | | $84.00 | | | | 1/1/2023 | | | | 18,200 | (9) | | | $2,071,160 | | | | — | | | | 50,500 | (6) | | | — | | | $ | 112.49 | | | 1/1/2024 | | | — | | | | — | | | | 13,200 | | | $ | 1,268,124 | (9) | | | | - | | | | - | | | | 103,260 | (8) | | | $79.06 | | | | 10/31/2022 | | | | - | | | | - | | | | — | | | | 73,000 | (7) | | | — | | | $ | 84.00 | | | 1/1/2023 | | | — | | | | — | | | | 7,876 | | | $ | 756,647 | (10) | | | | - | | | | 76,500 | (6) | | | - | | | | $74.66 | | | | 1/2/2022 | | | | 21,816 | (10) | | | $2,482,661 | | | | 75,500 | | | | — | | | | — | | | $ | 74.66 | | | 1/2/2022 | | | — | | | | — | | | | — | | | | — | | | | | - | | | | 72,500 | (7) | | | - | | | | $78.99 | | | | 1/2/2021 | | | | 25,568 | (11) | | | $2,909,638 | | | | 66,500 | | | | — | | | | — | | | $ | 78.99 | | | 1/2/2021 | | | — | | | | — | | | | — | | | | — | | | | | 76,000 | | | | - | | | | - | | | | $51.50 | | | | 1/2/2015 | | | | - | | | | - | | | | 60,500 | | | | — | | | | — | | | $ | 71.63 | | | 1/3/2020 | | | — | | | | — | | | | — | | | | — | | | | | | 74,500 | | | | — | | | | — | | | $ | 54.95 | | | 1/1/2019 | | | — | | | | — | | | | — | | | | — | | | | | | 90,000 | | | | — | | | | — | | | $ | 70.81 | | | 4/8/2018 | | | — | | | | — | | | | — | | | | — | | | | | | 43,500 | | | | — | | | | — | | | $ | 75.21 | | | 1/1/2018 | | | — | | | | — | | | | — | | | | — | | | | | | — | | | | — | | | | — | | | | — | | | – | | | 10,370 | (12) | | $ | 996,246 | | | | — | | | | — | | | | | | 23,300 | | | | — | | | | — | | | $ | 62.81 | | | 1/2/2017 | | | — | | | | — | | | | — | | | | — | | A. Bellemare | | | | — | | | | 64,500 | (5) | | | — | | | $ | 115.04 | | | 1/1/2025 | | | — | | | | — | | | | 15,400 | | | $ | 1,479,478 | (8) | | | | | — | | | | 69,000 | (6) | | | — | | | $ | 112.49 | | | 1/1/2024 | | | — | | | | — | | | | 18,000 | | | $ | 1,729,260 | (9) | | | | | — | | | | 100,500 | (7) | | | — | | | $ | 84.00 | | | 1/1/2023 | | | — | | | | — | | | | 10,868 | | | $ | 1,044,089 | (10) | | | | | 99,906 | | | | — | | | | — | | | $ | 74.79 | | | 7/31/2022 | | | — | | | | — | | | | — | | | | — | | | | | | 59,000 | | | | — | | | | — | | | $ | 78.99 | | | 1/2/2021 | | | — | | | | — | | | | — | | | | — | |
(1) | Under the LTIP, SARs have been granted since 2006 instead of non-qualified stock options. Stock options were utilized prior to 2006. Accordingly, awards under the heading “Option Awards” with an expiration date before 2016 are stock options, and awards with an expiration date in 2016 or later are SARs. |
(2) | The exercise price of each stock option and SAR is equal to the NYSE closing price of our Common Stock on the grant date. |
(3) | Payout levels for PSUs granted in 2013 and 2012 reflect target-level TSR and EPS performance, except for actual 2012 EPS performance. Actual payout vesting levels are | (2) | Calculated by multiplying the number of unvested RSUs by $96.07, the NYSE closing price of our Common Stock on December 31, 2015. | | | (3) | The number of shares shown for PSUs granted in 2011. Payouts2014 and 2015 assume target-level TSR and EPS performance; actual payouts for 2013 and 2012these PSUs will be based on actual performance.performance at the end of the performance periods. The number of shares shown for PSUs are describedgranted in the CD&A and footnote (2) to the Grants of Plan-Based Awards table on page 50.2013 reflect actual performance. |
(4) | Amounts in this column are calculated | (4) | Calculated by multiplying the number of unvested 2014 and 2015 PSUs in the adjacent columnand vested 2013 PSUs by $96.07, the NYSE closing price of our Common Stock of $113.80 on December 31, 2013.2015. |
(5) | Consists of | (5) | SARs scheduled to vest on January 2, 2016,2018, subject to the executive’s continued employment, of the executive. SARs vestexcept in the event of death, change-in-control or qualifying retirement occurring at least one year from the date of grant.grant and for Messrs. Bellemare, Darnis and Adams on the expiration of their post-employment consulting relationships. |
(6)Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | Consists of 61 |
COMPENSATION TABLES (6) | SARs scheduled to vest on January 3, 2015,2, 2017, subject to the executive’s continued employment, of the executive. SARs vestexcept in the event of death, change-in-control or qualifying retirement occurring at least one year from the date of grant. |
(7) | Consists of | (7) | SARs that vested on January 3, 2014.2, 2016. |
(8) | Consists of SARs, 50% of which are subject to vesting on December 31, 2014 and 50% of which are subject to vesting on December 31, 2016, in each case contingent on the achievement of established performance criteria and the continued employment of the executive. |
(9)(8) | Consists of PSUs that are subject to performance-based vesting contingent on the achievement of establishedCompany performance criteriameasured relative to targets over a three-year period ending on December 31, 2015, assuming2017, and the executive’s continued employment (except in cases of the executive, subject to certain exceptions.qualifying retirement, disability, death, change-in-control or post-employment consulting relationships). |
(10) | Consists of | (9) | PSUs that are subject to performance-based vesting contingent on the achievement of establishedCompany performance criteriameasured relative to targets over a three-year period ending on December 31, 2014, assuming2016, and the executive’s continued employment (except in cases of the executive, subject to certain exceptions.qualifying retirement, disability, death, change-in-control or post-employment consulting relationships). |
(11) | Consists of | (10) | PSUs for which the service condition was satisfied on January 3, 2014.2, 2016. The number of PSUs shown reflects the Committee’s approval of 44% performance achievementachieved by the Company relative to pre-established targets over the three-year performance period, as discussed on page 41. | | | (11) | RSU and SAR awards granted to Mr. Johri to offset the value of forfeited compensation from his former employer. RSU awards accumulate dividend equivalents during the vesting period that are reinvested as additional RSUs. These awards vest three years from the grant date. | | | (12) | Number of ELG RSUs granted to Messrs. Johri, Adams and Gill upon appointment to the ELG. Mr. Johri’s award will vest in the event of a mutually agreeable separation following three years of ELG service. Mr. Gill’s award will vest upon a mutually agreeable separation on or after age 62. Mr. Adams did not vest in his award upon termination of employment. ELG RSUs accumulate dividend equivalents, that are reinvested as additional RSUs during the vesting period. | | | (13) | SARs granted on January 2, 2014 to Mr. Darnis, of which 50% vested at 136%94.4% based on performance through December 31, 2015 relative to pre-established performance targets related to our commercial businesses. The remaining 50% of this award was cancelled upon Mr. Darnis’ retirement. | | | (14) | SARs granted on November 1, 2012 to Mr. Adams which will vest based on performance through December 31, 2016 relative to pre-established performance targets related to our aerospace businesses and continuation of Mr. Adams’ consulting relationship through this date. | | | (15) | RSUs granted to Mr. Adams in recognition for the FAA and EASA certification of the target performance level.GTF engine. RSUs will vest on February 28, 2017, contingent on the continuation of Mr. Adams’ consulting relationship through this date. RSUs accumulate dividend equivalents during the vesting period that are reinvested as additional RSUs. |
| | | 52 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
COMPENSATION TABLES
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
OPTION EXERCISES AND STOCK VESTED | | | Option Awards(1) | | | Stock Awards(2) | | | Option Awards | | Stock Awards | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($)(3) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($)(4) | | | | Number of Shares Acquired on Exercise (#) | (1) | | | Value Realized on Exercise ($) | (2) | | | Number of Shares Acquired on Vesting (#) | (3) | | | Value Realized on Vesting ($) | (4) | L. Chênevert | | | 240,000 | | | | $10,686,100 | | | | 84,390 | | | | $7,562,188 | | | G. Hayes(5) | | | 288,400 | | | | $15,386,506 | | | | 24,056 | | | | $2,155,658 | | | G. Hayes | | | | — | | | | — | | | | 29,070 | | | $ | 3,468,632 | | A. Johri | | | | — | | | | — | | | | 7,290 | | | $ | 869,843 | | G. Darnis | | | 191,000 | | | | $8,605,566 | | | | 23,862 | (6) | | | $2,138,274 | (6) | | | 301,500 | | | $ | 19,184,828 | | | | 27,270 | (5) | | $ | 3,253,856 | (5) | P. Adams | | | | — | | | | — | | | | 6,120 | | | $ | 730,238 | | C. Gill, Jr. | | | | — | | | | — | | | | 18,000 | | | $ | 2,147,760 | | A. Bellemare | | | 42,000 | | | | $2,113,897 | | | | 22,504 | | | | $2,016,583 | | | | 361,000 | | | $ | 19,151,496 | | | | 27,270 | | | $ | 3,253,856 | | D. Hess | | | 257,000 | | | | $6,941,161 | | | | 23,183 | | | | $2,077,429 | | |
(1) | Consists of stock option and/or SAR exercises.awards exercised in 2015. |
(2) | Consists of vested PSUs that converted to shares of Common Stock on a one-for-one basis upon vesting. |
(3)(2) | Calculated by multiplying the number of shares acquired upon exercise by the difference between the exercise price and the market price of our Common Stock on the exercise date. |
(4) | | (3) | PSUs that converted to shares of Common Stock on a one-for-one basis upon vesting in 2015. | | | (4) | Calculated by multiplying the number of vested PSUs by the market price of our Common Stock on the vesting date. |
(5) | Mr. Hayes held 140,500 SARs in an irrevocable trust that were exercised for a total realized gain of $7,644,701 on September 16, 2013. |
(6)(5) | Mr. Darnis elected to defer a portionthe receipt of his 2010vested 2012 PSU vesting equal to $1,069,137, as reported in the Nonqualified Deferred Compensation table on page 55. For details onunder the PSU Deferral Plan, refer toas shown on page 56.65. |
PENSION BENEFITS
| | | | | | | | | | | | | | | | | | | Plan Name | | | Number of Years Credited Service (#) | | | Present Value of Accumulated Benefit ($)(1) | | | Payments During 2013 | | L. Chênevert | | | | | | | | | | | | | | | | | UTC Employee Retirement Plan | | | | 17 | | | | $794,582 | | | | - | | | | | UTC Pension Preservation Plan | (2) | | | 21 | | | | $21,490,425 | | | | - | | | | | Pratt & Whitney Canada Salaried Employee Pension Plan | (3) | | | 3 | | | | $79,461 | | | | - | | | | | Total | | | | | | | | $22,364,468 | | | | - | | G. Hayes | | | | | | | | | | | | | | | | | UTC Employee Retirement Plan | | | | 24 | | | | $729,606 | | | | - | | | | | UTC Pension Preservation Plan | | | | 24 | | | | $4,645,509 | | | | - | | | | | Total | | | | | | | | $5,375,115 | | | | - | | G. Darnis | | | | | | | | | | | | | | | | | UTC Employee Retirement Plan | | | | 30 | | | | $1,065,430 | | | | - | | | | | UTC Pension Preservation Plan | | | | 30 | | | | $8,213,173 | | | | - | | | | | Total | | | | | | | | $9,278,603 | | | | - | | A. Bellemare | | | | | | | | | | | | | | | | | UTC Employee Retirement Plan | | | | 7 | | | | $266,883 | | | | - | | | | | UTC Pension Preservation Plan | | | | 7 | | | | $1,269,818 | | | | - | | | | | Pratt & Whitney Canada Salaried and Executive Employee Pension Plans | (3) | | | 10 | | | | $1,789,467 | | | | - | | | | | Total | | | | | | | | $3,326,168 | | | | - | | D. Hess | | | | | | | | | | | | | | | | | UTC Employee Retirement Plan | | | | 35 | | | | $1,340,154 | | | | - | | | | | UTC Pension Preservation Plan | | | | 35 | | | | $5,952,856 | | | | - | | | | | Total | | | | | | | | $7,293,010 | | | | - | |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners62 | | 53![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) PENSION BENEFITS | | | | Number of | | | Present Value of | | | Payments | | | | | | Years of Credited | | | Accumulated | | | During Last | | Name | | Plan Name | | Service (#) | | | Benefit ($) | (1) | | Fiscal Year ($) | | G. Hayes | | UTC Employee Retirement Plan | | | 26 | | | $ | 996,843 | | | | — | | | | UTC Pension Preservation Plan | | | 26 | | | $ | 6,416,128 | | | | — | | | | Total | | | | | | $ | 7,412,971 | | | | — | | A. Johri(2) | | UTC Employee Retirement Plan | | | 15 | | | $ | 709,323 | | | | — | | | | UTC Pension Preservation Plan | | | 15 | | | $ | 1,450,976 | | | | — | | | | Total | | | | | | $ | 2,160,299 | | | | — | | G. Darnis | | UTC Employee Retirement Plan | | | 32 | | | $ | 1,372,319 | | | | — | | | | UTC Pension Preservation Plan | | | 32 | | | $ | 18,162,551 | | | | — | | | | Total | | | | | | $ | 19,534,870 | | | | — | | P. Adams | | UTC Employee Retirement Plan | | | 16 | | | $ | 752,903 | | | | — | | | | UTC Pension Preservation Plan | | | 16 | | | $ | 2,388,607 | | | | — | | | | Total | | | | | | $ | 3,141,510 | | | | — | | C. Gill, Jr. | | UTC Employee Retirement Plan | | | 21 | | | $ | 868,591 | | | | — | | | | UTC Pension Preservation Plan | | | 21 | | | $ | 3,796,841 | | | | — | | | | Total | | | | | | $ | 4,665,432 | | | | — | | A. Bellemare | | UTC Employee Retirement Plan | | | 8 | | | $ | 405,867 | | | | — | | | | UTC Pension Preservation Plan | | | 8 | | | $ | 3,287,423 | | | | — | | | | Pratt & Whitney Canada Salaried and | | | | | | | | | | | | | | | Executive Employee Pension Plans | | | 10 | | | | — | | | $ | 3,155,901 | (3) | | | Total | | | | | | $ | 3,693,290 | | | $ | 3,155,901 | |
(1) | Calculation ofThe present value calculation is based on a 4.28% discount rate, a 4.00% long-term interest rate for lump-sum determinations under the FASB ASC Topic 715UTC Pension Preservation Plan (“PPP”), and other assumptions for U.S. plans, as described in the pension expense assumptions described inof Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 2013 Annual Report on2015 Form 10-K. Amounts are calculated based on an assumed benefit commencement date at the earliest date that athe participant can retire without a reduction of benefits due to age. |
(2) | Mr. Chênevert’sage or the actual retirement date, if known. The assumed form of payment is: (i) a monthly life annuity for benefits are determinedearned under the Final Average Earnings (“FAE”) formula applicablein the UTC Employee Retirement Plan; (ii) a lump-sum payment for the cash balance benefit under the UTC Employee Retirement Plan; and (iii) a lump-sum payment for benefits accrued under the PPP (except for the FAE benefit for Mr. Adams, which is assumed to U.S. salaried employees, basedbe paid as a monthly annuity as per his election, and the cash balance benefit for Mr. Bellemare, which is assumed to be paid as a 9-year installment benefit, as per his election). | | | (2) | Mr. Johri was employed by UTC in November 1986 and accrued pension benefits under the final average earnings formula of the UTC Employee Retirement Plan and the UTC Pension Preservation Plan until he separated from service in April 2013. When re-employed on January 1, 2015, Mr. Johri was not eligible to resume participation in UTC’s pension plans, and therefore, accrues no cash balance benefit under these plans. Instead, Mr. Johri is provided age-based Company automatic contributions to his UTC service from the date401(k) Savings Plan and Company Automatic Contribution Excess Plan (“CACEP”) accounts, as described more fully on page 65. | | | (3) | Lump-sum distribution of hire, offset byaccrued benefits payable separately under the Pratt & Whitney Canada Salaried Employee Pension Plan. |
(3) | Consists of amounts accrued under the Pratt & Whitney Canada Salaried and Executive Employee Pension Plans. TheMr. Bellemare received a distribution of this accrued benefit formula for these plans is substantially similar to the final average earnings formula in theas a result of his retirement from UTC Employee Retirement Plan. Benefits are payable as an annuity.on January 31, 2015. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 63 |
COMPENSATION TABLES UTC Employee Retirement benefits forPlan and UTC executivesPension Preservation Plan Employees hired before January 1, 2010, are provided througheligible to participate in the UTC Employee Retirement Plan and the UTC Pension Preservation Plan (“PPP”), each of which. Plan Description.The UTC Employee Retirement Plan is a defined benefittax-qualified plan subject to Internal Revenue Code provisions that, as of December 31, 2015, limit recognized annual compensation to $265,000 and annual retirement benefits to $210,000. The PPP is an unfunded, non-qualified retirement plan withutilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. The PPP provides benefits not accrued under the qualified plan due to Internal Revenue Code limitations on annual compensation recognition and retirement benefit amounts. Changes from Final Average Earnings Formula to Cash Balance Formula.Through the end of 2014, both of these pension plans used a traditional final average earnings (“FAE”) retirement benefit formula. Under this formula, and, for newer participants, a cash balance formula. In combination, the plans’ FAE formula providesplans provide an annual benefit payment equal to 2% of the executive’s earnings (defined below) for each year of service up to a maximum of twenty years, plus 1% of earnings for each year of service thereafter, minus 1.5% of the executive’s Social Security benefits for each year of service up(up to a maximum of 50% of the annual Social Security benefit). Earnings recognized under this formula consist of the highest five-year average annual combined base salary and annual performance bonus received over any consecutive five calendar-year period ending on or before December 31, 2014. The FAE formula does not includerecognize long-term incentive compensation in earnings. Normal Effective December 31, 2014, the FAE formula was replaced prospectively by a cash balance formula. The cash balance formula credits an account with amounts that grow each month with two types of credits—pay credits and interest credits. Pay credits range from 3% to 8% of base salary and annual performance bonus, depending on the participant’s age. Interest credits are based on 30-year U.S. Treasury Bond yields and are subject to annual adjustments, but cannot fall below 3.8%. Distribution Options.Lump-sum and annuity distribution options are available for amounts credited under these plans, except for benefits accrued under the FAE formula of the tax-qualified pension plan, which may only be distributed as an annuity. Because amounts payable under the PPP are unfunded and unsecured, a lump-sum distribution option is available as an alternative to a monthly annuity. However, a PPP lump-sum distribution is immediately and fully taxable as ordinary income. The PPP lump-sum calculation of the FAE portion of the benefit uses a discount rate equal to the Barclay’s Capital Municipal Bond Index averaged over five years (currently 2.316%). This non-taxable investment index is intended to yield an after-tax income stream comparable to that realized through a more tax efficient annuity distribution. The lump-sum value of the cash balance portion of the benefit will be equal to the accumulated cash balance account described above. Vesting and Retirement.Under both of these pension plans, vesting requires three years of service. The normal retirement age under both benefit formulas is 65; unreduced65. The FAE formula, however, also provides full retirement benefits are available at age 62 for a participant thatwho retires with at least ten years of service. None of the NEOs were eligible to retire with unreduced retirement benefits as of December 31, 2013. Early retirement benefits are also available under the FAE formula beginning at age 55 with at least ten years of service, reduced by 0.2% for each month forby which the early retirement date precedes age 62. All NEOs areThe value of the cash balance account is not impacted by an employee’s age at retirement. As of December 31, 2015, Mr. Hayes was the only current NEO eligible for early retirement. Vesting under the respective plans requires three years of service. to retire. Messrs. Bellemare, Darnis and Adams retired from UTC effective January 31, 2015, January 31, 2016 and February 29, 2016, respectively. Other Formulas Used.Benefits for Messrs. Darnis and Hayes include amounts accrued under different formulas ofused in the Carrier and Sundstrand predecessor plans, respectively, that have since beenwere merged into UTC retirement plans. The Pratt & Whitney Canada Salaried and Executive Employee Pension Plans utilize a FAE formula substantially similar to that used by the UTC Employee Retirement Plan and the PPP. Mr. Bellemare’s compensation increases result in additional accrued benefits under the Pratt & Whitney Canada Salaried and Executive Employee Pension Plans. Changes to UTC’s pension program that will take effect in 2015 are discussed in the CD&A on pages 25 and 37. The UTC Employee Retirement Plan is a tax-qualified plan subject to Internal Revenue Code provisions that, as of December 31, 2013, limit recognized annual compensation to $255,000 and the annual retirement benefit to $205,000. This Plan does not offer a lump-sum distribution option for benefits accrued under the FAE formula. However, a lump-sum distribution is available under the cash balance formula. The PPP is an unfunded, nonqualified retirement plan utilizing the same benefit formula, compensation recognition, retirement eligibility and vesting provisions as the tax-qualified UTC Employee Retirement Plan. The PPP provides benefits not awarded under the qualified plan due to Internal Revenue Code limitations on annual compensation recognition and retirement benefit amounts. Because amounts payable under the PPP are unfunded and unsecured, a lump-sum distribution option is available. Unlike distributions under the UTC Employee Retirement, a PPP lump-sum distribution is immediately and fully taxable as ordinary income. To address the tax impact, the PPP lump-sum calculation uses a discount rate equal to the Barclay’s Capital Municipal Bond Index averaged over five years (currently 3.272%).
