Qualifications
Mr. Paull brings to the Board significant financial expertise with a deep understanding of financial markets, corporate finance, accounting and controls, and investor relations. As a former chief financial officer of a multinational corporation, he also has extensive experience in international operations and marketing.AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS
For fiscal year 2017, directors who were not employed by the Company received an annual cash retainer for Board service of $100,000 and an annual grant of deferred stock units under the Deferred Compensation Program for Directors with a value of approximately $120,000 (rounded up to nearest whole share). For the first three quarters of the fiscal year, directors also received meeting fees of $2,000 per meeting for participating in meetings of committees of which they were members; committee chairs received an additional retainer of $11,250, (based on an annual retainer of $15,000); and the Lead Director received an additional retainer of $15,000 (based on an annual retainer of $20,000).
During fiscal year 2017, the Corporate Governance and Nominating Committee undertook a review of the Compensation Program for Nonemployee Directors (the “Program”). No changes had been made to the Program since 2013. The Committee reviewed a competitive assessment of directors’ compensation levels and practices among a peer group of chemical and industrial companies with similar capital structure, asset intensity and profitability to the Company3, the S&P 500, and the S&P 500 Basic Materials Sector. The competitive assessment indicated that adjustments to the Program design were recommendable to more closely align with market practice, although overall compensation levels were competitive with market practice except for committee chairs and the Lead Director. The following changes were approved by the Board effective July 1, 2017 to more closely align with the competitive market:
The value of the annual deferred stock unit grant was increased from $120,000 to $150,000;
Committee meeting fees were eliminated;
The Audit and Finance and Management Development and Compensation Committee chair retainers were increased from $15,000 to $25,000 and $20,000, respectively, and
The Lead Director retainer was increased from $20,000 to $25,000.
Accordingly, for the fourth quarter, no meeting fees were paid; the Audit and Finance Committee chair received a chair retainer of $6,250 (based on an annual retainer of $25,000); the Management Development and Compensation Committee chair received a chair retainer of $5,000 (based on an annual retainer of $20,000); the Corporate Governance and Nominating Committee chair received a chair retainer of $3,750; and the Lead Director received a retainer of $6,250 (based on an annual retainer of $25,000).
Director Compensation Program
Effective July 1, 2017
| | | | | Annual Deferred Stock Award (made immediately following Annual Meeting)4 | | $ | 150,000 | | Annual Cash Retainer | | $ | 100,000 | | Lead Director Retainer | | $ | 25,000 | | Audit and Finance Committee Chair Retainer | | $ | 25,000 | | Management Development and Compensation Committee Chair Retainer | | $ | 20,000 | | Corporate Governance and Nominating Committee Chair Retainer | | $ | 15,000 | |
3 | The peer group of chemical and industrial companies was comprised of the following companies: Celanase Corporation, Danaher Corporation, Dover Corporation, E. I. du Pont de Nemours & Company, Eastman Chemical Company, Ecolab Inc., Eaton Corp. plc, Huntsman Corporation, Illinois Tool Works Inc., Ingersoll-Rand plc, Parker Hannifin Corporation, PPG Industries Inc., Praxair Inc., Rockwell Automation Inc., and TE Connectivity Ltd.. S&P 500 Basic Materials Sector and S&P 500 peer data was based on the Equilar, Inc. Board Compensation Data (“Directors & Fees Reports”) and “Director Pay Trends 2016” (Equilar Inc., edited by Matthew Goforth), respectively.
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4 | Directors elected to the Board after thesignificant financial expertise with a deep understanding of financial markets, corporate finance, accounting and controls and investor relations. As a former chief financial officer of a multinational corporation, he also has extensive experience in international operations and marketing.
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| 6 | 2019 Annual Meeting receive a prorated grant of deferred stock units based on the number of months remaining until the next Annual Meeting.Proxy Statement |
Table of Contents AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF DIRECTORS
Directors may voluntarily defer all or a part of their cash retainers and their meeting fees (earned before July 1, 2017) under the Deferred Compensation Program for Directors. At the election of each director, voluntarily deferred amounts may be credited to deferred stock units or to an account which is credited with interest based on long-term corporate bond yields. Deferred stock units entitle the director to receive one share of Company stock upon payout, which generally occurs after the director’s service on the Board is over. Deferred stock units earn “dividend equivalents” equal to the dividends that would have been paid on one share of stock for each unit owned by the director on dividend record dates. Deferred retainers and meeting fees (plus dividend equivalents earned on the director’s existing deferred stock units account during a quarter) are converted to deferred stock units based on the NYSE closing price of a share of Company stock on the third to last business day of the quarter.
Directors are reimbursed for expenses incurred in performing their duties as directors. The Company covers directors under its overall directors and officers liability insurance policies. Directors are also covered by the business travel accident policy maintained by the Company and are eligible to participate in the Company’s charitable matching gift program. Under this program, for fiscal year 2017 the Company matched donations of up to $5,000 per year made by employees and directors to qualifying educational organizations; match,Corporate Governance at twice the amount, donations of up to $2,000 per year made to qualifying arts and cultural organizations; and matched donations of up to $1,000 per year to qualifying environmental and conservation organizations.
To emphasize the importance of long-term alignment with shareholders, the Board has adopted stock ownership requirements for directors. Directors are expected to own shares or share equivalents with a value (based on the NYSE closing price) equal to five times the annual cash retainer by the end of the fifth fiscal year after joining the Board. Directors are expected to increase their holdings to reflect an adjustment in the annual cash retainer within a reasonable period of time following the adjustment. Once a director has met the requirement, if there is a subsequent decline in the Company’s share price that causes the director’s ownership level to fall below this guideline, the director is not expected to purchase additional shares to meet the guideline, but is expected to refrain from selling or transferring shares until the guideline is again satisfied. All directors are currently in compliance with the stock ownership guidelines for directors.
On October 1, 2016 the Company completed itsspin-off of Versum Materials. Consistent with the terms of the Deferred Compensation Program for Directors, director’s outstanding deferred stock units on October 1, 2016 were modified to preserve their value after thespin-off. Each director’s Deferred Compensation Program for Directors account was credited with the number of Versum Materials deferred stock units equal to half the director’s Air Products’ deferred stock units on September 30, 2016, rounded up to the nearest whole unit. Terms and conditions applicable to Versum Materials deferred stock units are the same as those applicable to Air Products deferred stock units, except the value of Versum Materials deferred stock units are paid out in cash at the time of distribution, and Versum Materials dividend equivalents are converted into Air Products’ deferred stock units.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF DIRECTORS
2017 Director Compensation
| | | | | | | | | | | | | | | | | | | | | | | | Name | | Fees
Earned or
Paid in Cash (1) ($) | | | Stock
Awards (2)($) | | | All Other
Compensation (3)($) | | | Total($) | | S. K. Carter | | $ | 114,000 | | | $ | 120,090 | | | | | | | $ | 234,090 | | C. I. Cogut | | $ | 114,000 | | | $ | 120,090 | | | $ | 6,912 | | | $ | 241,002 | | C. C. Deaton | | $ | 146,250 | | | $ | 120,090 | | | $ | 5,000 | | | $ | 271,340 | | D. H. Y. Ho | | $ | 114,000 | | | $ | 120,090 | | | | | | | $ | 234,090 | | M. G. McGlynn | | $ | 110,000 | | | $ | 120,090 | | | $ | 5,000 | | | $ | 235,090 | | E. L. Monser | | $ | 130,250 | | | $ | 120,090 | | | | | | | $ | 250,340 | | M. H. Paull | | $ | 133,500 | | | $ | 120,090 | | | $ | 6,050 | | | $ | 259,640 | |
Certain directors voluntarily elected to defer some orThe Board has affirmatively determined that all of their cash retainers and meeting fees. Any voluntary deferrals are included in this column. This column includes annual retainers, meeting fees, and committee chair and presiding director retainers.
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2 | This column shows the grant date fair value of the annual deferred stock unit grant for 2017 calculated in accordance with FASB ASC Topic 718. Deferred stock units earned by directors are fully expensed on the Company’s financial statements at the market value of a share of stock on the date of grant. The annual deferred stock unit grant is prorated for directors, electedmid-year. All deferred stock units credited to directors are fully vested.
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3 | Amounts in this column reflect matching contributionsexcept Mr. Ghasemi, qualify as independent under the Company’s charitable matching gift program for Mr. Deaton and Ms. McGlynn. For Mr. Cogut,New York Stock Exchange (“NYSE”) corporate governance listing standards. In determining independence, the amount reflectsBoard determines whether directors have a matching contribution of $5000 and interest considered to be above-market interest credited on his Deferred Compensation Program balance. For Mr. Paull, the amount reflects a matching contribution of $1000 and interest considered to be above-market interest credited on his Deferred Compensation Program balance. Interest is calculated for the Deferred Compensation Program using a Moody’sA-rated Corporate Bond Rate because this is comparable to the ratematerial relationship with the Company pays its other creditorsthat would interfere with the exercise of independent judgment in carrying out the responsibilities of directors. When assessing materiality, the Board considers all relevant facts and circumstances, including transactions between the Company and the director, family members of directors or organizations with which the director is affiliated. The Board further considers the frequency of and dollar amounts associated with any of these transactions and whether the transactions were in the ordinary course of business and were consummated on long-term obligations. When this rate exceeds 120% of a rate set by the U.S. Internal Revenue Service for obligations ofterms and conditions similar maturity, it is treated as above-market interest, even though it is based on a market average for corporate bonds.
to those with unrelated parties. |
AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Our business is managed by our employees under the direction and oversight of the Board. We keep Board members informed of our business through discussions with management, materials we provide to them, visits to our offices and facilities, and their participation in Board and Board committee meetings.
The Board has adopted Corporate Governance Guidelines (“Guidelines”) for the Company in order to assure that it has the necessary practices in place to govern the Company in accordance with the interests of the shareholders. The Guidelines set forth the governance practices the Board follows, including with respect to the roles and functions of the Board, Board leadership, director independence and qualifications, nomination and election of directors, director responsibilities, access to management and independent advisors, director compensation, director orientation and education, chief executive officer performance assessment, management succession, and assessment of Board and committee performance. The Guidelines are available on the Company’s website at:http://www.airproducts.com/company/governance/board-of-directors/governance-guidelines.aspxand are available in print upon request. (Information contained on our website is not part of this proxy statement.) The Board regularly reviews corporate governance developments and modifies thes Guidelines as warranted.
Director Independence
The Board has affirmatively determined that all of the Company’s directors, except Mr. Ghasemi, qualify as independent under the NYSE corporate governance listing standards. In determining independence, the Board determines whether directors have a material relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of directors. When assessing materiality, the Board considers all relevant facts and circumstances including, without limitation, transactions between the Company and the director, family members of directors, or organizations with which the director is affiliated. The Board further considers the frequency and dollar amounts associated with any of these transactions and whether the transactions were in the ordinary course of business and were consummated on terms and conditions similar to those with unrelated parties.
In its determination, the Board considers the specific tests for independence included in the NYSE listing standards. In addition, the Guidelines provide standards to assist in determining each director’s independence, which meet or exceed the NYSE independence requirements. The Guidelines provide that the following categories of relationships are immaterial for purposes of making an independence determination: Sales or purchases of goods or services between the Company and a director’s employer or an employer of a director’s family member which occurred more than three years prior to the independence determination or involved less than 1% of such employer’s annual consolidated gross revenues, took place on the same terms and conditions offered to third parties or on terms and conditions established by competitive bid, and did not affect the director’s or family member’s compensation;
Charitable contributions by the Company to an organization in which the director or his or her immediate family member serves as an executive officer, director, or trustee that occurred more than three years prior to the independence determination, were made pursuant to the Company’s matching contributions program, or were less than the greater of $1 million or 2% of the organization’s gross revenues;
Membership of a director in the same professional association, social, fraternal, or religious organization or club as an Executive Officer of the Company;
A director’s past matriculation at the same educational institution as an Executive Officer of the Company;
A director’s service on the board of directors of another public company on which an Executive Officer of the Company also serves as a director, except for prohibited compensation committee interlocks; and
A director’s service as a director, trustee, or executive officer of a charitable or educational organization where an Executive Officer of the Company also serves as a director or trustee.
| ● | sales or purchases of goods or services between the Company and a director’s employer or an employer of a director’s family member, which occurred more than three years prior to the independence determination or involved less than 1% of such employer’s annual consolidated gross revenues, took place on the same terms and conditions offered to third parties or on terms and conditions established by competitive bid and did not affect the director’s or family member’s compensation; | | ● | charitable contributions by the Company to an organization in which the director or his or her immediate family member serves as an executive officer, director or trustee that occurred more than three years prior to the independence determination, were made pursuant to the Company’s matching contributions program or were less than the greater of $1 million or 2% of the organization’s gross revenues; | | ● | membership of a director in the same professional association, social, fraternal or religious organization or club as an executive officer of the Company; | | ● | a director’s past matriculation at the same educational institution as an executive officer of the Company; | | ● | a director’s service on the board of directors of another public company on which an executive officer of the Company also serves as a director, except for prohibited compensation committee interlocks; and | | ● | a director’s service as a director, trustee or executive officer of a charitable or educational organization where an executive officer of the Company also serves as a director or trustee. |
In accordance with NYSE listing standards, in affirmatively determining the independence of any director who will serve on the Management Development and Compensation Committee, the Board also specifically considers factors AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
relevant to determining whether a director has a relationship to the Company, which is material to that director’s ability to be independent from management in making judgments about the Company’s executive compensation, including sources of the director’s compensation and relationships of the director to the Company or senior management. In addition, the Guidelines provide that no director may serve on the Audit and Finance Committee or Management Development and Compensation Committee of the Board if he or she has received within the past or preceding fiscal year any compensatory fee from the Company other than for Board or committee service; and no director may serve on the Management Development and Compensation Committee of the Board unless the director qualifies as an “outside director” under U.S. tax laws pertaining to deductibility of executive compensation. On an annual basis, each member of the Board is required to complete a questionnaire designed in part to provide information to assist the Board in determining whether the director is independent under NYSE rules and the Guidelines. In addition, each director or potential director has an affirmative duty to disclose to the Corporate Governance and Nominating Committee relationships between and among that director (or an immediate family member), the Company and/or the Executive Officersexecutive officers of the Company.  | 7 |
Table of Contents Corporate Governance at Air Products The Corporate Governance and Nominating Committee reviews alldirector relationships and transactions for compliance with the standards described above and makes a recommendation to the Board, which makes the independence determination. For those directors identified as independent, the Company and the Board are aware of no relationships or transactions with the Company or management, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Routine purchases and sales of products involving Ms. Carter’s and Mr. Monser’s employers (amounting to less than 1% of the Company’s and each such employer’s consolidated revenues) and Mr. Paull’s service on the advisory board of a shareholder were determined not to interfere with their independence. | Board Refreshment | | Ongoing Assessment of Board Composition The qualities and skills necessary for a specific director nominee are governed by the needs of the Company at the time the Corporate Governance and Nominating Committee determines to add a director to the Board. The specific requirements of the Company are determined by the Committee and are based on, among other things, the Company’s current business, market, geographic and regulatory environments; the mix of perspectives, experience and competencies currently represented by the other Board members; and the CEO’s views as to areas in which management desires additional advice and counsel. | | Board Tenure Policy To enable Board succession planning and refreshment, the Board has adopted a policy that a non-executive director may not continue to serve on the Board after the Annual Meeting following the earlier of his or her completion of 15 full years of service on the Board or attainment of age 75. The Board retains the flexibility to waive this policy, including in response to events or recruiting realities. At the time Mr. Ghasemi was recruited to become the Company’s Chairman and CEO in 2014, the Board determined it would waive the age limit for him to enable him to remain a director during his employment. | |  | | | | | Identification of Candidates When the need to recruit a non-management director arises, the Corporate Governance and Nominating Committee’s standard process is to consult the other directors, the CEO and sometimes a third-party recruiting firm to identify potential candidates. Once a candidate is identified, the candidate screening process typically is conducted initially through an interview by one or more members of the Committee and the CEO. | | | | | | Candidate Selection After the initial interviews, the candidate meets with the full Corporate Governance and Nominating Committee for formal consideration and recommendation to the Board. Prior to nomination or election, an investigation is conducted to verify the candidate’s reputation and background, the candidate’s independence as measured by the Board’s independence standards and other factors the Committee deems appropriate at the time. | |
The Corporate Governance and Nominating Committee has adopted a policy regarding its consideration of director candidates recommended by shareholders for nomination by the Board at an Annual Meeting and a procedure for submission of such candidates. The policy provides that candidates recommended by shareholders will be considered by the Committee. Submissions of candidates must be made in writing and must be received not later than 120 days prior to the anniversary date of the proxy statement for the prior Annual Meeting. The submission must also provide certain information concerning the candidate and the recommending shareholder(s), a statement explaining why the candidate has the qualifications required and consent of the candidate to be interviewed by the Corporate Governance and Nominating Committee and to serve if elected. A copy of the policy and procedure is available upon request from the Corporate Secretary’s Office. Candidates recommended by shareholders in accordance with these procedures will be screened and evaluated by the Corporate Governance and Nominating Committee in the same manner as other candidates. | 8 | 2019 Annual Meeting Proxy Statement |
Table of Contents Shareholder EngagementCorporate Governance at Air Products
Board Responsibilities Our business is managed by our employees under the direction and oversight of the Board. Among other responsibilities discussed below, the Board reviews, monitors and, where appropriate, approves fundamental financial and business strategies and major corporate actions. The Board of Directors is elected by shareholders to provide advice and counsel to and oversee management to ensure that the interests of the stockholders and other corporate constituents are being served with a view toward maximizing our long-term value. Directors exercise their oversight responsibilities through discussions with management, review of materials management provides to them, visits to our offices and facilities and their participation in Board and Board committee meetings. The CEO and other members of senior management are responsible for assessing and managing the Company’s risk exposure, and the Board and its committees provide oversight in connection with those efforts. | |
| The Board of Directors
Responsibility for risk oversight rests with the Board. The Board formally reviews the Company’s risk management processes and policies periodically, including identification of key risks and associated monitoring, control and mitigation activities, but the Board primarily exercises its risk oversight responsibility through meetings, discussions and review of management reports and proposals. Consideration of risk is inherent in the Board’s consideration of the Company’s long-term strategies and in the transactions and other matters presented to the Board, including large capital expenditures, acquisitions and divestitures, cybersecurity and safety and environment updates. Committees help the Board carry out this responsibility by focusing on specific key areas of risk inherent in our business.All Board members are invited to attend most committee meetings, and Board members who do not attend committee meetings receive information about committee activities and deliberations. | | | | |  |  | | | | | |
| | | | | | | | | | | | | | | | | | | | | |  | | | | | | | | | | | | | | | | | | | | | | | | | | Audit and Finance Committee
The Audit and Finance Committee oversees risks associated with financial and accounting matters, including compliance with legal and regulatory requirements, financial instruments, financial transactions, financial policies and strategies, pension funding and capital structure and the Company’s financial reporting and internal control systems. The Audit and Finance Committee also has oversight of the Company’s risk assessment and management process and associated monitoring, control and mitigation activities. | | Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee oversees risks associated with corporate governance, including Board structure, director succession planning and allocation of authority between management and the Board. | | Management Development and Compensation Committee
The Management Development and Compensation Committee helps ensure that the Company’s executive compensation policies and practices support the retention and development of executive talent with the experience required to manage risks inherent to the business and do not encourage or reward excessive risk-taking by our executives. | | | | | | | | | | | | | | | | | | | | Management
Management is responsible for assessing and managing the Company’s various risk exposures on a day-to-day basis, including the creation of appropriate risk management programs and policies. | | | | | | |
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Table of Contents Corporate Governance at Air Products | Management Succession Planning |
The Management Development and Compensation Committee of the Board, the CEO and the Human Resources organization maintain an ongoing focus on executive development and succession planning to prepare the Company for future success. The Board reviews organization and succession plans with our CEO at least annually. In addition, the Company has an emergency succession procedure for the CEO that is reviewed annually by the Board. | A comprehensive review of executive talent determines readiness to take on additional leadership roles and identifies developmental and coaching opportunities needed to prepare our executives for greater responsibilities. | | | | | In addition to preparing for CEO succession, the succession planning process includes other senior management positions. | |  | | | | | | |  | | | | | | |  | | | | | | | | | | | Succession planning is a responsibility of the entire Board and all members participate in this process. | | | | | The CEO makes a formal succession planning presentation to the Board annually. | |  | | | | | |
| Shareholder Communications |
Shareholders and other interested parties may communicate with the independent directors by sending a written communication in care of the Corporate Secretary to:  | | Air Products and Chemicals, Inc. 7201 Hamilton Boulevard
Allentown, PA 18195-1501 |
The Board has adopted a written procedure for collecting, organizing and forwarding direct communications from shareholders and other interested parties to the non-management directors. A copy of the procedure is available upon request from the Corporate Secretary’s Office. Board Structure | Board Leadership Structure |
The Board does not have a policy on whether the roles of Chairman of the Board and CEO should be separate or whether the Chairman of the Board should be independent. The Board determines which structure is in the best interests of the Company at any given time. At present Mr. Ghasemi serves as both CEO and Chairman of the Board, and the Board also has an independent Lead Director. The Board decided to combine the CEO and Chairman roles because it has a high level of confidence in Mr. Ghasemi’s leadership and willingness to work closely and transparently with the independent directors. The Board believes the Company is best served at this time by unified leadership of operations and oversight of the Company, which ensures that fostering long-termthe Board and institution-wide relationshipsmanagement act with shareholders, listeningcommon purpose. Finally, the Board is satisfied that the independent directors have ample opportunities to execute their concernsresponsibilities independently through numerous executive sessions held throughout the year at both the Board and maintaining their trust and goodwill is a prerequisite to good governance. Management conducts extensive engagementscommittee levels, substantial interactions with key shareholders. These engagements may cover governance, compensation, and safety, as well as financial and operational matters to ensure thatmembers of the management team other than the CEO and the Board understandleadership of the Lead Director and address the issues that are important to our shareholders. The Board oversees the discharge by managementcommittee chairs. | 10 | 2019 Annual Meeting Proxy Statement |
Table of shareholder communication and engagement and receives regular reports on shareholder comments and feedback and is open to dialogue on issues of interest to significant long term shareholders. The Board also specifically seeks to understand any significant voting trends on the Company’s Executive Officer compensation program and other governance matters.Contents Executive SessionsCorporate Governance at Air Products
The Lead Director is elected by majority vote of the Board upon the nomination of the Corporate Governance and Nominating Committee. Mr. Deaton is currently the Lead Director. | The Guidelines provide that the Lead Director’s responsibilities include: | | ● | presiding at executive sessions of the Board and any other time the Chairman is not present and communicating feedback to the CEO; | | ● | determining the agenda for executive sessions of non-management directors; and | | ● | principal authority to convene a meeting of independent directors. |
The independent directors regularly meet without the chief executive officer (“CEO”)CEO or other members of management present in executive sessions that are scheduled at each Board meeting. In addition, the CEO performance review is conducted in executive session, and the Board committees regularly meet in executive session. Board executive sessions are led by the Lead Director, currently Mr. Deaton¸ except the CEO performance review is led by the ChairmanChair of the Management Development and Compensation Committee. | Standing Committees of the Board |
The Board has three standing committees, which operate under written charters approved by the Board: Audit and Finance; Corporate Governance and Nominating; and Management Development and Compensation. In accordance with NYSE listing standards, none of the directors who serve on the Audit and Finance, Corporate Governance and Nominating or Management Development and Compensation Committees have ever been employed by the Company, and the Board has determined in its business judgment that all of them are “independent” from the Company and its management in accordance with the guidelines described above in “Director Independence” as well as with additional NYSE listing criteria that are applicable to members of the Audit and Finance and Management Development and Compensation Committees. The Company’s Bylaws also provide for an Executive Committee. | The charters of all the committees can be viewed on the Company website at www.airproducts.com/Company/governance/board-of-directors/commitee-descriptions-and-charters.aspx and are available in print to any shareholder upon request. |
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Table of Contents Corporate Governance at Air Products Audit and Finance Committee Members ●Matthew H. Paull (Chair) ●Susan K. Carter ●Charles I. Cogut ●David H. Y. Ho ●Edward L. Monser The Board has determined that all of the Audit and Finance Committee members are “financially literate” and that Ms. Carter and Mr. Paull qualify as “audit committee financial experts” as defined by U.S. Securities and Exchange Commission (“SEC”) regulations and NYSE listing standards. FY2018 Meetings:8
Committee Report:Page 53 | The Audit and Finance Committee operates under a written charter.
Primary Responsibilities ●The Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. ●The Committee provides oversight of the Company’s external financial reporting process, systems and processes relating to the integrity of financial statements, internal audit process, programs for compliance with laws and regulations and the employee code of conduct, and processes for risk assessment and management. ●The Committee discusses with the Company’s internal auditor and independent registered public accountant the overall scope and plans for their respective audits. The Committee regularly meets with Internal Audit and the independent registered public accounting firm, with and without management present, to discuss the results of their audits, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. |
Corporate Governance and Nominating Committee Members ●Chadwick C. Deaton (Chair) ●Charles I. Cogut ●Margaret G. McGlynn ●Matthew H. Paull FY2018 Meetings:2 | The Corporate Governance and Nominating Committee operates under a written charter.
Primary Responsibilities ●The Committee monitors and makes recommendations to the Board about corporate governance matters, including the Guidelines, codes of conduct, Board structure and operation, Board policies on director compensation and tenure, the meeting schedules of the Board and its committees, the charters and composition of the committees and the annual Board and committee performance assessment processes. ●The Committee has primary responsibility for identifying, recommending and recruiting nominees for election to the Board and recommending candidates for election as Lead Director. ●The Committee also reviews and monitors the Company’s crisis management procedures, government relations activities and response to significant public policy issues, including social responsibility matters. |
| 12 | 2019 Annual Meeting Proxy Statement |
Table of Contents Corporate Governance at Air Products Management Development and Compensation Committee Members ●Edward L. Monser (Chair) ●Susan K. Carter ●Chadwick C. Deaton ●David H. Y. Ho ●Margaret G. McGlynn FY2018 Meetings:3
Committee Report:Page 18 | The Management Development and Compensation Committee operates under a written charter.
Primary Responsibilities ●The Committee establishes the executive officer compensation philosophy, design and strategy for the Company consistent with Company objectives and shareholder interests, determining CEO compensation and approving other executive officer compensation. ●The Committee approves performance objectives relevant to the compensation of the CEO, establishing the process for and leading the Board in evaluation of the performance of the Company’s CEO and providing oversight of the CEO’s evaluation of the performance of other executive officers. ●The Committee oversees CEO succession planning and the development and evaluation of potential candidates for other executive officer positions. ●The Committee oversees the Company’s overall management compensation program, the design and administration of management incentive compensation plans, including equity programs, and the design and administration of the Company’s retirement and welfare benefit plans.
The Committee’s charter permits it to delegate all or a portion of the authority granted to it by the Board to one or more Committee members, senior executives or subcommittees to the extent consistent with applicable laws, regulations and listing standards. The Company’s Delegation of Authority Policy reserves for the Board and the Committee all compensation and staffing decisions with respect to executive officers except as specifically delegated. |
Executive Committee Members ●Seifi Ghasemi (Chair) ●Chadwick C. Deaton ●Edward L. Monser ●Matthew H. Paull FY2018 Meetings:0 | Primary Responsibilities The Executive Committee has the authority of the Board to act on most matters during intervals between Board meetings. It is usually convened to approve capital expenditures associated with a project in excess of the CEO’s authority when a customer requires a commitment prior to the next Board meeting and a special meeting of the Board cannot be convened. |
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Table of Contents Corporate Governance at Air Products Board MeetingsPractices, Processes and AttendancePolicies | Board Meetings and Attendance |
During fiscal year 2017,2018, there were elevennine meetings of ourthe Board. No director attended less than 75% of the combined total of meetings of the Board and the committees on which he or she was serving. In accordance with the Guidelines, all directors are expected to attend the Annual Meeting unless they have an emergency or unavoidable schedule conflict. All directors attended the last Annual Meeting. | Board Performance Evaluation |
AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
Shareholder Communications
ShareholdersEach year the Board conducts an evaluation of its performance. The evaluation format is established by the Corporate Governance and other interested parties may communicate withNominating Committee. In recent years, the independent directorsformat has been an unstructured discussion led by sending a written communication in carethe Chair of the Corporate SecretaryGovernance and Nominating Committee covering topics approved by the Committee and provided to directors in advance of the address on page 5.evaluation. The Board has adoptedcommittees also conduct annual self-evaluations using a written proceduresimilar format. Individual directors are evaluated by the Corporate Governance and Nominating Committee at the time of nomination for collecting, organizing, and forwarding direct communications from shareholders and other interested parties to the independent directors. A copyreelection. The Lead Director is evaluated following his first full year of service in that role. This evaluation is conducted by a member of the procedure is available upon requestCorporate Governance and Nominating Committee after soliciting input from the Corporate Secretary’s Office.other directors.
| Corporate Governance Guidelines |
The Board has adopted Corporate Governance Guidelines for the Company in order to establish and maintain practices to govern the Company in accordance with the interests of the shareholders. The Guidelines set forth the governance practices the Board follows, including with respect to the roles and functions of the Board, Board leadership, director independence and qualifications, nomination and election of directors, director responsibilities, access to management and independent advisors, director compensation, director orientation and education, chief executive officer performance assessment, management succession and assessment of Board and committee performance. The Board regularly reviews corporate governance developments and modifies the Guidelines as warranted. | | The Guidelines are available on the Company’s website at: www.airproducts.com/company/governance/board-of-directors/governance-guidelines.aspx and are available in print upon request. (Information contained on our website is not part of this proxy statement.) |
The Board has adopted its own Code of Conduct that is intended to affirm its commitment to the highest ethical standards, integrity and accountability among directors and focuses on areas of potential ethical risk and conflicts of interest especially relevant to directors. The Company also has a Code of Conduct for officers and employees. This Code of Conduct addresses such topics as conflicts of interest, confidentiality, protection and proper use of Company assets and compliance with laws and regulations. | | Both Codes of Conduct can be found on the website at www.airproducts.com/company/governance/board-of-directors/director-code-of-conduct.aspx and www.airproducts.com/company/governance/commitment-ethical-business/employee-code-of-conduct.aspx and are available in print to any shareholder who requests them. |
| 14 | 2019 Annual Meeting Proxy Statement |
Table of Contents Code of ConductCorporate Governance at Air Products
The Board has adopted its own Code of Conduct that is intended to affirm its commitment to the highest ethical standards, integrity, and accountability among directors and focuses on areas of potential ethical risk and conflicts of interest especially relevant to directors. The Company also has a Code of Conduct for officers and employees. This Code of Conduct addresses such topics as conflicts of interest, confidentiality, protection and proper use of Company assets, and compliance with laws and regulations. Both Codes of Conduct can be found on the website at http://www.airproducts.com/company/governance/board-of-directors/director-code-of-conduct.aspx andhttp://www.airproducts.com/company/governance/commitment-ethical-business/employee-code-of-conduct.aspx
and are available in print to any shareholder who requests them.