64 | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
NONQUALIFIED DEFERRED COMPENSATION | | | Plan | | | Executive Contributions in Last FY ($)(1) | | | Registrant Contributions in Last FY ($)(2) | | | Aggregate Earnings in Last FY ($)(3) | | | Aggregate Withdrawals / Distributions ($) | | | Aggregate Balance at Last FYE ($)(4) | | | L. Chênevert | | | | | | | | | | | | | | | | UTC Deferred Compensation Plan | | | | $0 | | | | $0 | | | | $426,769 | | | | $0 | | | | $1,812,802 | | | | | | UTC Savings Restoration Plan | | | | $300,075 | | | | $180,045 | | | | $451,040 | | | | $0 | | | | $2,312,245 | | | Name | | | Plan | | Executive Contributions in Last FY ($) | (1) | | Registrant Contributions in Last FY ($) | (2) | | Aggregate Earnings in Last FY ($) | (3) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($) | (4) | G. Hayes | G. Hayes | | | | | | | | | | | | | UTC Deferred Compensation Plan | | $ | 0 | | | $ | 0 | | - | $ | 83,260 | | | $ | 0 | | $ | 1,155,105 | | | | | UTC Deferred Compensation Plan | | | | $0 | | | | $0 | | | | $241,870 | | | | $0 | | | | $1,190,769 | | | UTC Savings Restoration Plan | | $ | 158,100 | | $ | 94,860 | | - | $ | 59,527 | | | $ | 0 | | $ | 1,201,449 | | A. Johri | | | UTC Savings Restoration Plan | | $ | 0 | | $ | 0 | | - | $ | 11,427 | | - | $ | 23,345 | | $ | 168,461 | | | | | UTC Savings Restoration Plan | | | | $108,900 | | | | $65,340 | | | | $176,364 | | | | $0 | | | | $753,364 | | | UTC Company Automatic Contribution Excess Plan | | $ | 0 | | $ | 25,667 | | | $ | 286 | | | $ | 0 | | $ | 25,953 | | G. Darnis | G. Darnis | | | | | | | | | | | | | UTC Deferred Compensation Plan | | $ | 648,750 | | $ | 39,847 | (5) | | $ | 83,462 | | | $ | 0 | | $ | 3,793,706 | | | | | UTC Deferred Compensation Plan | | | | $535,750 | | | | $64,189 | (5) | | | $69,556 | | | | $0 | | | | $2,329,647 | | | UTC Savings Restoration Plan | | $ | 82,425 | | $ | 49,455 | | - | $ | 34,491 | | | $ | 0 | | $ | 776,083 | | | | | UTC Savings Restoration Plan | | | | $86,505 | | | | $51,903 | | | | $73,347 | | | | $0 | | | | $535,733 | | | PSU Deferral Plan(6) | | $ | 3,177,956 | | $ | 0 | | - | $ | 1,012,972 | | | $ | 0 | | $ | 5,347,662 | | | | | PSU Deferral Plan | (6) | | | $1,044,012 | | | | $0 | | | | $310,959 | | | | $0 | | | | $1,354,971 | | | P. Adams | | | UTC Savings Restoration Plan | | $ | 59,590 | | $ | 35,754 | | - | $ | 37,872 | | | $ | 0 | | $ | 377,847 | | C. Gill, Jr. | | | UTC Savings Restoration Plan | | $ | 72,000 | | $ | 43,200 | | - | $ | 103,548 | | | $ | 0 | | $ | 629,613 | | A. Bellemare | A. Bellemare | | | | | | | | | | | | | UTC Savings Restoration Plan | | $ | 0 | | $ | 0 | | - | $ | 37,858 | | | $ | 0 | | $ | 723,999 | | | | | UTC Deferred Compensation Plan | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | | | UTC Savings Restoration Plan | | | | $102,700 | | | | $61,620 | | | | $122,111 | | | | $0 | | | | $556,282 | | | D. Hess | | | | | | | | | | | | | | | | UTC Deferred Compensation Plan | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | | | UTC Savings Restoration Plan | | | | $60,825 | | | | $36,495 | | | | $115,202 | | | | $0 | | | | $487,397 | | |
(1) | Amounts in this columnshown are included in the Salary and Bonus columns of the Summary Compensation Table. |
(2) | | (2) | Amounts in this columnshown are included in the All Other Compensation column of the Summary Compensation Table. |
(3) | Amounts in this column reflect the returns | (3) | Returns on amounts credited to hypothetical investment accounts, as described under “Investment Options” on the following page. Amounts creditedpage 66. These returns do not constitute as above-market earnings, except for $8,227$9,908 credited to Mr. Hayes under athe frozen Sundstrand Corporation Deferred Compensation Plan. |
(4) | Amounts in this column include deferrals | (4) | The sum of contributions (both by the executive and UTC) and credited earnings in current and prior yearson those deferrals, less withdrawals. Of these totals, $1,195,530, $700,682, $1,767,403, $147,203 and $148,131 for Messrs. Chênevert, Hayes, Darnis, Bellemare and Hess, respectively,the following amounts have previously been included in the Salary, Bonus and Stock Awards columns of the Summary Compensation Table in prior years.years: $916,957 (Mr. Hayes), $5,806,141 (Mr. Darnis), $66,975 (Mr. Gill) and $350,178 (Mr. Bellemare). |
(5) | Reflects | (5) | Consists of a SRPSavings Restoration Plan match make upmake-up for 2011, 2012 and 2013 whichamounts inadvertently omitted from this Plan. The corrected amount has been deferred intocredited to Mr. Darnis’ UTC DCP account, as discussed in footnote (6)(e) of the SummaryDeferred Compensation Table.Plan account. |
(6) | Under | (6) | Mr. Darnis elected to defer his 2012 PSU vesting under the PSU Deferral Plan, as described on page 56, Mr. Darnis elected to defer a portion of his 2010 PSU vesting, as reported in the OptionsOption Exercises and Stock Vested table on page 53.62. |
UTC Savings Restoration Plan The UTC Savings Restoration Plan (“SRP”) is a non-qualified, unfunded deferred compensation arrangement that offers participants the opportunity to defer up to 6% of pay (base salary and annual bonus) above the annual Internal Revenue Code compensation limit ($265,000 in 2015) applicable to the tax-qualified UTC 401(k) Savings Plan. Using the UTC 401(k) Savings Plan’s matching contribution formula, the SRP credits matching contributions equal to 60% of the amount deferred by the executive in the form of UTC deferred stock units. Participants are vested in their own deferrals and vest in the UTC match after three years of service. SRP balances may be distributed at the election of the participant in a lump-sum payment or in annual installments over a period ranging from two to fifteen years. Employee deferrals are distributed in cash and Company matching amounts are distributed in shares of Common Stock. Company Automatic Contribution Excess Plan Salaried employees, including NEOs, hired on or after January 1, 2010 do not participate in UTC’s pension plans. These employees instead receive age-based Company automatic contributions equal to a percentage of salary and annual bonus to their tax-qualified UTC 401(k) Savings Plan account each payroll period. The purpose of the unfunded, non-qualified Company Automatic Contribution Excess Plan (“CACEP”) is to continue to credit such contributions on compensation that exceeds the Internal Revenue Code limit applicable to the tax-qualified UTC 401(k) Savings Plan. Participants receiving benefits under the CACEP do not accrue a benefit under the UTC Pension Preservation Plan. In 2015, Mr. Johri was the only NEO who participated in the CACEP for which he received a credit equal to 5.5% of pay. | | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 65 |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) UTC Deferred Compensation Plan The UTC Deferred Compensation Plan (“DCP”) is a nonqualified,non-qualified, unfunded deferred compensation arrangement that offers participants the opportunity to defer up to 50% of annual base salary and up to 70% of annual bonus. The minimum deferral period is five years. All distributions are made in cash and, at the election of the participant, in either a lump-sum payment or in annual installments over a period between two and fifteen years. If a participant’s employment terminates prior to retirement eligibility, all balances are paid as a lump sumlump-sum in the April following termination. Investment Options Amounts deferred by participants under either of the SRP, CACEP and DCP may be allocated by the participant to one or more of the following hypothetical investment accounts described below. The UTC Savings Restoration Plan (“SRP”) is a nonqualified, unfunded deferred compensation arrangement that offers participants the opportunity to defer up to 6% of pay (base salary and bonus) above the annual IRC compensation limit ($255,000 in 2013) applicable to the tax-qualified UTC 401(k) Savings Plan. Under the SRP, UTC will make matching contributions equal to 60% of the amount deferred by the executive in the form of UTC deferred stock units. Participants are vested in their own deferrals and vest in the UTC match after three years of service. Amounts credited under the SRP may be distributed in a lump-sum payment or annual installments over a period between two and fifteen years. Employee deferrals are distributed in cash and Company matching amounts are distributed in shares of Common Stock. Amounts deferred by the employee may be allocated to one of the hypothetical investment accounts offered by the DCP and SRP, as shown below:accounts:
| | | Hypothetical Investment Accounts* | | 20132015 Return | | Income Fund | | 3.39% | 3.56 | % | Equity Fund — Fund—S&P 500 Index | | 32.33% | 1.38 | % | Government / Credit Bond Fund | | (2.49) | 0.19 | % | Small Company Stock Index Fund | | 38.38% | -3.38 | % | International Equity Index | | 22.82% | -0.60 | % | Emerging Equity Index Fund | | (3.31) | -15.15 | % | UTC Common Stock with dividend reinvestment | | 41.86% | -13.99 | % |
* | Additional age-specific retirement date funds are also available; however, none ofavailable. In 2015, the NEOs elected to participateparticipated in these funds in 2013.the Target Retirement Fund 2020, which returned -2.13%, and the Target Retirement Fund 2025, which returned -2.26%. |
Under the
PSU Deferral Plan The PSU Deferral Plan allows executives may elect to defer between 10% and 100% of their vested PSU award.awards that otherwise upon vesting would be settled in unrestricted shares of Common Stock. Upon vesting, the deferred portion of the vested PSU award is converted into deferred sharestock units whichthat accrue dividend equivalents. Distributions from the PSU Deferral Plan are paidmade in full or in two to fifteen annual installments, either upon either retirement or in a future year selected by the executive (no earlier than five years from the year the PSUs are deferred). Distributions are made in whole shares of Common Stock with any fractional unitunits paid in cash. 66 | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
POTENTIAL PAYMENTS ON TERMINATION OR CHANGE-IN-CONTROL This table provides information concerningestimates the value of payments and benefits that each of the NEOsNEO would have been entitled to receive had employment terminated on December 31, 2013,2015 under various circumstances.hypothetical circumstances, except for Mr. Bellemare where actual payments are shown as a result of his retirement on January 31, 2015. Under UTC’s programs, benefit eligibility and the value of benefits an executive is entitled to receive vary depending on the reason for termination and whether the executive is eligible for retirement as of the termination date.at that time. | | | | | | | | | | | | | | | | | | | | | Payment Type | | L. Chênevert | | | G. Hayes | | | G. Darnis | | | A. Bellemare | | | D. Hess | | Termination — Involuntary (For Cause) | | | | | | | | | | | | | | | | | | Cash Payment(1) | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Pension Benefit(2) | | | $30,904,344 | | | | $7,019,713 | | | | $12,505,822 | | | | $4,087,803 | | | | $7,886,225 | | Option/SAR Value(3) | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | PSU Value (4) | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Dividend Equivalents(5) | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Sub-Total | | | $30,904,344 | | | | $7,019,713 | | | | $12,505,822 | | | | $4,087,803 | | | | $7,886,225 | | Less: Vested Pension | | | -$30,904,344 | | | | -$7,019,713 | | | | -$12,505,822 | | | | -$4,087,803 | | | | -$7,886,225 | | Amount Triggered due to Termination | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Voluntary | | | | | | | | | | | | | | | | | | Cash Payment(1) | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Pension Benefit(2) | | | $30,904,344 | | | | $7,019,713 | | | | $12,505,822 | | | | $4,087,803 | | | | $7,886,225 | | Option/SAR Value (3) | | | $129,311,420 | | | | $23,655,130 | | | | $56,814,610 | | | | $19,843,950 | | | | $10,252,735 | | PSU Value (4) | | | $25,620,932 | | | | $8,102,105 | | | | $7,268,178 | | | | $6,772,921 | | | | $5,392,299 | | Dividend Equivalents (5) | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Sub-Total | | | $185,836,696 | | | | $38,776,948 | | | | $76,588,610 | | | | $30,704,674 | | | | $23,531,259 | | Less: Vested Pension and Equity | | | -$185,836,696 | | | | -$38,776,948 | | | | -$76,588,610 | | | | -$30,704,674 | | | | -$23,531,259 | | Amount Triggered due to Termination | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Termination — Involuntary (Not For Cause) | | | | | | | | | | | | | | | | | | Cash Payment(1) | | | $4,437,500 | | | | $2,200,000 | | | | $2,500,000 | | | | $2,062,500 | | | | $1,687,500 | | Pension Benefit(2) | | | $30,904,344 | | | | $7,019,713 | | | | $12,505,822 | | | | $4,087,803 | | | | $7,886,225 | | Option/SAR Value (3) | | | $129,311,420 | | | | $23,655,130 | | | | $56,814,610 | | | | $19,843,950 | | | | $10,252,735 | | PSU Value(4) | | | $25,620,932 | | | | $8,102,105 | | | | $7,268,178 | | | | $6,772,921 | | | | $5,392,299 | | Dividend Equivalents (5) | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | Sub-Total | | | $190,274,196 | | | | $40,976,948 | | | | $79,088,610 | | | | $32,767,174 | | | | $25,218,759 | | Less: Vested Pension and Equity | | | -$185,836,696 | | | | -$38,776,948 | | | | -$76,588,610 | | | | -$30,704,674 | | | | -$23,531,259 | | Amount Triggered due to Termination | | | $4,437,500 | | | | $2,200,000 | | | | $2,500,000 | | | | $2,062,500 | | | | $1,687,500 | | Termination — Change-in-Control (6) | | | | | | | | | | | | | | | | | | Cash Payment(7) | | | $13,798,850 | | | | $4,999,280 | | | | $5,980,000 | | | | $4,933,500 | | | | $3,834,675 | | Pension Benefit(2) | | | $30,904,344 | | | | $7,019,713 | | | | $12,505,822 | | | | $4,087,803 | | | | $7,886,225 | | Option/SAR Value (8) | | | $137,774,620 | | | | $26,843,730 | | | | $59,958,510 | | | | $30,712,238 | | | | $16,060,087 | | PSU Value(8) | | | $33,541,412 | | | | $11,083,665 | | | | $10,215,598 | | | | $9,583,781 | | | | $7,463,459 | | Dividend Equivalents (5) | | | $888,901 | | | | $270,791 | | | | $588,676 | | | | $0 | | | | $447,394 | | Sub-Total | | | $216,908,127 | | | | $50,217,179 | | | | $89,248,606 | | | | $49,317,322 | | | | $35,691,840 | | Less: Vested Pension and Equity | | | -$185,836,696 | | | | -$38,776,948 | | | | -$76,588,610 | | | | -$30,704,674 | | | | -$23,531,259 | | Amount Triggered due to Termination | | | $31,071,431 | | | | $11,440,231 | | | | $12,659,996 | | | | $18,612,648 | | | | $12,160,581 | |
Payment Type | | G. Hayes | | | A. Johri | | | G. Darnis | | | P. Adams | | | C. Gill, Jr. | | | A. Bellemare | (1) | Involuntary Termination (For Cause) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Payment | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | — | | Pension Benefit(2) | | $ | 11,308,482 | | | $ | 2,328,667 | | | $ | 18,224,128 | | | $ | 2,410,229 | | | $ | 6,043,024 | | | | — | | Option/SAR Value(3) | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | — | | Stock Award Value(4) | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | — | | Sub-Total | | $ | 11,308,482 | | | $ | 2,328,667 | | | $ | 18,224,128 | | | $ | 2,410,229 | | | $ | 6,043,024 | | | | — | | Less: Vested Pension | - | $ | 11,308,482 | | - | $ | 2,328,667 | | - | $ | 18,224,128 | | - | $ | 2,410,229 | | - | $ | 6,043,024 | | | | — | | Amount Triggered due to Termination | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Voluntary Termination | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Payment | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | — | | Pension Benefit(2) | | $ | 11,308,482 | | | $ | 2,328,667 | | | $ | 18,224,128 | | | $ | 2,410,229 | | | $ | 6,043,024 | | | | — | | Option/SAR Value(3) | | $ | 13,020,790 | | | $ | 2,575,909 | | | $ | 21,591,050 | | | $ | 3,816,268 | | | $ | 12,131,213 | | | | — | | Stock Award Value(4) | | $ | 2,894,397 | | | $ | 0 | | | $ | 2,824,074 | | | $ | 1,173,975 | | | $ | 2,024,771 | | | | — | | Sub-Total | | $ | 27,223,669 | | | $ | 4,904,576 | | | $ | 42,639,252 | | | $ | 7,400,472 | | | $ | 20,199,008 | | | | — | | Less: Vested Pension and Equity | - | $ | 27,223,669 | | - | $ | 4,904,576 | | - | $ | 42,639,252 | | - | $ | 7,400,472 | | - | $ | 20,199,008 | | | | — | | Amount Triggered due to Termination | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Involuntary Termination (Not For Cause) or Retirement | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Payment(5) | | $ | 3,250,000 | | | $ | 0 | | | $ | 2,750,000 | (9) | | $ | 1,625,000 | (9) | | $ | 1,812,500 | | | $ | 2,492,288 | | Pension Benefit(2) | | $ | 11,308,482 | | | $ | 2,328,667 | | | $ | 18,224,128 | | | $ | 2,410,229 | | | $ | 6,043,024 | | | $ | 6,443,324 | | Option/SAR Value(3) | | $ | 13,020,790 | | | $ | 2,575,909 | | | $ | 21,591,050 | | | $ | 3,816,268 | | | $ | 12,131,213 | | | $ | 4,346,755 | | Stock Award Value(4) | | $ | 2,894,397 | | | $ | 0 | | | $ | 2,824,074 | | | $ | 1,173,975 | | | $ | 2,024,771 | | | $ | 2,773,349 | | Sub-Total | | $ | 30,473,669 | | | $ | 4,904,576 | | | $ | 45,389,252 | | | $ | 9,025,472 | | | $ | 22,011,508 | | | $ | 16,055,716 | | Less: Vested Pension and Equity | - | $ | 27,223,669 | | - | $ | 4,904,576 | | - | $ | 42,639,252 | | - | $ | 7,400,472 | | - | $ | 20,199,008 | | - | $ | 13,563,428 | | Amount Triggered due to Termination | | $ | 3,250,000 | | | $ | 0 | | | $ | 2,750,000 | | | $ | 1,625,000 | | | $ | 1,812,500 | | | $ | 2,492,288 | | | | | | | | | | | | | | | | | | | | | | | | | | | Termination following a Change-in-Control(6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Payment(7) | | $ | 10,300,550 | | | $ | 0 | | | $ | 6,906,900 | | | $ | 3,789,825 | | | $ | 4,010,338 | | | | — | | Pension Benefit(2) | | $ | 11,308,482 | | | $ | 2,328,667 | | | $ | 18,224,128 | | | $ | 2,410,229 | | | $ | 6,043,024 | | | | — | | Option/SAR Value(8) | | $ | 13,020,790 | | | $ | 2,575,909 | | | $ | 21,591,050 | | | $ | 4,474,896 | | | $ | 12,131,213 | | | | — | | Stock Award Value(8) | | $ | 6,689,162 | | | $ | 5,728,174 | | | $ | 4,937,614 | | | $ | 4,591,762 | | | $ | 4,500,495 | | | | — | | Sub-Total | | $ | 41,318,984 | | | $ | 10,632,750 | | | $ | 51,659,692 | | | $ | 15,266,712 | | | $ | 26,685,070 | | | | — | | Less: Vested Pension and Equity | - | $ | 27,223,669 | | - | $ | 4,904,576 | | - | $ | 42,639,252 | | - | $ | 7,400,472 | | - | $ | 20,199,008 | | | | — | | Amount Triggered due to Termination | | $ | 14,095,315 | | | $ | 5,728,174 | | | $ | 9,020,440 | | | $ | 7,866,240 | | | $ | 6,486,062 | | | | — | |
| | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 67 |
COMPENSATION TABLES ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
(1) | AmountsMr. Bellemare retired from UTC effective January 31, 2015. The value shown are payable underincludes the Executive Leadership Group (“ELG”) separation arrangement. The ELG cash separation benefit is(including interest earned at 3.5% during the payment deferral period required by the IRC) that Mr. Bellemare received as a cash payment equal to 2.5 times base salaryresult of his retirement and is provideda $200,000 retainer fee paid in the event of a mutually agreeable separation. A mutually agreeable separation occurs when: (i) the ELG participant’s positionconnection with an 18-month consulting agreement Mr. Bellemare entered into with UTC has been eliminated or diminished by a divestiture, restructuring, shiftfollowing his retirement. Details of this agreement are found in priorities or similar event; or (ii) the executive retires at age 62 or older. Voluntary terminations prior to age 62 or terminations related to misconduct do not qualify as mutually agreeable. Receiptfootnote (6)(f) of the ELG separation benefit is contingent upon execution of an agreement with UTC containing the following covenants made by the executiveSummary Compensation Table on page 58. The pension benefits shown for the protection of UTC: (i) three-year non-compete; (ii) three-year employee non-solicitation; (iii) non-disparagement; (iv) protection of confidential, sensitive and proprietary information; and (v) post-termination cooperation obligations. The ELG separation benefit is not treated as compensation for purposes of determining benefits under UTC’s pension plans or any other benefit program. This benefit is payable as a lump sum. Distributions are subject to certain restrictions imposed by Internal Revenue Code Section 409A. Benefit plan participation and fringe benefits are not continued following terminationMr. Bellemare include amounts accrued under the ELG separation arrangement. |
(2) | Pension benefits under the standard retirement benefit formula that exceed Internal Revenue Code limits for tax-qualified plans may be paid as a lump sum. Amounts in this column reflect the estimated lump-sum payment of the nonqualified portion of the retirement benefit, assuming retirement or termination on December 31, 2013, payable as of such date or attainment of age 55. Mr. Chênevert and Mr. Bellemare’s pension benefits also include amounts attributable to their Pratt & Whitney Canada Salaried and Executive Employee Pension Plans.Plans which were distributed following retirement, as shown in the Pension Benefits table on page 63. |
(3) | | (2) | Amounts reflect the estimated lump-sum value of the non-qualified portion of the retirement benefits accrued under UTC’s pension plans, assuming retirement or termination on December 31, 2015, payable as of such date, attainment of age 55 (if later), or the actual retirement date, if known. The present value of benefits payable under the qualified plan are shown in the Pension Benefits table on page 63. | | | (3) | The vesting of outstanding stock options and SARs (other than the performanceunvested portion of the performance-based SARs granted on August 1, 2012 and November 1, 2012)special sign-on SARs) that have been outstanding for at least one year will be accelerated in the event of a voluntary termination or an involuntary (not for cause) termination after attaining retirement age (i.e., 55(55 plus ten years of service) or satisfying the rule of 65 (i.e., age(age 50 plus fifteen years of service). Each of the NEOs satisfies one or both of these conditions. Amounts shown are based on the December 31, 20132015 closing price of our Common Stock on the NYSE of $113.80.$96.07. In the event of an involuntary termination for cause, outstanding stock options and SARs are forfeited. |
(4) | | (4) | In the event of a voluntary termination or an involuntary (not for cause) termination following attainment of retirement age or satisfying the rule of 65, PSUs outstanding for at least one year remain eligible to vest following completion of the performance period to the extent the performance targets are achieved. Amounts shown are based on the December 31, 20132015 closing price of our Common Stock on the NYSE of $113.80. Amounts shown reflect the current most probable$96.07 and target-level vesting for the 20132015 and 20122014 PSU grants and the actual payoutvesting level for the 20112013 PSU grant. In the event of an involuntary termination for cause, outstanding PSUs are forfeited. |
(5) | Consists of dividend equivalents (“DEs”) earned under | (5) | Reflects the terms of UTC’s Continuous Improvement Incentive Program (“CIIP”),ELG cash separation benefit which equals 2.5x base salary. This benefit is more fully describedpayable as a lump-sum in footnote (4) to the Summary Compensation Table. In the event of a change-in-control, the net present valuemutually agreeable separation (defined on page 44) following at least three years of all future DE payments (calculated basedELG service (and for certain ELG members, is dependent on the dividend rate in effectage at the timeseparation). Receipt of the change-in-control) would be paid in a lump sum atELG separation benefit is contingent upon execution of an agreement containing the timefollowing covenants made by the executive for the protection of the change-in-control. Amounts shownUTC: (i) non-compete; (ii) employee non-solicitation; (iii) non-disparagement; (iv) protection of confidential, sensitive and proprietary information; and (v) post-termination cooperation. The ELG separation benefit is not treated as compensation for purposes of determining benefits under UTC’s pension plans or any other benefit programs. Distributions are the present value of the dividends payable through the DE award expiration date, calculated using a discount rate equalsubject to 120% of the Applicable Federal Rate as of December 31, 2013.certain restrictions imposed by Internal Revenue Code Section 409A. ELG members appointed on or after May 2013, including Mr. Johri, are not eligible for this cash separation benefit. |