Transactions with Related Persons
| Transactions with Related Persons |
The Company did not engage in any reportable related person transactions in fiscal year 2017.2018. The Board recognizes that transactions with related persons can present actual or potential conflicts of interest and wants to ensure that Company transactions are based solely on the best interests of the Company and its shareholders. Accordingly, the Board has delegated responsibility to the Audit and Finance Committee to review transactions between the Company and related persons. The Audit and Finance Committee has adopted a written policy providing procedures for review of related person transactions. A related person transaction is a transaction between the Company and a director, Executive Officer,executive officer or 5% or more shareholder; anshareholder, any of their respective immediate family member of a director, Executive Officer, or 5% or more shareholder;members or a company or other entity in which any of these persons have a direct or indirect material interest. The policy specifically excludes certain types of transactions, which the Committee deems to be immaterial. Pursuant to the Audit and Finance Committee policy, related person transactions must be preapproved by the Committee or, in the event of an inadvertent failure to bring the transaction to the Committee for preapproval, ratified by the Committee. In deciding whether to approve or ratify a related person transaction, the Committee considers the benefits of the transaction to the Company, the impact on a director’s independence if a director or a director’s family member or affiliate is involved, the availability of comparable sources for products and services, the terms of the transaction and terms available to third parties for similar transactions. The Audit and Finance Committee chairmanChair is authorized to approve related person transactions when it is impractical or undesirable to wait until the next Committee meeting for approval. Such chairman-approvedChair-approved transactions must be reported to the Committee at the next meeting. Diversity PolicyCompensation of Directors
While the Board has not adopted a formal policy on diversity, the Guidelines provide that,
In fiscal 2018, our directors received compensation as a whole, the Board should include individuals with a diverse range of experience to give the Board depth and breadthset forth in the mix of skills represented. The Board seeks to include an array of skills, perspectives and experience in its overall composition. This guideline is implemented by seeking to identify candidates that bring diverse skills sets, backgrounds, and experiences, including ethnic, gender, and geographic diversity,chart below. There were no changes made to the compensation of non-employee directors in fiscal 2018. | Director Compensation Program | | ($) | | Annual Deferred Stock Award (made immediately following Annual Meeting)(1) | | 150,000 | | Annual Cash Retainer | | 100,000 | | Lead Director Retainer | | 25,000 | | Audit and Finance Committee Chair Retainer | | 25,000 | | Management Development and Compensation Committee Chair Retainer | | 20,000 | | Corporate Governance and Nominating Committee Chair | | 15,000 |
| (1) | Directors elected to the Board after the Annual Meeting receive a prorated grant of deferred stock units based on the number of months remaining until the next annual meeting. |
| Our Corporate Governance and Nominating Committee periodically undertakes a review of non-employee director compensation. The most recent review was completed in fiscal 2017, when the Committee reviewed a competitive assessment of directors’ compensation levels and practices among a peer group of chemical and industrial companies with similar capital structure, asset intensity and profitability to the Company, the S&P 500 and the S&P 500 Basic Materials Sector. |
Directors may voluntarily defer all or a part of their cash retainers under the Deferred Compensation Program for Directors. At the election of each director, candidates are needed. Board Leadership Structure
The Board does not have a policyvoluntarily deferred amounts may be credited to deferred stock units or to an account, which is credited with interest based on whetherlong-term corporate bond yields. Deferred stock units entitle the rolesdirector to receive one share of Chairman ofCompany stock upon payout, which generally occurs after the Board and CEO should be separate or whether the Chairman of the Board should be independent. The Board determines which structure is in the best interests of the Company at any given time.
AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
At present Mr. Ghasemi serves as both CEO and Chairman and the Board also has an independent Lead Director. The Board decided to combine the CEO and Chairman roles because it has a high level of confidence in Mr. Ghasemi’s leadership and willingness to work closely and transparently with the independent directors, and believes the Company is best served at this time by unified leadership of operations and oversight of the Company, which ensures that the Board and management act with common purpose. The Board also believes that maintaining equality among the independent directors fosters collegiality and openness among directors. Finally,director’s service on the Board is satisfiedover. Deferred stock units earn “dividend equivalents” equal to the dividends that would have been paid on one share of stock for each unit owned by the independent directors have ample opportunitiesdirector on dividend record dates. Deferred retainers (plus dividend equivalents
| 15 |
Table of Contents Corporate Governance at Air Products earned on the director’s existing deferred stock units account during a quarter) are converted to execute their responsibilities independently through numerous executive sessions held throughoutdeferred stock units based on the year at bothNYSE closing price of a share of Company stock on the Board and committee levels, substantial interactions with membersthird to last business day of the management team other thanquarter. Directors are reimbursed for expenses incurred in performing their duties as directors. The Company covers directors under its overall directors and officers liability insurance policies. Directors are also covered by the CEO,business travel accident policy maintained by the Company and are eligible to participate in the leadershipCompany’s charitable matching gift program. Under this program, for fiscal 2018 the Company matched donations of the Lead Directorup to $10,000 per year made by employees and the committee chairs. The Guidelines provide that the Lead Director’s responsibilities include:
Presiding at executive sessions of the Board and any other time the Chairman is not present, and communicating feedbackdirectors to the CEO;
Determining the agenda for executive sessions ofnon-management directors; and
Principal authority to convene a meeting of independent directors.
The Lead Director is elected by majority vote of the Board upon the nomination of the Corporate Governance and Nominating Committee and serves for a three-year term. Mr. Deaton is currently the Lead Director.
Board Tenure Policy
qualifying non-profit organizations. To enable Board succession planning and refreshment,emphasize the importance of long-term alignment with shareholders, the Board has adopted stock ownership requirements for directors. Directors are expected to own shares or share equivalents with a policy that anon-executive director may not continue to servevalue (based on the Board afterNYSE closing price) equal to five times the Annual Meeting following the earlier of his or her completion of fifteen full years of service on the Board or attainment of age 75. The Board retains the flexibility to waive this policy in response to events or recruiting realities. At the time Mr. Ghasemi was recruited to become the Company’s Chairman and CEO in 2014, the Board determined it would waive the age limit for him to enable him to remain a director during his employment. Board Performance Evaluation
Each year the Board conducts an evaluation of its performance. The evaluation format is establishedannual cash retainer by the Corporate Governance and Nominating Committee. In recent years, the format has been an unstructured discussion led by the Chairman of the Corporate Governance and Nominating Committee, covering topics approved by the Committee and provided to directors in advance of the evaluation. The Board committees also conduct annual self-evaluations using a similar format.
Individual directors are evaluated by the Corporate Governance and Nominating Committee at the time of nomination for reelection. The Lead Director is evaluated following his first full year of service in that role. This evaluation is conducted by a member of the Corporate Governance and Nominating Committee after soliciting input from other directors.
Management Succession Planning
The Management Development and Compensation Committee of the Board, the CEO, and the Human Resources organization maintain an ongoing focus on executive development and succession planning to prepare the Company for future success. In addition to preparing for CEO succession, the succession planning process includes other senior management positions. A comprehensive review of executive talent determines readiness to take on additional leadership roles and identifies developmental and coaching opportunities needed to prepare our executives for greater responsibilities. The CEO makes a formal succession planning presentation to the Board annually. Succession planning is a responsibility of the entire Board and all members participate. In addition, the Company has an emergency succession procedure for the CEO that is reviewed periodically by the Board.
AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
Role in Risk Oversight
The Board’s role in risk oversight of the Company is consistent with the Company’s leadership structure, with the CEO and other members of senior management having responsibility for assessing and managing the Company’s risk exposure, and the Board and its committees providing oversight in connection with those efforts. Management is responsible for assessing and managing the Company’s various exposures to risk on aday-to-day basis, including the creation of appropriate risk management programs and policies. Responsibility for risk oversight rests with the full Board. The Board formally reviews the Company’s risk management processes and policies periodically, including identification of key risks and associated monitoring, control, and mitigation activities; but the Board primarily exercises its risk oversight responsibility through meetings, discussions, and review of management reports and proposals. Consideration of risk is inherent in the Board’s consideration of the Company’s long-term strategies and in the transactions and other matters presented to the Board, including large capital expenditures, acquisitions and divestitures, and safety and environment updates. Committees help the Board carry out this responsibility by focusing on specific key areas of risk inherent in our business:
The Audit and Finance Committee oversees risks associated with financial and accounting matters, including compliance with legal and regulatory requirements; financial instruments, financial transactions, financial policies and strategies, pension funding, and capital structure; and the Company’s financial reporting and internal control systems. The Audit and Finance Committee also has oversight for the Company’s risk assessment and management process and associated monitoring, control and mitigation activities;
The Corporate Governance and Nominating Committee oversees risks associated with corporate governance, including Board structure, director succession planning, and allocation of authority between management and the Board;
The Management Development and Compensation Committee helps ensure that the Company’s executive compensation policies and practices support the retention and development of executive talent with the experience required to manage risks inherent to the business and do not encourage or reward excessive risk-taking by our executives.
All Board members are invited to attend most committee meetings and Board members who do not attend committee meetings receive information about committee activities and deliberations.
AIR PRODUCTS AND CHEMICALS, INC.
STANDING COMMITTEES OF THE BOARD
STANDING COMMITTEES OF THE BOARD
The Board has three standing committees which operate under written charters approved by the full Board: Audit and Finance; Corporate Governance and Nominating; and Management Development and Compensation. In accordance with NYSE listing standards, none of the directors who serve on the Audit and Finance, Corporate Governance and Nominating, or Management Development and Compensation Committees have ever been employed by the Company, and the Board has determined in its business judgment that all of them are “independent” from the Company and its management in accordance with the guidelines described above in “Director Independence”. The charters of all the committees can be viewed on the Company website athttp://www.airproducts.com/company/governance/board-of-directors/committee-composition/commitee-descriptions-and-charters.aspxand are available in print to any shareholder upon request. The Company’s Bylaws also provide for an Executive Committee. The chart below identifies directors who were members of each committee at the end of the fifth fiscal year 2017, the number of meetings held by each committee during fiscal year 2017, and the committee chairs.
| | | | | | | | | | | | | | | | Name | | Audit and
Finance | | Corporate
Governance and Nominating | | Executive | | Management Development & Compensation
Committee | S. K. Carter | | X | | | | | | X | C. I. Cogut | | X | | X | | | | | C. C. Deaton | | | | C | | X | | X | S. Ghasemi | | | | | | C | | | D. H. Y. Ho | | X | | | | | | X | M. G. McGlynn | | | | X | | | | X | E. L. Monser | | X | | | | X | | C | M. H. Paull | | C | | X | | X | | | FY2017 Meetings | | 7 | | 3 | | 0 | | 3 |
C = Chairman
Audit and Finance Committee
The Board has determined that all of the Audit and Finance Committee members are “financially literate” and that Ms. Carter and Mr. Paull qualify as “audit committee financial experts” as defined by SEC regulations and NYSE listing standards. The Committee operates under a written charter. The Committee is directly responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. The Committee provides oversight of the Company’s external financial reporting process, systems and processes relating to the integrity of financial statements, internal audit process, programs for compliance with laws and regulations and the employee code of conduct, and processes for risk assessment and management. The Committee discusses with the Company’s internal auditor and independent registered public accountant the overall scope and plans for their respective audits. The Committee regularly meets with Internal Audit and the independent registered public accounting firm, with and without management present, to discuss the results of their audits, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
Audit and Finance Committee Report
The Audit and Finance Committee provides oversight of the Company’s financial reporting process on behalf ofafter joining the Board. Management bears primary responsibility forDirectors are expected to increase their holdings to reflect an adjustment in the financial statements andannual cash retainer within a reasonable period of time following the reporting process, includingadjustment. Once a director has met the system of internal controls and disclosure controls. The independent registered public accounting firmrequirement, if there is responsible for expressing an opinion on the conformity of the audited consolidated financial statements with United States generally accepted accounting principles (“GAAP”).
AIR PRODUCTS AND CHEMICALS, INC.
STANDING COMMITTEES OF THE BOARD
In fulfilling its responsibilities, the Audit and Finance Committee has reviewed and discussed the audited consolidated financial statements containeda subsequent decline in the Company’s Annual Report onForm 10-K forshare price that causes the fiscal year ended September 30, 2017director’s ownership level to fall below this guideline, the director is not expected to purchase additional shares to meet the guideline but is expected to refrain from selling or transferring shares until the guideline is again satisfied. All directors are currently in compliance with the Company’s management and the independent registered public accounting firm, KPMG. The Committee has discussed with KPMG the matters that are required to be discussed under Public Company Accounting Oversight Board standards governing communications with audit committees. KPMG has provided to the Committee the written disclosures and the letter concerning independence required by applicable requirementsstock ownership guidelines for directors.
FISCAL 2018 DIRECTOR COMPENSATION | | |
| Name | | Fees Earned or
Paid in Cash(1)
($) | | Stock
Awards(2)
($) | | All Other
Compensation(3)
($) | | Total
($) | | Susan K. Carter | | 100,000 | | 150,162 | | — | | 250,162 | | Charles I. Cogut | | 100,000 | | 150,162 | | 12,255 | | 262,417 | | Chadwick C. Deaton | | 140,000 | | 150,162 | | — | | 290,162 | | David H. Y. Ho | | 100,000 | | 150,162 | | — | | 250,162 | | Margaret G. McGlynn | | 100,000 | | 150,162 | | 10,000 | | 260,162 | | Edward L. Monser | | 120,000 | | 150,162 | | 10,000 | | 280,162 | | Matthew H. Paull | | 125,000 | | 150,162 | | 13,741 | | 288,903 |
| (1) | Certain directors voluntarily elected to defer some or all of their cash retainers. Any voluntary deferrals are included in this column. This column includes annual retainers, committee chair and lead director retainers. | | (2) | This column shows the grant date fair value of the annual deferred stock unit grant for fiscal 2018 calculated in accordance with FASB ASC Topic 718. Deferred stock units earned by directors are fully expensed on the Company’s financial statements at the market value of a share of stock on the date of grant. The annual deferred stock unit grant is prorated for directors elected mid-year. All deferred stock units credited to directors are fully vested. | | (3) | Amounts in this column reflect charitable matching contributions under the Company’s charitable matching gift program for Mr. Monser and Ms. McGlynn. For Mr. Cogut, the amount reflects a charitable matching contribution of $10,000 and interest considered to be above-market interest credited on his Deferred Compensation Program balance. For Mr. Paull, the amount reflects a charitable matching contribution of $8,900 and interest considered to be above-market interest credited on his Deferred Compensation Program balance. Interest is calculated for the Deferred Compensation Program using a Moody’s A-rated Corporate Bond Rate, because this is comparable to the rate the Company pays its other creditors on long-term obligations. When this rate exceeds 120% of a rate set by the U.S. Internal Revenue Service for obligations of similar maturity, it is treated as above-market interest even though it is based on a market average for corporate bonds. |
| 16 | 2019 Annual Meeting Proxy Statement |
Table of the Public Company Accounting Oversight Board regarding independent registered public accounting firm communications with the Audit and Finance Committee, and the Committee has discussed with KPMG the firm’s independence. Based on the reviews and discussions referred to above, the Committee approved the audited consolidated financial statements and recommended to the Board that they be included in the Company’s Annual Report onForm 10-KContents for fiscal year 2017.
Audit and Finance Committee
Matthew H. Paull, Chairman
Susan K. Carter
Charles I. Cogut
David H. Y. Ho
Edward L. Monser
Independent Registered Public Accounting Firm
Appointment and Attendance at Annual Meeting. The Audit Committee appointed KPMG as the Company’s independent registered public accounting firm for fiscal year 2017. KPMG has been retained as the Company’s independent registered public accounting firm since 2002. Representatives of KPMG will be present at the Annual Meeting to respond to appropriate questions and make a statement if they desire.
Fees of Independent Registered Public Accounting Firm. Consistent with the Audit and Finance Committee’s responsibility for engaging the Company’s independent registered public accounting firm, all audit and permitted nonaudit services performed by KPMG require preapproval by the Audit and Finance Committee. The full Committee approves projected services and fee estimates for these services and establishes budgets for major categories of services at its first meeting of the fiscal year. The Committee chairman has been designated by the Committee to approve any services arising during the year that were not preapproved by the Committee and services that were preapproved if the associated fees will cause the budget established for the type of service at issue to be exceeded by more than ten percent. Services approved by the chairman are communicated to the full Committee at its next regular quarterly in person meeting, and the Committee reviews actual and forecast services and fees for the fiscal year at each such meeting. During fiscal year 2017, all services performed by the independent registered public accounting firm were preapproved.
During fiscal years 2016 and 2017, KPMG billed the Company fees for services in the following categories and amounts (in millions):
| | | | | | | | | | | | | | KPMG Fees | | 2016 | | | 2017 | | Audit Fees | | $ | 7.1 | | | $ | 6.7 | | Audit-related Fees(1) | | $ | 10.7 | | | $ | 2.8 | | Tax Fees | | $ | 0.3 | | | $ | 0.3 | | All Other Fees | | $ | 0.0 | | | $ | 0.0 | | Total Fees | | $ | 18.1 | | | $ | 9.8 | |
PROPOSAL
2 | | Advisory Vote on Executive Officer Compensation | | | The Board is committed to excellence in governance and recognizes the interest our shareholders have in the Company’s executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are asked to approve an advisory resolution on the compensation of our named executive officers, as disclosed in the Compensation Discussion and Analysis and accompanying Executive Compensation Tables and narrative. This proposal, commonly known as a “say on pay” proposal, gives you the opportunity to endorse or not endorse our fiscal 2018 executive compensation program by voting for or against the following resolution: RESOLVED, that the compensation of the named executive officers as discussed and disclosed in the Compensation Discussion and Analysis and the executive compensation tables and accompanying narrative is approved. Although the vote is non-binding, the Board and the Management Development and Compensation Committee will review the voting results. If there are a significant number of negative votes, we will seek to understand the concerns that influenced the vote and to address them in making future decisions about executive compensation programs. The Company intends to conduct an advisory vote on executive officer compensation annually. The next such vote will be conducted at our 2020 Annual Meeting. |  | | The Board recommends a vote “FOR” this resolution. | | | | 1 | | | | | 2016 includes audit-related feesAs described in the Compensation Discussion and Analysis, our executive officer compensation program has been designed to support our long-term business strategies and drive creation of $9.9 million associated with audit and review services provided in connectionshareholder value. It is aligned with the separation of Versum Materials.competitive market for talent, sensitive to Company performance and oriented to long-term incentives to maintain and improve the Company’s long-term profitability. We believe the program delivers reasonable pay that is strongly linked to Company performance.
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AIR PRODUCTS AND CHEMICALS, INC.
STANDING COMMITTEES OF THE BOARD
Audit fees are fees for those professional services rendered in connection with the auditTable of the Company’s consolidated financial statements and the review of the Company’s quarterly consolidated financial statements onForm 10-QContents that are customary under the standards of the Public Company Accounting Oversight Board (United States), and in connection with statutory audits in foreign jurisdictions. Audit-related services consisted primarily of services rendered in connection with employee benefit plan audits, SEC registration statements, due diligence assistance, and consultation on financial accounting and reporting standards. Tax fees were primarily for preparation of tax returns innon-U.S. jurisdictions, assistance with tax audits and appeals, 2016 advice on restructuring to enable the tax free separation of the Materials Technologies businesses and technical assistance.
Selection of Independent Registered Public Accounting Firm. The Audit and Finance Committee annually evaluates the performance of the Company’s independent registered public accounting firm, and determines whether to reappoint the current accounting firm or consider other firms. The Committee also evaluates and approves the selection of the lead engagement partner. At its meeting held in November 2017, the Committee approved reappointment of KPMG as the Company’s independent registered public accounting firm for fiscal year 2018. In determining whether to reappoint KPMG, the Committee took into consideration a number of factors, including:
KPMG’s global capabilities to handle the breadth and complexity of the Company’s global operations;
KPMG’s technical expertise and knowledge of the Company’s industry and global operations;
The quality and candor of KPMG’s communications with the Committee and management;
The appropriateness of KPMG’s fees; and
KPMG’s tenure as our independent registered public accounting firm, including the benefits of that tenure, and the controls and processes in place (such as rotation of key partners) that help ensure KPMG’s continued independence.
Based on its evaluation, the Committee believes the continued retention of KPMG is in the best interest of our shareholders. The Board concurs and requests that shareholders ratify the appointment of KPMG as the independent registered public accounting firm for fiscal year 2018.
Corporate Governance and Nominating CommitteeExecutive Compensation
The Corporate Governance and Nominating Committee operates under a written charter. The Committee monitors and makes recommendations to the Board about corporate governance matters including the Guidelines, codes of conduct, Board structure and operation, Board policies on director compensation and tenure, the meeting schedules of the Board and the committees, the charters and composition of the committees, and the annual Board and committee performance assessment processes. The Committee has primary responsibility for identifying, recommending, and recruiting nominees for election to the Board and recommending candidates for election as Lead Director. The Committee also reviews and monitors the Company’s crisis management procedures, government relations activities and response to significant public policy issues, including social responsibility matters. The Committee met three times in fiscal year 2017.
Selection of Directors. The Board has established the following minimum qualifications for all directors: business experience, judgment, independence, integrity, ability to commit sufficient time and attention to the activities of the Board, absence of any potential conflicts with the Company’s interests, and an ability to represent the interests of all shareholders. The qualities and skills necessary for a specific director nominee are governed by the needs of the Company at the time the Committee determines to add a director to the Board. The specific requirements of the Company are determined by the Committee and are based on, among other things, the Company’s current business, market, geographic, and regulatory environments; the mix of perspectives, experience, and competencies currently represented by the other Board members; and the CEO’s views as to areas in which management desires additional advice and counsel.
AIR PRODUCTS AND CHEMICALS, INC.
STANDING COMMITTEES OF THE BOARD
When the need to recruit a nonmanagement director arises, the Committee’s standard process is to consult the other directors, the CEO, and sometimes a third-party recruiting firm to identify potential candidates. Once a candidate is identified, the candidate screening process most recently has been conducted initially through an interview by one or more members of the Committee and the CEO. After the initial interviews, the candidate meets with the full Committee for formal consideration and recommendation to the Board. Prior to final election to the Board, a background investigation is conducted to verify the candidate’s reputation and background, the candidate’s independence as measured by the Board’s independence standards, and other factors the Committee deems appropriate at the time.
This year eight incumbent directors are standing for election, Ms. Carter, Mr. Cogut, Mr. Deaton, Mr. Ghasemi, Mr. Ho, Ms. McGlynn, Mr. Monser, and Mr. Paull. All the nominees have been previously elected by the Company’s shareholders.
The Committee has adopted a policy regarding its consideration of director candidates recommended by shareholders for nomination by the Board at an Annual Meeting, and a procedure for submission of such candidates. The policy provides that candidates recommended by shareholders will be considered by the Committee; submissions of candidates must be made in writing; and must be received not later than 120 days prior to the anniversary date of the proxy statement for the prior Annual Meeting. The submission must also provide certain information concerning the candidate and the recommending shareholder(s), a statement explaining why the candidate has the qualifications required, and consent of the candidate to be interviewed by the Committee and to serve if elected. A copy of the policy and procedure is available upon request from the Corporate Secretary’s Office. Candidates recommended by shareholders in accordance with these procedures will be screened and evaluated in the same manner as other candidates.
Executive Committee
The Executive Committee has the authority of the Board to act on most matters during intervals between Board meetings. It is usually convened to approve capital expenditures associated with a project in excess of the CEO’s authority when a customer requires a commitment prior to the next Board meeting and a special meeting of the Board cannot be convened. The Committee did not meet in fiscal year 2017.
Management Development and Compensation Committee
Pursuant to its charter, the primary responsibilities of the Management Development and Compensation Committee (the “Committee”) are:
Establishing the Executive Officer compensation philosophy, design and strategy for the Company, consistent with Company objectives and shareholder interests, determining CEO compensation, and approving other Executive Officer compensation;
Approving performance objectives relevant to the compensation of the CEO, establishing the process for and leading the Board in evaluation of the performance of the Company’s CEO, and providing oversight of the CEO’s evaluation of the performance of other Executive Officers;
Overseeing CEO succession planning and the development and evaluation of potential candidates for other Executive Officer positions; and
Overseeing the Company’s overall management compensation program, the design and administration of management incentive compensation plans, including equity programs, and the design and administration of the Company’s retirement and welfare benefit plans.
The Committee’s charter permits it to delegate all or a portion of the authority granted to it by the Board to one or more Committee members, senior executives, or subcommittees to the extent consistent with applicable laws, regulations, and listing standards. The Company’s Delegation of Authority Policy reserves for the Board and the Committee all compensation and staffing decisions with respect to Executive Officers except as specifically delegated.
AIR PRODUCTS AND CHEMICALS, INC.
STANDING COMMITTEES OF THE BOARD
Roles of the Committee, Management, and Compensation Consultant in the Compensation Process. The Committee is responsible to the Board and to shareholders for establishment and oversight of the Company’s compensation program for Executive Officers, and for approving the compensation level of the Executive Officers. During fiscal year 2017, the Company’s Executive Officers were:
Seifi Ghasemi, Chairman, President and Chief Executive Officer;
M. Scott Crocco, Executive Vice President and Chief Financial Officer (“CFO”);
Jennifer L. Grant, Senior Vice President and Chief Human Resources Officer;
| • | | Sean D. Major, Executive Vice President and General Counsel;5
|
Corning F. Painter, Executive Vice President, Industrial Gases; and
| • | | Dr. Samir Serhan, Executive Vice President.6
|
The Committee establishes overall compensation strategies and policies for the Executive Officers, allocates compensation for Executive Officers among the various components of compensation, evaluates and approves performance measures and goals relevant to the incentive compensation of the Executive Officers, evaluates the performance of the CEO with input from the full Board, determines direct compensation levels for the CEO, and evaluates and approves direct compensation levels for other Executive Officers. Each year, the Committee:
reviews and evaluates the appropriateness of the Company’s current Executive Officer compensation program based on several factors, including competitiveness of the program and alignment of compensation delivered under the program with the Company’s strategy and performance;
reviews whether the program design encourages excessive risk taking;
approves peer groups for market reference;
reviews dilution and burn rates associated with the Company’s equity compensation;
evaluates and approves changes to incentive compensation and benefit plans when needed;
approves incentive compensation payouts for the current year; and
addresses other specific issues regarding management development and compensation as needed.
Periodically, the Committee also undertakes an extensive review of the competitiveness and appropriateness of certain pay practices such as severance and change in control arrangements.
The Committee retains an external compensation consultant to provide independent advice, information, and analysis on executive compensation. The Committee has established several practices to ensure the external consultant’s independence, candor, and objectivity. The consultant is engaged by, has its compensation set by, and reports directly to the Committee; frequently meets separately with the Committee with no members of management present; and consults with the Committee chairman in between meetings. Management reports fees paid for executive compensation consulting services performed by the consultants to the Committee at each meeting and the Committee approves in advance the executive compensation consulting services to be performed.
The Committee retained Willis Towers Watson (“WTW”) as its external consultant for fiscal year 2017. Aggregate fees for WTW’s executive compensation consulting services provided to the Committee were $177,000. During 2017, WTW also performed global retirement plan actuarial and consulting, health care exchange, and aviation insurance brokering services for the Company in addition to the work performed for the Committee. The aggregate fees for those services were $724,000. The decision to engage a predecessor to WTW for actuarial services was made over a decade ago after an extensive bid process. WTW is one of few firms who is able to provide these services on a global basis. Decisions to hire WTW for the health care exchange and insurance brokering services were made by the responsible functional managers after a bid process.
5 | Mr. Major joined the Company and was designated an Executive Officer in May 2017.
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6 | Dr. Serhan joined the Company in December 2016 and was designated an Executive Officer in January 2017.
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AIR PRODUCTS AND CHEMICALS, INC.
STANDING COMMITTEES OF THE BOARD
The Committee has assessed WTW’s independence and concluded that there are no conflicts of interest that would prevent WTW from independently advising the Committee. In making this determination, the Committee considered, among other things, the fees paid for services provided to management as a percentage of WTW’s consolidated revenues, policies and procedures established by WTW to mitigate conflicts of interest, and the lack of business and personal relationships between WTW team members and the Company’s Executive Officers or Committee members.