(6) | | (6) | Change-in-control benefits are provided in accordance with the Senior Executive Severance Plan (“SESP”). Amounts shown reflect the benefit reductions, which was closed to the program, as discussed in the CD&A.new participants effective June 2009. Acquisition of 20% of UTC’s voting securities by a person or a group or a change in the majority of the Board of Directors constitutesconstitute a change-in-control. ExecutivesSESP benefits are provided to eligible for the SESP benefitsexecutives in the event of an involuntary termination or resignation for “good reason” (i.e., a material adverse change in the executive’s position, compensation, benefitsresponsibilities, authority, reporting relationship or work location) within two years following a change-in-control.change-in-control event. Receipt of SESP benefits is subject to an ongoing obligation to protect confidential UTC information.various restrictive covenants. An executive may receive the greater of the SESP or ELG cash separation benefitsbenefit (as described in footnote (1)(5) above), but not both. The SESP cash severance benefit is reduced by 1/36thfor each month that termination occurs after age 62 and, accordingly, is completely phased out at age 65. |
(7) | Reflects a | (7) | A lump-sum cash paymentbenefit payable under the SESP in an amount equal to 2.99 times2.99x the sum of the executive’s base salary and target bonus.annual bonus is applicable for ELG members appointed prior to June 2009. ELG members appointed on or after June 2009 but prior to May 2013, are eligible for the standard ELG cash severance payment upon change-in-control (2.5x base salary), while ELG appointees on or after May 2013, including Mr. Johri, are not eligible for a cash payment under either program. |
(8) | | (8) | In the event of a qualifying termination for “good reason” (as defined on page 45) following a change-in-control, the SESPLTIP provides for the accelerated vesting of all outstanding SARs and PSUsequity awards (including SARs and PSUsawards outstanding for less than one year, unvested performance-based SAR awards, special equity awards and the August 1, 2012 and November 1, 2012 performance SAR grants)ELG RSU awards). Amounts shown are based on the December 31, 20132015 closing price of our Common Stock on the NYSE of $113.80.$96.07. PSU and performance-based SAR values reflect vesting at target, except where actual performance is known as of December 31, 2013.2015. | | | (9) | Mr. Darnis and Mr. Adams retired from UTC effective January 31, 2016 and February 29, 2016, respectively. Following retirement, UTC entered into one-year consulting agreements valued at $300,000 for Mr. Darnis and $200,000 for Mr. Adams, which are excluded from the values shown. |
Post-Employment Consulting Arrangements In some cases, the Company enters into post-employment consulting arrangements to assist in the transition of an executive’s responsibilities and for support on matters in-process at the time of retirement. Because the LTIP recognizes service rendered in a consulting capacity, the termination date for vesting purposes under the LTIP may be later than the date employment ends. Mr. Bellemare entered into a $200,000, one-year consulting agreement following his retirement to remain available to provide advice on strategic matters related to our aerospace businesses. He will therefore remain eligible to vest in his 2015 SAR and PSU awards. Mr. Darnis entered into a one-year consulting agreement for $300,000 to advise on strategic matters and to assure continuity in key customer relationships. This arrangement will not impact the vesting of his long-term incentive awards. Pursuant to a one-year $200,000 consulting agreement following his retirement on February 29, 2016, Mr. Adams will remain available to provide technical advice and support on Pratt & Whitney’s GTF programs. As a result of this arrangement, his 2016 PSU and SAR awards and his 2012 performance-based SAR award remain eligible to vest, subject to the continuation of this consulting relationship through December 2016. His 2015 PSU and SAR awards were eligible to vest without regard to this agreement. In addition, the RSU award granted on December 1, 2015 remains eligible to vest, provided that his consulting relationship continues through February 28, 2017. 68 | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
Report of the Audit Committee ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
The Audit Committee reviews and makes recommendations toassists the Board of Directors concerning the reliability and integrityin its oversight of UTC’s financial statementsaccounting and reporting processes and the adequacy of its system of internal controls and processes to assure compliance with UTC’sCompany policies and procedures, its Code of Ethics and applicable laws and regulations. The Committee annually nominates UTC’s Independent Auditoran independent auditor for appointment by the shareowners, and evaluates the independence, qualifications and performance of UTC’s internal and independent auditors. TheSpecific responsibilities of the Committee also discusses with management UTC’s policies and procedures regarding risk assessment and risk management,are set forth in the Audit Committee Charter adopted by the Board, which is available on the Company’s majorwebsite. Management has the primary responsibility for the financial risk exposuresstatements and the steps management has taken to monitor and manage such exposures to be withinfinancial reporting processes, including the system of internal accounting controls. PricewaterhouseCoopers LLP (“PwC”), the Company’s risk tolerance. The Committee establishes proceduresindependent auditor, is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles and oversees receipt, retention, and treatmenton the effectiveness of complaints received by UTC regarding accounting,the Company’s internal control or auditing matters and confidential, anonymous submissions by UTC employees of concerns regarding questionable accounting or auditing matters.over financial reporting. The
In fulfilling its oversight responsibilities, the Committee has reviewed and discussed with management and UTC’s Independent Auditorthe independent auditor UTC’s audited financial statements as of and for the year ended December 31, 2013,2015, as well as the representations of management and the Independent Auditor’sindependent auditor’s opinion thereon regarding UTC’s internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. The Committee discussed with UTC’s internal and Independent Auditorsindependent auditors the overall scope and plans for their respective audits. The Committee met with the internal and Independent Auditors,independent auditors, with and without management present, to discuss the results of their examinations, the evaluation of UTC’s internal controls, management’s representations regarding internal control over financial reporting, and the overall quality of UTC’s financial reporting. The Committee has discussed with UTC’s Independent Auditorindependent auditor the matters required by the Public Company Accounting and Oversight Board’s (“PCAOB”) Auditing Standard No. 16Communications with Audit Committees.Committees The Committee. It has also discussed with UTC’s Independent Auditor theirindependent auditor its independence from UTC and its management, including the written disclosures and letter from UTC’s Independent Auditorindependent auditor required by the Public Company Accounting Oversight Board’sPCAOB’s Rule 3526,Communication with Audit Committees Concerning Independence, as approved by the SEC. The Committee has concluded that PwC’s provision of non-audit services as described in the table on pages 70 and 71 is compatible with PwC’s independence. UTC’s Independent Auditorindependent auditor represented to the Committee that UTC’s audited financial statements were fairly presented in accordance with generally accepted accounting principles in the United States of America. Based on the reviews and discussions referred to above, the Committee has recommended to the Board of Directors that the audited financial statements referred to above be included in UTC’s Annual Report on Form 10-K for the year ended December 31, 20132015 for filing with the SEC. The Committee nominates the firm of PricewaterhouseCoopers LLP for appointment by the shareowners as UTC’s Independent Auditor for 2014. | | | Audit Committee | Edward A. Kangas, Chair | Fredric G. Reynolds | | | Richard B. Myers | John V. Faraci
| Ellen J. Kullman | H. Patrick Swygert | Ellen J. Kullman
| | Richard B. Myers | André Villeneuve |
| | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 69 |
Proposal 22: Appointment of a Firm of Independent Registered Public Accountants to Serve as Independent Auditor for 2014 ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) 2016 As required by UTC’s Bylaws, we are submittingasking shareowners to a vote of shareownerson a proposal to appoint a firm of independent registered public accountants to act as the Company’s Independent Auditor of the Corporation until the next annual meeting. PricewaterhouseCoopers LLP, served as UTC’san independent registered public accounting firm, served as UTC’s Independent Auditor in 20132015 and 2012. The2014, and the Audit Committee has nominated the firm for appointment by the shareowners to serve again as UTC’s Independent Auditor for 2016. The Audit Committee is directly responsible for the nomination, compensation, retention and oversight of the Company’s independent auditor. To fulfill this responsibility, the Committee engages in a comprehensive annual evaluation of the independent auditor’s qualifications, performance and independence and periodically considers the advisability and potential impact of selecting a different independent registered public accounting firm to serve in that capacity. The Audit Committee has nominated, and the Board of Directors has approved the nomination of, PricewaterhouseCoopers LLP to serve as our Independent Auditor for UTC2016 and until the next Annual Meeting in 2015. 2017. PricewaterhouseCoopers LLP has acquired extensive knowledge of the Company’s operations, performance and development through its previous service as the Company’s Independent Auditor. In accordance with SEC rules and PricewaterhouseCoopers LLP policies, audit partners are subject to rotation requirements that limit the number of consecutive years an individual partner may provide service to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Company’s lead audit partner pursuant to this rotation policy includes a meeting of the Chairman of the Audit Committee with the candidate for the role, as well as consideration of the candidate’s qualifications by the full Committee and with management. The Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as our Independent Auditor is in the best interest of the Company and our shareowners. Representatives of PricewaterhouseCoopers LLP will be present at the 2016 Annual Meeting, will have an opportunity to make any statements they desire, and will also be available to respond to appropriate questions from shareowners. UTC paid the following fees to PricewaterhouseCoopers LLP for 20132015 and 2012:2014: | (in thousands) | | 2013 | | | 2012 | | | 2015 | | 2014 | | Audit Fees | | | $38,326 | | | | $36,586 | | | $ | 40,961 | | | $ | 42,054 | | Audit-Related Fees | | | $5,722 | | | | $17,221 | | | $ | 9,930 | | | $ | 5,535 | | Tax Fees | | | $19,058 | | | | $19,440 | | | $ | 19,926 | | | $ | 18,712 | | All Other Fees | | | $106 | | | | $1,970 | | | $ | 5,707 | | | $ | 757 | | Total | | | $63,212 | | | | $75,217 | | | $ | 76,524 | | | $ | 67,058 | |
70 | |
PROPOSAL 2:Appointment of Independent Auditor for 2016 Audit Fees in both years consisted of fees for the audit of UTC’s consolidated annual financial statements and the effectiveness of its internal control over financial reporting, the review of interim financial statements in UTC’s quarterly reports on Form 10-Q and the performance of audits in accordance with statutory requirements. In 2012, Audit Fees also included fees associated with other SEC filings related to several registered securities offerings. Audit-Related Fees in both years consisted of fees for financial and tax due diligence assistance related to acquisition and disposition activity, employee benefit plan audits, advice regarding the application of generally accepted accounting principles to proposed transactions, special reports pursuant to agreed-upon procedures, contractually required audits and compliance assessments. Audit-Related Fees in 2013 and 20122015 also included services related to our discontinued operations, including due diligencecarve-out audits and carve-out audits. Totalother agreed upon procedures with fees of approximately $5,400,000. $400,000 of our Audit-Related Fees related to services for our discontinued operations in 2013 and 2012 were $1,734,000 and $9,652,000, respectively. The decrease in Audit-Related Fees was due to a decrease in transactional activity during 2013. Under contractual requirements, $1,486,000 and $1,828,000 of fees were reimbursed bypursuant to contractual agreements with third parties in 2013 and 2012, respectively.parties. Tax Fees in 20132015 consisted of approximately $11,067,000$9,955,000 for U.S. and non-U.S. tax compliance, related planning and assistance with tax refund claims, and expatriate tax services, and approximately $7,991,000$9,971,000 for tax consulting and advisory services. In 2012,2014, Tax Fees consisted of approximately $8,351,000$11,429,000 for U.S. and non-U.S. tax compliance, and related planning and assistance with tax refund claims, and expatriate tax services, and approximately $11,089,000$7,283,000 for tax consulting and advisory services. | | | 60 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
PROPOSAL 2 APPOINTMENT OF A FIRM OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS TO SERVE AS INDEPENDENT AUDITOR FOR 2014
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
All Other Fees in 20132015 primarily consisted of accounting research software, benchmarking, and government compliance advisory services. All Other Fees in 2012 consisted of accounting research software, benchmarking, government compliance, advisory services, international employee benefits and pension plan advice, advice related to business disposition contractual compliance requirements,separation and other services. All Other Fees in 2014 primarily consisted of accounting research software, benchmarking, government compliance and other services. The Audit Committee has adopted procedures requiring Committee review and approval in advance of all particular engagements for services provided by UTC’s Independent Auditors.Auditor. Consistent with applicable laws, the procedures permit limited amounts of services, other than audit, review or attest services, to be approved by one or more members of the Committee pursuant to authority delegated by the Committee, provided the Committee subsequently is informed of each particular service approved by delegation. All of the engagements and fees for 20132015 and 20122014 were approved by the Committee. The Committee reviews with PricewaterhouseCoopers LLP whether the non-audit services to be provided are compatible with maintaining the auditors’firm’s independence. The Board has also adopted the policy that in any year fees paid to the Independent Auditor for non-audit services shall not exceed the fees paid for audit and audit-related services. Non-audit services consist of those described above, as included in the Tax Fees and All Other Fees categories. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTE FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTE FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP. | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x81x1.jpg) FOR |
| | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 71 |
Proposal 33: Amendment and Restatementto Our Restated Certificate of the 2005 Long-Term Incentive PlanIncorporation to Eliminate Cumulative Voting for Directors
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) In September 2015, in conjunction with the Board’s adoption of “proxy access” Bylaw provisions, the Board approved an amendment to UTC’s Restated Certificate of Incorporation to eliminate cumulative voting in the election of directors, subject to shareowners’ approval at the 2016 Annual Meeting(1). Cumulative voting enables a shareowner to concentrate his or her voting power in favor of the election of one or more nominees, rather than casting one vote per share. Accordingly, cumulative voting permits one or more directors to be elected based on the votes of a minority of shareowners casting votes in the election. The Board believes that each director should represent the interests of all shareowners rather than potentially only the interests of a limited constituency. Therefore and as further discussed below, the Board believes that it is in the best interests of the Company and its shareowners to eliminate cumulative voting. BACKGROUND The Company’s Bylaws provide that in uncontested elections, directors are elected according to a majority vote standard. In other words, a nominee is elected if the votes cast “for” the nominee exceed 50% of the total votes cast with respect to that nominee’s election. In contested elections, directors are elected by a plurality of the votes cast—those nominees who receive the most votes are elected even though the votes in favor of one or more nominees may be fewer than a majority of votes cast. Cumulative voting, which the Company’s Restated Certificate of Incorporation currently permits, enables a shareowner to “cumulate” his or her voting power. This means a shareowner can cast a number of votes equal to the number of shares the shareowner holds multiplied by the number of directors to be elected for a single nominee, or among fewer than all nominees. By allowing shareowners to cast multiple votes for a single or few nominees, instead of voting separately on each nominee, cumulative voting can result in the election of a board member that has not been supported by the holders of a majority of the shares voting on the election of directors. RATIONALE The Board believes that maintaining cumulative voting in UTC’s corporate governance structure is problematic for a number of reasons: Cumulative voting provides an unusual mechanism through which a minority shareowner can disrupt one of the most fundamental shareowner decisions, in opposition to the clear wishes of shareowners representing a majority of shares voting. UTC’s recently adopted proxy access provisions, in contrast to cumulative voting, establish procedures through which all shareowners, including minority shareowners, can share their opinions and actively participate in elections without giving a minority shareowner the ability to have a disproportionate influence by overruling the wishes of a majority of shareowners. (1) | UTC adopted “proxy access” Bylaw provisions that permit a shareowner, or a group of up to 20 shareowners, owning at least three percent of UTC’s outstanding shares of Common Stock continuously for at least three years to nominate and include in UTC’s annual meeting proxy materials director nominees who, if elected, would constitute up to twenty percent of the Board, provided that the shareowner(s) and nominee(s) satisfy the requirements specified in UTC’s Bylaws, which are available at:http://www.utc.com/Our-Company/Corporate-Governance/Documents/Bylaws.pdf. |
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PROPOSAL 3:Amendment to Our Restated Certificate of Incorporation to Eliminate Cumulative Voting for Directors • | A system in which shareowners can cast one vote per share for each director nominee is the prevailing election standard among large U.S. public companies and employed by the vast majority of S&P 500 companies. Very few publicly traded companies (including only two other S&P 100 companies) provide for cumulative voting. In recent years, a number of publicly traded companies have eliminated cumulative voting, often in connection with adopting a majority voting standard or proxy access. | | | • | Cumulative voting gives an advantage to minority shareowners with relatively large holdings, whose interests and objectives may not necessarily align with the views of a majority of our shareowners. These special-interest shareowners (or small groups of such shareowners) could cumulate their votes to elect specific directors who otherwise would not be elected. Such directors may be focused on the special interests or agendas of those who cumulated votes to elect them, which could create divisiveness among Board members and impair the Board’s ability to operate effectively. |
Both management and the Board of Directors view this proposal to eliminate cumulative voting as an appropriate balancing measure in view of the annual election of UTC’s directors, the recently adopted proxy access provisions and the director majority voting standard. AMENDMENT The proposed amendment would delete in its entirety the text of Clause (h) of Article Eighth of our Restated Certificate of Incorporation. A copy of the proposed amendment marked with strike-outs to show the deletions, is included in Appendix A. A copy of the complete Restated Certificate of Incorporation is available from the Corporate Secretary at corpsec@corphq.utc.com or Corporate Secretary, UTC, 10 Farm Springs Road, Farmington, CT 06032. If this proposal to eliminate cumulative voting is approved, the amendment to our Restated Certificate of Incorporation would become effective upon the filing of a Certificate of Amendment with the State of Delaware, which the Company would intend to file promptly following the shareowner vote. Cumulative voting would not be permitted in elections of directors thereafter, including the 2017 Annual Meeting of shareowners. The Board of Directors has approved and adopted, subject to shareowner approval, a proposed amendment and restatement of the United Technologies Corporation 2005 Long-Term Incentive Plan (the “Plan”), which following the amendment and restatement, will be referred to as the “United Technologies Corporation Long-Term Incentive Plan.” The Board is submitting the Plan to shareowners for approval pursuant to NYSE listing standards. Background
The Plan was initially approved by shareowners at the 2005 Annual Meeting. At the 2008 and 2011 Annual Meetings, shareownersalso unanimously approved amendments to UTC’s Bylaws to incorporate conforming changes to reflect the Plan, including, on each occasion, an increaseelimination of cumulative voting, in the number of shares of Common Stock available for delivery pursuant to awards under the Plan, an extension of the term of the Plan and certain performance targets for Plan awards. The Board believesevent that the Plan has served its intended purpose of enabling UTC to implement an executive compensation program that correlates compensation opportunities with shareowner value and focuses on long-term, sustainable performance. For the ten-year period ending on December 31, 2013, UTC’s cumulative total shareowner return was 197%, compared to 105% for the Dow Jones Industrial Average and 104% for the S&P 500. For the five-year period ending on December 31, 2013, UTC’s total shareowner return was 140%, compared to 117% for the Dow Jones Industrial Average and 128% for the S&P 500. The Board believes Plan incentive award opportunities contributed significantlyamendment to the achievementRestated Certificate of these results. The Board, therefore, wishes to continue the operation of the Plan by authorizing additional shares of Common Stock for Plan awards and to further extend the term of the Plan.
Since the adoption of the Plan in 2005, the number of shares subject to awards granted under the Plan, as a percentage of the number of fully diluted shares outstanding, has averaged approximately 1% per year. If the proposed increase in shares available for delivery pursuant to awards under the PlanIncorporation is approved by shareowners, UTC expects that the annual dilution attributable to awards under the Plan will continue to approximate 1%. This level of dilution facilitates the Plan’s objectives of aligning compensation opportunity with shareowner value and maintaining a competitive compensation program. Awards based on Common Stock are granted exclusively under this Plan.
For a discussion of awards under the Plan as components of UTC’s executive compensation program, please refer to the Compensation Discussion and Analysis (“CD&A”) beginning on page 21 of this Proxy Statement.
Description of the Proposed Amendments to the Plan
The proposed amendment and restatement, if approved by shareowners, would amend the Plan in the following material respects:shareowners.
•THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING. | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x81x1.jpg) Authorize FOR30 Million Sharesfor Future Awards Under the Plan. As originally approved by shareowners, the Plan authorized the delivery of up to 38,000,000 shares of Common Stock pursuant to awards, which the 2008 and 2011 amendments increased to 71,000,000 and 119,000,000 shares, respectively. This proposed amendment and restatement will increase the number of shares authorized for awards by 30,000,000, resulting in a total of 149,000,000 shares authorized since the Plan’s inception in 2005. As of December 31, 2013, an aggregate of 86,725,000 of the 119,000,000 previously approved shares have been delivered or reserved for delivery pursuant to awards under the Plan, leaving 32,275,000 shares available for future awards. As of February 10, 2014, 22,967,000 shares of Common Stock remained available for future Plan awards. These unused shares of Common Stock will remain available for awards under the Plan whether or not the amendment and restatement is approved by shareowners. Please refer to the table on page 67 for detailed information on Common Stock reserved for awards made under this Plan and predecessor plans. As noted above, UTC expects future awards under the amended and restated Plan to utilize annually approximately 1% of fully diluted shares outstanding. The proposed 30,000,000 additional shares represent approximately 3.3% of shares of Common Stock outstanding as of January 31, 2014. If approved, the 30,000,000 shares, in combination with the remaining available shares will be sufficient for Plan awards for approximately three to five years. Continuation of the Plan thereafter would again require shareowner approval, which would also coincide with the cycle for approval of performance targets under Internal Revenue Code Section 162(m), as discussed on page 65. As of February 10, 2014, the closing price of our Common Stock was $111.60. |
| | | 62 | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 73 |
PROPOSAL 3 AMENDMENT AND RESTATEMENT OF THE 2005 LONG-TERM INCENTIVE PLAN
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
• | | Extension of the Term of the Plan. As approved by shareowners in 2011, the Plan has a termination date of April 30, 2017. The proposed amendment and restatement would extend the term of the Plan to April 30, 2020. If the amendment and restatement is not approved by shareowners, the Plan will remain in full force and effect through April 30, 2017. |
• | | Approval of IRC Section 162(m) Qualified Performance-Based Awards Performance Metrics. The Plan, as approved by shareowners in 2011, sets forth the following performance metrics that can be used to set vesting targets for performance-based compensation awards granted under the Plan: (i) diluted earnings per share (“EPS”); (ii) total shareowner return (“TSR”); (iii) working capital and gross inventory turnover; and (iv) revenue growth. To provide additional flexibility for the design of Plan awards, the proposed amended and restated Plan provides that the following additional performance metrics may also be used to set vesting targets for performance-based awards: (i) return on invested capital (“ROIC”); (ii) return on net assets (“RONA”); (iii) earnings before interest and taxes (“EBIT”); (iv) free cash flow; (v) net income; (vi) segment profit; and (vii) return on sales (“ROS”). As more fully discussed on page 46 in the CD&A, Section 162(m) of the Internal Revenue Code exempts payments made pursuant to qualified performance-based awards from the $1 million limit on the deductibility of the compensation paid to our Chief Executive Officer and the three next most highly compensated executive officers (excluding the Chief Financial Officer). One of the requirements of Section 162(m) is that the performance metrics used as the basis for performance-based awards be approved by shareowners every five years. The amendments to the Plan in 2011 reapproved the performance metrics for an additional five-year period, until 2016. Shareowner approval of the amendment and restatement will constitute approval of the performance metrics described above for a new five-year period ending in 2019. |
• | | Enhance the Plan’s Clawback Provisions. The Plan has a comprehensive policy on recoupment (i.e., clawback) of gains from Plan awards in the event of certain types of misconduct. The proposed amendment and restatement further strengthens the Plan’s clawback policy by clarifying that an executive’s negligence (including his or her negligent supervision of a subordinate) can be a basis for clawback. |
In addition to the amendments described above, the restatement would also modify various other provisions of the Plan to conform to recent regulatory changes and other matters related to the administration and interpretation of the Plan. In the event of any conflict or question of interpretation, the Plan document will control.
Description of the Material Terms of the Plan
A copy of the Plan, as it is proposed to be amended and restated, is set forth in Appendix A and incorporated herein by reference. The following is a summary of the material terms of the Plan.
• | | Purpose of the Plan. The purposes of the Plan are to align shareowner and management interests through stock and performance-based awards linked to shareowner value and to give UTC a competitive advantage in attracting and retaining key employees and directors. |
• | | Administration of the Plan. The Plan is administered by the Committee on Compensation and Executive Development of the Board of Directors (the “Committee”) which is composed exclusively of non-employee directors who qualify as independent under NYSE listing standards. The Committee has full authority to administer the Plan, including, without limitation, the authority to determine who will receive awards, to determine the terms and conditions of awards, to interpret awards and Plan provisions, and to amend outstanding awards, subject to such limitations as are imposed by the Plan. The Committee may delegate authority to grant, interpret and administer awards to officers of UTC; provided that it may not delegate authority with respect to awards granted to executives who are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended. The foregoing is subject to the qualification that the Committee on Nominations and Governance of the Board of Directors is responsible for the granting, interpretation and administration of awards to UTC’s non-employee directors. |
• | | Eligibility and Participation. Directors, officers and employees of UTC, its subsidiaries and affiliates are eligible for selection to participate in the Plan. Stock-based incentive awards are granted exclusively under this Plan. |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 63 |
PROPOSAL 3 AMENDMENT AND RESTATEMENT OF THE 2005 LONG-TERM INCENTIVE PLAN
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• | | Share Accounting. Awards denominated in shares of Common Stock, including restricted stock, restricted stock units and performance share units (“Full Share Awards”), reduce the number of shares of Common Stock available for delivery by a multiple of 4.03. Awards of stock options and stock appreciation rights reduce the number of shares available for delivery on the basis of one share for each stock option or stock appreciation right awarded. If an award is forfeited, or a stock option or stock appreciation right terminates, expires or lapses without being exercised, the corresponding number of shares will be reinstated as shares available for delivery pursuant to awards under the Plan. Shares tendered or withheld to pay the exercise price of stock options or stock appreciation rights or to satisfy tax withholding obligations associated with the granting, vesting, exercise or settlement of an award are not reinstated as shares available for delivery pursuant to awards under the Plan. The settlement in cash of awards valued by reference to shares of Common Stock count as shares delivered to the same extent as would be the case if the award were settled in actual shares. |
• | | Individual Award Limits. No individual participant may be granted awards covering in excess of 1,000,000 stock options and stock appreciation rights or in excess of 500,000 shares of restricted stock, restricted stock units and other Full Share Awards in any one calendar year. |
• | | Types of Plan Awards. The Plan allows for the grant of the following types of awards. |
– | | Stock Options and Stock Appreciation Rights. A stock option entitles the holder to purchase a specified number of shares of Common Stock at a specified exercise price. Stock options, at the discretion of the Committee, may be non-qualified stock options or incentive stock options that are intended to comply with the requirements of Section 422 of the Internal Revenue Code. A stock appreciation right entitles the holder to receive shares of Common Stock or cash equal in value to the difference between the fair market value of Common Stock on the exercise date and the exercise price of the stock appreciation right. The term of stock options and stock appreciation rights may not exceed ten years, the vesting period generally may not be less than three years and the exercise price may not be less than the fair market value of the Common Stock on the date of the grant. The vesting and exercisability of stock options and stock appreciation rights can be made subject to such terms and conditions as the Committee shall determine. The exercise price of a stock option may be paid in cash or by any such other means as is approved by the Committee. |
The Plan prohibits: (i) the repricing of awards without shareowner approval, except for stock splits and other events affecting Common Stock; (ii) the sale or assignment of underwater stock options or stock appreciation rights; and (iii) the granting of dividend equivalents in tandem with stock options or stock appreciation rights.
| – | | Restricted Stock, Restricted Stock Units and Performance Share Units. A restricted stock award is an award of shares of Common Stock subject to a substantial risk of forfeiture and a restriction on transferability. The substantial risk of forfeiture and restriction on transferability will lapse following a stated period of time, generally at least three years, upon attainment of specified performance targets or a combination of both. A recipient of a restricted stock award will have all of the rights of a holder of Common Stock with respect to the underlying shares, including the right to vote the shares and receive dividends, but will not have the right to sell, assign, transfer, pledge or otherwise encumber the shares until the transferability restrictions lapse, and generally will forfeit the shares if the recipient terminates employment before the risk of forfeiture lapses. Dividends and dividend equivalents on performance-based awards (if any) are subject to the performance-based vesting requirements and will be deferred prior to vesting determination. A restricted stock unit corresponds to one share of Common Stock, the vesting of which is generally contingent on the completion of a specified period of continuous employment following the grant. A performance share unit corresponds to a share of Common Stock and is subject to vesting on the basis of the achievement of specified performance targets and satisfaction of a specified period of continuous employment following the grant, generally three years. Upon vesting, a performance share unit may be settled in either shares of Common Stock or in cash. The Committee intends to continue its current practice of granting at least 50% of the value of regular cycle long-term incentive awards to the most senior executives in the form of performance share units with vesting that is contingent on achievement of pre-established performance targets measured over a three-year period. The holders of restricted stock units and performance share units are not entitled to the rights of a holder of Common Stock. |
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PROPOSAL 3 AMENDMENT AND RESTATEMENT OF THE 2005 LONG-TERM INCENTIVE PLAN
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| – | | Other Stock-Based Awards. The Plan also authorizes other types of awards valued by reference to Common Stock, which may be awarded at the discretion of the Committee. |
• | | Adjustment Events. The number of shares reserved for delivery under the Plan and the terms of awards granted under the Plan are subject to adjustment in the following circumstances. |
| – | | Stock Splits and Similar Events. In the event of a stock split, reverse stock split, share combination, recapitalization, sale of assets, stock dividend, extraordinary dividend or similar event affecting the value of the Common Stock or the number of shares outstanding, the total number of shares authorized for delivery under the Plan, the share limitations on the various types of awards permitted by the Plan, the number of shares subject to outstanding awards, and the exercise price of outstanding stock options and stock appreciation rights will be adjusted as the Board of Directors or the Committee determines as necessary or appropriate to reflect the change in the number or value of outstanding shares and to preserve the value of outstanding awards. |
| – | | Corporate Transactions. In the event of a merger, consolidation, spin-off, reorganization, stock rights offering, liquidation, divestiture of a subsidiary, affiliate or division, or other material event affecting the capital structure of UTC, the Board of Directors or the Committee in its discretion may make such substitutions or adjustments as it deems appropriate and equitable to: (i) the aggregate number and kinds of shares reserved for delivery under the Plan; (ii) the share limitations on the various types of awards permitted by the Plan; (iii) the number and kind of shares subject to outstanding awards; and (iv) the exercise price of outstanding stock options and stock appreciation rights. Such adjustments may include, without limitation, the cancellation of outstanding awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the cancelled awards as determined by the Board of Directors or the Committee to be necessary or appropriate to protect the value of participants’ interests in their awards. |
| – | | Change-in-Control. In the event of a “Change-in-Control” (as defined by the Plan), the Committee may, in its discretion, take any or all of the following actions: (i) provide that all outstanding stock options and stock appreciation rights not then exercisable and vested will immediately vest and become exercisable; (ii) cause any restrictions on outstanding restricted stock, restricted stock unit awards and other awards immediately to lapse; (iii) provide that performance-based vesting targets applicable to performance share units and other awards will be deemed satisfied and that the awards will be considered to be earned and payable in full; and (iv) make such other adjustments, substitutions or settlements with respect to outstanding awards as the Committee deems appropriate to protect participants’ interests in the awards. In addition, if within 24 months following a Change-in-Control, the employment of an award recipient is involuntarily terminated, other than for Cause (as defined by the Plan), or the award recipient resigns following a material and adverse change in compensation, responsibilities, functions or reporting relationship or resigns rather than relocate more than 50 miles from his or her job location, then such recipient will become vested in all outstanding awards as of the date of termination without any further action by the Committee. Any stock options or stock appreciation rights that were held by the award recipient as of the date of the Change-in-Control may be exercised for a period not less than the third anniversary of the date of termination or the expiration of the term of the award. |
• | | Qualified Performance-Based Awards. The Plan provides that compensation from stock options, stock appreciation rights, performance share units and other performance-based awards will generally be structured to be exempt from the limitation on deductible compensation imposed by Section 162(m) of the Internal Revenue Code. The Plan will be administered and interpreted consistent with the purpose of maintaining the exemption from the Section 162(m) deduction limitation. However, the Committee may elect to provide non-deductible compensation under this Plan and other elements of the executive compensation program. The Committee, in its discretion, may provide that qualified performance targets may be waived in the event of death, disability or Change-in-Control. Performance targets may also be adjusted to reflect changes in accounting methods and certain other events, consistent with Section 162(m). The Plan does not require that all awards qualify for the Section 162(m) exemption. The Committee is responsible for certifying to the measurement of applicable performance targets. |
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PROPOSAL 3 AMENDMENT AND RESTATEMENT OF THE 2005 LONG-TERM INCENTIVE PLAN
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Federal Income Tax Consequences
The following discussion is intended only as a brief summary of the material U.S. Federal income tax rules that are generally relevant to Plan awards. The laws governing the tax aspects of awards are highly technical and such laws are subject to change.
Upon the exercise of a stock appreciation right, an award recipient will recognize ordinary income equal to the excess of the fair market value of Common Stock on the exercise date over the fair market value of Common Stock on the date of grant. UTC will generally be entitled to a corresponding deduction equal to the amount of ordinary income that the recipient recognizes. Upon the exercise of a non-qualified stock option, the excess of the fair market value of the shares acquired on the exercise of the option over the exercise price paid (the “spread”) will constitute compensation taxable to the recipient as ordinary income. UTC will generally be entitled to a corresponding deduction equal to the amount of ordinary income recognized by the recipient. Upon the sale of Common Stock acquired upon exercise of a stock appreciation right or non-qualified stock option, the recipient will recognize long- or short-term capital gain or loss, depending on whether the recipient held the stock for more than one year from the date of exercise, and might owe an additional tax on unearned income if the recipient’s modified adjusted gross income exceeds a dollar threshold. With respect to incentive stock options (“ISOs”), a recipient generally will not recognize taxable income when the recipient exercises the ISO, unless the recipient is subject to the alternative minimum tax or ceases to be a UTC employee more than three months before the exercise date. If the recipient sells the shares more than two years after the ISO was granted and more than one year after the ISO was exercised, the recipient will recognize long-term capital gain or loss, as the case may be, measured by the difference between the stock’s selling price and the exercise price, and might owe an additional tax on unearned income if the recipient’s modified adjusted gross income exceeds a dollar threshold. UTC will not receive a tax deduction with respect to the exercise of an ISO if the one-year ISO holding period is satisfied. Award recipients do not recognize any taxable income and UTC is not entitled to a deduction upon the grant of a stock appreciation right, a non-qualified option or an ISO.
The recipient of a performance share unit, restricted stock, restricted stock unit, or other stock-based or performance-based award will not recognize taxable income at the time of grant as long as the award is subject to a substantial risk of forfeiture as a result of performance-based vesting targets, continued service requirements or other conditions that must be satisfied before payment or delivery of shares can occur. The recipient will generally recognize ordinary income when the substantial risk of forfeiture expires or is removed unless, in the case of an award other than restricted stock, the cash to be paid or shares to be delivered are deferred until a date subsequent to the vesting date. UTC will generally be entitled to a corresponding deduction equal to the amount of income the recipient recognizes. If the recipient holds shares received upon settlement of an award for more than one year, the capital gain or loss when the recipient sells the shares will be long-term. Any gain on the sale of the shares (whether long-term or short-term) might be subject to an additional tax on unearned income if the recipient’s modified adjusted gross income exceeds a dollar threshold.
Foreign Employees and Foreign Law Considerations
The Committee may grant awards to eligible participants who are foreign nationals, who are located or compensated outside of the United States, or who are otherwise subject to (or could cause UTC to become subject to) non-U.S. legal provisions or regulatory jurisdiction. With respect to such individuals, the Committee may grant awards on terms and conditions different from those specified in the Plan if, in the judgment of the Committee, such action is desirable to foster and promote the achievement of the purposes of the Plan and, for this purpose, the Committee may amend the Plan, establish sub-plans or provide provisions to award agreements for the purpose of complying with legal or regulatory requirements of countries outside the United States. The tax consequences of awards to foreign nationals who reside outside the United States will depend on the foreign tax laws and tax treaties applicable to such individuals.
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PROPOSAL 3 AMENDMENT AND RESTATEMENT OF THE 2005 LONG-TERM INCENTIVE PLAN
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Amendment of the Plan
The Board of Directors may amend, alter or discontinue the Plan at any time, subject to the following qualifications: (i) no such amendment, alteration or discontinuance may materially impair the rights of a participant with respect to a previously-granted award without the participant’s consent unless the amendment is required to comply with applicable law, stock exchange rules, tax rules or accounting rules; and (ii) no amendment may be made without the approval of UTC’s shareowners if such approval is required by applicable law or NYSE listing standards. Under NYSE listing standards, the number of shares of Common Stock available for delivery under the Plan (other than to reflect a reorganization, stock split, merger, spinoff or similar transaction) may not be increased without the approval of shareowners.
New Plan Benefits
All awards to be made under the Plan, as it is proposed to be amended and restated, are subject to the future exercise of discretion by the Committee or its delegates, and accordingly are not determinable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT AND RESTATEMENT OF THE 2005 LONG-TERM INCENTIVE PLAN.
Equity Compensation Plan Information
The following table provides information as of December 31, 2013 concerning Common Stock issuable under UTC’s equity compensation plans.
| | | | | | | | | | | | | Plan Category | | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (#) (a) | | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($/share) (b) | | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(#) (c) | | Equity compensation plans approved by security holders | | | 47,675,000 | (1) | | | $70.40 | | | | 32,275,000 | (2) | Equity compensation plans not approved by security holders | | | 959,000 | (3) | | | $47.86 | | | | 0 | | Total | | | 48,634,000 | (4) | | | $69.92 | (5) | | | 32,275,000 | (6) |
(1) | Consists of: (i) shares of Common Stock issuable upon the exercise of stock options awarded under the 1989 Long-Term Incentive Plan (“1989 LTIP”), the 2005 Long-Term Incentive Plan, as amended (“2005 LTIP”) and the Non-Employee Director Stock Option Plan (“Non-Employee Director Plan”); and (ii) shares of Common Stock issuable pursuant to outstanding restricted stock unit and performance share unit awards, assuming performance at the target level. Up to an additional 2,696,000 could be issued if performance goals are achieved above target. The weighted average exercise price of outstanding options, warrants and rights shown in column (b) take into account only the shares identified in clause (i). |
(2) | Represents the maximum number of shares of Common Stock available to be awarded as of December 31, 2013. |
(3) | Consists of stock options awarded under the UTC Employee Stock Option Plan. This Plan authorized the award of non-qualified stock options to employees below the executive level considered to have the potential to contribute to the long-term success of UTC. These options have a fixed option price equal to the fair market value of Common Stock on the date the stock option was granted. Options vested three years after the grant date and have a ten-year term. Effective April 14, 2005, all equity incentive compensation awards are provided under the shareowner-approved 2005 LTIP. |
(4) | As of February 10, 2014, this number increased to 50,732,000, reflecting grants under the 2005 Long-Term Incentive Plan, as well as exercises and cancellations since December 31, 2013. The 50,732,000 shares outstanding include: (i) 46,943,000 issuable upon the exercise of stock options and stock appreciation rights; (ii) 1,222,000 restricted stock units; and (iii) 2,567,000 performance share units at the target level. Up to an additional 2,567,000 performance share units could be issued if performance goals are achieved above target. |
(5) | As of February 10, 2014, the weighted-average exercise price is $74.87 and the weighted-average remaining term is six years for outstanding options and stock appreciation rights. |
(6) | As of February 10, 2014, 22,967,000 shares of Common Stock remain available to be awarded, after taking into account grants, as well as exercises and cancellations since December 31, 2013. |
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Proposal 44: Advisory Vote to Approve Named Executive Officer Compensation ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
Each year we ask shareowners to approve, on an advisory basis, the compensation of UTC’s Named Executive Officers. We encourage you, before voting, to read the Compensation Discussion and Analysis (“CD&A”) on pages 2127 to 46,55, along with the compensation tables on pages 4857 to 58,68, and to review all compensation information in light ofconsider the information the CD&A provides about the correlationalignment between UTC’s performance and our compensation and performance.executives’ compensation. The CD&A also describes recent changes to our compensation programs that are designed to enhance corporate governance and align executive and shareowner alignment objectives.interests. Under the rules of the Securities and Exchange Commission, your vote is advisory and will not be binding on the Board or the Company. However, the Board will review the voting results and give them serious consideration when making future executive compensation decisions. As more fully discussed in the CD&A, the program’s fundamental objective of UTC’s compensation program is to closely align compensation opportunities with the long-term interests of our shareowners. For senior leadership, the substantial majority of compensation is both stock-based and contingent on performance. We base long-term incentive compensation on the achievement of performance metrics that link directly to sustainable performance and long-term shareowner value. We use relevant benchmarking to assure that overall compensation levels and opportunities align effectively with competitive market practices. Details of performance metrics and benchmarking can be found in the CD&A on pages 34 and 29 of this Proxy Statement. The design and operation of an executive compensation program for a large, complex, global enterprise such as UTC necessarily involves multiple objectives. The Board believes that UTC’s executive compensation programs have been effective in enabling the attractionattracting and retention ofretaining senior business leaders with the requisite talent and skills to drive UTC’s financial, strategic and operational performance. As described on page 2733 of this Proxy Statement, UTC’s executive compensation programs are designed to support the following guiding principles: • | | Pay for performance:Pay-for-performance:A substantial portion of compensation should be variable, contingent and directly linked to individual, Company and business unit performance. |
• | | • | Shareowner alignment:The financial interests of executives should be aligned with the long-term interests of our shareowners through stock-based compensation and performance metrics that correlate with long-term shareowner value. |
• | | • | Long-term focus:For our most senior executives, long-term, stock-based compensation opportunities should significantly outweigh short-term, cash-based opportunities. Annual objectives should complement sustainable long-term performance. |
• | | • | Competitiveness:Total compensation should be sufficiently competitive to attract, retain and motivate a leadership team capable of maximizing UTC’s performance. Each element should be benchmarked relative to peers. |
• | | • | Balance:The portion of total compensation contingent on performance should increase with an executive’s level of responsibility. Annual and long-term incentive compensation opportunities should reward the appropriate balance of short- and long-term financial, strategic and strategicoperational business results. |
• | | • | Responsibility:Compensation should take into account each executive’s responsibility to act in accordance with our ethical, environmental, health and safety objectives at all times. Financial and operating performance must not compromise these values. The need forA complete commitment to ethical and corporate responsibility is a fundamental belief underlyingprinciple incorporated into all aspects of our compensation program, from setting targets to conducting annual performance assessments.program. |
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PROPOSAL 44: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATIONAdvisory Vote to Approve Named Executive Officer Compensation ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
2013 was a very successful year for UTC. We generated earnings per shareAs in the past, long-term sustainable growth continues to be the driver behind the strategic and financial decisions of $6.21. Total shareowner return equaled 42% for the year. From a longer-term perspective,our senior executives. This can be seen in our cumulative total return to shareowners over the five- and ten-year periodsperiod ending December 31, 20132015, which equaled 140% and 197%, respectively, well115%. These returns are in excess of results for the Dow Jones Industrial Average (111%) and the S&P 500 (102%) indices for the same periods. When compared toperiod as well as the Capital Goods industry sector (99%), of which UTC is a component, UTC’s cumulative total shareowner return also outperformed the sector for the ten-year period ending on December 31, 2013.component. The Board believes that our executive compensation program plays a key role in driving and sustaining this level of performance.