During fiscal year 2017, WTW provided advice and analysis to the Committee on direct compensation for individual Executive Officers, peer group composition, incentive plan performance measures, compensation program design, and external trends and developments. WTW also provided an analysis of the alignment of pay delivered under the Company’s Executive Officer compensation program with its performance compared to peer group pay and performance, an assessment of the fit of the Company’s Executive Officer compensation program design with its business strategy, a comparison of the program design to peer programs, and an assessment of the potential relationship between the Company’s compensation program and risk taking by management.
While the Committee determines overall compensation strategy and policies for the Executive Officers and approves their compensation, it seeks input from several Executive Officers and other management employees with respect to both overall guidelines and discrete compensation decisions. Specifically:
Human Resources staff works with the Committee to develop the design of compensation programs and decision-making frameworks for determining compensation levels;
the CEO provides input to the Committee on the forms of incentive compensation and performance measures that will best support his strategic goals for the Company;
the CEO provides the Committee perspective on the performance of other Executive Officers and develops and recommends compensation actions for the other Executive Officers, in consultation with Human Resources, and based on competitive market analysis;
the CFO provides background to the Committee regarding the Company’s key financial objectives and performance against them; and
the Company’s Law and Human Resources staff provide technical advice and other support to the Committee.
These Executive Officers and employees attend portions of the Committee meetings; however, the Committee’s meets in executive session both alone and with its external compensation consultant to reach final decisions about CEO and other Executive Officer compensation.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
Report of the Management Development and Compensation Committee The Management Development and Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis section of the Company’s Proxy Statement for fiscal year 2017.Analysis. Based on its review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the proxy statement for the Company’s Proxy Statement2019 Annual Meeting of Shareholders and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year 2017.ended September 30, 2018. Management Development and Compensation Committee Edward L. Monser, Chairman Chair
Susan K. Carter
Chadwick C. Deaton
David H. Y. Ho
Margaret G. McGlynn
Compensation Discussion and Analysis The Compensation Discussion and Analysis describes and analyzes our Executive Officerexecutive officer compensation program with emphasis on compensation actions taken during fiscal year 2017. It2018. For fiscal 2018, the Company’s named executive officers were: | ● | Seifi Ghasemi, Chairman, President and Chief Executive Officer; | | ● | M. Scott Crocco, Executive Vice President and Chief Financial Officer (“CFO”); | | ● | Sean D. Major, Executive Vice President, General Counsel and Secretary; | | ● | Dr. Samir Serhan, Executive Vice President; and | | ● | Corning F. Painter, former Executive Vice President, Industrial Gases. |
The Compensation Discussion and Analysis is organized into 46 sections: | 18 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation  | Highlights of Fiscal 2018 Company Performance and Compensation Actions |
Fiscal 2018 Performance and Strategic Highlights Financial Performance | EARNINGS PER SHARE | | Fiscal Year 2017 Direct Compensation Components
| | Increased 28%
over fiscal 2017. |
35NET INCOME FROM CONTINUING OPERATIONS | | Employee Benefits and other Compensation Practices and Policies
| | Increased 28%
over fiscal 2017. |
40ADJUSTED EARNINGS PER SHARE1 | |
2017 Company Performance Highlights
The Company continued its dramatic improvement in safety performance, with 67% improvement in the lost time injury rate and 23% improvement in the recordable injury rate versus 2016, and even greater improvement in contractor injury rates.
| • | | Earnings per share increased 2% Increased 18%over prior year. Adjusted earnings per share7 increased 12%,fiscal 2017, representing the third
fourth consecutive year of double digitdouble-digit growth.
|
| ADJUSTED EBITDA1 | | | | Increased 11%over fiscal 2017. |
| | •Safety Performance | | Net income from continuing operations increased 3%. Adjusted EBITDA7 increased 7%.
Operational Performance | | Returns to Shareholders |
| The Company continued its improvement in safety performance, with 71% improvement in the employee lost time injury rate and 50% improvement in the employee recordable injury rate versus fiscal 2014 and even greater improvement in contractor injury rates. | • | The Company brought major projects on-stream in China, Korea and the U.S. and announced four large gasification projects and the acquisition of gasification technology. |
| The Company returned nearly $800$900 million to shareholders through dividends, increasing dividends for the 3536thconsecutive year. |
| • | | The Company completed itsspin-off of the Electronic Materials business with the distribution of all outstanding shares of Versum Materials to shareholders on October 1, 2016. Thespin-off unlocked significant shareholder value with Versum Materials stock price increasing over 37% since the distribution date NYSE closing price.8
|
The Company completed the sale of its Performance Materials business at an excellent EBITDA multiple for the industry.
The Company brought major projectson-stream in India, Korea and China; made significant progress towards completion of the world’s largest industrial gas project in Saudi Arabia; and announced multiple new projects across the globe.
The Company was named to the Dow Jones Sustainability Index (North America), FTSE4Good Index, Ethibel Sustainability Index (Excellence Global), and Corporate Responsibility Magazine’s 100 Best Corporate Citizens, and as a Corporate Equality Index Best Place to Work for LBGT Equality.
7 | ThisOur goal is anon-GAAP measure. See Appendix A for reconciliation to GAAP measures.
|
8 | October 3, 2016 NYSE closing price of $28.00 compared to November 30, 2017 NYSE closing price of $38.40.
|
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Highlights of Fiscal Year 2017 Compensation Actions
Note on impacts ofspin-off of Electronic Materials and Sale of Performance Materials
Thespin-off of Versum Materials and sale of the Performance Materials business unlocked significant value for shareholders but resulted in a decrease in several financial metrics for Air Products on a stand alone basis. For example, Air Products’ fiscal year 2017 Revenue Growth, EBITDA Growth and Cash Flow from Operations may appear to be negative on a year over year basis if prior performance data has not been adjusted for thespin-off, despite the Company’s industry leading performance across most profitability metrics.
The sale of the Performance Materials business generated significant cash for our shareholders which Air Products is actively working to deploy for shareholder value creation in our core industrial gas business, but the significant gain from the sale may impact return metrics in the short run.
The Management Development and Compensation Committee of the Board reevaluated compensation benchmarking peer groups to reflect the change in the Company’s business following thespin-off and divestiture. (See page 33 for details).
Committee Continued Shareholder-Focused Incentive Compensation Program Design.
For fiscal year 2017 the Committee continued incentive compensation opportunities designed to support the Company’s strategies. Three years ago the Company unveiled a five point plan for increasing shareholder value:
Focus on the core business;
Restructure the organization to decentralize, releasing entrepreneurial energy and reducing costs;
Change the culture to focus on safety, simplicity, speed and self-confidence;
Control capital and costs; and
Align rewards to drive accountability and value creation.
In addition, the Company committed to the goal of becoming the safest, most diverse and most profitable industrial gas company in the world, providing excellent service to our customers.
SinceIn fiscal 2014, we established a five-point plan that, when implemented, successfully focused our efforts on our core industrial gas business, restructured the five pointorganization, changed the culture, controlled capital and costs and aligned our awards. Accordingly, in fiscal 2018 we evolved our five-point plan to guide our success over the coming years. Our new five-point plan focuses on the following objectives:
Sustain
The Lead |  | Deploy
Capital | | Evolve
Portfolio | | Change
Culture | | Belong
and Matter | | | Safest, most diverse, and most profitable | Strategically invest significant available capacity | Grow onsite portion | Safety, Simplicity, Speed, Self-Confidence | Inclusion | | Best-in-class performance | Win profitable growth projects globally | Energy, environment and emerging markets | Committed and motivated | Enjoyable work environment | | Productivity | | | Positive attitudes and open minds | Proud to innovate and solve challenges |
| 1 | This is a non-GAAP financial measure. See Appendix A for a reconciliation to the most directly comparable financial measure calculated under GAAP. |
| 19 |
Table of Contents Executive Compensation Fiscal 2018 Executive Compensation Highlights Target Total Direct Compensation At the beginning of the year, after benchmarking against peer companies as discussed below, the Management Development and related goals were announced,Compensation Committee (within this Compensation Discussion and Analysis, the Committee has supported“Committee”) established fiscal 2018 target total direct compensation for the Company’s strategy by focusingexecutive officers. Mr. Ghasemi’s compensation was determined pursuant to his amended and restated employment agreement, dated November 14, 2017, which is described on page 24. The table below indicates the Company’starget total direct compensation opportunity (base salary, annual incentive programaward target and target value of long-term incentive awards) provided to our named executive officers for fiscal 2018. Total direct compensation that is actually paid to our named executive officers varies from the information below based on achieving aggressive adjusted earnings per share and EBITDA targets, and the results have been excellent. For 2017, Executive Officers’amount of annual incentive awards that are achieved and any discretionary bonuses or severance that is paid out during a fiscal year. This information regarding target total direct compensation opportunity is intended to supplement, but not replace, the Summary Compensation Table, which reports fiscal 2018 compensation in the format required by SEC rules. | Officer | | Base Salary
($) | | Annual
Incentive
Target
($) | | Grant Value of
Long-Term
Incentives
($) | | Total Direct
Compensation
($) | | Seifi Ghasemi | | 1,350,000 | | 2,025,000 | | 8,500,000 | | 11,875,000 | | M. Scott Crocco | | 600,000 | | 510,000 | | 1,700,000 | | 2,810,000 | | Sean D. Major | | 550,000 | | 412,500 | | 1,000,000 | | 1,962,500 | | Samir Serhan | | 550,000 | | 467,500 | | 1,000,000 | | 2,017,500 | | Corning F. Painter | | 600,000 | | 510,000 | | 1,300,000 | | 2,410,000 |
For fiscal 2018, total direct compensation opportunities established by the Committee for all executive officers (excluding the CEO as referenced below) approximated the market median. At the beginning of fiscal 2018, at the Committee’s direction its compensation consultant, Willis Towers Watson (“WTW”), performed a competitive assessment of Mr. Ghasemi’s total direct compensation and determined long-term incentives and total direct compensation were again based on adjusted earnings per share, andaligned with the adjusted earnings per share targets were translated to adjusted EBITDA targets75thpercentile for the business units belowPeer Reference Group (defined below) while his base salary and target total cash approximated market median. Based on Mr. Ghasemi’s excellent performance during fiscal years 2016-2017, including leading the Executive Officer levelCompany to align rewards with value-creating performance. Target level payouts for 2017 were conditionedimprovement in safety performance and financial results, the Committee increased Mr. Ghasemi’s base salary from $1,200,000 to $1,350,000. Mr. Ghasemi’s resultant positioning on meeting or exceedingall pay elements was at the 75thpercentile. Performance-Based Compensation The majority of compensation provided to the Company’s adjusted earnings per share goalexecutive officers is dependent upon total returns delivered to shareholders and/or the achievement of approximately 10% growth for 2017.performance objectives. Approximately 89% of the CEO’s Total Direct Compensation opportunity is performance-based to ensure that compensation directly reflects the creation of shareholder value. | CEO TARGET COMPENSATION MIX | OTHER NAMED EXECUTIVE OFFICER
TARGET COMPENSATION MIX |  |  |
| 20 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation Incentive Plan Metrics and Goals In fiscal 2018, the Committee continued incentive compensation opportunities designed to support the Company’s strategies. | The Committee supports the Company’s strategy by focusing the Company’s annual incentive program on achieving aggressive adjusted earnings per share and EBITDA targets, and the results have been excellent. For fiscal 2018, executive officers’ annual incentive awards were again based on adjusted earnings per share, and the adjusted earnings per share targets were translated to adjusted EBITDA targets for the business units below the executive officer level to align rewards with value-creating performance. Target level payouts for fiscal 2018 were conditioned on meeting or exceeding the Company’s adjusted earnings per share goal of approximately 9% growth. |
For fiscal year 2017,2018, the Committee also continued to grant 60% of long-term incentives in performance shares tied to TSR relative to a peer groupPeer Reference Group of industrial companies. Additional information about the Peer Reference Group is provided on pages 31-32. This metric reflects the growth in capital that would be experienced from purchasing a share of Company or Peer Reference Group member stock and holding it for the performance period, while reinvesting any dividends paid. The remaining 40% of long-term incentives was granted in restricted stock units. units (“RSUs”) that vest over a four-year period. | FISCAL 2018 INCENTIVE COMPENSATION | | | |
2017 Incentive Compensation | Annual Incentive Metric | | Adjusted Earnings Per Share | Performance Shares Metric | | Relative TSR | Performance Shares Weight | | 60% Long-Term Incentive Value | 4 Year Restricted Stock Units Weight
| | 40% Long-Term Incentive Value |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Committee maintained strong governance practices.
The Committee recognizes that shareholders want assurance that the processes for determiningPay and paying Executive Officer compensation reflect thoughtful stewardship of the Company’s resources. The Committee has adopted the following practices, among others, to help demonstrate commitment to this principle:Performance Alignment
| | Compensation Governance Highlights
• Independent directors make final compensation decisions pertaining to Executive Officers.
• Committee is advised by an independent compensation consultant.
• Executive sessions are held at all Committee meetings.
• Compensation is targeted at median for similar industrial companies.
• Stringent stock ownership guidelines.
• Prohibition on hedging or pledging Company stock.
• Consistent administration of performance goals and formulas.
• Annual review of dilution and burn rate relative to peers.
• Best practice change in control arrangements.
|
Target Fiscal Year 2017 Total Direct Compensation Set for Executive Officers.
At the beginning of the year, after benchmarking against peer companies, the Committee established 2017 total direct compensation for the Executive Officers.9 The table below indicates the Total Direct Compensation opportunity (base salary, annual incentive award target, and target value of long-term incentive awards10) provided to Executive Officers for fiscal year 2017.11
| | | | | | | | | | | | | | | | | | | | | | | | Officer | | Base Salary | | | Annual Incentive Target | | | Grant Value of Long-Term Incentives | | | Total Direct Compensation | | S. Ghasemi | | $ | 1,200,000 | | | $ | 1,800,000 | | | $ | 8,500,000 | | | $ | 11,500,000 | | M. S. Crocco | | $ | 600,000 | | | $ | 510,000 | | | $ | 1,500,000 | | | $ | 2,610,000 | | J. Grant | | $ | 430,000 | | | $ | 279,500 | | | $ | 650,000 | | | $ | 1,360,000 | | C. F. Painter | | $ | 600,000 | | | $ | 510,000 | | | $ | 1,300,000 | | | $ | 2,410,000 | | S. Serhan | | $ | 550,000 | | | $ | 385,000 | | | $ | 1,000,000 | | | $ | 1,935,000 | |
9 | Mr. Ghasemi’s compensation was partly determined by his employment agreement entered into when the joined the Company in 2014 which is described on pages 33-34. Dr. Serhan joined the Company in December 2016 and was designated by the Board as an Executive Officer in January 2017. His compensation was established prior to his joining the Company. See page 34 for a description of the terms of the employment offer to Dr. Serhan.
|
10 | Each year the Committee grants long-term incentive awards intended to deliver a target value. The process for determining the target value to be granted and the value of the awards is described on page 37. The actual value realized may differ significantly (up or down) from the target value due to Company stock price performance over the life of the awards and the extent to which applicable performance metrics are met.
|
11 | This table is intended to supplement, not replace, the Summary Compensation Table, which reports fiscal year 2017 Executive Officer compensation in the format required by SEC rules. The Summary Compensation Table provides important information regarding the accounting expense associated with the Committee’s intended level of pay and provides a standardized measure across companies. The table above reflects how the Committee views the compensation opportunities it is providing.
|
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Committee Determined Fiscal Year 2017 Incentive Compensation Payouts.
In fiscal year 20172018, the Company significantly improved itsdelivered excellent financial and safety performance, exceeded its adjusted earnings per share target, achieved multiple strategic milestones,results, including our fourth consecutive year of double-digit annual growth, industry leading safety and EBITDA margins, and successfully executed well on majorthe largest and most complex projects acrossin the globe, announced several major project wins and met or exceeded shareholders’ expectations.Company’s history. Following the end of the year, the Committee determined actual annual incentive awards for the Executive Officers.executive officers. The performance measure for the annual incentive awards was adjusted earnings per share and the payout metrics and calculation methodology are described on page 36.pages 25-26. Based on the Company’s outstanding performance, the annual incentive award payout factor was 182%127% for all Executive Officers.executive officers. The Committee also determined final payout levels for performance share awards granted in fiscal year 20152016 with a performance cycle ending at the end of fiscal year 2017,2018, which were conditioned on TSR performance relative to a peer group of similar industrial companies. For the three-year performance period, Air Products delivered a cumulative TSR of 48%; the resultant TSR Percentile Rank was below the threshold required for a minimum payout under the plan. The payout metrics and calculation methodology are described on pages 38-39. The Committee determined to award a target payout for fiscal year 2017.26-28. Shareholder Feedback Committee evaluated potential linkage between compensation and risk taking.
During fiscal year 2017, the Committee, with WTW, conducted a risk assessment of the Company’s Executive Officer compensation program. The Committee concluded that the program is balanced and does not provide an enticement for executives to take risks that are likely to have an adverse effect on the Company, including because of the following features:
The Company does not use highly leveraged short-term incentives that drive risky investments at the expense of long-term Company value.
The Company’s compensation programs reward consistent, long term performance by heavily weighting compensation to long-term incentives.
Concentration of long-term incentive compensation in awards based on relative TSR combined with overlapping grant cycles strengthens executives’ interest in stable, long term performance.
Cash incentive awards are capped at sustainable levels, and the Committee has discretion to reduce awards, including for nonfinancial considerations.
The Company enforces substantial Executive Officer stock ownership and holding requirements.
The Company has recovery policies (“clawbacks”) applicable to incentive compensation that permit the Company to cancel awards and recoup certain gains in the event of conduct detrimental to the Company.
In addition, management conducted and reported to the Committee on its evaluation of the Company’s overall compensation practices and programs to assess whether any of these programs and practices exposed the Company to excessive risk taking, concluding there were no such programs or practices.
Committee reviewed results of the shareholder advisory vote on Executive Officer compensation and comments received.
Following the 20172018 Annual Meeting, the Committee reviewed the results of the shareholder advisory vote on Executive Officerexecutive officer compensation. With over 97%approximately 96.5% of votes cast voted in favor of approval, the Committee determined that the great majority of shareholders were satisfied with the program. Compensation Governance Best Practices AIR PRODUCTS AND CHEMICALS, INC.In fiscal 2018, the Committee maintained strong compensation governance practices. See page ix of the proxy summary.
| 21 |
COMPENSATION OF EXECUTIVE OFFICERS
Table of Contents Fiscal Year 2017Executive Compensation
 | Fiscal 2018 Executive Officer Compensation Program Overview |
Our Compensation Philosophy Overview.Overview. The overall objective of our Executive Officerexecutive officer compensation program is to attract and retain a talented management team and provide them with the right incentives to execute our strategic objectives and to maximize our shareholders’ investment in the Company. The same principles that govern the compensation of all our salaried employees apply to the compensation of our Executive Officers:
executive officers: | Our Compensation Philosophy
• Tie compensation to strategy and performance and the interests of shareholders.
The Company’s programs provide incentive compensation opportunities that promote achievement of short-, medium-, and long-term strategic and financial objectives. Annual Incentiveincentive compensation targets are aligned with the Company’s adjusted earnings per share goals communicated to shareholders so that Executive Officersexecutive officers only receive target payouts if we meet shareholders’ expectations and above target payouts if we exceed them. Long-term incentives are delivered in stock and primarily tied to Company stock performance and delivered in stockTSR so that factors that impact the value of our shareholders’ investment in the Company significantly impact our management team’s compensation. |
• Provide competitive compensation for competitive performance.
The Company seeks to offer compensation opportunities that are sufficient to attract talented and experienced managers who have a choice about where they work, and to discourage them from seeking other opportunities. | • Foster nonfinancialnon-financial corporate goals.
While financial results are the primary commitment the Company makes to shareholders, the compensation program balances financial results with other Company values such as safety, diversity and environmental stewardship. Certain components of the program provide flexibility to reduceadjust compensation upwards or downwards for non-financial and strategic goals and to recoup compensation where insufficient attention is paid to nonfinancial Company objectives.in cases of misconduct and restatement of financial results. | • Support actions needed to respond to changing business environments.
The Company has sought to provide some elements of compensation, such as severance benefits, thatwhich give the management team or the Board tools to facilitate decisions about succession planning, divestitures and restructurings, succession planning, or other significant corporate events that may impact the position or employment status of Executive Officers.executive officers. |
The majority of compensation provided to the Company’s Executive Officers is dependent upon the achievement of performance objectives and/or total returns delivered to shareholders. Approximately 90% of the CEO’s TotalFiscal 2018 Direct Compensation opportunity is performance-based to ensure that compensation directly reflects the creation of shareholder value.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
The Committee intends the Executive Officerexecutive officer compensation program to provide our Executive Officersexecutive officers with target compensation that, on average, approximates the median for relevant peer groups,12 on average, with actual compensation driven up or down based on the Company’s operating performance, stock price and overall shareholder return. Individual components of compensation may be greater or lesser than the median, and actual compensation delivered may vary significantly from the target opportunity and the median based on Company or individual performance and changes in Company stock price. | 22 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation Direct compensation for fiscal year 20172018 was delivered to the CEO and other Executive Officersnamed executive officers through the components listed in the table below, which provides a brief description of the principal types of direct compensation, how performance factors into each type of compensation, and the compensation program objectives served by each type13.type. Detailed descriptions of the components of direct compensation begin on page 35. 24. | | | | | | | | | | | | Component | | Description | | Description | | How Amount Determined/
Performance Considerations | | Objectives | Base Salary | | Fixed cash payment. | | Targeted at Market Median14market median with adjustment based on level of responsibility, experience and individual performance. | | Provide competitive foundational pay. | | Annual Incentive | | Short-term incentive, cash payment. | | Target payout references Market Median.market median. Actual payout driven by adjusted EPS. | | Promote achievement of short-term financial and strategic objectives. | Performance Shares | | Deferred stock units that pay out upon achievement of performance targets. Delivered in shares of stock with dividend equivalents also payable on vesting. | | Target value based on Market Medianmarket median for long-term incentives. Actual payout based on relative TSR over 3 yearthree-year performance period. | | Promote achievement ofmid-term longer-term financial objectives; encourage current decisions that promote long-term value creation; align Executive Officers’executive officers’ interests with shareholder returns. | Restricted Stock Units | | Shares of stock that vest over 4 yearfour-year period and pay dividend equivalents on vesting. | | Target value based on Market Medianmarket median for long-term incentives. Actual value determined by shareholder returns during vesting period. | | Retain Executive Officers;executive officers; align Executive Officers’executive officers’ interests with shareholder returns. |
The Committee annually reviews and establishes the performance measures, target goals and payout schedules used for theour Annual Incentive Plan and the performance share component of the long-term incentive program.awards granted under our Long-Term Incentive Plan. In determining actual performance against these metrics, the Committee decides whether to include or exclude the impact of items reported in the Company’s financial statements that may not be reflective of underlying operating results for the current or a prior year. Adjustments from reported earnings are intended to avoid artificial inflation or deflation of awards due to unusual or non operationalnon-operational items in the applicable period and align pay outcomes with how the Committee and management view the performance of the business. Benchmarking. The Committee believes that a threshold characteristic of reasonable compensation is that it be aligned with compensation provided by companies the Company competes against for talent. In preparation for determining fiscal year 2017 compensation, the Committee benchmarked the Executive Officer compensation levels to evaluate the competitiveness of the program and as a reference for establishing compensation levels for fiscal year 2017.
12 | See “Benchmarking” below for information about peer groups.
|
13 | Other major components of compensation such as retirement benefits are based onpre-existing programs available to broad employee populations and were not the subject of Committee decisions for fiscal year 2017.
|
14 | See “Setting Total Compensation” below for an explanation of how the Committee views the Market Median.
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AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
The Committee uses two peer groups for benchmarking which it annually reviews and approves.
| | | | | | | | PEER GROUPS | | | | | NAME | | CRITERIA | | PURPOSE | | SOURCE | Survey Reference Group | | Broad group of industrial companies with $7 – 13 billion in revenue | | Benchmark competitive Executive Officer direct compensation levels at target | | WTW and Mercer surveys | Peer Reference Group | | Chemical and industrial companies with similar capital structure, asset intensity and profitability to Company (size adjusted) | | Benchmark competitive direct compensation levels for CEO & CFO and pay practices, pay for performance assessment, peer group for performance share relative TSR measure | | Compiled from proxy statement filings |
For purposes of assessing competitiveness and recommending compensation levels for fiscal year 2017, the Committee used survey data from Mercer and WTW compensation databases on a group of industrial companies with revenue of $7 to $13 billion (consistent with the Company’s fiscal year 2016 revenue of $9.5 billion)15 (“Survey Reference Group”). This Survey Reference Group is representative of the companies the Company competes against for talent and is used by the Company for various compensation benchmarking purposes, not just Executive Officer compensation. A list of companies included in the Survey Reference Group is provided in Appendix B onpage B-1.
Prior to the beginning of the fiscal year, the Committee reviewed an assessment of each Named Executive Officer’s compensation level relative to the Survey Reference Group based on similar functional responsibilities.16 The assessment identified median, 25th and 75th percentile levels for base salary, target annual incentive, target long-term incentives and targetSetting Total Direct Compensation. Annual and long-term incentive levels reflected a three-year average to reduce volatility in results.
The Committee also reviewed proxy data compiled from a smaller group of companies that are competitors of the Company or are similar to the Company in that they are chemical or other industrial companies with similar capital structures, asset intensity, operating margins, and business models (“Peer Reference Group”). Peer Reference Group companies are generally similar in revenue size to the Company; however certain larger companies are included based on proximity of business model. Data for the Peer Reference Group are size adjusted using regression analysis. The Committee used this reference group for benchmarking specific pay practices and for assessing alignment of pay with performance. In addition, the Committee also uses the Peer Reference Group to assess competitive compensation levels for CEO and CFO compensation. Because proxy data does not necessarily reflect similar positions to the other Executive Officers, only the Survey Reference Group is used to benchmark pay levels for them. The Peer Reference Group used for benchmarking 2017 pay was:
| | | Celanese Corp.
Danaher Corp.
Dover Corp.
Du Pont (E.I.) De Nemours & Co.
Eastman Chemical Co.
Eaton Corp.
Ecolab Inc.
Huntsman Corp.
| | Illinois Tool Works, Inc.
Ingersoll-Rand PLC
Parker-Hannifin Corp.
PPG Industries, Inc.
Praxair, Inc.
Rockwell Automation Inc.
TE Connectivity, Ltd.
|
The Peer Reference Group is also used for determining the Company’s relative TSR performance for purposes of performance share payouts.
15 | After adjustment to reflect the Company’s Materials Technologies segment as discontinued operations, fiscal year 2016 revenues were approximately $7.5 billion. See the Company’s current report on Form8-K filed on June 5, 2017.
|
16 | Dr. Serhan joined the Company after this assessment for 2017.
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AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Peer Group Review After theSpin-off and Divestiture. The Committee determined to reevaluate the peer group criteria after thespin-off of Versum Materials and sale of the Performance Materials businesses. In Spring of 2017, the Committee reviewed and discussed the peer groups based on the Company’s decreased revenues and the divestitures of the non industrial gases businesses. The Committee, with advice from WTW, determined that the revenue size parameters of the Survey Reference Group continued to be valid because Company revenues were still within the Survey Peer Group range; narrowing the revenue parameters did not significantly impact the benchmark compensation levels; and the Company expects to deploy investment capacity resulting from the divesture transactions into revenue generating assets that will replace the divested revenue. The Committee determined, however, to remove and replace members of the Peer Reference Group whose businesses were more aligned with the divested businesses.
As a result, for determining and evaluating fiscal year 2018 compensation the Peer Reference Group includes the following companies:
| | | Celanese Corp.
Chemours Company
Danaher Corp.
Dover Corp.
Du Pont (E.I.) De Nemours & Co.
Eastman Chemical Co.
Ecolab Inc.
| | Huntsman Corp.
Illinois Tool Works, Inc.
Ingersoll-Rand PLC
Olin Corporation
Parker-Hannifin Corp.
PPG Industries, Inc.