The Board remains committed to robust corporate governance practices and strongly shares the interest of shareowners in maintaining effective, performance-based executive compensation programs at UTC. In that regard, as discussed in the CD&A, the Committee has over the years made severala number of changes to our executive compensation programs, often in direct response to shareowner feedback.input from shareowners. The Board believes that UTC’s executive compensation programs have a proven record of effectively driving superior levels of financial performance, alignment ofaligned pay with performance high ethical standardsby incentivizing strong financial performance while encouraging long-term growth objectives. A balanced, competitive compensation program is also essential for attracting and attraction and retention of highlyretaining talented executives. Accordingly, the Board recommends that shareowners vote FOR the following resolution: “RESOLVED, that the compensation of UTC’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related information provided on pages 2127 to 5868 of this Proxy Statement, is hereby APPROVED on an advisory basis.” As a matter of law, the approval or disapproval of this Proposal 4 may not be construed as overruling any decision by UTC or the Board, or as imposing any duty or obligation on UTC, the Board or any individual director. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ABOVE RESOLUTION TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF UTC’S NAMED EXECUTIVE OFFICERS.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THEABOVE RESOLUTION TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATIONOF UTC’S NAMED EXECUTIVE OFFICERS. | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x81x1.jpg) FOR |
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General Information RegardingAbout the Annual Meeting ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Your vote is very important.YOUR VOTE IS VERY IMPORTANT.
Please vote your shares in advance of the meeting, using one of the voting methods described below. To conserve natural resources and reduce costs, we are sending manymost shareowners a one-pagebrief Notice of Internet Availability of Proxy Materials, as permitted by SEC rules. This Notice explains how you can access UTC’s proxy materials on the Internet and how to obtain printed copies if you prefer. It also tells youexplains how you can choose either electronic or print delivery of proxy materials for future Annual Meetings. WHO CAN VOTE You are entitled to vote at the Annual Meeting if you owned shares of Common Stock at the close of business on March 3, 2014,February 29, 2016, which is referred to as the “record date.” A list of registered shareowners entitled to vote at the meeting will be available at UTC’s offices, One Financial Plaza, Hartford,10 Farm Springs Road, Farmington, CT 06032 during the ten days prior to the meeting, and also at the meeting. ATTENDING THE MEETING You or your authorized proxy can attend the Annual Meeting if you were a registered or beneficial ownershareowner of Common Stock at the close of business on March 3, 2014.February 29, 2016. Because seating is limited, we
We ask that shareowners request tickets in advance to attend. To request an admission ticket to the Annual Meeting, contact the Corporate Secretary at UTC, One Financial Plaza, Hartford,10 Farm Springs Road, Farmington, CT 0610306032 or by email to: corpsec@corphq.utc.com. • | | If you own shares through an account with a broker, bank, trustee or other intermediary, you must also send a copy of an account statement, or a “legal proxy” from your intermediary, showing the number of shares you owned as of the record date. |
• | | • | If your shares are registered in your name with UTC’s stock registrar and transfer agent, Computershare Trust Company, N.A. (“Computershare”), or if you own shares through a UTC employee savings plan, there is no need to provide evidence of ownership of shares. UTC can verify your ownership of Common Stock. |
If you forget to bring a ticket, you will be admitted to the meeting only if seats remainare available and you provide proof of identification and satisfactory evidence that you were a registered shareowner or beneficial shareowner of Common Stock as of the record date. 76 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
GENERAL INFORMATION REGARDING THE ANNUAL MEETING QUORUM FOR THE MEETING We
Under the Company’s Bylaws, we can conduct business at the Annual Meeting only if the holders of a majority of the outstanding shares on the record date are present either in person or by proxy. The presence of at least that number of shares constitutes a “quorum”. As of the record date, 916,444,012836,729,909 shares of Common Stock were issued and outstanding. HOW TO VOTE If you own shares directly in your name… If your shares are registered in your name on the records of Computershare, you may vote in several different ways. • | | Vote on the Internet.You can vote online at:www.proxyvote.comwww/proxyvote.com. |
• | | • | Vote by Telephone.In the United States or Canada, you can vote by using a touch-tone telephone. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. | | | • | Vote by Mobile Device.You can scan the QR code provided with your proxy materials. |
Internet, telephone and telephonemobile device voting facilities will be available 24 hours a day until 11:59 p.m., Eastern Daylight Time, on April 27, 201424, 2016 (except in the case offor participants in the UTC Employee Savings Plan, who must submit voting instructions earlier, as described below). To authenticate your Internet, telephone or telephonemobile device vote, you will need to enter your confidential voter control number as shown on the voting materials you received. If you vote via the Internetonline, by telephone or by telephone,mobile device, you do not need to return a proxy card or voting instruction card. • | | Vote by Mail.You can mail the proxy card or voting instruction cardform enclosed with your printed proxy materials. Mark, sign and date your proxy card or voting instruction form and return it in the postage-paid envelope we have provided, or in an envelope addressed to Vote Processing, c/o Broadridge Financial Solutions, 51 Mercedes Way, Edgewood, NY 11717. Please allow sufficient time for delivery of your letterproxy card if you decide to vote by mail. |
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GENERAL INFORMATION REGARDING THE ANNUAL MEETING
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• | | Vote at the Annual Meeting.Most shareowners may vote by submitting a ballot in person at the Annual Meeting. If you have already voted via the Internet,online, by telephone, by mobile device or by mail, your vote at the Annual Meeting will supersede your prior vote. |
If you own your shares through an account with a bank, broker, trustee or other intermediary, sometimes referred to as owning in “street name”… Your intermediary will send you printed copies of the proxy materials or tell youprovide instructions on how to access proxy materials electronically. You are entitled to direct the intermediary how to vote your shares by following the voting instructions it provides to you. If you hold shares in the UTC Employee Savings Plan… You can direct the voting of your proportionate interest in shares of Common Stock held by the ESOP Fund and the Common Stock Fund under the UTC Employee Savings Plan by returning a voting instruction card or by providing voting instructions via the Internet, by telephone or by telephone.mobile device. If you do not provide voting instructions (or if your instructions are incomplete or unclear) as to one or more of the matters to be voted on, the trustee will vote your proportionate interest in shares held by the ESOP Fund for the voting choice that receives the greatest number of votes based on voting instructions received from ESOP Fund participants andparticipants. Similarly, the trustee will vote your uninstructed proportionate interest in shares held by the Common Stock Fund for the voting choice that receives the greatest number of votes based on voting instructions received from the Common Stock Fund participants. The trustee also will vote all shares of Common Stock held in the ESOP Fund that are not allocated to participant accounts for the voting choice that receives the greatest number of votes from ESOP Fund participants who submit voting instructions with respect to their allocated shares. Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 77 |
GENERAL INFORMATION REGARDING THE ANNUAL MEETING SPECIAL VOTING DEADLINE FOR PARTICIPANTS IN THE UTC EMPLOYEE SAVINGS PLAN:Broadridge Financial Solutions must receive your voting instructions by 11:00 a.m., Eastern Daylight Time, on April 24, 2014 in order21, 2016, so it will have time to tabulate theall voting instructions of participants and communicate those instructions to the trustee, who will vote the shares held by the Savings Plan. Because the Savings Plan trustee is designated to vote on your behalf, you will not be able to vote your shares held in the Savings Plan as described above, Savings Plan participants will not be able to votein person at the meeting their shares held in the Savings Plan.meeting.
Revoking a Proxyproxy or voting instructions If you hold shares registered in your name, you may revoke your proxy by: • | | Writing to the Corporate Secretary and providing your name and account information |
• | | • | If you submitted your proxy by telephone, or mobile device via the Internet, by using the same methodaccessing those voting methods and following the instructions given for revoking a proxy |
• | | Submitting• | If you submitted a signed proxy card, by submitting a new proxy card with a later date (which will override your earlier proxy)proxy card) |
• | | • | Voting in person at the Annual Meeting |
If you hold your shares in “street name,” you must follow the directions provided by your bank, broker, trustee or other intermediary for revoking or modifying your voting instructions. VOTING PROCEDURES How Shares Will Be Votedshares will be voted Each share is entitled to one vote.vote (other than in the case of cumulative voting, as described below). Your shares will be voted in accordance with your instructions. In addition, if you have returned a signed proxy card or submitted voting instructions by telephone, mobile device or via the Internet,online, the proxy holders will have, and intend to exercise, discretion to vote your shares (other than shares held in the UTC Employee Savings Plan) in accordance with their best judgment on any matters not identified in thethis Proxy Statement on whichthat are brought to a vote is taken at the Annual Meeting. At present we do not know of any such additional matters. If your shares are registered in your name and you sign and return a proxy card or vote via the Internet, by telephone, mobile device or by mailonline butdo notgive voting instructions on a particular matter, the proxy holders will be authorized to vote your shares on that matter in accordance with the Board’s recommendation. If you hold your shares through an account with a broker anddo notgive voting instructions on a matter, under the rules of the New York Stock Exchange your broker is permitted to vote in its discretion only on Proposal 2 (appointment of the Independent Auditor) and is required to withhold itsa vote on each of the other Proposals, the withholding of which is referred to asresulting in a so-called “broker non-vote.” The impact of abstentions and broker non-votes on the overall vote is shown in the following table. | | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners78 | | 71![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
GENERAL INFORMATION REGARDING THE ANNUAL MEETING ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
Votes Requiredrequired and Effecteffect of Abstentionsabstentions and Broker Non-Votesbroker non-votes | | | | | | | Matter | | Required Vote | | Impact of Abstentions | | Impact of Broker Non-Votes | Election of Directors | | Votes FOR a nominee must exceed 50% of the votes AGAINSTcast with respect to that nominee. | | Not counted as votes cast; no impact on outcome. | | Not counted as votes cast; no impact on outcome. | Appointment of PricewaterhouseCoopers LLP to serve as Independent Auditor for 2016 | | Approval by a majority of the votes making up the quorum. | | Counted toward quorum; impact equivalent tois the same as a vote AGAINST. | | Not applicable. | ApprovalAmendment to our Restated Certificate of amendmentsIncorporation to
LTIP Eliminate Cumulative Voting for Directors | | Approval by a majority of the votes making up the quorum. outstanding shares. | | Counted toward quorum; impact equivalent toImpact is the same as a vote AGAINST.
| | Counted toward quorum; impact equivalent toImpact is the same as a vote AGAINST.
| An Advisory voteVote to approve Approve Named Executive Officer compensation | | Votes FOR the proposal must exceed votes AGAINST it. | | Not counted as votes cast; no impact on outcome. | | Not counted as votes cast; no impact on outcome. |
Cumulative Votingvoting for Directorsdirectors(1) You have the right to “cumulate” your votes in the election of UTC directors. This means that you are entitled in the election of directors to a number of votes equal to the number of shares of Common Stock you own, multiplied by the number of directors to be elected. You may cast all of these votes for a single nominee or distribute them among any two or more nominees, in your discretion. If your shares are registered in your name and you wish to exercise cumulative voting rights, you must submit a proxy card by mail or attend the Annual Meeting and vote in person by ballot. Your proxy card or ballot must specify how you want to allocate your votes among the nominees. TelephoneThe telephone, mobile device and Internet voting facilities do not accommodate cumulative voting. If you own your shares in “street name,” contact your broker, bank, trustee or other intermediary for directions on how to exercise cumulative voting rights using the voting instruction card, or to request a legal proxy so you can vote your shares directly. The Board of Directors is soliciting discretionary authority to cumulate votes with respect to the election of directors. If shareowners (other than UTC Employee Savings Plan participants) return a signed proxy card or submit voting instructions without providing instructions about cumulative voting, or if shareowners (other than UTC Employee Savings Plan participants) vote by telephone, mobile device or via the Internet, they will confer on the designated proxy holders discretionary authority to exercise cumulative voting. Pursuant toUnder this discretionary authority, the designated proxy holders may, if they elect to do so, allocate the aggregate number of votes (other than votes in respect of shares held in the UTC Employee Savings Plan) among the nominees in the manner recommended by the Board of Directors or otherwise determined by the proxy holders. However, the proxy holders will not cast any votes for any nominee for whom you have given instructions to vote against or withhold a vote. If you do not wish to grant the proxy holders authority to cumulate your votes in the election of directors, you must explicitly state that objection on your proxy card or voting instruction card. The telephone, mobile device and Internet voting facilities do not accommodate objections to granting that authority. (1) | Although the Board has submitted a proposal included at pages 72 to 73 of this Proxy Statement to be voted upon by shareowners at the 2016 Annual Meeting to eliminate cumulative voting in the future, currently shareowners have the right to cumulate their votes. |
Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 79 |
GENERAL INFORMATION REGARDING THE ANNUAL MEETING VOTE COUNTING Broadridge Financial Solutions (“Broadridge”), an independent entity, will receive and tabulate the vote in connection with the Annual Meeting. Representatives of Broadridge will act as the independent Inspectors of Election and in this capacity will supervise the voting, decide the validity of proxies and certify the results. Broadridge has been instructed that the vote of each shareowner must be kept confidential and may not be disclosed (except in legal proceedings or for the purpose of soliciting shareowner votes in a contested proxy solicitation). INFORMATION ABOUT PROXY SOLICITATION Employees of UTC may solicit proxies on behalf of the Board of Directors by mail, email, in person and by telephone. These employees will not receive any additional compensation for these activities. UTC will bear the cost of soliciting proxies and will reimburse banks, brokers, trustees and other intermediaries for their reasonable out-of-pocket | | | 72 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
GENERAL INFORMATION REGARDING THE ANNUAL MEETING
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expenses for forwarding proxy materials to shareowners. UTC has retained Georgeson Inc. to assist in distributing proxy materials and soliciting proxies for a fee of $16,000, plus out-of-pocket expenses. ELECTRONIC ACCESS TO PROXY MATERIALS If you hold shares registered in your name, you may sign up atat:http://www.computershare-na.com/greento receive electronic access to proxy materials for future meetings, rather than receiving mailed copies. If you choose electronic access, you will receive an email notifying you when the Annual Report and Proxy Statement are available, with electronic links to access the documents (in PDF and HTML formats) on a website and instructions on how to vote via the Internet.online. Your enrollment for electronic access will remain in effect for subsequent years, althoughunless you cancel it, which you can cancel itdo up to two weeks prior tobefore the record date for any future annual meeting. If you own your shares in “street name,” you may be able to obtain electronic access to proxy materials by contacting theyour broker, bank, trustee or other intermediary, or by contacting Broadridge at:http://enroll.icsdelivery.com/utc. ELIMINATING DUPLICATE MAILINGS If you share an address with one or more other UTC shareowners, you may have received notification that you will receive only a single copy of the Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials for your entire household unless you or another UTC shareowner at that address gives contrary instructions to UTC’s stock registrar and transfer agent or yourto the bank, broker, trustee or other intermediary that provides the notification receives contrary instructions from any UTC shareowner at that address.notification. This practice, known as “householding,” is designed to reduce printing and mailing costs. Upon written or oral request, UTC will deliver promptly a separate copy of the Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials to any shareowner at a shared address to which the Company delivered a single copy of any of these documents. If you wish to receive free of charge a separate Annual Report, Proxy Statement or Notice of Internet Availability of Proxy Materials this year or in the future, or if you are receiving multiple copies at your address and would like to enroll in “householding,” please contact UTC’s stock registrar and transfer agent, Computershare Trust Company, at 1-800-488-9281. If you own your shares in “street name,” please contact your broker, bank, trustee or other intermediary to make your request. SUBMITTING PROPOSALS AND NOMINATIONS FOR 20152017 ANNUAL MEETING Shareowner proposals.Proposals.In order for a shareowner proposal to be considered for inclusion in UTC’s Proxy Statement for the 20152017 Annual Meeting under SEC Rule 14a-8, our Corporate Secretary must receive itsuch proposal in writing by November 14, 2014.22, 2016. 80 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
GENERAL INFORMATION REGARDING THE ANNUAL MEETING In order to introduce a proposal for vote at the 20152017 Annual Meeting (other than a shareowner proposal included in the proxy statement in accordance with SEC Rule 14a-8), UTC’s Bylaws require that the shareowner send advance written notice to the Corporate Secretary for receipt no earlier than November 28, 2014December 27, 2016 and no later than January 28, 2015.26, 2017. This notice must include the information specified by Section 1.10 of the Bylaws, a copy of which is available at:http://utc.com/StaticFiles/UTC/StaticFiles/bylaws.pdfwww.utc.com/Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx. Director nominations.Nominations at the 2017 Annual Meeting.UTC’s Bylaws require that a shareowner who wishes to nominate a personcandidate for election as a director at the 20152017 Annual Meeting (other than pursuant to the “proxy access” provisions of Section 1.12 of the Bylaws) must send advance written notice to the Corporate Secretary for receipt no earlier than November 28, 2014December 27, 2016 and no later than January 28, 2015.26, 2017. This notice must include the information, documents and agreements specified by Section 1.10 of the Bylaws, a copy of which is available at:http://utc.com/StaticFiles/UTC/StaticFiles/bylaws.pdfwww.utc.com/Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx. Director Nominations by Proxy Access.UTC’s Bylaws require that an eligible shareowner who wishes to have a nominee of that shareowner included in UTC’s proxy materials for the 2017 Annual Meeting pursuant to the “proxy access” provisions of Section 1.12 of the Bylaws must send advance written notice to the Corporate Secretary for receipt no earlier than October 23, 2016 and no later than November 22, 2016. This notice must include the information, documents and agreements specified by Section 1.12 of the Bylaws, a copy of which is available at:http://www.utc.com/Our-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx. | | | United Technologies CorporationProxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 81 |
Other Information ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg)
Cautionary StatementNote Concerning Factors That May Affect Future Performance.Results.This Proxy Statement and the accompanying materials containcontains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases and other measures of financial performance.performance or potential future plans, strategies or transactions. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: • | | the effect of economic conditions in the industries and markets in which we operate in the United StatesU.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, changes in government procurement priorities and availability of funding, financial difficulties (including bankruptcy)condition of commercial airlines, the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers; |
• | challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; | • | future levels of indebtedness and capital spending and research and development spending; | • | future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; | • | delays and disruption in delivery of materials and services from suppliers; | • | customer- and Company-directed cost reduction efforts and restructuring costs and savings and other consequences thereof; | • | the scope, nature, impact or timing of acquisition divestiture and joint venturedivestiture activity, including among other things integration of acquired businesses into our existing businesses and realization of synergies and opportunities for growth and innovation; |
• | | future levels of indebtedness and capital spending and research and development spending;new business opportunities; |
• | | future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; |
• | | delays and disruption in delivery of materials and services from suppliers; |
• | | customer- and Company-directed cost reduction efforts and restructuring costs and savings and other consequences thereof; |
• | | the development, production, delivery, support, performance and anticipated benefits of advanced technologies and new products and services; |
• | | our ability to identify, monitor and mitigate risks inherent inrealize the operationsintended benefits of UTC and its business units;organizational changes; |
• | | the impact of the negotiation of collective bargaining agreements and labor disputes; |
• | | the anticipated benefits of diversification and balance of operations across product lines, regions and industries; |
• | the timing and scope of future repurchases of our common stock; | • | the outcome of legal proceedings, investigations and other contingencies; |
• | | future repurchases of our Common Stock; |
• | | pension plan assumptions and future contributions; | • | the impact of the negotiation of collective bargaining agreements and labor disputes; |
• | | the effect of changes in tax, environmental and other laws and regulations or political conditions in the United StatesU.S. and other countries in which we operate.operate; and |
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OTHER INFORMATION the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we operate. In addition, our 20132015 Annual Report on Form 10-K includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. See the “Notes to Condensed Consolidated Financial Statements” under the heading “Contingent“Note 17: Contingent Liabilities,” the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Critical Accounting Estimates,” “Results of Operations,” and “Liquidity and Financial Condition,” and “Critical Accounting Estimates,” and the section titled “Risk Factors” in our 20132015 Form 10-K. OurForm 10-K also includes important information as to these factors in the “Business” section under the headings “General,” “Description of Business by Segment” and “Other Matters Relating to Our Business as a Whole,” and in the “Legal Proceedings” section. Additional important information as to these factors is included in Exhibit 13 to our 2013 Annual Report2015 Form 10-K in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Restructuring Costs,” “Environmental Matters” and “Restructuring Costs.“Governmental Matters.” The forward-looking statements in this Proxy Statement speak only as of the date of this Proxy Statement.report or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking | | | 74 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
OTHER INFORMATION
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statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed fromtime-to-time time to time in our other filings with the SEC. United Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or trade names of United Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and product and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners.