Praxair, Inc.
|
Setting Total Compensation Levels for Fiscal Year 2017.2018
Overall, the Committee sought to provide a Total Direct Compensationtotal direct compensation target opportunity (base salary, target annual incentive award and long-term incentive award value) for the Executive Officersexecutive officers that approximated the projected median level (the “Market Median”) for similar positions in the Survey Reference Group and/or,and in the case of the CEO and CFO, the projected median level for two data sources—the Survey Reference Group and Peer Reference Group.17Group, each weighted equally. Additional information regarding these peer groups is provided on pages 31-32. Consistent with industry practice, the Company considers Total Direct Compensation within 15% of median to be competitive with median. This margin allows for year-to-year swings in data than can occur based on a number of factors unrelated to underlying compensation strategy. The Company utilizes two peer groups for benchmarking CEO and CFO compensation to ensure that the compensation is reasonably aligned with compensation provided by companies the Company competes against for talent. The Survey Reference Group is comprised of companies that are similar in revenue size to the Company to benchmark specific pay practices. The Peer Reference Group is comprised of peers to determine the Company’s relative TSR performance for purposes of performance share payouts. Total direct compensation target opportunities may be established at greater or lesser levels for individual Executive Officersexecutive officers based on performance factors, experience in the position, retention and succession planning considerations oryear-to-year swings in the market reference data. | 23 |
Table of Contents Executive Compensation For fiscal year 2017 Total Direct Compensation2018, total direct compensation opportunities established by the Committee for all Executive Officersnamed executive officers (excluding the CEO as referenced below), approximated the Market Median.18 market median. Within the Total Direct Compensationtotal direct compensation opportunity for each Executive Officer,executive officer, individual components of compensation may be greater or lesser than the Market Medianmarket median because the Committee is primarily concerned with the competitiveness of the entire program versus any one element of compensation. Actual compensationCompensation realized canby each executive officer may vary significantly from the target opportunity for any component of Total Direct Compensation based on Company or individual performance and Company stock price fluctuation. As part of the process for determining Total Direct Compensation,total direct compensation, the Committee also reviews tally sheets, which detail the value, earnings and accumulated potential payout of each element of an Executive Officer’sexecutive officer’s compensation in various employment termination scenarios. The tally sheets help the Committee consider the retention value of an Executive Officer’sexecutive officer’s accumulated compensation package, compare Executive Officers’executive officers’ accumulated compensation and understand the impact of their compensation decisions on various termination of employment scenarios. Mr. Ghasemi. The Board recruited Mr. Ghasemi in June 2014 after an extensive search. The Company entered into an employment agreement with Mr. Ghasemi in June 2014 (“Employment Agreement”) which established the minimum components
Mr. Ghasemi. Mr. Ghasemi’s Employment Agreement was amended and restated on November 14, 2017, and provides that Mr. Ghasemi will receive a minimum annual base salary of $1,200,000 and participate in the Company’s Annual Incentive Plan with a minimum target annual incentive award equal to 150% of base salary, with actual awards to be determined by the Committee. Under the Agreement, Mr. Ghasemi was also entitled to receive minimum annual equity compensation awards under the Company’s Long-Term Incentive Plan with a grant date value (determined under the Company’s normal valuation practices) of $7,000,000, apportioned in a manner consistent with the allocation for other executive officers. At the Committee’s direction, WTW performed a competitive assessment of his compensation for the term of the agreement.19 In determining the terms of his Employment Agreement, the Committee considered peer group data20, Mr. Ghasemi’s experience, the 17 | Consistent with industry practice, the Company considers Total Direct Compensation within 15%at the beginning of median to be competitivefiscal 2018 and determined long-term incentives and total direct compensation were aligned with median. This margin allowsthe 75thpercentile foryear-to-year swings in data than can occur based on a number of factors unrelated to underlying compensation strategy.
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18 | A Market Median could not be established for Dr. Serhan due to the uniqueness of his position. As a result, his compensation was determined based on his experience, his compensation at his previous employer, and his positioningvis-à-vis the other Executive Officers.
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19 | In November 2017, the Board announced that the Company had entered an amended and restated employment agreement with Mr. Ghasemi extending the term of his employment and making certain other changes. See the Company’s current report on Form8-K filed on November 14, 2017.
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20 | An external consultant, Farient Advisors LLC, advised the Committee on the competitiveness of the compensation levels based on 2014 Survey Reference Group and Peer Reference Group, data.while his base salary and target total cash approximated market median. Based on Mr. Ghasemi’s excellent performance during fiscal years 2016-2017, including leading the Company to improvement in safety performance and financial results, the Committee increased Mr. Ghasemi’s base salary from $1,200,000 to $1,350,000. Mr. Ghasemi’s resultant fiscal 2018 pay positioning is at the 75thpercentile.
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AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
compensation arrangements that he would have to give up at his former employer to accept employment with the Company, and the Company’s existing CEO compensation arrangements which had been repeatedly approved by the overwhelming majority of our shareholders. Consistent with market practice, and based on greater responsibility levels, the Company’s CEO compensation is substantially more than that of other Executive Officers.
The Employment Agreement provided that Mr. Ghasemi would receive a minimum annual base salary of $1,200,000 and participate in the Company’s Annual Incentive Plan with a minimum target annual incentive award equal to 130% of base salary, with actual awards to be determined by the Committee. Under the Agreement Mr. Ghasemi was also entitled to receive minimum annual equity compensation awards under the Company’s Long-Term Incentive Plan with a grant date value (determined under the Company’s normal valuation practices) of $7,000,000, allocated among restricted stock, performance shares, stock options or other equity awards in a manner consistent with the allocation for other Executive Officers.
For fiscal year 2017, at the Committee’s direction, WTW performed a competitive assessment of Mr. Ghasemi’s Total Direct Compensation and determined his annual and long-term incentives were between the 25th and 50th percentile for the Peer Reference Group, while his base salary approximated Market Median. Based on Mr. Ghasemi’s excellent performance during fiscal years 2015 and 2016, including leading the Company to dramatic improvement in safety performance and financial results, the Committee determined that his compensation should be increased to at least Market Median for the Peer Reference Group. Accordingly, the Committee increased his annual incentive target and his long-term incentive intended value, but maintained his base salary at the same level. After the adjustment, all components of Mr. Ghasemi’s compensation were within the Market Median range for the Peer Reference Group.
Dr. Serhan. Dr. Serhan’s compensation for fiscal year 2017 was negotiated prior to his joining the Company in December 2016. The terms of the employment offer accepted by Dr. Serhan provided that he would receive base salary of $550,000, a target annual incentive award of 70% of base salary and long-term incentive awards with a target value of $1,000,000. The Company also agreed to provide Dr. Serhansign-on long-term incentive awards of performance shares with a target value of $660,000 and three year vesting restricted stock units with a target value of $450,000 to compensate him for forfeiture of equity awards granted by his former employer. The Company paid Dr. Serhan asign-on cash bonus of $1,100,000; which was subject to recoupment if he voluntarily terminated without Good Reason prior to twelve months following his start date. The agreed upon terms also include a $770,000 cash award to be paid following his twelve month anniversary, subject to recoupment if he voluntarily terminates within the twelve months following payment of the award without Good Reason. For this purpose “Good Reason” includes: (i) material diminution in the nature or scope of Dr. Serhan’s responsibilities, duties, or authority, (ii) failure of the Company to make any material payment or provide any material benefit required by the agreement, (iii) a material breach by the Company of the agreement, (iv) a material reduction in fixed/variable pay or benefits not commensurate with reductions applied to all the Company’s Executive Officers, or (v) being legally enjoined from Company employment by a court of competent jurisdiction. Finally, the agreement provided that the Company would provide Dr. Serhan with relocation benefits under the Company’s standard domestic relocation policy, a payment to reimburse him for any loss on the sale of his home and certain tax preparation services, and would indemnify him and continue to provide the agreed upon compensation in the event certain legal actions prevented him from assuming or continuing his position with the Company.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Fiscal Year 2017 Direct Compensation Components
 | Fiscal 2018 Direct Compensation Components |
Within the competitive target value for an Executive Officer’sexecutive officer’s Total Direct Compensation established by the Committee, the Committee determines the individual compensation components of the program. Base Salary.Salary Base salary is generally targeted at the Market Median,market median, with adjustment where the Committee believes appropriate for proficiency, performance, experience and the uniqueness of the responsibilities held by certain Executive Officers.executive officers. Changes in base salaries for Executive Officersexecutive officers become effective as of the first payroll period in the calendar year; so the amounts reflected in the Summary Compensation Table reflect the fiscal year 20162017 base salary rate for the first quarter of the Company’s fiscal year and the fiscal year 20172018 base salary rate for the remainder of the fiscal year. For fiscal year 2017, all Executive Officers’ base salaries approximated Market Median.21 Mr. Ghasemi, Mr. Crocco, and Mr. Painter received no increase in base salary for 2017. Ms. Grant received a modest increase to more closely align her with Market Median positioning. Dr. Serhan’s2018, the CEO’s base salary was negotiated during his recruitment. increased and, as a result, it aligned with the 75thpercentile. For all other named executive officers, base salaries remained the same and approximated market median.
| 24 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation Base salaries approved for the Executive Officersexecutive officers for 2016fiscal 2017 and 2017fiscal 2018 were as follows: | | | | | | | | | | | | | | | | | | | Officer | | 2016 Base
Salary Rate | | | 2017 Base
Salary Rate | | | % Increase | | S. Ghasemi | | $ | 1,200,000 | | | $ | 1,200,000 | | | | 0 | | M. S. Crocco | | $ | 600,000 | | | $ | 600,000 | | | | 0 | | J. Grant | | $ | 412,000 | | | $ | 430,000 | | | | 4 | % | C. F. Painter | | $ | 600,000 | | | $ | 600,000 | | | | 0 | | S. Serhan | | $ | N/A | | | $ | 550,000 | | | | N/A | |
| Officer | | 2017 Base
Salary Rate
($) | | 2018 Base
Salary Rate
($) | | %
Increase | | Seifi Ghasemi | | 1,200,000 | | 1,350,000 | | 12.5 | | M. Scott Crocco | | 600,000 | | 600,000 | | 0 | | Sean D. Major | | 550,000 | | 550,000 | | 0 | | Samir Serhan | | 550,000 | | 550,000 | | 0 | | Corning F. Painter | | 600,000 | | 600,000 | | 0 |
Annual Incentive Plan.Plan Target annual incentive opportunities under the Annual Incentive Plan are intended to approximate the Market Median.market median. Targets may be established at greater or lesser levels for individual Executive Officersexecutive officers based on performance factors, internal equity, experience in the position oryear-to-year swings in the market data. Actual annual incentive awards may be above or below target depending upon the Company’s fiscal year performance as measured by the performance measures and goals established by the Committee at the beginning of the fiscal year. When performance exceeds the target goals for the performance measures, annual incentive awards may exceed target as well, and may exceed Market Medianmarket median payouts. Actual annual incentive awards can range from 0% to 230% of target.target, inclusive of up to 30 percentage points of positive discretion. Over the previous five years, Executive Officerexecutive officer awards have ranged from 50% to 200% of target. Determination of annual incentive awards is a multi-step process which begins with establishing target opportunities. At the beginning of the fiscal year, the Committee determines Executive Officerexecutive officer target annual incentive awards as a percentage of each Executive Officer’sexecutive officer’s base salary based on the Survey Reference Group and Peer Reference Group (for the CEO and CFO) competitive assessment. For fiscal year 2017,2018, the target award level for Mr. GhasemiMajor and Dr. Serhan was increased as described above.to enhance overall amount of performance-based compensation and to align target bonus opportunities reflective of job scope. All other Executive Officersnamed executive officers remained the same asfor fiscal year 2016 (except for Dr. Serhan who was not employed by the Company in fiscal year 2016).2018. | | | | | | | | | | | | | | | | | | | Officer | | 2016 Target (% of Base Salary) | | | 2017 Target (% of Base Salary) | | | 2017 Target Value | | S. Ghasemi | | | 135 | % | | | 150 | % | | $ | 1,800,000 | | M. S. Crocco | | | 85 | % | | | 85 | % | | $ | 510,000 | | J. Grant | | | 65 | % | | | 65 | % | | $ | 279,500 | | C. F. Painter | | | 85 | % | | | 85 | % | | $ | 510,000 | | S. Serhan | | | N/A | | | | 70 | % | | $ | 385,000 | |
| Officer | | 2017 Target
(% of Base Salary) | | 2018 Target
(% of Base Salary) | | 2018
Target Value
($) | | Seifi Ghasemi | | 150% | | 150% | | 2,025,000 | | M. Scott Crocco | | 85% | | 85% | | 510,000 | | Sean D. Major | | 70% | | 75% | | 412,500 | | Samir Serhan | | 70% | | 85% | | 467,500 | | Corning F. Painter | | 85% | | 85% | | 510,000 |
An Executive Officer’sexecutive officer’s actual award is determined by multiplying the target award by his or her individual payout factor. 21 | As noted above, no Market Median could be established for Dr. Serhan due to the uniqueness of his position, but his compensation was designed to be consistent with the market.
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AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
As a first step in determining an Executive Officer’sexecutive officer’s individual payout factor, the Committee determines an initial payout factor derived from the Company’s performance against the payout schedules established by the Committee at the beginning of the fiscal year. As described above, for fiscal year 20172018 the Committee selected rigorous adjusted earnings per share(1)targets as the performance measure for the Annual Incentive Plan to drive towardssustain the Company’s goal of beingposition as the most profitable industrial gas company in the world. Target adjusted earnings per share of $6.90 represents a 9.35% increase from fiscal 2017 adjusted earnings per share of $6.31. The threshold, target and maximum factors for each measure are set out below. (Factors are interpolated between points.) 2018 Adjusted
Earnings per Share(1) | | Initial Payout
Factor % | | <$6.31 | | 0% | | $6.31 | | 50% | | $6.90 | | 100% | | $7.20 | | 200% |
| 25 |
Table of Contents Executive Compensation | | | | | | 2017 Adjusted Earnings per Share22 (% increase from 2016) | | Initial Payout Factor% | <$ 5.64 | | 0% | $5.64 | | 50% | $6.20 (10%) | | 100% | $6.51 (15%) | | 200% |
| (1) | Adjusted earnings per share is defined as Non-GAAP EPS, as referenced in Appendix A, and further adjusted to eliminate the effect of foreign exchange fluctuations not anticipated in the operating plan. |
Further, consistent with the Company’s goal of beingposition as the safest industrial gas company in the world and other nonfinancialnon-financial and strategic goals, the Committee also reserved the ability to adjust the payout within a range to reflect performance in areas such as safety, sustainability, diversity and productivity, progress on strategic objectives or individual performance factors. The actual payout factor can range is from 30 percentage points below the initial payout factor determined using the schedule above based on Company performance for the year to 30 percentage points above the initial payout factor. Actual payout factors can be adjusted within the range by the Committee. | DETERMINATION OF ANNUAL INCENTIVE PLAN PAYOUT | | | | | | | | | | | | | | | | | | |
| | Determination of Annual Incentive Plan Payout | | | | | | | | Determine Target Award (Beginning of year) | |  |  | Determine Payout Factor Range (After year-end) |  | | | Adjust Payout Factor Within the Range to Determine Actual Payout Factor |  | | | Multiply Actual Payout Factor by Target Award | | | | | | | | | | | | | | | | | | | |
For fiscal year 2017,2018, adjusted earnings per share for purposes of the Annual Incentive Plan were $6.36.23 Thewas $6.98, which resulted in an initial payout factor was 152%of 127%. The potential payout range was 122%97% to 182%. The157%; however, the Committee determineddecided not to award annual incentive payouts atexercise its discretion to adjust the top of theinitial payout factor range because of the Company’s outstanding performance for 2017: Double digit improvement in safety performance;
Double digit improvement in adjusted earnings per share; and
Achievement of strategic milestones, including thespin-off of Versum Materials, the divestiture of Performance Materials, the successful start up of several major projects and signing of several key projects.
factor. Fiscal year 20172018 awards determined for Executive Officersexecutive officers appear in the NonequityNon-Equity Incentive Plan Compensation column of the Summary Compensation Table. One-timeLong-Term Incentives Cash Incentive Award. In addition to the annual incentive award, the Committee approved a specialone-time cash award of $250,000 to Mr. Crocco to recognize his extraordinary efforts in executing the sale of the Performance Materials business. The award was paid in February 2017.
22 | Adjusted earnings per share are calculated by excluding certain disclosed items from GAAP earnings per share that management believes are not representative of the underlying business performance; and, for purposes of determining Annual Incentive Plan targets and payouts, are normalized for currency and foreign exchange impacts that were not anticipated in the operating plan. Adjusted earnings per share for 2016 were adjusted to reflect thespin-off of Versum Materials and the sale of the Performance Materials business and the resulting classification of both businesses as discontinued operations, as reported in the Company’s updated presentation of its financial statements and related disclosure filed on Form8-K dated June 5, 2017.
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23 | This is anon-GAAP measure. See Appendix A for a reconciliation to GAAP.
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AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Long-Term Incentives.The Committee believes long-term incentive compensation is the most critical part of Executive Officerexecutive officer compensation because it creates alignment with shareholders and promotes achievement of longer termlong-term financial and strategic objectives. The success of the Company’s business and resulting value for our shareholders is predominantly built on stable, long-term contractual relationships with customers and substantial capital investments that reap returns over a long time horizon through technological differentiation, cost control and operational efficiencies. Reflecting this long-term business model, the Committee emphasizes long-term incentive compensation designed to ensure that the decisions being made today build value for the long term, and to reward sustainable growth, disciplined capital investment, sustainable cost reduction and consistent operational excellence. For 2017fiscal 2018, the Committee selected two components for the Executive Officer’sexecutive officer’s long-term incentives: “performance shares”performance shares which are conditioned on performance over a three-year period (for fiscal year 20172018 grants, relative total shareholder returnTSR for fiscal year 2017-2019)2018-2020); and restricted stock unitsRSUs which link Executive Officers’executive officers’ interests to shareholder returns and provide a retention incentive.
For fiscal year 2017,2018, the mix of intended long-term incentive value for Executive Officersexecutive officers was 60% performance shares and 40% restricted stock units.RSUs. The Committee chose this mix to provide a balance of stock-based compensation to encourage both above-market performance and talent retention. Because both components of an Executive Officer’sexecutive officer’s long-term incentive opportunity are delivered in Company stock-based awards, they become more or less valuabletheir value is based on our stock price, which serves the Committee’s objective of creating alignment with changes in Company stock value that affect shareholders. The Committee determined the level of long-term incentive grants for fiscal year 20172018 at the beginning of the fiscal year.24 Prior to making the grants, the Committee established an intended long-term incentive value for each Executive Officer.executive officer. When setting these intended values, the Committee considersconsidered the Survey and Peer Reference Group competitive data and target Total Direct Compensationtotal direct compensation opportunities. It is the Committee’s intent that the long-term incentive value and total direct compensation opportunity for our CEO be at the 75thpercentile of the Peer Reference Group. It is the Committee’s intent that for executive officers other than our CEO, the long-term incentive value approximate the Market Medianmarket median and bring the Total Direct Compensationtotal direct compensation opportunity for each Executive Officer to approximatelysuch executive officers approximate the Market Medianmarket median level when combined with base salary and target Annual Incentive Plan awards. Individual performance or other factors may result in awards which are above or below the Market Median.25market median. These factors include tenure and experience, succession planning and retention, concerns, subjective evaluations of performance, historical | 26 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation grant levels and other recent compensation actions with respect to the individual such as specialone-time retention awards. For fiscal year 2017,2018, all intended long-term incentive values approximated the projected Market Median.market median (except for the CEO value, which approximated the 75th percentile). The actual value realized may differ significantly (up or down) from the intended value due to Company stock price performance over the life of the awards and the extent to which performance goals are met in the case of performance shares. | | | | | | | | | Officer | | Intended Long-Term Incentive Value | | S. Ghasemi | | $ | 8,500,000 | | S. Crocco | | $ | 1,500,000 | | J. Grant | | $ | 650,000 | | C. Painter | | $ | 1,300,000 | | S. Serhan | | $ | 1,000,000 | |
Granting Practices. Equity compensation awards are provided to Executive Officers and approximately 200 other management employees under the Company’s Long-Term Incentive Plan and (except foroff-cycle recruiting and retention awards) are granted as of the first NYSE business day in the month of December. Recruiting grants are generally issued as of the first day of employment.Off-cycle retention grants are made occasionally in response to extraordinary retention needs that arise during the year.
24Officer | With the exception of Dr. Serhan’s grants, which were negotiated prior to his hiring.
Intended Long-Term Incentive Value
($) |
25Seifi Ghasemi | As noted above, no Market Median was determined for Dr.8,500,000
| | M. Scott Crocco | 1,700,000 | | Sean D. Major | 1,000,000 | Samir Serhan due to the uniqueness of his position. | 1,000,000 | | Corning F. Painter | 1,300,000 |
Performance Shares AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
2017 Performance Shares.The primarymore significant component of the long-term incentive program for 2017incentives granted to our executive officers in fiscal 2018 was performance shares. Performance shares entitle the recipient to receive one share of Company stock and accumulated dividend equivalents for each performance share earned upon the satisfaction of performance objectives and other conditions to earning the award. Performance shares are granted each year with overlapping three-year performance cycles. The awards are paid out at the end of the three-year period based on performance, if threshold performance goals are met. Payouts of performance shares range from 0% to 215%200% of the target level of shares awarded. The target level for fiscal year 20172018 grants, (60% of each Executive Officer’sexecutive officer’s total intended long-term incentive value), was converted to a number of shares based on the grant date closing market valueprice of Company stock. The actual number of performance shares earned is determined by multiplying the target number of shares by a payout factor, which is subject to adjustment by the Committee within a narrow range to address performance factors that may not be reflected in relative TSR results.
Fiscal year 20172018 performance shares were granted conditioned upon the Company’s three-year TSR26 percentile rank compared to the TSR of Peer Reference Group members over the three-year performance period (fiscal years 2017-2019)2018-2020). The payout factor will be determined in accordance with the following schedule (with payout factors interpolated between levels): Company’s TSR
Percentile Rank | | | | Payout Factor* | | | Company’s TSR
Percentile Rank
| | Payout Factor* | | >75th %ile %ile | | | 200 | % 200% | 50th %ile %ile | | | 100 | % 100% | 30th %ile %ile | | | 30 | % 30% | <30th %ile %ile | | | 0 | % 0% |
| * | The Committee may increase or decrease the Payout Factor by up to 15 percentage points. |
The target number of fiscal year 20172018 performance shares granted to each Executive Officernamed executive officer was as follows: | Officer | | | | | | | Officer | | Target Performance Shares | | S.Seifi Ghasemi
| | | 36,267 | 31,489 | M. S.Scott Crocco | | | 6,400 | 6,297 | J. Grant
Sean D. Major | | | 2,773 | 3,704 | C.Samir Serhan
| 3,704 | | Corning F. Painter | | | 5,546 | | S. Serhan
| | | 4,267 | 4,816 |
The Committee determined final payout levels for performance share awards granted in fiscal 2016 with a performance cycle ending at the end of fiscal 2018. Prior to determining the payout, the Committee considered the need to reflect the impact on TSR of thespin-off of the Electronic Materials business through the distribution of 100% of the Versum Materials shares to the Company’s shareholders.Materials. The Committee determined the most logical way to reflect thespin-off spinoff was to calculate the TSR performance as if one half of a share of Versum Materials (the distribution received by | 27 |
Table of Contents Executive Compensation shareholders for each share of Company stock) was included in the Company’s TSR through the end of the performance period. The resulting cumulative TSR was 35.6%48%, which was the 4614thpercentile rank versuscompared to the Peer Reference Group, resultingGroup. Air Products’ TSR percentile rank was below the 30thpercentile threshold required for a minimum payout under our Long-Term Incentive Plan. This resulted in a zero percent payout factor range of71%-101%. The Committee established the payout factor at 100% performance shares for the fiscal 2016-2018 performance cycle as outlined in the following reasons: table. | •FISCAL 2016-2018 PERFORMANCE SHARES PAYOUT | | |
| Officer(1) | | Target Performance Shares Grant(2) | | Performance Shares Earned(3) | | Seifi Ghasemi | | 32,332 | | 0 | | M. Scott Crocco | | 6,006 | | 0 | | Samir J. Serhan | | 4,694 | | 0 | | Corning F. Painter | | 6,006 | | 0 |
| (1) | The Company’s performance over the three year period has been extraordinary, with 75% improvement in employee lost time injuries, 10% or greater adjusted earnings per share27 growth each year despite a tepid economic environment, and execution of multiple transformative actions to reorganizeDr. Serhan joined the Company reduce costs, refocusin early fiscal 2017 and received a grant of fiscal 2016 performance shares as a sign-on award. Mr. Major joined the Company later in fiscal 2017 and did not participate in these awards.
| | (2) | Target performance shares were adjusted by a share price ratio of 1.071 on its core industrial gases business and strengthen its balance sheet.October 1, 2016 in conjunction with the spin-off of Versum Materials. This adjustment was provided for under the non-discretionary anti-dilution provisions for the award terms to maintain the intrinsic value of the award immediately after the spin-off. | | (3) | Based on final payout factor of 0%. |
26 | “TSR” or “Total Shareholder Return” is the growth in capital that would be experienced from purchasing a share of Company or Peer Reference Group member stock and holding it for the performance period, assuming that dividends are reinvested in the Company’s stock, or Peer Reference Group member’s stock, respectively.
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27 | This is anon-GAAP measure. See reconciliation to GAAP in Appendix A.
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AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
The starting point of the performance period occurred at a high point for the Company’s stock, which had TSR performance of 22% in the six months preceding the start of the performance period compared to a 1% median TSR performance for the Peer Reference Group over the same period.
The performance share program is the primary long-term incentive for over 200 managerial employees, not just for the Executive Officers.
For the past three years the Committee has determined a performance share payout at the very bottom of the range based on the underperformance of certain large capital investments made during the applicable performance periods.
Restricted Stock Units.Units Restricted stock units entitle the recipient to receive one share of Company stock upon payout, generally at the end of a four yearfour-year vesting period. Restricted stock unitsRSUs are conditioned upon continued employment during the vesting period but are subject to special vesting rules for terminations due to death, disability or retirement or terminations covered by the Executive Separation Program described on pages 53-54 below.45-48. Upon vesting, restricted stock unitsRSUs also entitle the holder to receive dividend equivalents equal to the amount of dividends paid on a share of Company stock during the vesting period. The vesting conditions provide an incentive for retention, and the value of this compensation element increases or decreases in direct proportion to our TSR. The value of restricted stock unitsRSUs granted to the Executive Officersexecutive officers in fiscal year 20172018 is reflected in the Summary Compensation Table and the Grants of Plan-Based Awards table. Individual award amounts were determined by calculating the value (based on the average closing market value of a share ofstock price for the Company’s stock on10 trading days preceding the grant date) to approximate 40% of the total intended long-term incentive value for the Executive Officer.executive officer. Special Recruiting Grant: Dr. Serhan received aone-time equity compensation award under the Long-Term Incentive PlanIn fiscal 2018 we granted RSUs to incent him to join Air Products and compensate him for the forfeiture of equity awards made by his previous employer. Thissign-on award consisted of 4694 fiscal year 2016 performance shares and 3201 three-year restricted stock units. The performance shares are subject to the same termsour named executive officers as fiscal year 2017 performance share awards described above except the performance period is fiscal years 2016-2018. The restricted stock units will vest, along with accrued dividend equivalents, on December 1, 2019, subject to Dr. Serhan’s continued employment.
Note on Treatment Of Long-Term Incentive Awards Outstanding At Time Of Versum MaterialsSpin-Off. Long-term incentive awards held by continuing Air Products employees under the Long-Term Incentive Plan that were outstanding on October 1, 2017 (other than restricted stock) were adjusted to maintain the economic value of those awards before and after thespin-off. The terms of the long-term incentive awards, such as the vesting schedule, generally continued unchanged.
follows: | Officer | | | | | Antidilution Adjustments PostSpin-OffRSUs | Stock Options
Seifi Ghasemi | | The number and exercise price of Air Products stock options was adjusted.20,992 | Restricted Stock UnitsM. Scott Crocco | | The number of restricted stock units was adjusted.4,198 | Performance Shares
Sean D. Major | | The number of performance shares was adjusted.2,469 | | Samir J. Serhan | | 2,469 | | Corning F. Painter | | 3,210 |
Executive Officers who held unvested Air Products restricted stockFollowing the completion of fiscal 2018, the Committee granted Dr. Serhan 9,424 RSUs in December 2018 as a special retention award that will vest in three equal installments beginning on December 3, 2019. Dr. Serhan also receivedone-half an adjustment to his salary and an increase in the value of a fully vested share of Versum Materials common stock for every share of Air Products restricted stock held at the timehis annual equity grants. The Committee took these actions in recognition of thespin-off, as if they held fully vested Air Products common stock on expanding scope of Dr. Serhan’s responsibilities in our operations and, in particular, the record date.leadership role he will play in winning and executing the Company’s largest projects and building out and integrating our global gasification technologies.
| 28 | 2019 Annual Meeting Proxy Statement |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Table of Contents Employee Benefit Plans and OtherExecutive Compensation Practices and Policies
 | Employee Benefit Plans and Other Compensation |
Our employee benefit programs are offered and designed to be competitive and to provide reasonable security for employees. Welfare and retirement benefits are offered at essentially the same level to all U.S. salaried employees, including Executive Officers.executive officers. Retirement Benefits.Benefits Executive Officersofficers participate in the Company’s generally available U.S. salaried retirement programs. The Company maintains qualified retirement programs for its salaried employees, including a defined benefit pension planPension Plan for Salaried Employees (the “Salaried Pension Plan”), which has been closed to new entrants since 2005, and a retirement savings and profit sharing plan. The Company also maintains a nonqualified pension plan (alsowhich is closed to new entrants)entrants and a nonqualified deferred compensation plan in which Executive Officerscertain executive officers and other eligible employees participate. The plans are discussed in more detail below in the narrative accompanying the Pension Benefits table and the Nonqualified Deferred Compensation table. Welfare Benefits.Benefits The Company provides medical and dental coverage, life insurance and disability insurance to Executive Officersexecutive officers under the same programs offered to all salaried employees. All participating employees pay a portion of the cost of these programs. Severance and Change in Control Arrangements.Arrangements Executive Officerofficer severance and change in control arrangements are provided to support major corporate and management transitions. The Committee believes these arrangements provide benefit to the Company and its shareholders. The Committee periodically reviews these arrangements in depth for market competitiveness and appropriateness for the Company’s business. Severance.Severance
All Executive Officersexecutive officers participate in the Executive Separation Program. This program is intended to facilitate changes in the leadership team by establishing terms for the separation of an Executive Officerexecutive officer in advance, allowing a smooth transition of responsibilities when it is in the best interests of the Company. The program provides severance benefits and vesting of certain long-term incentives upon involuntary termination other than for cause or voluntary termination for good reason.reason in exchange for certain post-employment restrictions designed to protect the Company. Details of the Programprogram are provided beginning on pages 53-54.page 45. Change in Control Arrangements.Arrangements To enable the management team to negotiate effectively for shareholders without concern for their own future in the event of any actual or threatened change in control of the Company, the Company has entered individual change in control severance agreements for each of the Executive Officers. Theexecutive officers. Consistent with compensation governance best practice, our change in control agreements giveare “double-trigger,” which means that each Executive Officerexecutive officer will receive specific rights and benefits if, following a change in control, his or her employment is terminated by the Company without “cause” (as defined) or he or she terminates employment for “good reason” (as defined). in exchange for certain post-employment restrictions. Details of the agreements are described below on pages 56-57.48-49. Perquisites.Perquisites
The Committee has approved Mr. Ghasemi’s use of corporate aircraft for personal travel in order to mitigate security concerns, preserve confidentiality and maximize the time he is able to spend on the Company’s business. The Committee has also approved Mr. Ghasemi’s personal use of a Company car and driver and Mr. Ghasemi’s spousespouse’s use of a car and driver on rare occasions where security is a concern. Mr. Ghasemi uses commuting time for performing his | 29 |
Table of Contents Executive Compensation responsibilities to the Company. Mr. Ghasemi is responsible for any taxes on his orpersonal use and his spouse’s use of corporate aircraft and cars. The Committee believes the benefits of security, confidentiality and efficiency achieved by these arrangements outweigh the expense to the Company and are in the best interestinterests of shareholders.  | Executive Compensation Decision-Making Process |
Roles of the Committee, Compensation Consultant and Management in the Compensation Process Committee Responsibilities The Committee is responsible to the Board and to shareholders for establishment and oversight of the Company’s compensation program for executive officers, and for approving the compensation level of the executive officers. The Committee establishes overall compensation strategies and policies for the executive officers, allocates compensation for executive officers among the various components of compensation, evaluates and approves performance measures and goals relevant to the incentive compensation of the executive officers, evaluates the performance of the CEO with input from the Board, determines direct compensation levels for the CEO, and evaluates and approves direct compensation levels for other executive officers. Each year, the Committee: | ● | reviews and evaluates the appropriateness of the Company’s current executive officer compensation program based on several factors, including competitiveness of the program and alignment of compensation delivered under the program with the Company’s strategy and performance; | | ● | reviews whether the program design encourages excessive risk taking; | | ● | approves peer groups for market reference; | | ● | reviews dilution and burn rates associated with the Company’s equity compensation; | | ● | evaluates and approves changes to incentive compensation and benefit plans when needed; | | ● | approves incentive compensation payouts for the current year; and | | ● | addresses other specific issues regarding management development and compensation as needed. |
Periodically, the Committee also undertakes an extensive review of the competitiveness and appropriateness of certain pay practices such as severance and change in control arrangements. Engagement of Compensation Consultant The Committee retains an external compensation consultant to provide independent advice, information and analysis on executive compensation. The Committee has established several practices to ensure the external consultant’s independence, candor and objectivity. The consultant is engaged by, has its compensation set by, and reports directly to the Committee, frequently meets separately with the Committee with no members of management present, and consults with the Committee chairman in between meetings. Management reports fees paid for executive compensation consulting services performed by the consultants to the Committee at each meeting and the Committee approves in advance the executive compensation consulting services to be performed. The Committee retained WTW as its external consultant for fiscal 2018. Aggregate fees for WTW’s executive compensation consulting services provided to the Committee were $158,000. During fiscal 2018, WTW also performed global retirement plan actuarial, administrative and consulting, health care exchange and aviation insurance brokering services for the Company in addition to the work performed for the Committee. The aggregate fees for those services were $677,000. The decision to engage a predecessor to WTW for actuarial services was made over a decade ago after an extensive bid process. WTW is one of few firms which is able to provide these services on a global basis. Decisions to hire WTW for the health care exchange and insurance brokering services were made by the responsible functional managers after a bid process. | 30 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation During fiscal 2018, WTW provided relocation benefitsadvice and analysis to Dr. Serhan consistentthe Committee on direct compensation for individual executive officers, peer group composition, incentive plan performance measures, compensation program design and external trends and developments. WTW also provided an analysis of the alignment of pay delivered under the Company’s executive officer compensation program with its domestic relocation policy, including reimbursementperformance compared to peer group pay and performance, an assessment of the fit of the Company’s executive officer compensation program design with its business strategy, a comparison of the program design to peer programs, and an assessment of the potential relationship between the Company’s compensation program and risk taking by management. Independence Assessment The Committee has assessed WTW’s independence and concluded that there are no conflicts of interest that would prevent WTW from independently advising the Committee. In making this determination, the Committee considered, among other things, the fees paid for services provided to management as a percentage of WTW’s consolidated revenues, policies and procedures established by WTW to mitigate conflicts of interest, and the lack of business and personal relationships between WTW team members and the Company’s executive officers or Committee members. |
Management Input While the Committee determines overall compensation strategy and policies for lossthe executive officers and approves their compensation, it seeks input from several executive officers and other management employees with respect to both overall guidelines and discrete compensation decisions. Specifically: | ● | Human Resources staff work with the Committee to develop the design of compensation programs and decision-making frameworks for determining compensation levels; | | ● | the CEO provides input to the Committee on the forms of incentive compensation and performance measures that will best support his strategic goals for the Company; | | ● | the CEO provides the Committee perspective on the performance of other executive officers and develops and recommends compensation actions for the other executive officers, in consultation with Human Resources, and based on competitive market analysis; | | ● | the CFO provides background to the Committee regarding the Company’s key financial objectives and performance against them; and | | ● | the Company’s Law and Human Resources staff provide technical advice and other support to the Committee. |
These executive officers and employees attend portions of the Committee meetings; however, the Committee meets in executive session both alone and with its external compensation consultant to reach final decisions about CEO and other executive officers’ compensation. Benchmarking The Committee believes that a threshold characteristic of reasonable compensation is that it is aligned with compensation provided by companies the Company competes against for talent. In preparation for determining fiscal 2018 compensation, the Committee benchmarked the executive officer compensation levels to evaluate the competitiveness of the program and as a reference for establishing compensation levels for fiscal 2018. | 31 |
Table of Contents Executive Compensation The Committee uses two peer groups for benchmarking, which it reviews and approves annually. | Name | | Criteria | | Purpose | | Source | | Survey Reference Group | | Broad group of industrial companies with $7 – 13 billion in revenue | | Benchmark competitive executive officer direct compensation levels at target | | WTW and Mercer surveys | | Peer Reference Group | | Chemical and industrial companies with similar capital structure, asset intensity and profitability to Company | | Benchmark competitive direct compensation levels for CEO and CFO, pay practice and pay for performance assessment, peer group for performance share relative TSR measure | | Compiled from proxy statement filings |
For purposes of assessing competitiveness and recommending compensation levels for fiscal 2018, the Committee used survey data from WTW and Mercer compensation databases on a group of industrial companies with revenue of $7 to $13 billion (consistent with the Company’s fiscal 2017 revenue of $8.2 billion) (the “Survey Reference Group”). This Survey Reference Group is representative of the companies the Company competes against for talent and is used by the Company for various compensation benchmarking purposes, not just executive officer compensation. A list of companies included in the Survey Reference Group is provided in Appendix B on page B-1. Prior to the beginning of the fiscal year, the Committee reviewed an assessment of each named executive officer’s compensation level relative to the Survey Reference Group based on similar functional responsibilities. The assessment identified median, 25thand 75thpercentile levels for base salary, target annual incentive, target long-term incentives and target total direct compensation. Annual and long-term incentive levels reflected a three-year average to reduce volatility in results. The Committee also reviewed proxy data compiled from a smaller group of companies that are competitors of the Company or are similar to the Company in that they are chemical or other industrial companies with similar capital structures, asset intensity, operating margins and business models (the “Peer Reference Group”). Peer Reference Group companies are generally similar in revenue size to the Company, however certain companies with higher revenues are included based on proximity of business model. The Committee used the Peer Reference Group for benchmarking specific pay practices and for assessing alignment of pay with performance. In addition, the Committee also uses the Peer Reference Group to assess competitive compensation levels for CEO and CFO total direct compensation. Because proxy data does not necessarily reflect similar positions to the other executive officers, only the Survey Reference Group is used to benchmark pay levels for them. The Peer Reference Group is also used for determining the Company’s relative TSR performance for purposes of performance share payouts. The fiscal 2018 Peer Reference Group consisted of the following companies: | Celanese Corp. | Ecolab Inc. | Olin Corporation | | Chemours Company | Huntsman Corp. | Parker-Hannifin Corp. | | Danaher Corp. | Illinois Tool Works, Inc. | PPG Industries, Inc. | | Dover Corp. | Ingersoll-Rand plc | Praxair, Inc. | | Eastman Chemical Co. | | |
For fiscal 2018, the Peer Reference Group was updated to add Chemours Company and Olin Corporation and to remove Du Pont (E.I.) De Nemours & Co., Eaton Corp., Rockwell Automation Inc. and TE Connectivity, Ltd. Eaton Corp., Rockwell Automation Inc. and TE Connectivity, Ltd. were closely aligned with the Materials Technologies business and were removed from the peer group following the spin-off of Versum Materials. Chemours Company and Olin Corporation were added as peers based on their fit with our business strategy focused on industrial gases. Du Pont (E.I.) De Nemours & Co. was removed from the peer group as a result of the DowDuPont merger. | 32 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation Risk Assessment During fiscal 2018, the Committee, with assistance from WTW, conducted a risk assessment of the Company’s executive officer compensation program. The Committee concluded that the program is balanced and does not provide an enticement for executives to take risks that are likely to have an adverse effect on the saleCompany, due to the following features: | ● | the Company does not use highly leveraged short-term incentives that drive risky investments at the expense of long-term Company value; | | ● | the Company’s compensation programs reward consistent, long-term performance by heavily weightingcompensation to long-term incentives; | | ● | concentration of long-term incentive compensation in awards based on relative TSR combined with overlapping grant cycles strengthens executives’ incentive to foster stable, long-term performance; | | ● | cash incentive awards are capped at sustainable levels, and the Committee has discretion to reduce awards, including for non-financial considerations; | | ● | the Company enforces substantial executive officer stock ownership and holding requirements; | | ● | the Company has recovery policies (“clawbacks”) applicable to incentive compensation that permit the Company to cancel awards and recoup certain gains in the event of conduct detrimental to the Company. |
In addition, management conducted and reported to the Committee on its evaluation of his homethe Company’s overall compensation practices and certain tax preparation services. Theprograms to assess whether any of these programs and practices exposed the Company also paid certain legal fees on behalf of Dr. Serhan to facilitate his employment by the Company.excessive risk taking, concluding there were no such programs or practices.  | Key Compensation Practices and Policies |
Executive Officer Stock Ownership. The Committee has approved ownership guidelines that require Executive Officersexecutive officers to achieve an ownership stake in the Company that is significant in comparison with the Executive Officer’sexecutive officer’s salary. The ownership guidelines are six times base salary for the CEO and three times base salary for the other Executive Officers.executive officers. The Executive Officersexecutive officers are expected to achieve the specified ownership level within five years of AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
assuming their position. Executive Officersofficers may count toward these requirements the value of shares owned, share equivalents held in their Retirement Savings Plan accounts, earned performance shares, restricted shares, unvested RSUs and deferred stock units which are fully vested and held in the Company’s nonqualified deferred compensation plan.Deferred Compensation Plan. Stock options and unearned performance shares are not counted. All Executive Officersexecutive officers are currently in compliance with this policy. Hedging and Pledging Policy. It is the policy of the Company that Executive Officersexecutive officers and directors may not purchase or sell options on Company stock; engage in short sales with respect to Company stock; or trade in puts, calls, straddles, equity swaps or other derivative securities that are directly linked to Company stock. It is also the policy of the Company that shares of Company stock owned by Executive Officersexecutive officers or directors may not be held in a margin account or pledged as collateral on a loan. Clawback Policy. The Company’s equity plans and agreements provide that awards may be cancelled and that certain gains will be “clawed back” (i.e.(i.e., must be repaid to the Company) if an Executive Officerexecutive officer engages in activity that is detrimental to the Company, such as performing services for a competitor, disclosing confidential information or violating Company policies. The Committee has also adopted a policy allowing the clawback of cash incentive payments and performance | 33 |
Table of Contents Executive Compensation shares in the event an Executive Officer’sexecutive officer’s conduct leads to a restatement of the Company’s financial results. The Committee may, in its discretion, seek to recoup any bonus or incentive compensation paid to an Executive Officerexecutive officer if (i) the amount of such payment was based on the achievement of certain financial results that were subsequently the subject of a restatement, (ii) the Committee determines that the Executive Officerexecutive officer engaged in misconduct that resulted in the requirement to restate and (iii) a lower payment would have been made to the Executive Officerexecutive officer based upon the restated financial results. AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION TABLESGranting Practices
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 Summary Compensation Table | | | | | | | | | | | | | Name and
Principal Position | | Year | | | Salary | | | Bonus (2) | | | Stock
Awards
(3) | | | Option
Awards
(4) | | | Non-Equity
Incentive
Plan
Compen-
sation (5) | | | Changes in
Pension
Value and
Nonqualified
Deferred
Compen-
sation
Earnings (6) | | | All Other
Compen-
sation
(7) | | | Total | | S. Ghasemi Chairman, President and Chief Executive Officer | |
| 2017
2016 2015 |
| | $
$ $ | 1,200,000
1,200,000 1,200,000 |
| | $
$ $ |
|
| | $
$ $ | 9,194,498
6,839,951 6,947,086 |
| | $
$ $ |
1,505,563 |
| | $
$ $ | 3,276,000
3,240,000 3,120,000 |
| | $
$ $ | 5,793
4,290 1,079 |
| | $
$ $ | 283,476
251,592 184,385 |
| | $
$ $ | 13,959,767
11,535,833 12,958,113 |
| M. Crocco Executive Vice President and Chief Financial Officer | |
| 2017
2016 2015 |
| | $
$ $ | 600,000
597,308 581,923 |
| | $
$ $ | 250,000
|
| | $
$ $ | 1,622,219
1,270,434 1,190,851 |
| | $
$ $ |
258,099 |
| | $
$ $ | 928,200
1,020,000 757,530 |
| | $
$ $ | 1,959,685
1,311,416 1,018,815 |
| | $
$ $ | 19,179
19,608 18,466 |
| | $
$ $ | 5,379,283
4,218,766 3,825,684 |
| J. Grant Vice President Human Resources (1) | |
| 2017
2016 2015 |
| | $
$ $ | 425,154
|
| | $
$ $ |
|
| | $
$ $ | 702,822
|
| | $
$ $ |
|
| | $
$ $ | 487,396
|
| | $
$ $ | 1,021
|
| | $
$ $ | 48,709
|
| | $
$ $ | 1,665,102
|
| C. Painter Executive Vice President, Industrial Gases | |
| 2017
2016 2015 |
| | $
$ $ | 600,000
600,000 573,077 |
| | $
$ $ |
|
| | $
$ $ | 1,405,789
1,270,434 1,290,082 |
| | $
$ $ |
279,594 |
| | $
$ $ | 928,200
1,020,000 769,500 |
| | $
$ $ | 2,582,803
1,433,449 1,153,174 |
| | $
$ $ | 19,179
21,777 18,200 |
| | $
$ $ | 5,535,971
4,345,660 4,083,627 |
| S. Serhan Executive Vice President(1) | |
| 2017
2016 2015 |
| | $
$ $ | 448,462
|
| | $
$ $ | 1,100,000
|
| | $
$ $ | 2,132,692
|
| | $
$ $ |
|
| | $
$ $ | 700,700
|
| | $
$ $ | 71
|
| | $
$ $ | 477,748
|
| | $
$ $ | 4,859,673
|
|
Equity compensation awards are provided to executive officers and approximately 200 other management employees under the Company’s Long-Term Incentive Plan and (except for off-cycle recruiting and retention awards) are granted as of the first NYSE business day in the month of December. Recruiting grants are generally issued as of the first day of employment. Off-cycle retention grants are made occasionally in response to extraordinary retention needs that arise during the year. | 34 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation Executive Compensation Tables | Fiscal 2018 Summary Compensation Table |
| Name and Principal Position | | Year | | Salary
($) | |
Bonus(2)
($) | | Stock
Awards(3)
($) | | Non-Equity
Incentive
Plan
Compensation(4)
($) | | Changes in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(5)
($) | | All Other
Compensation(6)
($) | | Total
($) | Seifi Ghasemi,
Chairman, President and
Chief Executive Officer | | 2018 | | 1,309,615 | | — | | 9,788,563 | | 2,571,750 | | 6,181 | | 265,398 | | 13,941,507 | | 2017 | | 1,200,000 | | — | | 9,194,498 | | 3,276,000 | | 5,793 | | 283,476 | | 13,959,767 | | 2016 | | 1,200,000 | | — | | 6,839,951 | | 3,240,000 | | 4,290 | | 251,592 | | 11,535,833 | M. Scott Crocco,
Executive Vice President and Chief Financial Officer | | 2018 | | 600,000 | | — | | 1,957,485 | | 647,700 | | 726,537 | | 8,851 | | 3,940,573 | | 2017 | | 600,000 | | 250,000 | | 1,622,219 | | 928,200 | | 1,959,685 | | 19,179 | | 5,379,283 | | 2016 | | 597,308 | | — | | 1,270,434 | | 1,020,000 | | 1,311,416 | | 19,608 | | 4,218,766 | Sean D. Major,
Executive Vice President,
General Counsel and Secretary(1) | | 2018 | | 550,000 | | — | | 1,151,372 | | 523,875 | | 187 | | 45,140 | | 2,270,574 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Samir Serhan,
Executive Vice President(1) | | 2018 | | 550,000 | | 770,000 | | 1,151,372 | | 593,725 | | 472 | | 61,418 | | 3,126,987 | | 2017 | | 448,462 | | 1,100,000 | | 2,132,692 | | 700,700 | | 71 | | 477,748 | | 4,859,673 | Corning F. Painter,
Former Executive Vice President,
Industrial Gases(1) | | 2018 | | 461,538 | | — | | 1,496,994 | | — | | 4,342,921 | | 2,589,855 | | 8,891,308 | | 2017 | | 600,000 | | — | | 1,405,789 | | 928,200 | | 2,582,803 | | 19,179 | | 5,535,971 | | 2016 | | 600,000 | | — | | 1,270,434 | | 1,020,000 | | 1,433,449 | | 21,777 | | 4,345,660 |
| (1) | Ms. GrantMr. Major and Dr. Serhan were not Executive Officers for 2015 or 2016; sojoined the Company in fiscal 2017 and became named executive officers in fiscal 2018 and fiscal 2017, respectively; therefore their compensation is not shown for thoseprior years.
Mr. Painter separated from the Company on June 30, 2018. |
| (2) | This column includes a transactional bonus paid to Mr. Crocco upon the completion of the sale of the Performance Materials business and a sign-on bonusbonuses paid to Dr. Serhan. Serhan in his first month and first year anniversary with Air Products. |
| (3) | Amounts in this column represent the U.S. GAAP grant date fair value of restricted stock units (2017)RSUs (2018 and 2017), restricted stock (2016 and 2015)(2016) and performance share awards granted in the fiscal year indicated, disregarding any estimate of forfeitures related to time-based vesting. Generally, the expense for these awards is recognized over the vesting or performance period unless the recipient is eligible for retirement and the award vests upon retirement, in which case the expense may be required to be recognized entirely in the year of grant. The valuation models and assumptions applicable to these grant date fair values are set forth in Note 19, Share-Based Compensation, to our audited financial statements included in our Annual Report on Form10-K for the fiscal year ended September 30, 2017,2018, filed with the SEC on November 16, 2017.20, 2018. The amounts shown may not correspond to the actual value that will be realized by the Executive Officers.executive officers. The grant date fair values of the performance shares are based upon the grant date probable outcomes of satisfying the performance conditions stipulated in the grants. Maximum grant date values are displayed in the table below. Maximum values reflect the maximum calculated payout at 200% as well as the maximum discretion that could be applied of up to 15% based on grant date stock price. For additional information on awards made in fiscal 2017,2018, see the Fiscal 2018 Grants of Plan-Based Awards Table and Outstanding Equity Awards at 2018 Fiscal Year-End Table on pages 4537 and 47,39, respectively. |
| | | | | | | | | | | | 2017 Performance Shares Grant Date Values | | | | | | | Officer | | Value
Included | | | Maximum
Value | | S. Ghasemi | | $ | 5,709,876 | | | $ | 11,233,721 | | S. Crocco | | $ | 1,007,616 | | | $ | 1,982,403 | | J. Grant | | $ | 436,581 | | | $ | 858,938 | | C. Painter | | $ | 873,162 | | | $ | 1,717,876 | | S. Serhan | | $ | 1,344,071 | | | $ | 2,775,674 | |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
(4) | This column shows the grant date fair value of stock options granted in the fiscal year indicated, disregarding any estimate of forfeitures relating to time-based vesting. The assumptions for the valuation determination are set forth in Note 19, Share Based Compensation, to our financial statements included in our Annual Report onForm 10-K for the fiscal year ending September 30, 2017, filed with the SEC on November 16, 2017. Additional information regarding these awards is set forth in the “Outstanding Equity Awards” table and accompanying footnotes.
|
| FISCAL 2018 PERFORMANCE SHARES GRANT DATE VALUES |
| |
| | Officer | | Value
Included
($) | | Maximum
Value
($) | | | Seifi Ghasemi | | 6,395,416 | | 10,943,246 | | | M. Scott Crocco | | 1,278,921 | | 2,188,371 | | | Sean D. Major | | 752,282 | | 1,287,236 | | | Samir Serhan | | 752,282 | | 1,287,236 | | | Corning F. Painter | | 978,130 | | 1,673,685 |
| (4) | Amounts in this column reflect Annual Incentive Plan awards. At their election, Executive Officersexecutive officers may defer awards received under this Plan.plan. |
(6) | 35 |
Table of Contents Executive Compensation | (5) | Amounts in this column reflect the annual change in the actuarial present value of each Executive Officers’executive officer’s accumulated tax qualifiedtax-qualified and nonqualified pension benefits and interest considered to be above-market interest credited to their Deferred Compensation Plan balances. |
| Interest is calculated for the Deferred Compensation Plan accounts using a Moody’sA-rated Corporate Bond Rate because thisit is comparable to the rate the Company pays its other creditors on long-term obligations. When this rate exceeds 120% of a rate set by the U.S. Internal Revenue Service, it is treated as above-market interest, even though it is based on a market average for corporate bonds. The amounts included as above-market interest were as follows: |
| | | | | | | | ABOVE MARKET INTEREST | | S. Ghasemi | | $ | 5,793 | | S. Crocco | | $ | 6,860 | | J. Grant | | $ | 1,021 | | C. Painter | | $ | 3,832 | | S. Serhan | | $ | 71 | |
The pension accrual amounts represent the difference between the September 30, 2016 and September 30, 2017 actuarial present value of accumulated benefits under the Company’s tax qualified and nonqualified pension plans for those Executive Officers who participate in the pension plans. No amounts are shown in the Summary Compensation Table for negative changes in value. The pension accrual amounts are as follows:
| | | | | | | | Pension Accruals | | S. Crocco | | $ | 1,952,895 | | C. Painter | | $ | 2,578,971 | |
No changes were made to pension benefit formulas for this year. Changes in pension value can result from additional years of service, changes in pensionable compensation, and changes to discount and mortality rates. Additional information on how these amounts are calculated is included in the notes accompanying the Pension Benefits table.
(7) | ABOVE-MARKET INTEREST | | |
| | Seifi Ghasemi | | $ | 6,181 | | M. Scott Crocco | | $ | 5,763 | | Sean D. Major | | $ | 187 | | Samir Serhan | | $ | 472 | | Corning F. Painter | | $ | 3,559 |
| The pension accrual amounts represent the difference between the September 30, 2017 and September 30, 2018 actuarial present value of accumulated benefits under the Company’s tax-qualified and nonqualified pension plans for those executive officers who participate in the pension plans. No amounts are shown in the Summary Compensation Table for negative changes in value. The pension accrual amounts are as follows: |
| | M. Scott Crocco | | $ | 720,774 | | Corning F. Painter | | $ | 4,339,362 |
| No changes were made to pension benefit formulas for this year. Changes in pension value can result from additional years of service, changes in pensionable compensation and changes to discount and mortality rates. Additional information on how these amounts are calculated is included in the footnotes accompanying the Pension Benefits Table. | | (6) | Amounts shown in this column are detailed in the chart below. |
| | | | | | | | | | | | | | | | | | | Officer | | Contributions
Under Defined
Contribution Plans | | | Group Term
Life Insurance
Premiums | | | Perquisites or
Personal Benefits | | S. Ghasemi | | $ | 225,601 | | | $ | 1,179 | | | $ | 56,696 | (i) | M. Crocco | | $ | 18,000 | | | $ | 1,179 | | | | | | J. Grant | | $ | 47,723 | | | $ | 986 | | | | | | C. Painter | | $ | 18,000 | | | $ | 1,179 | | | | | | S. Serhan | | $ | 34,692 | | | $ | 1,011 | | | $ | 442,045 | (ii) |
| | Officer | | Severance
($) | | | Contributions
Under Defined
Contribution Plans
($) | | Group Term
Life Insurance
Premiums
($) | | Perquisites or
Personal Benefits
($) | | | Seifi Ghasemi | | — | | | 196,348 | | 1,236 | | 67,814 | (i) | | M. Scott Crocco | | — | | | 7,615 | | 1,236 | | — | | | Sean D. Major | | — | | | 43,904 | | 1,236 | | — | | | Samir Serhan | | — | | | 60,182 | | 1,236 | | — | | | Corning F. Painter | | 2,582,005 | (ii) | | 6,923 | | 927 | | — | |
(i) | (i) | This amount includes the incremental cost to the Company of providing Mr. Ghasemi a car and driver for occasional personal use ($ 24,810)25,666), including for occasional use by his spouse to mitigate security concerns, and of providing Mr. Ghasemi personal use of corporate aircraft ($31,886)42,148). The incremental cost for the car and driver is calculated using the U.S. Internal Revenue Service mileage rate based on the variable costs of operating a vehicle. The variable cost rate is used rather than the standard business rate as the Company uses the car and driver for Company business, including to transport other passengers, when not being used by Mr. Ghasemi, and would incur the fixed costs of operating the vehicle and employing the driver whether or not Mr. Ghasemi was provided the car and driver for commuting. In addition to the mileage rate, which includes trips to and from Mr. Ghasemi’s residence with no passengers, the amount calculated for use of the car and driver includes tolls and overtime compensation and reimbursement for meals and lodging provided to the driver in connection with Mr. Ghasemi’s use. Mr. Ghasemi pays all taxes associated with personal use of the car and driver. | | | | | | The incremental cost of the corporate aircraft is calculated using an hourly rate for each flight hour for variable operating costs (fuel and maintenance) plus flight specific costs such as parking and landing fees and crew expenses. The valuation also includes these costs with respect to flights with no passengers that are associated with Mr. Ghasemi’s personal travel. Fixed costs such as pilot compensation and lease payments are not included as the aircraft is primarily used for business purposes, and the Company would incur these costs regardless of Mr. Ghasemi’s personal use. Mr. Ghasemi’s family members traveled with Mr. Ghasemi on some of the flights reflected; however, no incremental cost to the Company arises from their accompanying Mr. Ghasemi. Mr. Ghasemi pays all taxes associated with personal use of the aircraft. | | (ii) | Reflects severance paid to Mr. Painter in connection with his separation from the Company. For additional information, see Potential Payments Upon Termination — Mr. Painter’s Separation Agreement on page 46. |
| 36 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation | Fiscal 2018 Grants of Plan-Based Awards Table |
| Officer | | Award Type | | Grant
Date | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards ($) | |
Estimated Future Payouts
Under Equity Incentive
Plan Awards(#) | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(#) | | Grant
Date Fair
Value of
Stock and
Option
Awards
($)(1) | | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | Seifi Ghasemi | | Annual Incentive Plan | | | | — | | 2,025,000 | | 4,000,000 | | | | | | | | | | | | | Performance Shares | | 12/1/2017 | | | | | | | | 0 | | 31,489 | | 67,701 | | | | 6,395,416 | | | Restricted Stock Units | | 12/1/2017 | | | | | | | | | | | | | | 20,992 | | 3,393,147 | | M. Scott Crocco | | Annual Incentive Plan | | | | — | | 510,000 | | 1,173,000 | | | | | | | | | | | | | Performance Shares | | 12/1/2017 | | | | | | | | 0 | | 6,297 | | 13,539 | | | | 1,278,921 | | | Restricted Stock Units | | 12/1/2017 | | | | | | | | | | | | | | 4,198 | | 678,565 | | Sean D. Major | | Annual Incentive Plan | | | | — | | 412,500 | | 948,750 | | | | | | | | | | | | | Performance Shares | | 12/1/2017 | | | | | | | | 0 | | 3,704 | | 7,964 | | | | 752,282 | | | Restricted Stock Units | | 12/1/2017 | | | | | | | | | | | | | | 2,469 | | 399,089 | | Samir Serhan | | Annual Incentive Plan | | | | — | | 467,500 | | 1,075,250 | | | | | | | | | | | | | Performance Shares | | 12/1/2017 | | | | | | | | 0 | | 3,704 | | 7,964 | | | | 752,282 | | | Restricted Stock Units | | 12/1/2017 | | | | | | | | | | | | | | 2,469 | | 399,089 | | Corning F. Painter | | Annual Incentive Plan | | | | — | | 510,000 | | 1,173,000 | | | | | | | | | | | | | Performance Shares | | 12/1/2017 | | | | | | | | 0 | | 4,816 | | 10,354 | | | | 978,130 | | | Restricted Stock Units | | 12/1/2017 | | | | | | | | | | | | | | 3,210 | | 518,864 |
| (1) | Mr. Painter separated from the Company on June 30, 2018. Amounts that would have been potentially payable under the Non-Equity Incentive Plan were forfeited. Mr. Painter received cash payments under his Separation Agreement and equity vested upon termination under the Executive Separation Program as outlined on pages 45-48. |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
The incremental cost of the corporate aircraft is calculated using an hourly rate for each flight hour for variable operating costs (fuel and maintenance) plus flight specific costs such as parking and landing fees and crew expenses. The valuation also includes these costs with respect to flights with no passengers that are associated with Mr. Ghasemi’s personal travel. Fixed costs such as pilot compensation and lease payments are not included as the aircraft is primarily used for business purposes, and the Company would incur these costs regardless of Mr. Ghasemi’s personal use. Mr. Ghasemi’s family members traveled with Mr. Ghasemi on some of the flights reflected; however, no incremental cost to the Company arises from their accompanying Mr. Ghasemi. Mr. Ghasemi pays all taxes associated with personal use of the aircraft. (ii) | This amount also includes legal fees paid on behalf of Dr. Serhan ($105,304), a payment to him to compensate for lost salary from his prior employer ($45,833), and relocation costs ($290,908) reimbursed to Dr. Serhan including the following:
|
| | | | | | | | | Type | | Amount | | Real Estate Broker Commissions | | $ | 104,400 | | Other Home Disposition Fees | | $ | 22,070 | | Reimbursement of loss on home sale | | $ | 62,207 | | Movement and storage of household goods | | $ | 31,900 | | Tax gross up | | $ | 30,294 | | Other costs and allowances | | $ | 40,037 | |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
2017Fiscal 2018 Grants of Plan-Based Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Grant Date | | | Estimated Future Payouts
Under Nonequity Incentive
Plan Awards($) | | | Estimated Future Payouts
Under Equity Incentive Plan
Awards(#) | | | All Other
Stock
Awards:
Number of
Shares Of
Stock or Units(#) | | | Grant
Date Fair
Value of
Stock and
Option Awards($) | | | Officer | | Award Type | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | | S. Ghasemi | | Annual Incentive Plan | | | | | | $ | - | | | $ | 1,800,000 | | | $ | 4,000,000 | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares | | | 12/1/2016 | | | | | | | | | | | | | | | | 0 | | | | 36,267 | | | | 77,974 | | | | | | | $ | 5,709,876 | | | | Restricted Stock
Units | | | 12/1/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 24,178 | | | $ | 3,484,621 | | S. Crocco | | Annual Incentive Plan | | | | | | $ | - | | | $ | 510,000 | | | $ | 1,173,000 | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares | | | 12/1/2016 | | | | | | | | | | | | | | | | 0 | | | | 6,400 | | | | 13,760 | | | | | | | $ | 1,007,616 | | | | Restricted Stock
Units | | | 12/1/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,266 | | | $ | 614,603 | | J. Grant | | Annual Incentive Plan | | | | | | $ | - | | | $ | 279,500 | | | $ | 642,850 | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares | | | 12/1/2016 | | | | | | | | | | | | | | | | 0 | | | | 2,773 | | | | 5,962 | | | | | | | $ | 436,581 | | | | Restricted Stock
Units | | | 12/1/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,848 | | | $ | 266,241 | | C. Painter | | Annual Incentive Plan | | | | | | $ | - | | | $ | 510,000 | | | $ | 1,173,000 | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares | | | 12/1/2016 | | | | | | | | | | | | | | | | 0 | | | | 5,546 | | | | 11,924 | | | | | | | $ | 873,162 | | | | Restricted Stock
Units | | | 12/1/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,697 | | | $ | 532,627 | | S. Serhan | | Annual Incentive Plan | | | | | | $ | - | | | $ | 385,000 | | | $ | 885,500 | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares | | | 12/1/2016 | | | | | | | | | | | | | | | | 0 | | | | 8,961 | | | | 19,266 | | | | | | | $ | 1,261,645 | | | | Restricted Stock
Units | | | 12/1/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,046 | | | $ | 871,047 | |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
The Grants of Plan-Based Awards table Table reports the dollar value of cash (nonequity)(non-equity) incentive awards and the number and value of equity awards granted to each Executive Officerexecutive officer during fiscal year 2017.2018. With regard to cash incentives, this table reports the range of potential value that could have been obtained by the Executive Officer;executive officer; whereas the Summary Compensation Table reports the actual value realized for fiscal year 2017.2018. Equity amounts represent the grant date values of the awards determined under FASB ASC Topic 718 for purposes of financial statement reporting, which are based on probable outcomes.