Annual Report on Form 10-K for 20132015.. UTC undertakes towill provide, without charge, to any shareowner submitting an oral or written request, a copy of the UTC Annual Report on Form 10-K for 20132015 filed with the SEC. Requests may beSEC to any shareowner upon request directed to: UTC Corporate Secretary, United Technologies Corporation, One Financial Plaza, Hartford,10 Farm Springs Road, Farmington, CT 06103,06032, Telephone (860) 728-7870,1-860-728-7870, or by email to: corpsec@corphq.utc.com. Corporate Governance Information and Code of Ethics.UTC’s Corporate Governance Guidelines and the charters for each Board Committee are available on UTC’s website:http://www.utc.com/Governance/Board+of+DirectorsOur-Company/Corporate-Governance/Pages/Governance-Documents-and-Policies.aspx. UTC’s Code of Ethics is available on UTC’s website:http://www.utc.com/Governance/Ethics/Code+of+EthicsOur-Company/Ethics-And-Compliance/Pages/Code-of-Ethics.aspx. Printed copies will be provided, without charge, to any shareowner upon request addressed to the Corporate Secretary. The Code of Ethics applies to all directors and employees, including the principal executive, financial and accounting officers. Shareowners and other interested persons may send communications to the Board, the Chairman, the Lead Director or one or more non-management directors by using the contact information provided on UTC’s website under the headings “Governance,by accessing sequentially “Corporate Governance,” “Board of Directors,” “Contact UTC’s Board.” Shareowners and interested persons also may send communications by letter addressed to the Corporate Secretary at UTC, One Financial Plaza, Hartford,10 Farm Springs Road, Farmington, CT 0610306032 or by contacting the Business Practices OfficeUTC Ombudsman at 860-728-6485.1-800-871-9065. These communications will be received and reviewed by UTC’s Business PracticesGlobal Ethics and Compliance Office. The receipt of concerns about UTC’s accounting, internal controls, auditing matters or business practices will be reported to the Audit Committee. The receipt of other concerns will be reported to the appropriate Committee(s) of the Board. UTC employees also can raise questions or concerns confidentially or anonymously using UTC’s Ombudsman/DIALOG program. Transactions with Related Persons.UTC has adopted a written policy for the review of transactions with related persons. The policy requires review, approval or ratification of transactions exceeding $120,000 in which UTC is a participant and in which a UTC director, executive officer, a beneficial owner of five percent or more of UTC’s outstanding shares, or an immediate family member of any of the foregoing persons has a direct or indirect material interest. TheseAny such transactions must be reported for review by the Corporate Secretary and the Corporate Vice President, Global Compliance, who will determine whether the transaction may be a transaction with a related person, as such term is defined under UTC’s policy and the relevant SEC rules. Following review by these officers, the Board’s Committee on Nominations and Governance must determine whether the transaction can be approved or not, based on whether the transaction is determined to be in, or not inconsistent with, the best interests of UTC and its shareowners. In making this determination, the Committee must take into consideration whether the transaction is on terms no less favorable to UTC than those Proxy Statement and Notice of 2016 Annual Meeting of Shareowners | 83 |
OTHER INFORMATION available with other parties and the related person’s interest in the transaction. UTC’s policy permits employment of related persons possessing qualifications consistent with UTC’s requirements for non-related persons in similar circumstances, provided the employment is approved by the SeniorExecutive Vice President & Chief Human Resources & OrganizationOfficer and the Corporate Vice President, Global Compliance. State Street Corporation (“State Street”), acting in various fiduciary capacities, filed a Schedule 13G with the SEC reporting that as of December 31, 20132015 State Street and certain of its subsidiaries collectively were the beneficial owners of more than five percent of UTC’s outstanding shares of Common Stock. A subsidiary of State Street is the trustee for the UTC Employee Savings Plan Master Trust. Other State Street subsidiaries provide investment management services. During 2013,2015, the Savings Plan Trust paid State Street and its subsidiaries approximately $2.3$2.2 million for services as trustee, as investment managers and for administrative and other services. | | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 75 |
OTHER INFORMATION
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BlackRock, Inc. (“BlackRock”) filed a Schedule 13G with the SEC reporting that as of December 31, 20132015 BlackRock and certain subsidiaries collectively were the beneficial owners of more than five percent of UTC’s outstanding shares of Common Stock. During 2013,2015, BlackRock acted as an investment manager for certain assets within UTC’s pension plans and Employee Savings Plan. BlackRock received approximately $5.9$2.9 million for such services. Each of the relationships described above was reviewed and ratifiedapproved in accordance with UTC’s policy for review of transactions with related persons. Section 16(a) Beneficial Ownership Reporting Compliance.Reporting.Section 16(a) of the Securities Exchange Act of 1934, as amended, requires certain of our officers, andas well as each director and eachany beneficial owner of more than ten percent of UTC Common Stock to file reports with the SEC regarding their holdings and transactions in UTC’s equity securities. Based upon a review of these reports as filed with the SEC during or with respect to 2013,2015, and upon written confirmation from our directors and officers, we believe that each director and covered officer met these filing requirements, except that there were inadvertent delays in reporting a gift of 125 shares of Common Stock by Elizabeth B. Amato, Senior Vice President, Human Resources & Organization, and her acquisition of 27 shares of Common Stock through reinvestment of dividends. The required report was subsequently filed.requirements. UTC is not aware of any beneficial owners of more than ten percent beneficial owner (as such term is defined under SEC Rule 16a-1) of UTC Common Stock. Incorporation by Reference.In connection with our discussion of director and executive compensation, we have incorporated by reference in this Proxy Statement certain information included infrom Note 12, Employee Benefit Plans, to the Consolidated Financial Statements in Exhibit 13 to UTC’s 20132015 Annual Report on Form 10-K filed on February 6, 2014. Only those11, 2016; these are the only portions of such filings specified in the preceding sentencethat are incorporated by reference in this Proxy Statement. Company Names, Trademarks and Trade Names.United Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and product and service designators are either the registered or unregistered trademarks or trade names of United Technologies Corporation and its subsidiaries. Names of other companies, abbreviations thereof, logos of other companies, and product and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners. | | | 7684 | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x3_c83913x4x2.jpg) |
United Technologies Corporation |
Appendix A PROPOSED AMENDMENT TO UTC’S RESTATED CERTIFICATE OF INCORPORATION The Restated Certificate of Incorporation of United Technologies Corporation would be amended and restated to reflect the following amendment, in order to delete the current text included in Clause (h) of Article Eighth and replace that text with “[Reserved]”: (h)At all elections of directors of the Corporation, each holder of Common Stock shall be entitled to as many votes as shall equal the number of his shares of such stock multiplied by the number of directors to be elected by the holders of Common Stock, and he may cast all of such votes for a single director or may distribute them among the number to be voted for by the holders of the Common Stock, or any two or more of them as he may see fit. [Reserved]. Proxy Statement and Notice of 20142016 Annual Meeting of Shareowners | 85 |
Appendix AB Proposed Amendment and Restatement of the UTC 2005 Long-Term Incentive Plan
![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g68v30.jpg) Reconciliation of Non-GAAP Measures to Corresponding GAAP Measures UNITED TECHNOLOGIES CORPORATION LONG-TERM INCENTIVE PLANUnited Technologies Corporation
Amended
Reconciliation of Net Sales to Adjusted Net Sales (dollars in millions) | | 2015 | | | 2014 | | | 2013 | | Net sales | | $ | 56,098 | | | $ | 57,900 | | | $ | 56,600 | | Adjustments to net sales: | | | | | | | | | | | | | Pratt & Whitney – charge resulting from customer contract negotiations | | $ | 142 | | | | — | | | | — | | UTC Aerospace Systems – charge resulting from customer contract negotiations | | $ | 210 | | | | — | | | | — | | Adjusted net sales | | $ | 56,450 | | | $ | 57,900 | | | $ | 56,600 | |
Reconciliation of Adjusted Net Income from Continuing Operations Attributable to Common Shareowners and restated effective April 28, 2014Adjusted Diluted Earnings per Share to Corresponding GAAP Measures SECTION 1. Purpose
The purpose
(dollars in millions, except per share amounts) | | 2015 | | | 2014 | | | 2013 | | Net income attributable to common shareowners | | $ | 7,608 | | | $ | 6,220 | | | $ | 5,721 | | Less: Income from discontinued operations attributable to common shareowners | - | $ | 3,612 | | - | $ | 154 | | - | $ | 456 | | Net income from continuing operations attributable to common shareowners | | $ | 3,996 | | | $ | 6,066 | | | $ | 5,265 | | Adjustments to net income from continuing operations attributable to common shareowners: | | | | | | | | | | | | | Restructuring costs | | $ | 396 | | | $ | 354 | | | $ | 431 | | Significant non-recurring and non-operational charges (gains) | | $ | 1,446 | | - | $ | 240 | | - | $ | 271 | | Income tax expense (benefit) on restructuring costs and significant non-recurring and non-operational items | - | $ | 617 | | - | $ | 7 | | - | $ | 38 | | Significant non-recurring and non-operational charges (gains) recorded within income tax expense | | $ | 342 | | - | $ | 284 | | - | $ | 154 | | Total adjustments to net income from continuing operations attributable to common shareowners | | $ | 1,567 | | - | $ | 177 | | - | $ | 32 | | Adjusted net income from continuing operations attributable to common shareowners | | $ | 5,563 | | | $ | 5,889 | | | $ | 5,233 | | Weighted average diluted shares outstanding | | | 883 | | | | 912 | | | | 915 | | Diluted earnings per share — net income attributable to common shareowners | | $ | 8.61 | | | $ | 6.82 | | | $ | 6.25 | | Net income from discontinued operations | | $ | 4.09 | | | $ | 0.17 | | | $ | 0.50 | | Diluted earnings per share—Net income from continuing operations attributable to common shareowners | | $ | 4.53 | | | $ | 6.65 | | | $ | 5.75 | | Impact of non-recurring and non-operational charges (gain) on diluted earnings per share | | $ | 1.77 | | - | $ | 0.19 | | - | $ | 0.03 | | Adjusted diluted earnings per share—Net income from continuing operations attributable to common shareowners | | $ | 6.30 | | | $ | 6.46 | | | $ | 5.72 | |
Reconciliation of Cash Flow From Operating Activities of Continuing Operations to Free Cash Flow (dollars in millions) | | 2015 | | | 2014 | | | 2013 | | Cash flow provided by operating activities of continuing operations | | $ | 6,698 | | | $ | 6,994 | | | $ | 7,314 | | Less: Capital expenditures | | $ | 1,652 | | | $ | 1,594 | | | $ | 1,569 | | Free cash flow from continuing operations | | $ | 5,046 | | | $ | 5,400 | | | $ | 5,745 | | Net income from continuing operations attributable to common shareowners | | $ | 3,996 | | | $ | 6,066 | | | $ | 5,265 | | Free cash flow from continuing operations as a percentage of net income from continuing operations attributable to common shareowners | | | 126 | % | | | 89 | % | | | 109 | % |
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APPENDIX B United Technologies Corporation (the “Company”) reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). However, management believes that certain non-GAAP financial measures provide users with additional meaningful financial information that should be considered when assessing our ongoing performance. Adjusted Net Sales, Adjusted Net Income, Adjusted Diluted EPS and Free Cash Flow are non-GAAP financial measures. Adjusted Net Sales represents Net Sales from continuing operations excluding significant items of a non-recurring and non-operational nature. Adjusted Net Income represents net income from continuing operations excluding restructuring costs and other significant items of a non-recurring and non-operational nature. Adjusted Diluted EPS represents diluted earnings per share from continuing operations, excluding restructuring costs and other significant items of a non-recurring and non-operational nature. Free Cash Flow represents cash flow from operating activities of continuing operations less capital expenditures. Management believes Adjusted Net Sales, Adjusted Net Income, Adjusted Diluted EPS are useful in providing period to period comparisons of the Planresults of the Company’s ongoing operational performance. Management believes Free Cash Flow is a useful measure of liquidity and an additional basis for assessing the Company’s ability to align shareowner and management interests throughFund its activities, including the financing of acquisitions, debt service, repurchases of UTC’s common stock and performance-based awards linkeddistribution of earnings to shareowner valueshareowners. The preceding tables provide a reconciliation of these non-GAAP measures to the corresponding amounts prepared in accordance with generally accepted accounting principles. Adjusted Net Sales, Adjusted Net Income, Adjusted Diluted EPS and Free Cash Flow should not be considered in isolation or as substitutes for analysis of the Company’s results as reported in accordance with GAAP. Other companies may calculate Adjusted Net Sales, Adjusted Net Income, Adjusted Diluted EPS and Free Cash Flow differently than the Company does, limiting the usefulness of those measures for comparisons with other companies. Non-GAAP financial measures should be viewed in addition to, give UTCand not as an alternative for, the Company’s reported results prepared in accordance with GAAP. Our non-GAAP financial information does not represent a competitive advantage in attracting and retaining key employees and directors. SECTION 2. Definitions
Certain terms used herein have definitions provided when they are first used. In addition, for purposescomprehensive basis of this Plan, the following terms are defined as set forth below:accounting.
a. | “Affiliate”means a corporation or other entity in which the Corporation has an equity or other financial interest, a joint venturer or partner of the Corporation, or an organization that is involved in a strategic, technological or marketing collaboration with the Corporation. |
b. | “Award”means an Option, Stock Appreciation Right, Performance Share Unit, Restricted Stock, Restricted Stock Unit, dividend equivalent or other stock-based award granted pursuant to the terms of this Plan. |
c. | “Award Agreement”means the written documents setting forth the specific terms and conditions of an Award. |
d. | “Board” means the Board of Directors of the Corporation. |
e. | “Cause” means: (i) conduct involving a felony criminal offense under U.S. federal or state law or an equivalent violation of the laws of any other country; (ii) dishonesty, fraud, self-dealing or material violations of civil law in the course of fulfilling the Participant’s employment duties; (iii) breach of the Participant’s intellectual property agreement or other written agreement with the Corporation; (iv) willful misconduct injurious to the Corporation or any of its Subsidiaries or Affiliates as shall be determined by the Committee; or (v) negligent conduct injurious to the Corporation and any of its Subsidiaries and Affiliates, including negligent supervision of a subordinate who causes significant harm to the Corporation as determined by the Committee. |
f. | “Change-in-Control” has the meaning set forth in Section 10(e). |
g. | “Code” means the Internal Revenue Code of 1986, as amended from time-to-time, and any successor thereto. Reference to any section of the Internal Revenue Code shall include any final regulations and public guidance interpreting that section. |
h. | “Commission” means the Securities and Exchange Commission or any successor agency. |
i. | “Committee” means the Board’s Committee on Compensation and Executive Development or any successor Committee designated by the Board. |
j. | “Common Stock” means common stock, par value $1 per share, of the Corporation. |
k. | “Corporation” means United Technologies Corporation, a Delaware corporation. |
l. | “Disability” means permanent and total disability as determined under the Corporation’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A(a)(2)(C) of the Code, with respect to an Award subject to Section 409A of the Code. |
m. | “Disaffiliation” means the sale, spin-off, public offering or other transaction that effects the divestiture of the Corporation’s ownership of a Subsidiary, Affiliate or division of the Corporation. |
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UNITED TECHNOLOGIES CORPORATION 10 FARM SPRINGS ROAD FARMINGTON, CT 06032 n. | “Early Retirement” means early retirement (for a reason other than Cause) as defined in the applicable provisions of the Participant’s Award Agreement. Unless otherwise stated in the Award Agreement, “Early Retirement” means: (i) a Participant’s Retirement from active employment for a reason other than Cause before age 65, and as early as the first of the month following the date he/she reaches age 55, if he/she has accrued at least ten years of continuous service; or (ii) a Participant’s Retirement from active employment before age 55, and as early as the first of the month following the date he/she reaches age 50, if his/her age and years of continuous service combined as of the retirement date equal at least 65. |
o. | “Eligible Individuals” means directors, officers and employees of the Corporation or any of its Subsidiaries or Affiliates, and prospective directors, officers and employees who have accepted offers of employment or affiliation with the Corporation or its Subsidiaries or Affiliates. |
p. | “Exchange” means the New York Stock Exchange. |
q. | “Exchange Act” means the Securities Exchange Act of 1934, as amended from time-to-time, and any successor thereto. |
r. | “Fair MarketValue” in reference to the grant of an Award, means the closing price for Common Stock on the Exchange on the Grant Date. In reference to the exercise, vesting, settlement or payout of an Award, Fair Market Value may mean the average of the high and low per share trading prices, or the closing price, or the real time trading price, for Common Stock on the Exchange during regular session trading on the relevant date, as specified in the Award Agreement. If there is no reported price on the relevant date, Fair Market Value will be determined for the next following day for which there is a reported price for Common Stock. |
s. | “Grant Date” means the effective date of an Award as specified in the Award Agreement. |
t. | “Normal Retirement” means retirement from active employment (for a reason other than Cause) with the Corporation and its Subsidiaries and Affiliates at or after age 65. |
u. | “Participant” means an Eligible Individual to whom an Award is or has been granted. |
v. | “Performance Target” means one or more performance targets established by the Committee in connection with the grant of Performance Share Units, Restricted Stock or other stock-based awards. In the case of Qualified Performance-Based Awards, such targets shall be based on the attainment of specified levels of one or more of the following measures: (i) diluted earnings per share (“EPS”); (ii) total shareowner return (“TSR”); (iii) working capital and gross inventory turnover; (iv) net income; (v) revenue growth; (vi) return on invested capital (“ROIC”); (vii) return on net assets (“RONA”); (viii) earnings before interest and taxes (“EBIT”); (ix) free cash flow; (x) segment profit; and (xi) return on sales (“ROS”). |
w. | “Plan” means this United Technologies Corporation Long-Term Incentive Plan, as set forth herein and as hereafter amended from time-to-time. |
x. | “Qualified Performance-Based Award” means an Award intended to qualify for the Section 162(m) Exemption, as provided in Section 11. |
y. | “Retirement” means Normal or Early Retirement (for a reason other than Cause) as defined in this Plan or in the Award Agreement. |
z. | “Section 162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code. |
aa. | “Separation from Service,” with respect to Awards that are subject to Section 409A of the Code, means a Participant’s Termination of Employment with the Corporation and its Subsidiaries or Affiliates, other than by reason of death or Disability, that qualifies as a “separation from service” for purposes of Section 409A of the Code. A Separation from Service will be deemed to occur where the Participant and the Corporation and its Subsidiaries and Affiliates reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or as an independent contractor) will be permanently reduced to a level that is less than thirty-seven and a half percent (37.5%) of the average
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| level of bona fide services the Participant performed during the immediately preceding 36 months (or the entire period the Participant has provided services if the Participant has been providing services to the Corporation and any of its Subsidiaries or Affiliates for less than 36 months). |
bb. | “Share” means a share of Common Stock. |
cc. | “Specified Employee” means each of the fifty (50) highest-paid officers and other executives of the Corporation and its Subsidiaries, effective annually as of April 1st, based on wages subject to federal income tax withholding, and amounts that are excluded from taxable income by the employee’s election to make pre-tax contributions under a cafeteria plan, section 401(k) plan, or similar plan, determined for the preceding calendar year as provided in Treas.Reg. § 1.415(c)-2(d)(3). The term includes both U.S. and non-U.S. employees, and the compensation used to determine whether an employee is among the fifty (50) highest-paid officers and other executives shall be determined by treating non-U.S. compensation as if it had been earned in the U.S. by a U.S. citizen. |
dd. | “Subsidiary” means any corporation, partnership, joint venture or other entity during any period in which at least a 50% voting or profits interest is owned, directly or indirectly, by the Corporation or any successor to the Corporation. |
ee. | “Term” means the maximum period of an Award, which shall not exceed ten years for Options and Stock Appreciation Rights. |
ff. | “Termination of Employment” means the termination of a Participant’s employment with, or performance of services for, the Corporation and its Subsidiaries and Affiliates. Unless otherwise determined by the Committee, if a Participant’s employment with the Corporation and its Subsidiaries and Affiliates terminates but such Participant continues to provide services to the Corporation and its Subsidiaries and Affiliates in a non-employee capacity, such change in status shall not be deemed a Termination of Employment. A Participant shall be deemed to incur a Termination of Employment in the event of the Disaffiliation of the Subsidiary, Affiliate, or division that employs the Participant or to which the Participant provides services unless the Committee specifies otherwise. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Corporation and its Subsidiaries and Affiliates do not constitute a Termination of Employment. If an Award is subject to Section 409A of the Code, however, Termination of Employment for purposes of that Award shall mean the Participant’s Separation from Service. |
SECTION 3. Administration
a. | Committee. The Plan shall be administered by the Committee, which shall be composed exclusively of independent non-employee directors appointed by the Board. The Committee shall have full authority to administer the Plan, including the authority to select Eligible Individuals to whom Awards are granted, to determine the number of Shares covered by each Award, the terms and conditions of each Award and to interpret the terms and provisions of the Plan and Award Agreements, provided, however, that the Board Committee on Nominations and Governance shall be responsible for approving Awards to non-employee directors. The Committee shall have the authority to modify, amend or adjust the terms and conditions of any Award to comply with tax and securities laws, including laws of countries outside of the United States, and to comply with changes of law and accounting standards. The Committee may temporarily suspend Awards pursuant to any blackout period that it deems necessary or advisable in its sole discretion. |
b. | Procedures. The Committee may act by a majority of its members then in office. It also may allocate responsibilities and powers among its members and may delegate its responsibilities and powers to any person or persons selected by it, to the extent permitted by applicable law and the listing standards of the Exchange. The Committee may delegate authority to grant, interpret and administer Awards under the Plan to officers of the Corporation, provided however, that no such authority shall be delegated with respect to awards granted to any officer of the Corporation who is a reporting person under Section 16 of the Exchange Act. The full Board may exercise any of the Committee’s authority, except with respect to the grant of any Qualified Performance-Based Award or the administration of such Award, as provided in Section 11. |
c. | Discretion of Committee. Any determination made by the Committee or by a person pursuant to delegated authority (a “Delegate”) with respect to any Award shall be made in the sole discretion of the Committee or such Delegate unless in
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| contravention of any express term of the Plan. All decisions made by the Committee or a Delegate shall be final, binding and conclusive on all persons, including the Corporation, Participants and Eligible Individuals; provided, however, that in the event of a Change-in-Control, all such decisions made after the effective date of the Change-in-Control shall be subject to de novo review. |
d. | Award Agreements. The terms and conditions of each Award, as determined by the Committee, shall be set forth in a written Award Agreement, which shall be delivered to the Participant receiving such Award as promptly as is reasonably practicable following the grant of such Award. The Award’s effectiveness will not be dependent on any signature unless specifically so provided in the Award Agreement. Awards subject to a time-based vesting period of less than three years are limited to special purpose awards, such as make up awards designed for recruitment purposes, and may in no event exceed 5% of awards granted in any calendar year. Notwithstanding the foregoing, all annual awards granted pursuant to the Corporation’s regular cycle of long-term incentive awards shall in all cases impose a minimum three-year vesting requirement. However, vesting may accelerate in the event of a Change-in-Control and certain other events as set forth in Section 10 herein, and in the event of death, Disability, Early Retirement or Retirement, as will be specified in the Award Agreement. |
SECTION 4. Common Stock Subject to Plan
a. | Plan Maximums. As of the Plan’s original effective date, 38,000,000 Shares were authorized by shareowners for issuance in connection with Plan Awards. Effective April 9, 2008, shareowners approved an additional 33,000,000 Shares to be issued under the Plan. Effective April 13, 2011, shareowners approved an additional 48,000,000 Shares to be issued under this Plan. Subject to shareowner approval, effective April 28, 2014, 30,000,000 additional shares will be authorized to be issued under the Plan. No more than 3,000,000 Shares may be subject to Incentive Stock Option Awards over the life of the LTIP. All equity-based awards by the Corporation shall be made pursuant to this Plan exclusively, utilizing Shares of Common Stock authorized herein. |
b. | Individual Limits. No Participant may be granted Awards covering in excess of 1,000,000 Stock Appreciation Rights or Options, or in excess of 500,000 Shares of Restricted Stock, Performance Share Units, Restricted Stock Units, or other Full Share Awards, during any calendar year. |
c. | Rules for Calculating Shares Delivered. The following rules shall apply to the determination of the number of Shares available for delivery pursuant to the authorization in Section 4(a): |
| (i) | Stock awards with value denominated in full Shares (a “Full Share Award”) will result in a reduction of 4.03 times the number of Shares subject to the award. Options and Stock Appreciation Rights, as described in Section 5, do not constitute Full Share Awards and will accordingly result in a one Share reduction for each Option or Stock Appreciation Right awarded. Restricted Stock, Performance Share Units, Restricted Stock Units and all other stock-based awards are treated as Full Share Awards. |
| (ii) | To the extent that any Award is forfeited, or any Option or Stock Appreciation Right terminates, expires or lapses without being exercised, the Shares subject to such Award will not be counted as Shares delivered under the Plan. |
| (iii) | Shares delivered with respect to Option and Stock Appreciation Right awards will correspond to the total number of Options or Stock Appreciation Rights granted, rather than net shares delivered. Shares tendered or withheld to pay the exercise price of an Option or Stock Appreciation Right or to pay tax withholding associated with the granting, vesting, exercise or settlement of any Award will not be added back to the Shares available for delivery under the Plan. |
| (iv) | An Award valued by reference to Common Stock that provides for settlement in cash (whether mandatorily or at the election of the Corporation or the Participant) will be treated as Share Awards to the same extent as if the Award were settled in Shares. |
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SECTION 5. Options and Stock Appreciation Rights
a. | Options. An “Option” entitles the holder to acquire Shares at an exercise price equal to or greater than the Fair Market Value of Common Stock on the Grant Date, subject to the terms and conditions set forth in the Award Agreement. Options will be non-qualified Options unless the Award Agreement specifies that the Option is an incentive stock option intended to comply with Section 422 of the Code. Only eligible individuals who are employees of the Corporation or its subsidiary corporations (as defined in Code Section 424) are eligible to receive incentive stock options. |
b. | Stock Appreciation Rights. A “Stock Appreciation Right” entitles the holder to acquire shares of Common Stock or to receive a cash payment upon exercise of the Stock Appreciation Right, in each case, equal in value to the excess, if any, of (i) the Fair Market Value on the date of exercise over (ii) the Fair Market Value on the grant date, subject to the terms and conditions set forth in the Award Agreement. The Award Agreement shall specify at the time of grant whether such payment is to be made in cash, Common Stock or a combination thereof. |
c. | Limitations. The exercise price per Share of an Option or a Stock Appreciation Right shall be determined by the Committee and set forth in the applicable Award Agreement, and shall not be less than the Fair Market Value of a share of the Common Stock on the Grant Date. In no event may any Option or Stock Appreciation Right granted under this Plan be amended, other than pursuant to Section 10, to decrease the exercise price thereof, be cancelled in conjunction with the grant of any new Option or Stock Appreciation Right with a lower exercise price, or otherwise be subject to any action that would be treated, for accounting purposes, as a “repricing” of such Option or Stock Appreciation Right, unless such amendment, cancellation or action is approved by the Corporation’s shareowners. |
d. | Term. The Term of each Option and Stock Appreciation Right shall be fixed by the Committee, but shall not exceed ten years from the Grant Date. |
e. | Vesting and Exercisability. Except as otherwise provided herein, Options and Stock Appreciation Rights shall be vested and exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and set forth in the Award Agreement. |
f. | Method of Exercise. Vested Options and Stock Appreciation Rights may be exercised, in whole or in part, by giving written notice of exercise to the Corporation, or the vendor designated by the Corporation, specifying the number of Options or Stock Appreciation Rights to be exercised. In the case of the exercise of an Option, such notice shall be accompanied by payment in full of the exercise price in cash. If approved by the Committee, payment, in full or in part, may also be made as follows: |
| (i) | In the form of unrestricted Shares owned by the Participant (either by delivery of such Shares or by attestation by the Participant of ownership thereof) of the same class as the Common Stock subject to the Option (valued in either case based on the Fair Market Value of the Common Stock on the date the Option is exercised); |
| (ii) | By such other means as the Committee shall authorize, including, without limitation, the withholding of Shares otherwise receivable upon settlement of the Award in payment of the exercise price. |
g. | Termination of Employment. Options and Stock Appreciation Rights will generally vest after a three-year holding period and achievement of Performance Targets, if applicable. Awards shall be forfeited in the event of a Participant’s Termination of Employment prior to the vesting date, except as set forth below: |
| (i) | Upon a Participant’s Termination of Employment by reason of death, Options and Stock Appreciation Rights held by the Participant shall immediately vest and all outstanding Options and Stock Appreciation Rights may be exercised at any time until the first anniversary of the date of death; |
| (ii) | Upon a Participant’s Termination of Employment by reason of Disability, Options and Stock Appreciation Rights held by the Participant that were exercisable immediately before the Termination of Employment may be exercised at any time until the earlier of (A) the third anniversary of such Termination of Employment or (B) the expiration of the Term thereof. Non-vested Stock Appreciation Rights and Options will continue to be eligible to vest as scheduled during the period the Participant remains disabled and may be exercised at any time until the earlier of (A) the third anniversary of the vesting date or (B) the expiration of the Term thereof; |
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| (iii) | Upon a Participant’s Termination of Employment by reason of Retirement, Options and Stock Appreciation Rights held for more than one year shall immediately become vested and exercisable. Vested Options and vested Stock Appreciation Rights may be exercised until the expiration of their Term with respect to Participants who retire on or after age 55; |
| (iv) | Upon a Participant’s Termination of Employment for Cause, all Options and Stock Appreciation Rights held by the Participant will be forfeited immediately, whether or not vested; |
| (v) | If a Participant dies after Termination of Employment, outstanding Options and Stock Appreciation Rights may be exercised until the earlier of (A) the first anniversary of the date of death or (B) the expiration of the Term thereof; and |
| (vi) | Upon a Participant’s Termination of Employment for any reason other than death, Disability, Retirement or for Cause any non-vested Option or Stock Appreciation Right will be forfeited immediately and any vested Option or Stock Appreciation Right may be exercised until the earlier of (A) the 90th day following such Termination of Employment or (B) expiration of the Term thereof. |
Notwithstanding the foregoing, the Committee shall have the power, in its discretion, to apply different rules concerning the consequences of a Termination of Employment, as set forth in the applicable Award Agreement.
h. | No Dividend Equivalents. Options and Stock Appreciation Rights shall not include the right to receive dividends or dividend equivalent payments, nor shall any dividend equivalent award be granted in tandem with any Option or Stock Appreciation Right Awards. |
SECTION 6. Restricted Stock
a. | Nature of Awards and Certificates. Shares of “Restricted Stock” are Shares issued to a Participant, as evidenced by book-entry registration of the Shares in the name of the Participant that are subject to the terms, conditions, and restrictions set forth in the Award Agreement. |
b. | Terms and Conditions. Shares of Restricted Stock shall be subject to the following terms and conditions: |
| (i) | The Committee may designate an Award of Restricted Stock as a Qualified Performance-Based Award that will vest only upon the attainment of Performance Targets. The Committee may also condition the grant or vesting of a Restricted Stock Award upon the continued service of the Participant or a combination of continued service and performance vesting criteria; |
| (ii) | The Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Shares of Restricted Stock prior to the expiration of the required period of continued service and/or the achievement of applicable Performance Targets. Except as provided in the preceding sentence or in an Award Agreement, the Participant shall have all of the rights of a shareowner of the Corporation holding the class or series of Common Stock that is the subject of the Restricted Stock Award, including the right to vote the Shares and, with respect to Awards with vesting conditional only on continual service, the right to receive cash dividends at the same time as the dividends are paid to the Corporation’s other shareowners. With respect to Awards with vesting contingent on performance-based criteria, payments of cash or shares corresponding to dividends paid by the Corporation shall occur only if, and to the extent applicable, performance targets are achieved; and |
| (iii) | Upon a Participant’s Termination of Employment during the restriction period or before the applicable Performance Targets are satisfied, non-vested Shares of Restricted Stock shall be forfeited by such Participant; provided, however, that Restricted Stock will vest in the event of death and may vest or remain eligible to vest in the event of Retirement or Disability, as set forth in the Award Agreement. |
SECTION 7. Performance Share Units
a. | Nature of Award. A “Performance Share Unit” corresponds to one Share and is subject to vesting on the basis of the achievement of specified Performance Targets or a combination of continued service and performance vesting criteria.
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| Upon vesting, Performance Share Units will be settled by delivery of Shares to the Participant equal to the number of vested Performance Share Units (or, if specified in the Award Agreement, cash in an amount equal to the Fair Market Value of the Shares otherwise deliverable). |
b. | Terms and Conditions. Performance Share Units shall be subject to the following terms and conditions: |
| (i) | Performance Share Units are Qualified Performance-Based Awards and shall vest solely as a result of the achievement of Performance Targets, except as provided below in clause (iv); |
| (ii) | A Participant may not assign, transfer, pledge or otherwise encumber Performance Share Units; |
| (iii) | The Award Agreement shall specify if the Participant shall be entitled to receive current or deferred payments of cash or Shares in respect of non-vested Performance Share Units corresponding to the dividends paid by the Corporation, provided, however, that any such payment or delivery of shares shall be withheld subject to achievement of performance-based vesting requirements in accordance with clauses (i) and (iv) herein; |
| (iv) | Performance Share Unit Awards will generally be subject to a three-year service-based vesting requirement in addition to performance-based vesting criteria. In the event of a Participant’s Termination of Employment before the applicable Performance Targets are satisfied or the expiration of the time-based vesting requirement, all Performance Share Units still subject to restriction shall be forfeited by such Participant; provided, however, that Performance Share Units will vest in the event of death, and remain eligible to vest in the event of Retirement or Disability; and |
| (v) | Except as provided in the following sentence, all Performance Share Units shall be settled no later than 2 1⁄2 months after the end of the year in which the Performance Share Units vest. If the Award Agreement provides (when the Award is granted) that a Performance Share Unit may vest in the event of Early Retirement or Normal Retirement, the Performance Share Unit shall be settled 30 days after the end of the performance measurement period designated in the Award Agreement, or on another specific date designated in the Award Agreement; provided, however, that if the Performance Share Unit actually vests upon Retirement and if the Participant is a Specified Employee, the Performance Share Unit shall be settled on the first day of the seventh month following the Participant’s Termination of Employment. |
SECTION 8. Restricted Stock Units
Nature of Award. A “Restricted Stock Unit” corresponds to one Share of Common Stock and is subject to vesting on the basis of a period of continuous employment with the Corporation or a Subsidiary or Affiliate or other criteria as specified in the Award Agreement that constitute a “substantial risk of forfeiture” for purposes of Section 409A of the Code. Upon vesting, Restricted Stock Units will be settled by delivery of Shares to the Participant equal to the number of vested Restricted Stock Units.
Upon a Participant’s Termination of Employment during the restriction period or before the applicable performance criteria, specified in the Award Agreement are satisfied, non-vested Restricted Stock Units shall be forfeited by such Participant; provided, however, that Restricted Stock Units will vest in the event of death and may vest or remain eligible to vest in the event of Early Retirement, Retirement or Disability if provided for in the Award Agreement.
SECTION 9. Other Stock-Based Awards
Other Awards that are valued in whole or in part by reference to, or are otherwise based upon, Common Stock, including (without limitation) unrestricted stock, dividend equivalents and convertible debentures, may be granted under the Plan. Dividend equivalents may not be granted in tandem with Options or Stock Appreciation Rights.
SECTION 10. Future Events
a. | Adjustments to Common Stock. In the event of a stock split, reverse stock split, share combination, recapitalization, sale of assets, stock dividend, extraordinary dividend or similar event affecting the value of a Share of Common Stock, or the number of Shares outstanding (each, a “Share Change”), the Share and Award limitations as set forth in
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| Section 4, the number of Shares subject to outstanding Awards, the exercise price of Options and Stock Appreciation Rights and other relevant provisions of the Plan and outstanding Awards shall be adjusted as determined by the Committee or Board to reflect the Share Change and to preserve the value of Awards. |
b. | Changes to the Corporation’s Capital Structure. In the event of a merger, consolidation, spin-off, reorganization, stock rights offering, liquidation, Disaffiliation, or other material event affecting the capital structure of the Corporation (each, a “Corporate Transaction”), the Committee or the Board may in its discretion make such substitutions or adjustments as it deems appropriate and equitable to: (i) the aggregate number and kind of Shares or other securities reserved for issuance and delivery under the Plan; (ii) the various maximum limitations set forth in Section 4; (iii) the number and kind of Shares or other securities subject to outstanding Awards; and (iv) the exercise price of outstanding Options and Stock Appreciation Rights. Adjustments may include, without limitation, the cancellation of outstanding Awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Committee or the Board in its sole discretion to be necessary or appropriate to protect the value of Participants’ interests in their Awards. In the event of a Disaffiliation, the Committee may arrange for the assumption of Awards or replacement of Awards with new Awards based on other property or other securities. |
c. | Change-in-Control. In the event of a Change-in-Control, subject to the following sentence, but notwithstanding any other provision of the Plan to the contrary, the Committee may, in its discretion, take any of the actions listed in this subsection (c). If an Award is subject to Section 409A of the Code, any special provision regarding the timing or form of payment upon a Change-in-Control must be set forth in the Award Agreement when the Award is granted, and must comply with the requirements of Section 409A. |
| (i) | provide that any Options and Stock Appreciation Rights outstanding which are not then exercisable and vested shall become immediately vested and fully exercisable; |
| (ii) | immediately lapse restrictions and deferral limitations applicable to any Restricted Stock, Restricted Stock Unit and other Awards, whereupon, such Restricted Stock shall become free of all restrictions, fully vested and transferable and such Restricted Stock Units and other Awards shall be settled as promptly as practicable in the form set forth in the applicable Award Agreement; |
| (iii) | provide that Performance Targets applicable to Performance Share Units and other Awards shall be deemed to be satisfied and such Awards shall be considered to be earned and payable in full, and any deferral or other restriction shall lapse and such Performance Share Units and other Awards shall be settled as promptly as is practicable in the form set forth in the applicable Award Agreement; and |
| (iv) | make such additional adjustments, substitutions and/or settlements of outstanding Awards as it deems appropriate to protect Participants’ interests in their Awards, consistent with the Plan’s purposes, including, without limitation, the cancellation of outstanding Awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Committee or the Board in its sole discretion. |
d. | Termination of Employment Following Change-in-Control. To the extent not otherwise vested by the Committee in accordance with the provisions of this Section 10 and notwithstanding any other provision of this Plan to the contrary, during the 24-month period following a Change-in-Control: (i) upon the involuntary termination of a Participant’s employment other than termination for Cause; or (ii) upon the resignation of the employee for Good Reason, then, in any such event, all outstanding Awards held by such Participant shall become vested as of the Date of Termination. Any Option or Stock Appreciation Right held by the Participant as of the date of the Change-in-Control that remains outstanding as of the date of Termination of Employment may thereafter be exercised, until the earlier of: (i) the third anniversary of the date of termination; or (ii) the expiration of the Term of such Option or Stock Appreciation Right. Restricted Stock shall immediately be free and transferable. Restricted Stock Units, Performance Share Units and other Awards shall be vested as of the Termination of Employment and settled as soon as practicable as specified in the Award Agreement; provided, however, that if the Award is subject to Section 409A and the Participant is a Specified Employee, the Award shall be settled on the first day of the seventh month following the Participant’s Termination of
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LONG-TERM INCENTIVE PLAN
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| Employment. For purposes of this provision, “Good Reason” shall mean a resignation of employment by the Participant following: (i) a material reduction in the Participant’s annual base salary, annual bonus opportunities, long-term incentive opportunities or other compensation and benefits in the aggregate from those in effect immediately prior to theChange-in-Control; (ii) a material diminution in the Participant’s title, duties, authority, responsibilities, functions or reporting relationship from those in effect immediately prior to the Change-in-Control; or (iii) a mandatory relocation of the Participant’s principal location of employment greater than 50 miles from immediately prior to the Change-in-Control. In order to invoke a termination for Good Reason, the Participant shall provide written notice to the Corporation of the existence of one or more of the conditions described in clauses (i) through (iii) within 90 days following the Participant’s knowledge of the initial existence of such condition or conditions, and the Corporation shall have 30 days following receipt of such written notice (the “Cure Period”) during which it may cure the condition, if curable. In the event that the Corporation fails to cure the condition constituting Good Reason during the Cure Period, the Participant must terminate employment, if at all, within one year following the end of the Cure Period in order for such termination to constitute a termination for Good Reason. The Participant’s mental or physical incapacity following the occurrence of an event described above in clauses (i) through (iii) shall not affect the Participant’s ability to terminate employment for Good Reason. |
e. | Definition of Change-in-Control. For purposes of the Plan, a “Change-in-Control” shall mean any of the following events: |
| (i) | The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding Shares of Common Stock (the “Outstanding Corporation Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Corporation Voting Securities”) provided, however, that for purposes of this definition, the following acquisitions shall not constitute a Change-in-Control: (w) any acquisition directly from the Corporation; (x) any acquisition by the Corporation; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Affiliated Corporation; or (z) any acquisition pursuant to a transaction that does not constitute a Change-in-Control under clauses (iii)(A), (iii)(B) and (iii)(C) below; or |
| (ii) | A change in the composition of the Board such that the individuals who constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board. For this purpose, any individual whose election or nomination for election by the Corporation’s shareowners was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or |
| (iii) | The consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Corporation or any of its Subsidiaries or a sale or other disposition of substantially all of the assets of the Corporation or a material acquisition of assets or stock of another entity by the Corporation or any of its Subsidiaries, (each, a “Business Combination”) if: |
| (A) | the individuals and entities that were the beneficial owners of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Business Combination do not beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of stock and the combined voting power of the then-outstanding voting securities of the corporation resulting from such Business Combination in substantially the same proportions as their ownership immediately prior to such Business Combination; or |
| (B) | a Person beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; or |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 85 |
APPENDIX A PROPOSED AMENDMENT AND RESTATEMENT OF THE UTC 2005
LONG-TERM INCENTIVE PLAN
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| (C) | members of the Incumbent Board do not comprise at least a majority of the members of the board of directors of the corporation resulting from such Business Combination; or |
| (iv) | A complete liquidation or dissolution of the Corporation. |
If an Award is subject to Section 409A of the Code, the payment or settlement of the Award shall accelerate upon a Change-in-Control only if the event also constitutes a “change in ownership,” “change in effective control,” or “change in the ownership of a substantial portion of the Corporation’s assets” as defined under Section 409A of the Code. Any adjustment to the Award that does not affect the Award’s status under Section 409A (including, but not limited to, accelerated vesting or adjustment of the amount of the Award) may occur upon a Change-in-Control as defined in the Plan without regard to this paragraph, even if the event does not constitute a Change-in-Control under Section 409A. Nothing in this Section 10 shall preclude the Company from settling upon a Change-in-Control an Award if it is not replaced by a Replacement Award, to the extent effectuated in accordance with Treas. Reg. § 1.409A-3(j)(ix).