NonequityNon-Equity Incentive Plan Awards — Annual Incentive Plan.Plan
Annual Incentive Plan awards are based on performance for the fiscal year. The Committee approves performance measures and payout schedules prior to or at the beginning of the fiscal year. Following the end of the fiscal year, the Committee determines the range of actual amounts that can be paid out under a formula which reflects the Company’s performance against the approved performance measures. Individual awards are determined by the Committee within the range, based on individual performance. There is no minimum bonus under the terms of the Plan, so the threshold amount is shown as 0.$0. The maximum bonus payable under this Plan is capped at $4,000,000. For more information on fiscal year 20172018 targets and the award determination, see page 36.pages 25-26. Equity Incentive Plan Awards — Performance Shares.Shares The Equity Incentive Plan Awards reflected in the table are performance shares. Performance shares are deferred stock units whose earn outpayout is conditioned on the Company’s TSR percentile relative to the Peer Reference Group. “DeferredDeferred stock units”units are an award type provided under the Company’s Long-Term Incentive Plan that entitle the holder to the value of one share of Company stock and accumulated dividend equivalents upon satisfaction of performance and/or time-based vesting conditions. Dividend equivalents are paid in cash and equal the dividends that would have accrued on a share of Company stock from the grant date of a deferred stock unit until it is paid out. Dividend equivalents are not paid until the award is vested. No dividend equivalents are paid on units that are forfeited. | 37 |
Table of Contents Executive Compensation The performance shares reflected in the table have a three-year performance cycle which will be completed at the end of fiscal year 2019.2020. The number of performance shares that will be paid out is based on a schedule tied to the Company’s TSR percentile as described on page 38.pages 27-28. Performance shares are generally forfeited if the Executive Officerexecutive officer voluntarily terminates employment during the performance period; however, if an Executive Officerexecutive officer terminates due to death, disability or retirement one year or more after the grant date, he will receive apro-rata portion of any performance share payout upon completion of the performance period. Upon a termination covered by the Executive Separation Program described on pages 53-54,45-48, the terms of that Program regarding treatment of equity compensation will apply. Other Stock Awards — RSUs — The Other Stock Awards reflected in the table are restricted stock units. Restricted stock unitsRSUs, which are deferred stock units that have time basedtime-based vesting conditions. Most of the restricted stock unitsRSUs granted in fiscal year 20172018 are subject to a four-year vesting period. However, Dr. Serhan was granted 3201 three-year vesting restricted stock units as a special recruiting award. If an Executive Officer’sexecutive officer’s employment terminates due to death, disability or retirement one year or more after the grant date, the units will vest. Pursuant to his Employment Agreement, Mr. Ghasemi’s restricted stock unitsRSUs will not be forfeited and will continue to vest if he is terminated at any time due to death or disability, voluntarily for Good Reason, by the Company without Cause or at the conclusion of his Employment Agreement. (See page 5445 for the definitiondefinitions of “Cause” and “Good Reason” under the Employment Agreement.). If another Executive Officer’sexecutive officer’s employment termination is covered by the Executive Separation Program described on pages 53-5445-48, the terms of that Program regarding treatment of equity compensation will apply. | 38 | 2019 Annual Meeting Proxy Statement |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Table of Contents Outstanding Equity Awards at FiscalYear-EndExecutive Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1) | | | Stock Awards | | | | | | | | | | | | | | | | | | | | Number of Shares
of Units
of Stock Held that have not Vested (#)(2) | | | Market Value of Shares or Units of Stock held that have not Vested ($)(3) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other
Rights that
have not
Vested (#)(4) | | | Equity Incentive Plan Awards: Market or Payout
Value of
Unearned Shares, Units, or Other
Rights That
Have Not Vested ($)(3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Grant Date | | | Number of Securities Underlying Unexercised Options (#) | | | Option Exercise Price | | | Option Expiration Date | | | | | | | Officer | | | Exercisable | | | Unexercisable | | | | | | | | S. Ghasemi | | | | | | | | | | | | | | | | | | | | | | | 85,065 | | | $ | 12,863,529 | | | | 68,599 | | | $ | 10,373,541 | | | | | 7/1/2014 | | | | 165,235 | | | | 0 | | | $ | 120.69 | | | | 7/1/2024 | | | | | | | | | | | | | | | | | | | | | 12/1/2014 | | | | 28,904 | | | | 14,454 | | | $ | 134.54 | | | | 12/1/2024 | | | | | | | | | | | | | | | | | | S. Crocco | | | | | | | | | | | | | | | | | | | | | | | 17,313 | | | $ | 2,618,072 | | | | 12,406 | | | $ | 1,876,035 | | | | | 10/1/2008 | | | | 7,954 | | | | 0 | | | $ | 62.47 | | | | 10/1/2018 | | | | | | | | | | | | | | | | | | | | | 12/1/2009 | | | | 4,443 | | | | 0 | | | $ | 78.06 | | | | 12/1/2019 | | | | | | | | | | | | | | | | | | | | | 12/1/2010 | | | | 4,314 | | | | 0 | | | $ | 80.67 | | | | 12/1/2020 | | | | | | | | | | | | | | | | | | | | | 12/1/2011 | | | | 6,803 | | | | 0 | | | $ | 77.16 | | | | 12/1/2021 | | | | | | | | | | | | | | | | | | | | | 12/3/2012 | | | | 14,271 | | | | 0 | | | $ | 76.17 | | | | 12/3/2022 | | | | | | | | | | | | | | | | | | | | | 12/2/2013 | | | | 18,082 | | | | 0 | | | $ | 100.55 | | | | 12/2/2023 | | | | | | | | | | | | | | | | | | | | | 12/1/2014 | | | | 4,954 | | | | 2,478 | | | $ | 134.54 | | | | 12/1/2024 | | | | | | | | | | | | | | | | | | J. Grant | | | | | | | | | | | | | | | | | | | | | | | 8,404 | | | $ | 1,270,853 | | | | 5,522 | | | $ | 835,037 | | | | | 12/2/2013 | | | | 5,727 | | | | 0 | | | $ | 100.55 | | | | 12/2/2023 | | | | | | | | | | | | | | | | | | | | | 12/1/2014 | | | | 2,456 | | | | 1,230 | | | $ | 134.54 | | | | 12/1/2024 | | | | | | | | | | | | | | | | | | C. Painter | | | | | | | | | | | | | | | | | | | | | | | 17,326 | | | $ | 2,620,038 | | | | 11,552 | | | $ | 1,746,893 | | | | | 12/1/2009 | | | | 5,491 | | | | 0 | | | $ | 78.06 | | | | 12/1/2019 | | | | | | | | | | | | | | | | | | | | | 12/1/2010 | | | | 5,455 | | | | 0 | | | $ | 80.67 | | | | 12/1/2020 | | | | | | | | | | | | | | | | | | | | | 12/1/2011 | | | | 14,849 | | | | 0 | | | $ | 77.16 | | | | 12/1/2021 | | | | | | | | | | | | | | | | | | | | | 12/3/2012 | | | | 17,125 | | | | 0 | | | $ | 76.17 | | | | 12/3/2022 | | | | | | | | | | | | | | | | | | | | | 12/2/2013 | | | | 18,082 | | | | 0 | | | $ | 100.55 | | | | 12/2/2023 | | | | | | | | | | | | | | | | | | | | | 12/1/2014 | | | | 5,366 | | | | 2,685 | | | $ | 134.54 | | | | 12/1/2024 | | | | | | | | | | | | | | | | | | S. Serhan | | | | | | | | | | | | | | | | | | | | | | | 6,046 | | | $ | 914,276 | | | | 8,961 | | | $ | 1,355,082 | |
| Outstanding Equity Awards at 2018 Fiscal Year-End Table |
| | Option Awards(1) | | Stock Awards | | | Option
Grant Date | |
Number of
Securities Underlying
Unexercised Options (#) | |
Option
Exercise
Price
($) | |
Option
Expiration
Date | |
Number of
Shares
of Units
of Stock
Held that
have not
Vested (#)(2) | | Market
Value of
Shares
or Units
of Stock
held that
have not
Vested ($)(3) | |
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
have not
Vested (#)(4) | | Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($)(3) | | Officer | | | Exercisable | | Unexercisable | | | | | | | | Seifi Ghasemi | | | | | | | | | | | | 77,440 | | 12,936,352 | | 103,968 | | 17,367,854 | | | 7/1/2014 | | 165,235 | | 0 | | 120.69 | | 6/28/2024 | | | | | | | | | | | 12/1/2014 | | 43,358 | | 0 | | 134.54 | | 12/1/2024 | | | | | | | | | | M. Scott Crocco | | | | | | | | | | | | 14,284 | | 2,386,142 | | 19,939 | | 3,330,810 | | | 10/1/2008 | | 7,954 | | 0 | | 62.47 | | 10/1/2018 | | | | | | | | | | | 12/1/2009 | | 4,443 | | 0 | | 78.06 | | 12/1/2019 | | | | | | | | | | | 12/1/2010 | | 4,314 | | 0 | | 80.67 | | 12/1/2020 | | | | | | | | | | | 12/1/2011 | | 6,803 | | 0 | | 77.16 | | 12/1/2021 | | | | | | | | | | | 12/3/2012 | | 14,271 | | 0 | | 76.17 | | 12/3/2022 | | | | | | | | | | | 12/2/2013 | | 18,082 | | 0 | | 100.55 | | 12/2/2023 | | | | | | | | | | | 12/1/2014 | | 7,432 | | 0 | | 134.54 | | 12/1/2024 | | | | | | | | | | Sean D. Major | | | | | | | | | | | | 5,989 | | 1,000,462 | | 7,964 | | 1,330,386 | | Samir Serhan | | | | | | | | | | | | 8,515 | | 1,422,431 | | 12,231 | | 2,043,189 | | Corning F. Painter | | | | | | | | | | | | 0 | | — | | 5,824 | | 972,899 | | | 12/1/2011 | | 14,849 | | 0 | | 77.16 | | 12/1/2021 | | | | | | | | | | | 12/3/2012 | | 17,125 | | 0 | | 76.17 | | 12/3/2022 | | | | | | | | | | | 12/2/2013 | | 18,082 | | 0 | | 100.55 | | 12/2/2023 | | | | | | | | | | | 12/1/2014 | | 8,051 | | 0 | | 134.54 | | 12/1/2024 | | | | | | | | |
| (1) | Grant dates for all stock options are shown in the first column. All stock options have an exercise price equal to the closing market value on the grant date and becomebecame exercisable in three consecutive, equal annual installments on the first, second and third anniversary of the grant date. They generally remain exercisable until ten10 years after the grant date; however, except as described below, exercisable options generally expire ninety90 days after voluntary termination of employment and unexercisable options are forfeited upon voluntary termination. Options granted more than one year prior to an Executive Officer’sexecutive officer’s termination due to death, disability or retirement continue to become and remain exercisable for their full term. If an Executive Officer’sexecutive officer’s termination is covered by the Executive Separation Program described on pages 45-48, the terms of that Program regarding treatment of equity compensation will apply. Mr. Ghasemi’s Employment Agreement provides that, upon his death, disability, involuntary termination without Cause, voluntary termination for Good Reason or the conclusion of the term of his Employment Agreement, his options will not terminate but will continue to become and be exercisable through the end of their term. (See page 45 for the definition of “Cause” and “Good Reason” under the Employment Agreement.) Stock options are also subject to special vesting rules upon a change in control of the Company.Company as described on pages 48-49. |
| (2) | This column reflects unvested restricted stock and deferred stock units which, upon vesting, entitle the holder to a share of Company Stock and dividend equivalents accumulated since the date of grant. |
| Restricted Stock. RESTRICTED STOCK
Shares of restricted stock are shares of Company stock that are issued in the Executive Officer’sexecutive officer’s name subject to restrictions on transferability. The shares may be voted but the Executive Officerexecutive officer may not sell or transfer restricted stock during the vesting period. Dividends are paid on the restricted stock during the vesting period. Generally, if an Executive Officer’sexecutive officer’s employment terminates during the vesting period, the stock will be forfeited. However, if an Executive Officer’sexecutive officer’s employment terminates due to death, disability or retirement one year or more after the grant date, the stock will vest. Pursuant to his Employment Agreement, Mr. Ghasemi’s shares will not be forfeited and will continue to vest if he is terminated at any time due to death or disability, voluntarilyinvoluntary termination without Cause, voluntary termination for Good Reason by the Company without Cause, or at the conclusion of the Employment Agreement. (See page 54 for the definition of “Cause” and “Good Reason” under the Employment Agreement.). If another Executive Officer’s employment termination is covered by the Executive Separation Program described on pages 53-54, the terms of that Program regarding treatment of equity compensation will apply. Shares of restricted stock granted in fiscal year 2014 vested on December 1, 2017. Shares of restricted stock granted in fiscal year 2014 shown are as follows: Mr. Crocco 2,321 and Mr. Painter: 2,321. Shares of restricted stock granted in fiscal year 2015 vest on the earlier of December 1, 2018 or the Executive Officer’s termination of employment due to death, disability or retirement. Shares of restricted stock granted in fiscal year 2015 shown are as follows: Mr. Ghasemi 12,145, Mr. Crocco 2,082 and Mr. Painter 2,255. Shares of Restricted Stock granted in fiscal year 2016 vest on the earlier of
|
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
| 39 |
Table of Contents Executive Compensation (See page 46 for the definition of “Cause” and “Good Reason” under the Employment Agreement.) If another executive officer’s employment termination is covered by the Executive Separation Program described on pages 45-48, the terms of that Program regarding treatment of equity compensation will apply. Shares of restricted stock granted in fiscal 2015 vested on the earlier of December 1, 2018 or the executive officer’s termination of employment due to death, disability or retirement. Shares of restricted stock granted in fiscal 2015 are as follows: Mr. Ghasemi 12,145 and Mr. Crocco 2,082. Shares of restricted stock granted in fiscal 2016 vest on the earlier of December 1, 2019 or the executive officer’s termination of employment due to death, disability or retirement. Shares of restricted stock granted in fiscal 2016 are as follows: Mr. Ghasemi 20,125 and Mr. Crocco 3,738. Restricted stock is subject to special vesting rules for terminations upon a change in control of the Company as described on pages 48-49. DEFERRED STOCK UNITS
The Company grants two types of deferred stock units; restricted stock units and performance shares. Each deferred stock unit is the equivalent in value to one share of common stock and, subject to satisfaction of any applicable performance or time-based conditions, entitles the executive officer to receive from the Company at the end of the deferral period one share of common stock for each restricted stock unit or earned performance share. Restricted stock units typically have a four-year vesting period. This column reflects four-year restricted stock units granted to executive officers on December 1, 2016 and December 1, 2017 and special recruiting and retention grants of restricted stock units. All deferred stock units, including the performance shares described in footnote 4 below, are subject to special vesting rules for terminations covered by the Executive Separation Program described on pages 45-48 or upon a change in control as described on pages 48-49. | (i) | December 1, 2019 or the Executive Officer’s termination of employment due to death, disability or retirement. Shares of restricted stock granted in fiscal year 2016 shown are as follows: Mr. Ghasemi 20,125, Mr. Crocco 3,738 and Mr. Painter 3,738. Restricted stock is subject to special vesting rules for terminations upon a change in control of the Company.
|
| Deferred Stock Units. This column reflects three kinds of deferred stock units: (i) four-yearUnvested restricted stock units granted to Executive Officers on December 1, 2016, and earlier in the case of Ms. Grant, (ii) earned performance shares granted in fiscal year 2015 that vested on December 1, 2017 and (ii) special recruiting and retention grants. All deferred stock units are subject to special vesting rules for terminations covered by the Executive Separation Program described on pages 53-54 or upon a change in control.
|
| (i) | Fiscal year 2017 four-year restricted stock units shownfiscal 2018 are as follows:
|
| | Officer | | FY17 | | FY18 | | Total | | | Seifi Ghasemi | | 24,178 | | 20,992 | | 45,170 | | | M. Scott Crocco | | 4,266 | | 4,198 | | 8,464 | | | Sean D. Major | | 0 | | 2,469 | | 2,469 | | | Samir Serhan | | 2,845 | | 2,469 | | 5,314 | | | Corning F. Painter* | | 0 | | 0 | | 0 |
| | | | | | | Officer | | Awards | | S. Ghasemi
| | | 24,178 | | S. Crocco
| | | 4,266 | | J. Grant
| | | 1,848 | | C. Painter
| | | 3,697 | | S. Serhan
| | | 2,845 | |
| * | In addition, Ms. Grant had the following four-year restricted stock units outstanding on September 30, 2017 that were granted for fiscal years 2014-2016:Paid at separation.
|
| | | | | | | Number of Units | | Vesting Date | | 1,182
| | | December 1, 2017 | | 1,107
| | | December 1, 2018 | | 1,833
| | | December 1, 2019 | |
| (ii) | Fiscal year 2015 earned performance shares are shown at 100% of target, the payout factor determined by the Committee,This column also shows special recruiting grants and are as follows:
|
| | | | | | | Officer | | Number of
Units
| | S. Ghasemi
| | | 28,617 | | M. Crocco
| | | 4,906 | | J. Grant
| | | 2,434 | | C. Painter
| | | 5,315 | |
| | (iii)Officer | | Number of Units | | Sean D. Major* | | 3,520 | | Dr. Samir Serhan** | | 3,201 |
| * | This column also shows a special recruiting grant of 3201 three-yearTwo-year vesting restricted stock units made to Dr. Serhangranted May 1, 2017. These will vest on May 1, 2019.