SECTION 11. Qualified Performance-Based Awards
a. | The provisions of this Plan are intended to ensure that all Options, Stock Appreciation Rights, Performance Share Units and other Qualified Performance-Based Awards granted hereunder to any Participant who is or may be a “covered employee” (within the meaning of Section 162(m)(3) of the Code) qualify for the Section 162(m) Exemption, and all such Awards and this Plan shall be interpreted and administered consistent with that intention. |
b. | Each Qualified Performance-Based Award (other than an Option or Stock Appreciation Right) shall be earned, vested and payable (as applicable) only upon the achievement of one or more Performance Targets, together with the satisfaction of any other conditions, such as continued employment, as the Committee may determine to be appropriate. |
c. | The Committee shall certify to the measurement of performance by the Corporation and the business units relative to Performance Targets and the resulting vesting achievement percentage with respect to Qualified Performance-Based Awards. The Committee shall rely on such financial information and other materials as it deems necessary and appropriate to enable it to certify to the percentage of achievement of Performance Targets. The Committee shall make its vesting determination and (except as provided in Section 7.b.(v)) vested Awards shall be paid or delivered not later than 2 1⁄2 months following the end of the performance measurement period. |
SECTION 12. Term, Amendment and Termination
a. | Effective Date. The Amended and Restated Plan shall be effective as of April 28, 2014 (the “Effective Date”), subject to the approval of the shareowners of the Corporation. |
b. | Termination. The Plan will terminate on the earlier of: (i) the date all Shares authorized in Section 4 have been awarded; or (ii) April 30, 2020. Awards outstanding shall not be affected or impaired by the termination of the Plan. |
c. | Amendment of Plan. The Board may amend, alter, or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of a Participant with respect to a previously granted Award without such Participant’s consent, except an amendment made to comply with applicable law, stock exchange rules, tax rules or accounting rules. In addition, no amendment shall be made without the approval of the Corporation’s shareowners to the extent such approval is required by applicable law or the listing standards of the Exchange. In the event the Exchange’s listing standards are modified for the purpose of reducing or eliminating the requirement for shareowner approval of equity plans and amendments, Plan amendments shall remain subject to shareowner approval in accordance with the listing standards in effect immediately prior to any such amendment. |
d. | Amendment of Awards. Subject to Section 10, the Committee may unilaterally amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall be made without the Participant’s consent if such amendment materially impairs the rights of any Participant with respect to an Award, except amendments made to cause the Plan or Award to comply with applicable law, stock exchange rules, tax rules or accounting rules. No amendment to any Award shall reduce the exercise price of any Option or Stock Appreciation
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| | | 86 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
APPENDIX A PROPOSED AMENDMENT AND RESTATEMENT OF THE UTC 2005
LONG-TERM INCENTIVE PLAN
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| Right except to the extent necessary to preserve the value of the Award in the event of a stock split or other “Share Change” as defined in Section 10(a) or a “Corporate Transaction” as described in Section 10(b). In no event, including a Corporate Transaction or a Change-in-Control, may any Award be amended or action taken to make a cash payment in exchange for an Option or Stock Appreciation Right that has the effect of providing value greater than the amount determined using the exercise price in effect as of the date of the contemplated action, unless approved by the Corporation’s shareowners. |
SECTION 13. General Provisions
a. | Nature of Payments. All Awards made pursuant to this Plan are in consideration of services performed for the Corporation or its Subsidiaries or Affiliates. Any gain realized pursuant to such Awards constitutes a special incentive payment to the Participant and shall not be taken into account as compensation for purposes of any of the employee benefit plans of the Corporation or any Subsidiary or Affiliate. Nothing contained in the Plan shall prevent the Corporation or any Subsidiary or Affiliate from adopting other or additional compensation arrangements for its employees. |
b. | Unfunded Plan. The Plan constitutes an “unfunded” plan for incentive and deferred compensation. Neither the Corporation nor the Committee shall have any obligation to segregate assets or establish a trust or other arrangements to meet the obligations created under the Plan. Any liability of the Corporation to any Participant with respect to an Award shall be based solely upon contractual obligation created by the Plan and the Award Agreement. No such obligation shall be deemed to be secured by any pledge or encumbrance on the property of the Corporation. |
c. | No Contract of Employment. The Plan shall not constitute a contract of employment, and adoption of the Plan or granting of an Award shall not confer upon any employee the right to continued employment, nor shall it interfere in any way with the right of the Corporation or any Subsidiary or Affiliate to terminate the employment of any employee at any time. |
d. | Required Taxes. No later than the date an amount first becomes includible in gross income or is no longer subject to a substantial risk of forfeiture, with respect to any Award, Participants must pay to the Corporation, or make arrangements satisfactory to the Corporation regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Corporation, withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award that gives rise to the withholding requirement; provided, however, that not more than the legally required minimum withholding may be settled with Common Stock. The obligations of the Corporation under the Plan and any Award Agreement shall be conditional on such payment or arrangements, and the Corporation and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to such Participant. |
e. | Forfeiture of Interests and Gains upon Certain Events. All Awards, including vested Awards, shall be forfeited, and a Participant shall be obligated to repay gains previously realized from Awards upon any of the following events: |
| (i) | Termination of Employment for Cause; |
| (ii) | if within three years following any Termination of Employment the Committee or the Corporation determines that the Participant engaged in conduct before the Participant’s termination date that would have constituted the basis for a Termination of Employment for Cause; |
| (iii) | if at any time during the 24-month period immediately following any Termination of Employment, a Participant: |
| (A) | solicits for employment or otherwise attempts to retain the professional services of any individual then employed or engaged by the Corporation (other than a person performing secretarial or similar services) or who was so employed or engaged during the three-month period preceding such solicitation; or |
| (B) | publicly disparages the Corporation or any of its officers, directors or senior executive employees or otherwise makes any public statement that is materially detrimental to the interests of the Corporation or such individuals; or |
| | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners | | 87 |
APPENDIX A PROPOSED AMENDMENT AND RESTATEMENT OF THE UTC 2005
LONG-TERM INCENTIVE PLAN
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| (iv) | if at any time during the 12-month period following any Termination of Employment, a Participant becomes employed by, consults for or otherwise renders services to any business entity or person engaged in activities that compete with the Corporation or the business unit that employed the Participant, unless the Participant has first obtained the written consent of the Sr. Vice President, Human Resources and Organization. For purposes of applying this provision: |
| (A) | A Participant shall be deemed to have been employed by each business unit that employed the Participant within the two-year period immediately prior to the date of the Termination of Employment; and |
| (B) | The status of a business entity or person as a competitor shall be determined by the Sr. Vice President, Human Resources and Organization in his/her sole discretion. |
Following any of these events and immediately upon notice from the Corporation, the Participant must repay an amount equal to all income or gain realized in respect of any Awards on and after: (A) in the case of competing employment described in Section 13(e)(iv), 12 months prior to the date on which the Participant entered into competing employment; and (B) in all other cases, 24 months prior to the date on which the Participant engaged in conduct that constituted (in the cases of Section 13(e)(i)), or could have constituted (in the case of Section 13(e)(ii)) the basis for termination for Cause in Section 13(e)(i) or (ii) above or the conduct prohibited by Section 13(e)(iii) above. The amount of repayment shall include, without limitation: (i) gains from the exercise of Options or Stock Appreciation Rights; (ii) amounts received in connection with the delivery or sale of Shares or cash paid in respect of any Award; and (iii) any dividends, dividend equivalents or other distributions received in respect of any Award. There shall be no forfeiture or repayment under this Section 13(e) following a Change-in-Control.
f. | Certain Deferrals. The Committee may from time-to-time establish procedures pursuant to which a Participant may elect to defer payments under a Performance Share Unit, until a date later than the date a Performance Share Unit would otherwise become vested and payable. In the event of such a deferral, the Units subject to the deferral will be credited with dividend equivalents to be re-invested in additional Units. Any deferral procedures established pursuant to this subsection (f), and any amounts deferred pursuant to such procedures, shall include provisions designed to comply with the requirements of Section 409A of the Code. |
g. | Designation of Death Beneficiary. The Committee shall establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable in the event of such Participant’s death are to be paid or by whom any rights of such Participant may be exercised, after the Participant’s death. |
h. | Governing Law and Interpretation. The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws and, where applicable, the laws of the United States. The captions of this Plan are not part of the provisions hereof and shall have no force or effect. |
i. | Non-Transferability. Except as provided in this paragraph, awards under the Plan are not transferable except by will or by the laws of descent and distribution. The Committee may provide that certain Options and Stock Appreciation Rights may be transferred to a Participant’s children or family members, whether directly or indirectly by means of a trust, partnership or otherwise. “Family member” shall have the meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under the Securities Act of 1933, as amended, and any successor thereto. Options and Stock Appreciation Rights shall be exercisable only by the Participant, the guardian or legal representative of such Participant, or any person to whom such Option or Stock Appreciation Right is permissibly transferred pursuant to this Section 13(i). No Participant may enter into any agreement for the purpose of selling, transferring or otherwise engaging in any transaction that has the effect of exchanging his or her economic interest in any Plan Award to another person or entity for a cash payment or other consideration unless first approved by a majority of the Corporation’s shareowners. |
j. | Foreign Employees and Foreign Law Considerations. The Committee may grant Awards to Eligible Individuals who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause the Corporation to be subject to) legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified
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| | | 88 | | United Technologies CorporationProxy Statement and Notice of 2014 Annual Meeting of Shareowners |
APPENDIX A PROPOSED AMENDMENT AND RESTATEMENT OF THE UTC 2005
LONG-TERM INCENTIVE PLAN
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| in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions. |
k. | Section 409A of the Code. All Awards under the Plan are intended either to be exempt from, or to comply with, the requirements of Section 409A of the Code, and the Plan and all Awards shall be interpreted and operated in a manner consistent with that intention. If any provision of the Plan or any Award contravenes any regulation or guidance promulgated under Section 409A of the Code, the provision may be amended by the Committee, without the consent of the Participant, in any manner the Committee deems reasonable or necessary to comply with Section 409A. The Corporation does not warrant that the Plan will comply with Section 409A with respect to any Participant or with respect to any Award. In no event shall the Corporation, its Subsidiaries or Affiliates, any director, officer or employee of the Corporation, its Subsidiaries or Affiliates (other than the Participant), or any member of the Committee be liable for any additional tax, interest, or penalty incurred by a Participant or beneficiary as a result of an Award’s failure to satisfy the requirements of Code Section 409A, or as a result of an Award’s failure to satisfy any other applicable requirements for favorable tax treatment. |
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| | | ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g74e03.jpg)
UNITED TECHNOLOGIES CORPORATION
ONE FINANCIAL PLAZA
HARTFORD, CT 06103
| | VOTE BY INTERNET-www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 p.m. EDT the day before the meeting. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
| | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
| | VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDT the day before the meeting. Have your proxy card in hand when you call and then follow the instructions.
| | VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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| | | | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| M66161-P46529-Z62321 KEEP THIS PORTION FOR YOUR RECORDS | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x2_c83913x1x3.jpg) | | | UNITED TECHNOLOGIES CORPORATION
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VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above. Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 p.m. EDT the day before the meeting date or the earlier cut-off date and time for Savings Plan Participants. Follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. EDT the day before the meeting date or the earlier cut-off date and time for Savings Plan Participants. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E00129-P71919-Z66951 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED UNITED TECHNOLOGIES CORPORATION | | | | | | | | | THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR EACH OF THE FOLLOWING NOMINEES ANDFOR PROPOSALS 2, 3 AND 4. | | | | | | | | | | | | | | | | | | 1. | Election of Directors | | For | | Against | | Abstain | | | | | | | | | | | | | THE BOARD OF DIRECTORS RECOMMENDS A
VOTEFOR EACH OF THE FOLLOWING NOMINEES ANDFOR 1a. | John V. Faraci | | o | | o | | o | | | PROPOSALS 2, 3 AND 4.
| | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | 1. | | Election of Directors
| | | | | | | | For | | Against | | Abstain | | | | | | | | | 1a. Louis R. Chênevert
1b. John V. Faraci
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| | 2. | | Appointment of PricewaterhouseCoopers LLP as Independent Auditor for 2014 | | ¨ | | ¨ | | ¨ | | | | | | | | | 1c. Jean-Pierre Garnier
1d. Jamie S. Gorelick
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| | Approve an amendment and restatement of the 2005 Long-Term Incentive Plan, including approval of additional shares for future awards
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| | | | | | | | | 1e. Edward A. Kangas
1f. Ellen J. Kullman
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| | Advisory vote to approve the compensation of our named executive officers
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| | | | | | | | | | | | | | | | | | | | | 1g. Marshall O. Larsen
1h. Harold McGraw III
1i. Richard B. Myers
1j. H. Patrick Swygert
1k. André Villeneuve
1l. Christine Todd Whitman
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| | For address changes, please check this box andwrite them on the back where indicated. | | | | | | ¨ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1b. | Jean-Pierre Garnier | | o | | o | | o | | | | | | | | | | | | | 1c. | Gregory J. Hayes | | o | | o | | o | | | | | | | | | | | | | 1d. | Edward A. Kangas | | o | | o | | o | | | | | | | | | | | | | 1e. | Ellen J. Kullman | | o | | o | | o | | | | | | | | | | | | | 1f. | Marshall O. Larsen | | o | | o | | o | | | | | | | | | | | | | 1g. | Harold McGraw III | | o | | o | | o | | | | | | | | | | | | | 1h. | Richard B. Myers | | o | | o | | o | | | | | | | | | | | | | 1i. | Fredric G. Reynolds | | o | | o | | o | | | | | | | | | | | | For address changes, please check this box and write them on the back where indicated. | | o | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX]
| | Date | | | | Signature (Joint Owners) | | |
Annual Meeting of Shareowners of United Technologies Corporation
Monday, April 28, 2014, 2:00 p.m. EDT
Held in The Ballroom at The Ritz-Carlton, Charlotte, 201 East Trade Street, Charlotte, North Carolina 28202
The purposes of the meeting are to consider the following matters:
| 1. | Election of the twelve director nominees listed in the Proxy Statement, |
| 2. | Appointment of PricewaterhouseCoopers LLP as Independent Auditor for 2014, |
| 3. | Approve an amendment and restatement of the 2005 Long-Term Incentive Plan, including approval of additional shares for future awards, |
| 4 | Advisory vote to approve the compensation of our named executive officers; and |
| 5. | Other business if properly raised. |
TICKET REQUESTS: Because seating at the meeting is limited, we ask that shareowners request a ticket in advance to attend. Please email your request tocorpsec@corphq.utc.com or write to the Corporate Secretary, UTC, One Financial Plaza, Hartford, CT 06103.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
M66162-P46529-Z62321
| | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | 1j. | Brian C. Rogers | | o | | o | | o | | | | | | | | | | | 1k. | ![LOGO](https://capedge.com/proxy/DEF 14A/0001193125-14-100280/g691066g69i85.jpg) PROXY H. Patrick Swygert | | o | | o | | o | | | | | | | | | | | 1l. | This Proxy is Solicited on Behalf of the Board of Directors of United Technologies Corporation.André Villeneuve | | o | | o | | o | | | | | | | | | | | 1m. | Christine Todd Whitman | | o | | o | | o | | | The undersigned hereby appoints John V. Faraci, Edward A. Kangas and H. Patrick Swygert, and each of them, each with power of substitution, as proxies for the undersigned to act and vote at the Annual Meeting of the Shareowners of United Technologies Corporation to be held April 28, 2014, and at any postponed or at any reconvened session following any adjournment thereof, as directed on this Proxy Card, upon the matters set forth on the reverse side hereof, all as described in the Proxy Statement, and, in their discretion, upon any other business which may properly come before said meeting.If this Proxy Card is properly signed and returned but no voting instructions are given, the votes represented by this Proxy Card will be applied in the election of directors, as authorized in the following sentence, as votes for one or more of the nominees listed on the reverse and as votes for each of Proposals 2, 3 and 4. Absent specific instructions to the contrary by the undersigned with respect to cumulative voting, the persons named as proxies herein shall have full discretionary authority to vote the shares represented by a properly signed and returned Proxy Card cumulatively for all or less than all of such nominees listed on the reverse and to allocate such votes among all or less than all of such nominees (other than any one or more nominees for whom instructions have been given to vote against or abstain) in the manner as the Board of Directors shall recommend or otherwise in the proxies’ discretion. | | | | | | | 2. | Appointment of PricewaterhouseCoopers LLP as Independent Auditor for 2016. | | o | | o | | o | | | This Proxy Card also constitutes voting instructions to the Trustee under each of the UTC employee savings plans to vote, in person or by proxy, the proportionate interest of the undersigned in the shares of Common Stock of UTC held by the Trustee under any such plan(s) as described in the Proxy Statement. Such voting instructions must be received by 11:00 a.m. EDT on April 24, 2014.If voting instructions are not received by that time, the plan shares will be voted by the Trustee as described in the Proxy Statement. The undersigned hereby revokes all proxies previously given by the undersigned to vote at the Annual Meeting of Shareowners or any adjournment or postponement thereof. | | | | | | 3. | Amendment to our Restated Certificate of Incorporation to eliminate cumulative voting for directors. | | o | | o | | o | | | You are encouraged
| | | | | | 4. | An advisory vote to specify your choices by markingapprove the appropriate boxes, SEE REVERSE SIDE,compensation of our named executive officers. | | o | | o | | o | | | | | | | | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
| | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date |
Annual Meeting of Shareowners of United Technologies Corporation Monday, April 25, 2016, 8:00 a.m. EDT Held in the Palm Court Ballroom of The Vinoy®Renaissance St. Petersburg 501 5th Avenue NE, St. Petersburg, Florida 33701 The purposes of the meeting are to consider the following matters: | 1. | Election of the thirteen director nominees listed in the Proxy Statement; |
| 2. | Appointment of PricewaterhouseCoopers LLP as Independent Auditor for 2016; |
| 3. | Amendment to our Restated Certificate of Incorporation to eliminate cumulative voting for directors; |
| 4. | An advisory vote to approve the compensation of our named executive officers; and |
| 5. | Other business, if properly raised. |
TICKET REQUESTS:We ask that shareowners request a ticket in advance to attend. Please email your request to:corpsec@corphq.utc.comor write to: Corporate Secretary, UTC, 10 Farm Springs Road, Farmington, CT 06032. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at:www.proxyvote.com. E00130-P71919-Z66951 ![](https://capedge.com/proxy/PRE 14A/0000930413-16-005863/x2_c83913x2x1.jpg) | PROXY |
This Proxy is Solicited on Behalf of the Board of Directors of United Technologies Corporation. The undersigned hereby appoints John V. Faraci, Edward A. Kangas and H. Patrick Swygert, and each of them, each with power of substitution, as proxies for the undersigned to act and vote at the Annual Meeting of Shareowners of United Technologies Corporation to be held April 25, 2016, and at any postponed or at any reconvened session following any adjournment thereof, as directed on this Proxy Card, upon the matters set forth on the reverse side hereof, all as described in the Proxy Statement, and, in their discretion, upon any other business which may properly come before said meeting.If this Proxy Card is properly signed and returned but no voting instructions are given, the votes represented by this Proxy Card will be applied in the election of directors, as authorized in the following sentence, as votes for one or more of the nominees listed on the reverse and as votes for each of Proposals 2, 3 and 4. Absent specific instructions to the contrary by the undersigned with respect to cumulative voting, the persons named as proxies herein shall have full discretionary authority to vote the shares represented by a properly signed and returned Proxy Card cumulatively for all or less than all of such nominees listed on the reverse and to allocate such votes among all or less than all of such nominees (other than any one or more nominees for whom instructions have been given to vote against or abstain) in the manner as the Board of Directors shall recommend or otherwise in the proxies’ discretion. This Proxy Card also constitutes voting instructions to the Trustee under each of the UTC employee savings plans to vote, in person or by proxy, the proportionate interest of the undersigned in the shares of Common Stock of UTC held by the Trustee under any such plan(s) as described in the Proxy Statement. Such voting instructions must be received by 11:00 a.m. EDT on April 21, 2016.If voting instructions are not received by that time, the plan shares will be voted by the Trustee as described in the Proxy Statement.The undersigned hereby revokes all proxies previously given by the undersigned to vote at the Annual Meeting of Shareowners or any adjournment or postponement thereof. You are encouraged to specify your choices by marking the appropriate boxes (SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies designated above cannot vote these shares unless you sign and return this Proxy Card. | | | | | | | | Address Changes: | | | | | | | | |
| | | | | | | | | | | | | | | | | | (If you noted any Address Changes above, please mark corresponding box on the reverse side.)
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(If you noted any Address Changes above, please mark the corresponding box on the reverse side.) |