| | ** | Three-year vesting restricted stock units granted December 1, 2016. These will vest on December 1, 2019. |
| (3) | These amounts are based on the 20172018 fiscalyear-end NYSE closing market price of $151.22.$167.05. |
| (4) | This column reflects deferred stock units granted as performance shares granted in fiscal years 20162017 and 2017.fiscal 2018. These shares are conditioned upon performance during three-year cycles ending on September 30, 20182019 and September 30, 2019,2020, respectively. These awards will earn out and be paid out following the end of the relevant performance period as indicated in the chart below. The dollar values and numbers of theseshare counts for fiscal year 2017 awards are shown in the table at the target payout level.level and fiscal year 2018 awards are shown at 215% (maximum payout including full positive discretion) based on Company’s current total shareholder return percentile rank compared to the Peer Reference Group for the respective performance periods. The fiscal 2016 performance share payout was 0% (zero payout) as described on page 28 and, accordingly, the amounts reported in this column and in the table below do not include performance shares granted in 2016 or, with respect to Dr. Serhan, when he joined the Company in fiscal 2017. |
| | | | Fiscal 2017 and 2018 Unearned
Performance Shares End of
Performance Period | | Officer | | 09/30/2019 | | 09/30/2020 | | Seifi Ghasemi | | 36,267 | | 67,701 | | M. Scott Crocco | | 6,400 | | 13,539 | | Sean D. Major | | 0 | | 7,964 | | Samir Serhan | | 4,267 | | 7,964 | | Corning F. Painter* | | 3,235 | | 2,589 |
| * | Prorated per Separation Agreement terms |
| 40 | 2019 Annual Meeting Proxy Statement |
| | | | | | | | | | | | | | | Target Award Performance Shares End of Performance Period | | | | | | | Officer | | 09/30/2018 | | | 09/30/2019 | | S. Ghasemi | | | 32,332 | | | | 36,267 | | M. Crocco | | | 6,006 | | | | 6,400 | | J. Grant | | | 2,749 | | | | 2,773 | | C. Painter | | | 6,006 | | | | 5,546 | | S. Serhan | | | 4,694 | | | | 4,267 | |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Table of Contents 2017 Option Exercises and Stock VestedExecutive Compensation
| | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | | | Officer | | Number of Shares
Acquired on Exercise (#) | | | Value Realized
on Exercise | | | Number of Shares
Acquired on Vesting (#)(1) | | | Value Realized
on Vesting ($) (2) | | S. Ghasemi | | | 0 | | | $ | — | | | | 12,342 | | | $ | 1,780,827 | | S. Crocco | | | 10,174 | | | $ | 651,048 | | | | 4,700 | | | $ | 682,725 | | J. Grant | | | 0 | | | $ | — | | | | 2,030 | | | $ | 290,149 | | C. Painter | | | 6,854 | | | $ | 403,838 | | | | 9,826 | | | $ | 1,454,471 | | S. Serhan | | | 0 | | | $ | — | | | | 0 | | | $ | — | |
| Fiscal 2018 Option Exercises and Stock Vested Table |
| | Option Awards | | Stock Awards | | Officer | | Number of Shares
Acquired on Exercise
(#) | | Value Realized
on Exercise
($) | | Number of Shares
Acquired on Vesting
(#)(1) | | Value Realized
on Vesting
($)(2) | | Seifi Ghasemi | | 0 | | — | | 28,617 | | 4,641,964 | | M. Scott Crocco | | 0 | | — | | 7,227 | | 1,172,733 | | Sean D. Major | | 0 | | — | | 0 | | — | | Samir Serhan | | 0 | | — | | 0 | | — | | Corning F. Painter | | 10,946 | | 971,355 | | 17,794 | | 2,818,544 |
| (1) | The shares in this column include restricted stock granted in fiscal year 20132014 which vested in December 2016;2017; performance shares granted in fiscal year 20142015 which vested in December 2016;2017; and for Mr. Painter, it also includes fiscal year 2015 and fiscal year 2016 restricted shares and fiscal year 2017 restricted stock units granted inand pro-rated fiscal year 2013 which vested in December 2016. It also includes one third of a special recruiting grant of restricted shares made to Mr. Ghasemi upon his recruitment to compensate him for the value of equity forfeited when he left his prior employer, a special retention grant of2018 restricted stock units made to Mr. Painter in 2012 which vested in September 2017, and a special recruiting grant of restricted stock units made to Ms. Grant which vested in February 2017.on an accelerated basis at separation, as described on page 46. |
| (2) | The following dividend equivalents were paid on the performance share awards and the restricted stock units but are not included in the Value Realizedvalue realized on vesting: |
| | | | | | | | | Officer | | Dividend
Equivalents
Paid | | S. Crocco | | $ | 28,607 | | J. Grant | | $ | 17,981 | | C. Painter | | $ | 104,667 | |
2017 Pension Benefits
| | | | | | | | | | | | | | | | | Officer | | Plan Name | | Number of
Years Credited
Service (#) | | | Present Value
of Accumulated
Benefit | | S. Ghasemi | | Air Products and Chemicals, Inc. Pension Plan for Salaried Employees | | | 0 | | | $ | — | | | | Air Products and Chemicals, Inc. Supplementary Pension Plan | | | 0 | | | $ | — | | M. Crocco | | Air Products and Chemicals, Inc. Pension Plan for Salaried Employees | | | 27 | | | $ | 1,148,804 | | | | Air Products and Chemicals, Inc. Supplementary Pension Plan | | | 27 | | | $ | 5,060,707 | | J. Grant | | Air Products and Chemicals, Inc. Pension Plan for Salaried Employees | | | 0 | | | $ | — | | | | Air Products and Chemicals, Inc. Supplementary Pension Plan | | | 0 | | | $ | — | | C. Painter | | Air Products and Chemicals, Inc. Pension Plan for Salaried Employees | | | 33 | | | $ | 1,467,703 | | | | Air Products and Chemicals, Inc. Supplementary Pension Plan | | | 33 | | | $ | 6,466,865 | | S. Serhan | | Air Products and Chemicals, Inc. Pension Plan for Salaried Employees | | | 0 | | | $ | — | | | | Air Products and Chemicals, Inc. Supplementary Pension Plan | | | 0 | | | $ | — | |
| Officer | | Dividend
Equivalents
Paid
($) | | Seifi Ghasemi | | 283,881 | | M. Scott Crocco | | 48,668 | | Corning F. Painter | | 74,979 |
| Fiscal 2018 Pension Benefits Table |
| | | | Number of
Years Credited
Service | | Present Value
of Accumulated
Benefit | | Officer | | Plan Name | | (#) | | ($) | | M. Scott Crocco | | Air Products and Chemicals, Inc. | | 28 | | 1,121,762 | | | Pension Plan for Salaried Employees | | | | | | | Air Products and Chemicals, Inc. | | 28 | | 5,808,523 | | | Supplementary Pension Plan | | | | | | Corning F. Painter | | Air Products and Chemicals, Inc. | | 34 | | 1,910,099 | | | Pension Plan for Salaried Employees | | | | | | | Air Products and Chemicals, Inc. | | 34 | | 10,335,846 | | | Supplementary Pension Plan | | | | |
The table above illustrates the actuarial present value of accrued pension benefits for each of the Executive Officers underexecutive officers who participated in the Company’s defined benefit plans as of September 30, 2017.2018. Actuarial present values are complex AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
calculations that rely on many assumptions. The Company has calculated the amounts shown above generally using the same assumptions used in determining the pension cost recognized in its financial statements, which are described in Note 16, Retirement Benefits, to the financial statements and under “Critical Accounting Policies”Policies and Estimates” in the ManagementManagement’s Discussion and Analysis in the financial statements,of Financial Condition and Results of Operations, both of which are included in the Company’s Annual Report onForm 10-K for the fiscal year endingended September 30, 2017,2018, filed with the SEC on November 16, 2017.20, 2018. However, in accordance with SEC requirements, the Company has calculated these values assuming payment begins the earliest date the Executive Officerexecutive officer can receive an unreduced early retirement benefit. The Company has also used actual fiscal year 20172018 annual incentive awards in the calculation; whereas the value in the financial statements is based on estimated annual incentive awards. | 41 |
Table of Contents Executive Compensation The Company’s Pension Plan for Salaried Employees (“Salaried Pension Plan”)Plan is a funded, tax qualifiedtax-qualified defined benefit plan funded entirely by the Company. All U.S. salaried employees hired before October 1, 2004 are eligible to participate. (Mr. Ghasemi, Ms. Grant and Dr. Serhan are not eligible for this Plan). Benefits under the Salaried Pension Plan are paid after retirement in the form of a monthly annuity. Participants may select from monthly payments for their lifetime or smaller monthly payments for their life and the life of a beneficiary. The amount of the benefit under the Salaried Pension Plan is based on the following formula: 1.184% x Years of Service x Average Monthly Compensation (Up to the Average Social Security Maximum Taxable Wage Base) Plus 1.5% x Years of Service x Average Monthly Compensation (In excess of the Average Social Security Maximum Taxable Wage Base) “Average Monthly Compensation” is the average monthly compensation for the 36 months (or 3 years) during which the participant’s compensation was the highest during the ten10 years preceding retirement; generally this is the participant’s average base salary for the three years preceding retirement. The “Average Social Security Maximum Taxable Wage Base” is the average of the U.S. Social Security Wage Bases over a35-year period. Benefits under the Salaried Pension Plan become vested after a participant has completed five years of service. The Normal Retirement Age under the Salaried Pension Plan is age 65. A participant with at least five years of service may retire after attaining age 55 and receive a benefit reduced by 3% per year for the number of years prior to his attaining age 62. Benefits accrued as of January 1, 2005 are not reduced upon retirement at age 55 or later if the sum of the participants age and credited service under the Plan equals 80 or more at the time of retirement. Under U.S. federal tax laws, benefits payable under the Salaried Pension Plan, and compensation which can be considered in calculating the benefits, are limited. The Supplementary Pension Plan (“Supplementary Plan”) is a nonqualified, unfunded pension plan that provides benefits that cannot be provided under the Salaried Pension Plan due to these limits. Benefits under the Supplementary Plan are calculated using the same formula as the Salaried Pension Plan, but there is no limit on the amount of base salary that can be covered by the pension formula, and Average Monthly Compensation under the Supplementary Plan also includes Annual Incentive Plan awards. Supplementary Plan benefits are subject to the same vesting and early retirement terms as the Salaried Pension Plan. Supplementary Plan benefits are generally payable following retirement in one of the annuity forms available under the Salaried Pension Plan or, at the election of the participant, in a lump sum. In the case of the Executive Officersexecutive officers and certain other executives, distribution of benefits under the Supplementary Plan, whether in annuity or lump sum form, is delayed for six months after termination of employment to comply with U.S. federal tax laws. AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
2017 Nonqualified Deferred Compensation
| Fiscal 2018 Nonqualified Deferred Compensation Table |
Amounts shown in this table are provided under the Company’s nonqualified Deferred Compensation Plan. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Officer | | Executive
Contributions
in Last FY(1) | | | Registrant
Contributions
in Last FY(2) | | | Aggregate
Earnings
in Last FY | | | Aggregrate
Withdrawals/
Distributions | | | Aggregate
Balance
at Last FYE(3) | | S. Ghasemi | | $ | 58,154 | | | $ | 207,139 | | | $ | 24,432 | | | $ | — | | | $ | 755,751 | | S. Crocco | | $ | 81,231 | | | $ | 15,231 | | | $ | 28,186 | | | $ | — | | | $ | 771,697 | | J. Grant | | $ | 9,923 | | | $ | 26,942 | | | $ | 4,237 | | | $ | — | | | $ | 129,737 | | C. Painter | | $ | 53,538 | | | $ | 15,231 | | | $ | 24,948 | | | $ | — | | | $ | 442,075 | | S. Serhan | | $ | 14,808 | | | $ | 17,769 | | | $ | 327 | | | $ | — | | | $ | 32,904 | |
| Officer | | 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)
($) | | Seifi Ghasemi | | 5,538 | | 177,886 | | 36,361 | | — | | 975,536 | | M. Scott Crocco | | 87,231 | | 4,846 | | 33,665 | | — | | 897,439 | | Sean D. Major | | 16,923 | | 29,519 | | 1,186 | | — | | 47,628 | | Samir Serhan | | 2,538 | | 41,566 | | 2,557 | | — | | 79,566 | | Corning F. Painter | | 150,000 | | — | | 35,629 | | — | | 627,705 |
| (1) | All amounts reported in this column were voluntary deferrals of base salary by the Executive Officers.executive officers. These amounts are also reported in the Summary Compensation Table. |
| 42 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Compensation | (2) | Amounts reported in this column include Company matching credits based on each Executive Officer’sexecutive officer’s voluntary deferrals of base salary. In the case of Mr. Ghasemi, Ms. GrantMr. Major and Dr. Serhan, a Company contribution credit of a percentage of their base salaries in excess of tax law limits on Retirement Savings Plan contributions and their Annual Incentive Plan awards is also included because they receive their primary retirement benefit under the Company’s defined contribution plansRetirement Savings Plan (the “RSP”) rather than the pension plans. The percentage is based on years of serviceSalaried Pension Plan and for fiscal year 2017 was 4%.Supplementary Plan. Amounts reported in this column are also reported in the Summary Compensation Table. |
| (3) | A portion of the earnings reflected in this column are reported in the Summary Compensation Table as above-market interest, as described in footnote 5 to such table. | | (4) | The following portion of these accumulated balances has been previously reported as compensation in the Summary Compensation Table of the Company’s proxy statements for prior years: |
| | | | | | | | | Officer | | Amount Previously Reported | | S. Ghasemi | | $ | 448,524 | | S. Crocco | | $ | 336,244 | | J. Grant | | $ | 0 | | C. Painter | | $ | 148,221 | | S. Serhan | | $ | 0 | |
| Officer | | Amount Previously Reported
($) | | Seifi Ghasemi | | 723,898 | | M. Scott Crocco | | 446,732 | | Sean D. Major | | — | | Samir Serhan | | 32,648 | | Corning F. Painter | | 227,363 |
The Company provides the tax qualified Retirement Savings Plan (the “RSP”)tax-qualified RSP to all U.S.-based salaried and certain hourly employees of the Company. Currently, U.S. tax laws limit the amounts that may be contributed totax-qualified savings plans and the amount of compensation that can be taken into account in computing benefits under the RSP. The Deferred Compensation Plan was amended and restated effective January 1, 2018 to “unlink” the RSP from the Deferred Compensation Plan. Prior to January 1, 2018, elective deferrals to the RSP in excess of the U.S. tax law limits would automatically be deferred into the Deferred Compensation Plan. Effective January 1, 2018, once a participant reaches the U.S. tax law limits in the RSP for elective deferrals such deferrals cease and are not contributed to the Deferred Compensation Plan; rather, Deferred Compensation Plan participants may make a separate deferral election prior to the calendar year to defer amounts of base salary into the Deferred Compensation Plan. The Deferred Compensation Plan is intended to permit participants to defer an amount of base salary and to make up, out of general assets of the Company, an amount substantially equal to thecertain benefits an employee did not receive under the RSP due to these limits. U.S. employees who participate in the Annual Incentive Plan, including all Executive Officers,executive officers, are eligible to participate in the Deferred Compensation Plan. Participants can elect to defer up to 16 percent50% of base salary on abefore-tax basis (offset by amounts deferred under the RSP) and up to 75% of Annual Incentive Plan awards. For participants in the Company’s pension plans, including Mr. Crocco and Mr. Painter, theThe Deferred Compensation Plan provides for a Company matching credit for participants in the RSP, including all executive officers, whose Company matching contribution in the RSP is limited by U.S. tax law limitations. The Deferred Compensation Plan also provides for a Company core credit on base salary deferrals of 75 percent ofwhen such core contribution in the first three percent of base salary deferredRSP is limited by participantsU.S. tax law limitations and 25 percent of the next three percent of base salary deferred. Foron Annual Incentive Plan awards for employees who receive their primary retirement benefit under the Company’s defined contribution plansRSP rather than the pension plans,Salaried Pension Plan, including Mr. Ghasemi, Ms. Grant,Mr. Major and Dr. Serhan, the RSP also provides an enhanced matching contribution of 75% of elective deferrals up to 4% of base salary and 50% of elective deferrals of an additional 2% of base salary; and a defined contribution primary retirement benefit contribution of 4 to 6% of base salary, depending on years of service. The Deferred Compensation Plan provides a comparable matching credit and primary retirement benefit credit for base salary to the extent not covered under the RSP due to tax law limits, and a primary retirement benefit credit of 4 to 6% for Annual Incentive Plan awards. The primary retirement contributions and credits vest ratably over the participant’s first five years of service for the Company.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Serhan. Participants may elect to have their Deferred Compensation Plan balances earn interest at a corporate bond rate or be deemed to be invested in Company stock and earn dividend equivalents and market appreciation on the stock. If a participant chooses the Company stock alternative, his or her account balance will be distributed in shares of Company stock, except for dividend equivalents. Participants can elect to receive payments of their Deferred Compensation Plan balances in service, or in lump sum or in one to ten10 equal annual installments following termination from service. The Executive Officersexecutive officers and certain other executives cannot commence distribution until six months following termination to comply with tax laws. | 43 |
Table of Contents Executive Compensation Potential Payments Upon Termination Potential payments to Executive Officersexecutive officers upon termination vary depending on the exact nature of the termination and, generally, whether the Executive Officerexecutive officer is retirement eligible at the time of the termination. Retirement eligibility for U.S. employees, including the Executive Officersexecutive officers except Mr. Ghasemi, generally occurs upon the attainment of age 55 after completing at least five years of service to the Company. Mr. Ghasemi’s Employment Agreement provides that he is eligible for retirement treatment under all equity, equity derivative and incentive awards after three years of employment with the Company. Accordingly, he became eligible for retirement on July 1, 2014.2017. The following discussion explains potential payments to the Executive Officersexecutive officers under various termination scenarios. Voluntary Termination Other Than Retirement
| Voluntary Termination Other Than Retirement |
A voluntary termination by Mr. Ghasemi on September 30, 2017 would be a retirement, as discussed below. If Mr. Crocco, Ms. Grant, Mr. PainterMajor or Dr. Serhan voluntarily terminated employment with the Company prior to retirement eligibility, like all salaried employees of the Company, he or she would receive any unpaid salary and accrued vacation, vested RSP balances and nonqualified deferred compensation shown in the table on page 42 and earnings thereon. Upon attainment of age 55, Mr. Crocco or Mr. Painter could commence accrued benefits under the qualified, and will commence accrued benefits under the nonqualified, pension plans described on pages 49-5141-42 on the same terms as all other participants under these plans who were not eligible for retirement at the time of termination. Executive Officersofficers and other eligible employees generally must remain employed until the last day of the fiscal year to receive an Annual Incentive Plan award for the fiscal year. Therefore, if an Executive Officerexecutive officer voluntarily terminated, he or she would forfeit any Annual Incentive Plan award for the fiscal year of termination, unless he or she terminated on the last day of thesuch fiscal year. If he or she voluntarily terminated on September 30, 2017,2018, he would be eligible for a fiscal year 20172018 Annual Incentive Plan award in an amount, if any, determined by the Committee in its discretion. Most outstanding awards under the Long-Term Incentive Plan would be forfeited upon a voluntary termination prior to retirement eligibility, including all unexercisable stock options, all restricted stock, all RSUs and all performance shares, whether or not earned. Exercisable stock options would continue to be exercisable for 90 days following termination and then, if unexercised, would be forfeited. Retirement
Upon retirement, Executive Officersexecutive officers are entitled to unpaid salary and accrued vacation, accrued qualified and nonqualified pension benefits, vested RSP balances and deferred compensation described above, and retiree medical benefits, if they are eligible, on the same terms as for all salaried employees meeting age and service conditions. Retiring Executive Officersexecutive officers may also receive, in the discretion of the Committee, an Annual Incentive Plan award for the year of retirement. In addition, like all Long-Term Incentive Plan participants, they receive the following treatment of their outstanding long-term incentive awards: All
| ● | all outstanding stock options which were granted one year or more prior to retirement will continue to be and become exercisable in accordance with the normal schedule as if the executive officer remained employed, and will be exercisable for the normal term; | | ● | restricted stock and RSUs awarded at least one year prior to retirement will vest immediately upon retirement and restricted stock and RSUs granted less than one year prior to retirement are forfeited; and | | ● | all earned performance shares and dividend equivalents thereon will be paid on the normal schedule. A pro-rata portion of unearned performance shares awarded at least one year prior to retirement and associated dividend equivalents will be paid in accordance with the normal schedule and at the normal payout level if performance thresholds are met. Performance shares awarded less than one year prior to retirement are forfeited. |
| 44 | 2019 Annual Meeting Proxy Statement |
Table of Contents Executive Officer remained employed, and will be exercisable for the normal term.Compensation AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Restricted stock and restricted stock units awarded at least one year prior to retirement will vest immediately upon retirement. Restricted stock and restricted stock units granted less than one year prior to retirement are forfeited.
All earned performance shares and dividend equivalents thereon will be paid on the normal schedule. Apro-rata portion of unearned performance shares awarded at least one year prior to retirement and associated dividend equivalents will be paid in accordance with the normal schedule and at the normal payout level if performance thresholds are met. Performance shares awarded less than one year prior to retirement are forfeited.
The table below shows the value of Mr. Ghasemi’s outstanding long-term incentive awards that would have vested had he retired as of September 30, 2017,2018, and the value of awards that would have been forfeited. Amounts are based on the closing price of a share of Company stock as of September 30, 2017.2018. Other Executive Officersexecutive officers were not eligible for retirement on September 30, 2017;2018; so no amounts are shown for them. | | | | | | | | | | | | | | | | | | | | | | | | Officer | | Unvested
Stock Options | | | Unvested Restricted Stock | | | Performance
Shares(1) | | | Value of
Awards
Forfeited | | S. Ghasemi | | $ | 241,070 | | | $ | 4,880,021 | | | $ | 7,972,551 | | | $ | 11,001,518 | |
| Officer | | Unvested
Stock Options
($) | | Restricted Stock
($) | | Restricted
Stock Units
($) | | Performance
Shares(1)
($) | | Value of
Awards
Forfeited
($) | | Seifi Ghasemi | | — | | 5,390,871 | | 4,204,796 | | 4,204,796 | | 11,034,664 |
| (1) | Performance shares are shown at the target payout level. Amounts include accumulated dividend equivalents. The 20172018 grant and a prorated portion of the fiscal year 20162017 grant would be forfeited. |
Executive Separation Program
| Executive Separation Program |
The Committee established the Executive Separation Program (the “Separation Program”) to facilitate changes in the leadership team and recruiting of senior executives. All the Executive Officersexecutive officers are covered by this Program. An Executive Officerexecutive officer becomes eligible for program benefits upon involuntary termination of employment other than for “Cause” or upon voluntary termination for “Good Reason”.Reason.” A termination for Cause“Cause” occurs upon the Executive Officer’sexecutive officer’s failure to substantially perform his duties after demand therefor, willful misconduct, certain illegal acts, insubordination, dishonesty, or violation of the Company’s Code of Conduct. “Good Reason” includes: A material adverse change in the Executive Officer’s position, material diminution of his duties or authority, or assignment to him of duties or responsibilities inconsistent with his status;
A decrease in the Executive Officer’s salary or a material reduction in benefits or annual incentive compensation opportunities if not similarly applied to other highly compensated employees; or
A relocation of the Executive Officer’s principal workplace more than 50 miles from the existing location.
| ● | a material adverse change in the executive officer’s position, material diminution of his duties or authority or assignment to him of duties or responsibilities inconsistent with his status; | | ● | a decrease in the executive officer’s salary or a material reduction in benefits or annual incentive compensation opportunities if not similarly applied to other highly compensated employees; or | | ● | a relocation of the executive officer’s principal workplace more than 50 miles from the existing location. |
Benefits under the Separation Program are contingent upon the Executive Officer’sexecutive officer’s continuing to perform the duties typically related to his or her position (or such other position as the Board reasonably requests) until termination, and assistance in the identification, recruitment and/or transitioning of his or her successor. The Executive Officerexecutive officer also is required to sign a general release of claims against the Company and atwo-year noncompetition, nonsolicitation and nondisparagement agreement. If all these requirements are met, the Executive Officerexecutive officer is entitled to cash benefits as follows: | • | ● | Aa cash severance payment of one times (two timesthe executive officer’s annual base salary and the executive officer’s target bonus for the fiscal year in which the termination of employment occurs, provided that in the case of Mr. Ghasemi)Ghasemi, the Executive Officer’s annual base salary and average annual incentive award for the three of the last five years for which his award was highest or, if less, the number of years he received awards;28
|
A bonus for the year of termination equal to apro-rata portion of the Executive Officer’s target multiplied by the payout factor applicable to corporate staff.
28 | Mr. Ghasemi’s cash severance payment is proratedwill be two times such amount and, if the termination occurs after September 30, 2020, the payment will be prorated based uponon the remaining term of his amended and restated employment agreement.agreement;
| | ● | a bonus for the year of termination equal to a pro-rata portion of the executive officer’s target bonus multiplied by the Annual Incentive Plan payout factor for the fiscal year in which the termination of employment occurs; | | ● | outplacement assistance; | | ● | in the case of Mr. Crocco, a cash payment equal to the actuarial equivalent of pension benefits that would have accrued based on one additional year of service and a payment equal to the value of the early retirement subsidy that would have been provided under the pension plans on the accumulated benefit if age and service conditions were met, calculated with an additional year of service; and | | ● | for the other executive officers who receive their primary retirement benefit under the RSP, a cash payment equal to the additional (nonmatching) contributions and credits each would have received under the RSP and the Deferred Compensation Plan, respectively, had he remained employed an additional two years for Mr. Ghasemi and an additional year for Mr. Major and Dr. Serhan, assuming base salary remained the same and the Annual Incentive Plan award was the higher of his most recent award or the average of the last three awards. |
| 45 |
Table of Contents AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
A cash payment equal to the actuarial equivalent of pension benefits that would have accrued based on one additional year of service in the case of Mr. Crocco and Mr. Painter, and a paymentequal to the value of the early retirement subsidy that would have been provided under the pension plans on the accumulated benefit if age and service conditions were met, calculated with an additional year of service; and
For the other Executive Officers who receive their primary retirement benefit under the Company’s defined contribution plans, a cash payment equal to the additional (nonmatching) contributions and credits each would have received under the RSP and the Deferred Compensation Plan, respectively, had he or she remained employed an additional two years for Mr. Ghasemi and an additional year for Ms. Grant and Dr. Serhan, assuming base salary remained the same and the Annual Incentive Plan award was the higher of his most recent award or the average of the last three awards.
Noncash benefits are also provided or maintained under the Separation Program as follows: | ● | The Company pays the cost of continued coverage under the Company’s medical and dental plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for executive officers and their dependents for one year following termination. (Executive officers eligible for retiree medical participate in the medical plan on the same basis as other eligible retirees at no incremental cost to the Company.) | | ● | Nonretirement eligible executive officers forfeit unexercisable stock options. Their exercisable options remain in effect for the normal term. Retirement provisions described above apply to the stock options of retirement eligible executive officers. | | ● | A pro-rata portion of four-year vesting restricted stock, RSUs and recruiting and retention grants of RSUs vest. The remaining RSUs are forfeited. However, retirement provisions described above apply to outstanding restricted stock and RSUs held by retirement eligible executive officers if more favorable. | | ● | A pro-rata portion of unearned performance shares based on actual performance at the end of the performance period vest and are paid at the end of the performance period and the remainder are forfeited. The unforfeited shares are paid in accordance with the normal schedule and at the normal payout level if performance thresholds are met. |
| Mr. Ghasemi’s Employment Agreement |
The Company pays the cost of continued coverage under the Company’s medical and dental plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for Executive Officers and their dependents for one year following termination. (Executive Officers eligible for retiree medical participate in the medical plan on the same basis as other eligible retirees at no incremental cost to the Company.)
Nonretirement eligible Executive Officers forfeit unexercisable stock options. Their exercisable options remain in effect for the normal term. Retirement provisions described above apply to the stock options of retirement eligible Executive Officers.
Apro-rata portion of four-year vesting restricted stock, restricted stock units and recruiting and retention grants of restricted stock units vests. The remaining restricted stock units are forfeited. However, retirement provisions described above apply to outstanding restricted stock and restricted stock units held by retirement eligible Executive Officers if more favorable.
Apro-rata portion of unearned performance shares based on actual performance at the end of the performance period vest and are paid at the end of the performance period and the remainder are forfeited. The unforfeited shares are paid in accordance with the normal schedule and at the normal payout level if performance thresholds are met.
Mr. Ghasemi’s Employment Agreement. In addition to the Separation Program, Mr. Ghasemi’s Employment Agreement provides that, upon his termination by the Company other than for Cause or his voluntary termination for Good Reason, his long-term incentive awards will continue to vest as if he remained employed. For purposes of the Employment Agreement, “Cause” is Mr. Ghasemi’s willful failure to substantially perform his duties after a demand for substantial performance is delivered, willful misconduct that has caused or would reasonably be expected to result in a material injury to the Company, criminal conviction of or a plea of nolo contendere to a crime that constitutes a felony, repeated acts of insubordination, an act of dishonesty inconsistent with his position or material violation of the Company’s Code of Conduct. Mr. Ghasemi has the right to resign for “Good Reason” under the Agreement if there is a material adverse change in his position or office; a decrease in his salary, benefits or incentive compensation if not applied to other highly compensated employees; or a relocation of his principal workplace more than 50 miles from the existing location.
| Mr. Painter’s Separation Agreement |
The Company and Mr. Painter entered into a Separation Agreement (the “Separation Agreement”) in connection with Mr. Painter’s separation from the Company in fiscal 2018. Under the Separation Agreement, Mr. Painter received a lump sum cash severance payment of $2,582,005. In addition, under the Separation Agreement Mr. Painter’s outstanding stock options will remain exercisable for the remainder of his term, unearned performance shares will remain outstanding and be paid out based on the Company’s performance for the applicable award cycle, calculated on a pro rata basis to account for Mr. Painter’s service to the Company during the applicable performance period, restrictions on restricted shares lapsed and unvested restricted stock units granted in fiscal 2017 are retained and will vest in accordance with their original terms and unvested restricted stock units granted in fiscal 2018 became vested on a prorated basis. The Separation Agreement also provided Mr. Painter and his eligible dependents with subsidized continuation coverage under the Company’s group medical and dental plans, outplacement assistance for up to 12 months and attorneys’ fees incurred in connection with the Separation Agreement. In addition, both Mr. Painter and the Company executed a release of claims pursuant to the terms of the Separation Agreement, and Mr. Painter agreed to comply with certain confidentiality, non-solicitation and non-disparagement covenants, while the Company waived Mr. Painter’s compliance with non-competition covenants. | 46 | 2019 Annual Meeting Proxy Statement |
Table of Contents AIR PRODUCTS AND CHEMICALS, INC.Executive Compensation
COMPENSATION OF EXECUTIVE OFFICERS
Estimated Payments on Severance
As of September 30, 2017
| Estimated Payments on Severance As of September 30, 2018 |
The table below shows estimated cash payments that would have been made to each Executive Officerexecutive officer upon an involuntary termination on September 30, 20172018 covered under the Executive Separation Program and the Employment Agreement in the case of Mr. Ghasemi, his Employment Agreement, and the estimated value of long-term incentive awards that would have vested upon termination under the Program. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-Term Incentive Plan | | | | | | | | | | | | | Officer | | Severance
Benefit | | | Pro-rata
Bonus | | | Retirement
Plan
Payment(1) | | | Benefits(2) | | | Stock
Options(3) | | | Restricted
Stock | | | Restricted
Stock Units(4) | | | Performance
Shares(5) | | S. Ghasemi(6) | | $ | 8,952,000 | | | $ | 3,276,000 | | | $ | 355,200 | | | $ | 25,940 | | | $ | - | | | $ | - | | | $ | 3,722,928 | | | $ | 7,278,589 | | M. Crocco | | $ | 1,528,200 | | | $ | 928,200 | | | $ | 1,283,128 | | | $ | 34,853 | | | $ | 4,230,869 | | | $ | 818,447 | | | $ | 136,850 | | | $ | 1,743,812 | | J. Grant | | $ | 917,396 | | | $ | 487,396 | | | $ | 30,911 | | | $ | 25,940 | | | $ | 476,193 | | | | | | | $ | 501,610 | | | $ | 820,331 | | C. Painter | | $ | 1,528,200 | | | $ | 928,200 | | | $ | 1,796,300 | | | $ | 34,406 | | | $ | 4,581,100 | | | $ | 836,977 | | | $ | 118,597 | | | $ | 1,765,496 | | S. Serhan | | $ | 1,250,700 | | | $ | 700,700 | | | $ | 22,000 | | | $ | 34,406 | | | | | | | | | | | $ | 228,179 | | | $ | 700,866 | |
| | | | | | | | | | Long-Term Incentive Plan | | Officer | | Severance
Benefit
($) | | Pro-rata
Bonus
($) | | Retirement
Plan
Payment(1)
($) | | Benefits(2)
($) | | Stock
Options(3)
($) | | Restricted
Stock
($) | | Restricted
Stock Units(4)
($) | | Performance
Shares(5)
($) | | Seifi Ghasemi(6) | | 6,750,000 | | 2,571,750 | | 370,080 | | 25,852 | | — | | — | | 3,572,838 | | 7,461,826 | | M. Scott Crocco | | 1,110,000 | | 647,700 | | 2,378,166 | | 30,860 | | 4,952,393 | | 775,613 | | 488,892 | | 1,099,266 | | Sean D. Major | | 962,500 | | 523,875 | | 33,750 | | 32,392 | | — | | — | | 510,432 | | 210,140 | | Samir Serhan | | 1,017,500 | | 593,725 | | 50,028 | | 32,392 | | — | | — | | 654,515 | | 1,259,155 | | Corning F. Painter(7) | | 1,825,020 | | 756,985 | | — | | 15,709 | | 4,516,882 | | 931,852 | | 669,870 | | 1,616,838 |
| (1) | Includes payment in lieu of Company contributions and credits under the RSP and Deferred Compensation Plan for Mr. Ghasemi, Ms. GrantMr. Major and Dr. Serhan and the pension planmake-up payment for Mr. Crocco and Mr. Painter. Crocco. |
| (2) | Includes the value of outplacement benefits estimated based on current arrangements for these services;services and the cost of COBRA payments for the Company’s medical plan and dental plans. |
| (3) | Stock options are shown at their intrinsic value based on the September 30, 201728, 2018 closing price of $151.22. $167.05, except for Mr. Painter where the close price of $155.49 on July 2, 2018 was used. |
| (4) | These amounts reflect the value of restricted stock unitsRSUs such as four-year restricted stock unitsRSUs and special recruiting and retention and recruiting grants, and dividend equivalents thereon. |
| (5) | Performance shares are reflected at target payout level and amounts include accumulated dividend equivalents. |
| (6) | Values of Mr. Ghasemi’s long-term incentive awards that would have vested upon his voluntary termination due to his retirement eligibility are not shown. | | (7) | Mr. Painter separated from the Company on June 30, 2018. The amounts reported in this table for Mr. Painter reflect the terms of the Separation Agreement, dated as of May 16, 2018, between the Company and Mr. Painter. Mr. Painter did not earn the cash bonus payment of $1,000,000 disclosed in the Company’s Current Report on Form 8-K filed May 17, 2018; that payment was contingent upon completion of a business development project before December 31, 2019 which was not attained. |
Termination for Cause
Upon involuntary termination for Cause, Executive Officersexecutive officers receive only unpaid salary and accrued vacation, qualified and nonqualified pension and deferred compensation. Termination Due to Death or Disability
| Termination Due to Death or Disability |
Upon termination due to death or disability of an Executive Officer,executive officer, in addition to insurance, continuation of medical benefits and other benefits provided to all salaried employees and their families to help with these circumstances, the Long-Term Incentive Plan has provisions that provide continued vesting or accelerated payout of equity awards as follows: | ● | All stock options that have been outstanding for at least a year at the time of termination continue to be and become exercisable on the normal schedule as if the employee had remained active. All other stock options are forfeited. | | ● | All restrictions on restricted stock outstanding for at least one year are removed. All other restricted stock is forfeited. | | ● | All earned but deferred performance shares, all career-vesting deferred stock units and retention and recruiting grants of deferred stock units outstanding more than one year are paid out. | | ● | A prorated portion of unearned performance shares outstanding for at least one year continues to earn out and be payable as if the employee had remained active. All other unearned performance shares are forfeited. |
| 47 |
Table of termination continue to be and become exercisable on the normal schedule as if the employee had remained active. All other stock options are forfeited.Contents All restrictions on restricted stock outstanding for at least one year are removed. All other restricted stock is forfeited.
All earned but deferred performance shares, all career-vesting deferred stock units, and retention and recruiting grants of deferred stock units outstanding more than one year are paid out.
A prorated portion of unearned performance shares outstanding for at least one year continues to earn out and be payable as if the employee had remained active. All other unearned performance shares are forfeited.
Executive Officers or their beneficiaries may also receive an Annual Incentive Plan award at the discretion of the Committee.Compensation AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
| ● | Executive officers or their beneficiaries may also receive an Annual Incentive Plan award at the discretion of the Committee. |
In addition, Mr. Ghasemi’s Employment Agreement provides that upon his termination of employment due to death or disability, his Long-Term Incentive Plan awards will continue to vest as if he remained employed and he will receive a prorated Annual Incentive Award. Change in Control Arrangements
| Change in Control Arrangements |
The Company provides individual change in control severance agreements for all of the Executive Officers.executive officers. For purposes of the agreements, a change in control occurs upon a 30% stock acquisition by a person not controlled by the Company, a greater than 50% change in membership on the Board during anytwo-year period unless approved bytwo-thirds of directors still in office who were directors at the beginning of the period; consummation of a business reorganization, merger, consolidation or other corporate transaction that results in the Company’s shareholders owning less than 50% of the surviving entity; or shareholder approval of a plan of liquidation or sale of substantially all of the Company’s assets. The severance agreements give each Executive Officerexecutive officer specific rights and certain benefits if, within two years after a change in control, his or her employment is terminated by the Company without Cause (as defined below) or he or she terminates employment for Good Reason (as defined below). In such circumstances the Executive Officerexecutive officer would be entitled to: | • | ● | Aa cash severance payment equal to two (three for Mr. Ghasemi) times the sum of his or her annual base salary and target bonus under the Annual Incentive Plan;29
|
A cash payment of apro-rata target bonus for the year;
| • | ● | Fora cash payment of a pro-rata target bonus for the year;
| | ● | for each of Mr. Crocco and Mr. Painter, a cash payment equal to the additional actuarial present value of the pension benefits he would have been entitled to receive under the Company’s pension plans had he accumulated two additional years of credited service after termination and a cash payment equal to the actuarial present value of the early retirement subsidy on the accumulated benefit, calculated with an additional two years of credited service;29 |
| • | ● | Aa cash payment equal to two (three for Mr. Ghasemi) times the value for the most recent fiscal year of the Company’s matching contributions and/or credits for the Executive Officerexecutive officer under the RSP and the Deferred Compensation Plan;29
| | ● | for each of Mr. Ghasemi, Mr. Major and Dr. Serhan, a cash payment equal to the additional primary retirement benefit contributions and credits he would have received under the RSP and the Deferred Compensation Plan, respectively, had he remained employed for an additional three years in the case of Mr. Ghasemi and two years in the case of Mr. Major and Dr. Serhan, at the same base salary and the higher of the executive officer’s most recent Annual Incentive Plan award or the average such award for the three full fiscal years preceding the Change in Control; | | ● | continuation of medical, dental, health and accident disability and life insurance benefits for a period of up to two years (three years in the case of Mr. Ghasemi), and provision of outplacement services and certain legal fees; and | | ● | indemnification if he becomes involved in litigation because he is a party to the agreement. |
ForThe payments referenced in the first, third, fourth and fifth bullets above will be reduced each month on a pro-rated basis when the named executive officer, other than Mr. Ghasemi, Ms. Grantis between ages 63 and Dr. Serhan, a cash payment equal to the additional primary retirement benefit contributions and credits he or she would have received under the RSP and the Deferred Compensation Plan, respectively, had he or she remained employed for an additional three years in the case of Mr. Ghasemi and two years in the case of Ms. Grant and Dr. Serhan, at the same base salary and the higher of the Executive Officer’s most recent Annual Incentive Plan award or the average such award for the three full fiscal years preceding the Change in Control;65.
Continuation of medical, dental, disability, and life insurance benefits for a period of up to two years (three years in the case of Mr. Ghasemi), and provision of outplacement services and certain legal fees; and
Indemnification if he or she becomes involved in litigation because he is a party to the agreement.
A termination for “Cause” occurs under the agreements upon the Executive Officer’sexecutive officer’s continued willful failure to perform his duties or willful misconduct. “Good Reason” includes: A material adverse change in the Executive Officer’s position;
A decrease in the Executive Officer’s salary, benefits, or incentive compensation if not applied to other highly compensated employees; or
Relocation of the Executive Officer’s
| ● | a material adverse change in the executive officer’s position; | | ● | a decrease in the executive officer’s salary, benefits or incentive compensation if not applied to other highly compensated employees; or | | ● | relocation of the executive officer’s principal workplace more than 50 miles from the existing location. 29 | Except for Mr. Ghasemi, the payment is reduced once the Executive Officer attains age 63, by a prorated amount for each month as the Executive Officer approaches age 65.
|
| 48 | 2019 Annual Meeting Proxy Statement |
Table of Contents AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation The table below shows amounts that would be payable under the change in control severance agreements if the Executive Officerexecutive officer had been terminated on September 30, 20172018 following a change in control. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Officer | | Severance
Payment | | | Pro-rata
Bonus | | | Matching
Contribution
Payment | | | Retirement
Plan Payment(1) | | | Outplacement/
Financial | | | Benefits(2) | | S. Ghasemi | | $ | 9,000,000 | | | $ | 1,800,000 | | | $ | 144,000 | | | $ | 532,800 | | | $ | 14,500 | | | $ | 34,956 | | M. Crocco | | $ | 2,220,000 | | | $ | 510,000 | | | $ | 36,000 | | | $ | 1,459,323 | | | $ | 14,500 | | | $ | 36,694 | | J. Grant | | $ | 1,419,000 | | | $ | 279,500 | | | $ | 34,400 | | | $ | 61,823 | | | $ | 14,500 | | | $ | 22,284 | | C. Painter | | $ | 2,220,000 | | | $ | 510,000 | | | $ | 36,000 | | | $ | 2,042,962 | | | $ | 14,500 | | | $ | 36,694 | | S. Serhan | | $ | 1,870,000 | | | $ | 385,000 | | | $ | 44,000 | | | $ | 44,000 | | | $ | 14,500 | | | $ | 36,694 | |
| Officer | | Severance
Payment
($) | | Pro-rata
Bonus
($) | | Matching
Contribution
Payment
($) | | Retirement
Plan Payment(1)
($) | | Outplacement/
Financial
($) | | Benefits(2)
($) | | Seifi Ghasemi | | 10,125,000 | | 2,025,000 | | 38,769 | | 555,120 | | 14,500 | | 35,111 | | M. Scott Crocco | | 2,220,000 | | 510,000 | | 15,231 | | 2,683,994 | | 14,500 | | 32,488 | | Sean D. Major | | 1,925,000 | | 412,500 | | 20,308 | | 67,500 | | 14,500 | | 34,922 | | Samir Serhan | | 2,035,000 | | 467,500 | | 20,308 | | 100,056 | | 14,500 | | 34,922 | | Corning F. Painter(3) | | — | | — | | — | | — | | — | | — |
| (1) | Includes payments in lieu of Company core contributions and credits under the RSP and Deferred Compensation Plan for Mr. Ghasemi, Ms. GrantMr. Major and Dr. Serhan and, for Mr. Crocco, and Mr. Painter, the pension payment. |
| (2) | Includes continuation of medical, dental, disability and life insurance benefits. | | (3) | Mr. Painter separated from the Company on June 30, 2018. |
In addition to the change in control severance agreements, the Company’s Long-Term Incentive Plan provides change in control protectionsprotection for all participants. For awards granted prior to October 1, 2014, upon a change in control (as defined by the Plan): All outstanding stock options become exercisable and remain exercisable for their full term on the earlier of the change in control or six months after the grant date.
Restrictions lapse on all restricted stock.
All forms of restricted stock units, except unearned performance shares and related dividend equivalents, will fully vest and be paid immediately. Apro-rata portion of unearned performance shares and related dividend equivalents will be paid out in shares at the target performance level.
The estimated value of long term incentive awards that would have automatically vested under these provisions upon change in control on September 30, 2017 is $ 350,982 for both Mr. Crocco and Mr. Painter and $ 192,678 for Ms. Grant.
The Committee, in its discretion, may pay out the value of stock options, restricted stock, and restricted stock units in cash.
Awards granted on or after October 1, 2014 will not automatically vest on an accelerated basis as a result of a change in control if they are replaced by the surviving entity. For these provisions to apply; the replacement awards must be issued by a publicly listed company and preserve the value of, and be on terms as favorable as the existing award; performance conditionedperformance-conditioned awards must be replaced by time basedtime-based vesting awards; and the replacement awards must provide that if the participant is terminated without Cause or voluntarily terminates for Good Reason within 24 months following the change in control, the award will vest immediately upon termination. The Long-Term Incentive Plan also provides that, pursuant to an agreement associated with a change in control or in the discretion of the Board or an appropriate committee thereof, awards may be settled for cash at the change in control price. AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Long-Term Incentive Plan Awardsawards granted in fiscal year 2015 or later would not automatically vest upon a change in control but would vest upon a termination of the Executive Officerexecutive officer by the Company without causeCause or a voluntary termination by the Executive Officerexecutive officer for Good Reason within 24 months of the change in control. The table below shows the estimated value of long-term incentive awards that would have vested upon an eligible termination on September 30, 20172018 following a change in control. These acceleration provisions apply to all Long-Term Incentive Plan participants. In the case of Mr. Ghasemi, who was retirement eligible on September 30, 2017,2018, most of these amounts would have vested on voluntary termination, but payment or lapse of restrictions could be accelerated upon a change in control. For the other Executive Officers,executive officers, most of the amounts shown would become vested or payable if his or her active employment continued without a change in control, but payment, lapse of restrictions would be accelerated upon a change in control. | | | | | | | | | Officer | | Estimated Value | | S. Ghasemi | | $ | 23,854,089 | | M. Crocco | | $ | 4,603,468 | | J. Grant | | $ | 2,191,753 | | C. Painter | | $ | 4,476,033 | | S. Serhan | | $ | 2,310,778 | |
| Officer | | Estimated Value
($) | | Seifi Ghasemi | | 28,545,562 | | M. Scott Crocco | | 8,480,289 | | Sean D. Major | | 1,227,379 | | Samir Serhan | | 2,730,839 | | Corning F. Painter | | — |
Finally, accrued benefits under the nonqualified pension and deferred compensation plans (described onpages 49-50)41-43) would be paid out upon a change in control. | 49 |
Table of Contents As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC regulation, we are providing the following information about the ratio of the annual total compensation of the median Air Products employee and the annual total compensation of our CEO, Seifi Ghasemi as of our fiscal year-end, September 30, 2018. AIR PRODUCTS AND CHEMICALS, INC.The pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules, using methodologies, reasonable assumptions and adjustments as described below.
| ● | The median employee annual total compensation was $50,802. | | ● | The annual total compensation of our CEO, as reported in the Summary Compensation Table of this Proxy Statement was $13,941,507. | | ● | Based on this information, the estimated ratio of annual total compensation of Mr. Ghasemi, our CEO, to the annual total compensation of our median employee was 274 to 1. | | ● | Our total employee population as of fiscal year-end consisted of approximately 16,300 employees, including 4,500 US employees and 11,800 non-US employees. We employed thede minimisexemption to exclude 281 employees (less than 2% of the global workforce) in the following countries: Norway (54), Oman (60), Qatar (1), Russia (89), Saudi Arabia (19), Switzerland (2) and United Arab Emirates (56). In addition, as permitted by SEC rules, we excluded 79 employees of Dixons of Westerhope, a United Kingdom subsidiary that we acquired in fiscal 2018. As a result, the aggregate employee population for purposes of identifying our median employee was approximately 15,900. | | ● | To identify the median employee from our employee population, we used annual base salary as our consistently applied compensation measure. For hourly employees, annual salary was estimated by multiplying the hourly rate by the scheduled work hours for each work location. | | ● | After identifying the median employee, the Company calculated annual total compensation for both the median employee and CEO in accordance with SEC rules to determine the pay ratio. |
Under SEC’s rules and guidance, companies are allowed to adopt numerous ways to identify the median employee. In addition, other companies have different employee demographics and compensation and benefit practices. As a result, CEO pay ratios reported by other companies may vary significantly and are likely not comparable to our CEO pay ratio. | 50 | 2019 Annual Meeting Proxy Statement |
Table of Contents
Audit and Finance Committee Matters |
PROPOSAL
3 | | Ratification of Appointment of Independent Auditors | | | | | | The Audit and Finance Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. In 2018 the Audit and Finance Committee conducted a competitive process, which resulted in the Audit and Finance Committee selecting a new independent registered public accounting firm for fiscal 2019 — Deloitte & Touche LLP. The Board concurs with the appointment of Deloitte and, as a matter of good corporate governance, requests that our shareholders ratify the appointment of Deloitte even though ratification is not legally required. If shareholders do not ratify this appointment, the Audit and Finance Committee will consider such vote a recommendation to consider the appointment of another public accounting firm for the fiscal year ending September 30, 2020. Representatives of Deloitte will be available at the Annual Meeting to respond to questions. | | | |  | | The Board recommends a vote “FOR” the ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm for fiscal 2019. As discussed in more detail below, the Audit and Finance Committee recently conducted a competitive process to determine our independent registered public accounting firm for fiscal 2019. Following the review and evaluation of proposals, the Audit and Finance Committee approved the engagement of Deloitte. The Board believes that the engagement of Deloitte as our independent registered public accounting firm for fiscal 2019 is in the best interests of shareholders and is submitting the appointment of Deloitte to our shareholders for ratification as a matter of good corporate governance. |
Selection of New Independent Registered Public Accounting Firm As previously reported on the Company’s Current Report on Form 8-K, dated July 26, 2018, the Audit and Finance Committee conducted a competitive process to determine the Company’s independent registered public accounting firm for the Company’s fiscal year ending September 30, 2019. The process included consideration of, among other things, external auditor independence, capability, effectiveness and efficiency of audit services, the qualifications and experience of the lead engagement partner and proposed team, results from management and Audit and Finance Committee performance assessments, performance in Public Company Accounting Oversight Board assessments, technological capabilities and the relative benefits of tenure versus fresh perspective. Several independent registered public accounting firms were invited to participate in this process, including KPMG, which had served as our independent registered public accounting firm since 2002. Following the review and evaluation of proposals from the firms participating in that process, and after careful consideration of each firm’s demonstrated qualifications, the Audit and Finance Committee approved the engagement of Deloitte as our independent registered public accounting firm for the Company’s fiscal year ending September 30, 2019. The Board believes that the engagement of Deloitte as the Company’s independent registered public accounting firm for fiscal 2019 is in the best interests of the Company and our shareholders and recommends that shareholders ratify the appointment of Deloitte. | 51 |
INFORMATION ABOUT STOCK OWNERSHIP
Table of Contents Audit and Finance Committee Matters No Disagreements with Prior Accountants As previously reported, KPMG’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended September 30, 2016 and 2017 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of September 30, 2016 and 2017 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended September 30, 2016 and 2017, and the subsequent interim periods through July 24, 2018, there were (i) no disagreements between the Company and KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, any of which, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference thereto in their reports and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K. During the fiscal years ended 30 September 2017 and 2016, and the subsequent interim periods through July 24, 2018, neither the Company nor anyone on its behalf consulted with Deloitte regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Deloitte concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K. |
We have been advised by Deloitte that it will have a representative present at the Annual Meeting. Deloitte’s representative will have the ability to make a statement, if he or she desires, and will be available to respond to questions. We have been advised that a representative of KPMG will not be present at the Annual Meeting. Based on its evaluation, the Audit and Finance Committee believes the appointment of Deloitte is in the best interests of the Company and our shareholders. The Board concurs and requests that shareholders ratify the appointment of Deloitte as the independent registered public accounting firm for fiscal 2019. INFORMATION ABOUT STOCK OWNERSHIPFees of Independent Registered Public Accounting Firm
Consistent with the Audit and Finance Committee’s responsibility for engaging the Company’s independent registered public accounting firm, all audit and permitted non-audit services performed by the Company’s independent registered public accounting firm require preapproval by the Audit and Finance Committee. The full Committee approves projected services and fee estimates for these services and establishes budgets for major categories of services at its first meeting of the fiscal year. The Committee Chair has been designated by the Committee to approve any services arising during the year that were not preapproved by the Committee and services that were preapproved if the associated fees will cause the budget established for the type of service at issue to be exceeded by more than 10%. Services approved by the Chair are communicated to the full Committee at its next regular quarterly in person meeting, and the Committee reviews actual and forecasted services and fees for the fiscal year at each such meeting. During fiscal 2018, all services performed by the independent registered public accounting firm were preapproved. | 52 | 2019 Annual Meeting Proxy Statement |
Table of Contents Audit and Finance Committee Matters During fiscal 2017 and fiscal 2018, the Company’s former independent registered public accounting firm, KPMG, billed the Company fees for services in the following categories and amounts (in millions): | KPMG Fees | | 2017
($) | | 2018
($) | | Audit Fees | | 6.7 | | 6.8 | | Audit-related Fees | | 2.8 | | 1.1 | | Tax Fees | | 0.3 | | 0.3 | | All Other Fees | | 0.0 | | 0.0 | | Total Fees | | 9.8 | | 8.2 |
Audit fees are fees for those professional services rendered in connection with the audit of the Company’s consolidated financial statements and the review of the Company’s quarterly consolidated financial statements on Form 10-Q that are customary under the standards of the Public Company Accounting Oversight Board (United States) and in connection with statutory audits in foreign jurisdictions. Audit-related services consisted primarily of services rendered in connection with employee benefit plan audits, SEC registration statements, due diligence assistance and consultation on financial accounting and reporting standards. Tax fees were primarily for preparation of tax returns in non-U.S. jurisdictions, assistance with tax audits and appeals and consulting on tax reform matters. Audit and Finance Committee Report The Audit and Finance Committee provides oversight of the Company’s financial reporting process on behalf of the Board. Management bears primary responsibility for the financial statements and the reporting process, including the system of internal controls and disclosure controls. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the audited consolidated financial statements with United States generally accepted accounting principles. In fulfilling its responsibilities, the Audit and Finance Committee has reviewed and discussed the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018 with the Company’s management and KPMG, which was the independent registered public accounting firm that audited such financial statements. The Committee has discussed with KPMG the matters that are required to be discussed under Public Company Accounting Oversight Board standards governing communications with audit committees. KPMG has provided to the Committee the written disclosures and the letter concerning independence required by applicable requirements of the Public Company Accounting Oversight Board regarding independent registered public accounting firm communications with the Audit and Finance Committee, and the Committee has discussed with KPMG the firm’s independence. Based on the reviews and discussions referred to above, the Committee approved the audited consolidated financial statements and recommended to the Board that they be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018. Audit and Finance Committee Matthew H. Paull, Chair
Susan K. Carter
Charles I. Cogut
David H. Y. Ho
Edward L. Monser | 53 |
Table of Contents
Information About Stock Ownership |
Persons Owning More than 5% of Air Products Stock as of September 30, 20172018 | | | | | | | | | | Name and Address of Beneficial Owner | | Amount and
Nature of
Beneficial Ownership | | Percent of Class | The Vanguard Group (“Vanguard”)(1) 100 Vanguard Boulevard Malvern, PA 19355 | | 16,001,401 | | 7.12% | State Farm Mutual Automobile Insurance Company (“State Farm”)(2) One State Farm Plaza Bloomington, IL 61710 | | 15,499,069 | | 7.35% | Black Rock, Inc.(3) 55 East 52nd Street New York, NY 10055 | | 13,804,651 | | 6.3% |
| Name and Address of Beneficial Owner | | Amount and
Nature of
Beneficial
Ownership | | Percent of
Class | The Vanguard Group (“Vanguard”)(1)
100 Vanguard Boulevard
Malvern, PA 19355 | | 18,059,167 | | 8.25% | Black Rock, Inc.(2)
55 East 52ndStreet
New York, NY 10055 | | 17,544,664 | | 8.00% | State Farm Mutual Automobile Insurance Company (“State Farm”)(3)
One State Farm Plaza
Bloomington, IL 61710 | | 15,499,889 | | 7.08% |
| (1) | InAs reported in Amendment No. 6 to its Schedule 13G filed with the aggregate,SEC on February 7, 2018, Vanguard has sole voting power over 331,503302,146 shares, shared voting power over 40,22643,249 shares, sole power to direct disposition of 15,630,41217,718,550 shares and shared power to direct disposition of 370,989340,617 shares.
|
| (2) | InAs reported in Amendment No. 2 to its Schedule 13G filed with the SEC on January 29, 2018, Black Rock, Inc. has sole voting power over 15,283,725 shares and sole power to direct disposition of 17,544,664 shares.
| | (3) | As reported on its Schedule 13G filed with the SEC on February 8, 2018, in the aggregate entities affiliated with State Farm hashave sole voting power over 15,393,100 shares, shared voting power over 105,969106,789 shares, sole power to direct disposition of 15,393,100 shares and shared power to direct disposition of 105,969106,789 shares. |
(3)54 | In the aggregate, Black Rock, Inc. has sole voting power over 11,822,534 shares shared voting power over 10,590 shares, and sole power to direct disposition of 13,794,061 and shared disposition power over 10,590.
2019 Annual Meeting Proxy Statement |
AIR PRODUCTS AND CHEMICALS, INC.
INFORMATION ABOUT STOCK OWNERSHIP
Table of Contents Information About Stock Ownership Air Products Stock Beneficially Owned by Officers and Directors The table below shows the number of shares of common stock beneficially owned as of November 1, 20172018 by each member of the Board and each Named Executive Officer,named executive officer as well as the number of shares owned by the directors and all Executive Officersexecutive officers as a group. None of the directors or Executive Officersexecutive officers own one percent or more of the Company’s common stock. | | | | | | | | | | | | | | | | | | | Name of Beneficial Owner | | Common
Stock(1) | | | Right to Acquire(2)(3) | | | Total(4) | | S. Carter | | | 0 | | | | 0 | | | | 0 | | S. Crocco | | | 34,320 | | | | 65,727 | | | | 100,047 | | C. Cogut | | | 1,000 | | | | 2,354 | | | | 3,354 | | C. Deaton | | | 0 | | | | 9,838 | | | | 9,838 | | J. Grant | | | 1,745 | | | | 11,799 | | | | 13,544 | | S. Ghasemi | | | 315,027 | | | | 225,280 | | | | 540,307 | | D. Ho | | | 0 | | | | 9,694 | | | | 9,694 | | M. McGlynn | | | 0 | | | | 12,665 | | | | 12,665 | | E. Monser | | | 0 | | | | 8,286 | | | | 8,286 | | C. Painter | | | 28,830 | | | | 71,683 | | | | 100,513 | | M. Paull | | | 4,057 | | | | 0 | | | | 4,057 | | S. Serhan | | | 65 | | | | 0 | | | | 65 | | Directors and Executive Officers as a group (13 persons) | | | 385,090 | | | | 417,326 | | | | 802,416 | |
| Name of Beneficial Owner | | Common
Stock(1) | | Right to
Acquire(2)(3) | | Total(4) | | Seifi Ghasemi | | 343,683 | | 208,593 | | 552,276 | | M. Scott Crocco | | 39,589 | | 55,345 | | 94,934 | | Sean D. Major | | 73 | | 0 | | 73 | | Samir Serhan | | 109 | | 0 | | 109 | | Corning F. Painter | | 27,055 | | 58,107 | | 85,162 | | Susan K. Carter | | 0 | | 0 | | 0 | | Charles I. Cogut | | 1,000 | | 3,290 | | 4,290 | | Chadwick C. Deaton | | 0 | | 10,971 | | 10,971 | | David H. Y. Ho | | 0 | | 11,451 | | 11,451 | | Margaret G. McGlynn | | 0 | | 12,664 | | 12,664 | | Edward L. Monser | | 0 | | 9,565 | | 9,565 | | Matthew H. Paull | | 4,057 | | 0 | | 4,057 | | Directors and executive officers as a group (12 persons) | | 415,566 | | 369,986 | | 785,552 |
| (1) | Certain Executive Officersexecutive officers hold restricted shares, which we include in this column. The Executive Officerexecutive officer may vote the restricted shares but may not sell or transfer them until the restrictions expire. The individuals in the table hold the following number of restricted shares: |
| Name | | | Shares | | Seifi Ghasemi | 32,270 | Name | M. Scott Crocco | Shares | 5,820 | S. Crocco
| All executive officers | | 8,141 | 38,090 | S. Ghasemi
| | | 32,270 | | C. Painter
| | | 8,314 | | All Executive Officers
| | | 48,725 | |
| This column also includes shares held by Executive Officersexecutive officers in the Company’s qualified 401(k) plan.Retirement Savings Plan. Participants have voting rights with respect to such shares and can generally redirect their plan investments. |
| (2) | The Executive Officersexecutive officers have the right to acquire this number of shares within 60 days of November 1, 2018 by exercising outstanding options granted under the Company’s Long-Term Incentive Plan or through the vesting of performance shares or restricted stock unitsRSUs. In addition to these amounts, our executive officers hold equity awards granted under the Company’s Long-Term Incentive Plan that will not vest within 60 days.days of November 1, 2018. For additional information regarding such holdings, refer to the Outstanding Equity Awards at 2018 Fiscal Year-End Table on page 39. Directors hold deferred stock units shown in the table that are distributable within 60 days upon a director’s retirement or resignation based upon the director’s payout elections under the Deferred Compensation Program for Directors. Deferred stock units held by directors who have elected to defer payout for longer periods are disclosed in note (3).footnote 3 below. Deferred stock units entitle the holder to receive one share of Company stock and accrued dividend equivalents. Deferred stock units do not have voting rights. |
| (3) | Executive Officersofficers and directors hold deferred stock units reflected in the table below, which are not distributable within 60 days and which have been earned out or acquired through deferrals of salary, annual incentive awards or directors’ fees. Directors’ deferred stock units shown below are not included in the table above solely because the directors have elected to defer payout of those units beyond their retirement or resignation. |
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Table of Contents Information About Stock Ownership | | | | | | | | Name of Beneficial Owner | | Deferred Stock Units | | S. Carter
| Seifi Ghasemi | | 11,646 | 2,590 | S. Ghasemi
| Corning F. Painter | | 2,542 | 1,045 | M. McGlynn
| Susan K. Carter | | 20,999 | 13,454 | C. Painter
| Margaret G. McGlynn | | 1,045 | 22,762 | M.
| Matthew H. Paull | | | 4,425 | 5,416 |
| (4) | Directors, nominees and Executive Officersexecutive officers as a group beneficially own less than 1% of the Company’s outstanding shares. | |
AIR PRODUCTS AND CHEMICALS, INC.
INFORMATION ABOUT STOCK OWNERSHIP
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires our directors and Executive Officersexecutive officers to file reports of holdings and transactions in Company stock and related securities with the SEC and the NYSE. Based on our records and other information, we believe that in 2017fiscal 2018 all of our directors and Executive Officersexecutive officers met all applicable Section 16(a) filing requirements.requirements with one exception. On October 9, 2018, Russell A. Flugel filed a Form 4 to report the disposition of 100 shares that were withheld for taxes incurred upon the vesting of certain restricted stock units on December 5, 2017. The reporting of this transaction was delayed due to an administrative oversight. | 56 | 2019 Annual Meeting Proxy Statement |
Table of Contents
Questions and Answers on Voting and the Annual Meeting |
 | How many shares can vote at the Annual Meeting? | |  | As of the record date, which was November 30, 2018, 219,549,135 shares of Company common stock were issued and outstanding, which are the only shares entitled to vote at the Annual Meeting. Every owner of Company stock is entitled to one vote for each share owned. | | Who counts the votes? | | | A representative of Broadridge Corporate Issuer Solutions, Inc. will tabulate the votes and act as the independent inspector of election. | | What is a proxy? | | | A proxy is your legal appointment of another person to vote the shares of Company stock that you own in accordance with your instructions. The person you appoint to vote your shares is also called a proxy. You can find an electronic proxy card at www.proxyvote.com that you can use to vote your shares online or you can scan the QR code provided with your proxy materials. If you received these proxy materials by mail, you can also vote by mail or telephone using the proxy card enclosed with these materials. On the proxy card, you will find the names of the persons designated by the Company to act as proxies to vote your shares at the Annual Meeting. The proxies are required to vote your shares in the manner you instruct. | | What shares are included on my proxy card? | | | If you are a registered shareholder, your proxy card(s) will show all of the shares of Company stock registered in your name with our Transfer Agent, Broadridge Corporate Issuer Solutions, Inc. on the record date, including shares in the Direct Stock Purchase and Sale Program administered for Air Products’ shareholders by our Transfer Agent. If you have shares registered in the name of a bank, broker or other registered owner or nominee, they will not appear on your proxy card. | | How do I vote the shares on my proxy card? | | | If you received a Notice of Availability of Proxy Materials and accessed these proxy materials online, follow the instructions on the Notice to obtain your records and vote electronically. If you received these proxy materials by mail, you may vote by signing and dating the proxy card(s) and returning the card(s) in the prepaid envelope. You also can vote via mobile device, online or by using a toll-free telephone number. Instructions about these ways to vote appear on the proxy card. If you vote by telephone, please have your paper proxy card and control number available. The sequence of numbers appearing on your card is your control number, and your control number is necessary to verify your vote. If you received these proxy materials via e-mail, the e-mail message transmitting the link to these materials contains instructions on how to vote your shares of Company stock and your control number. |
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Table of Contents Questions and Answers on Voting and the Annual Meeting Whether your proxy is submitted by mail, telephone, mobile device or online, your shares will be voted in the manner you instruct. If you do not specify in your proxy how you want your shares voted, they will be voted according to the Board’s recommendations below: | Item | Board Recommendation | | 1. | Election of the Board’s Eight Nominees as Directors | FOR | | 2. | Advisory Vote on Executive Officer Compensation | FOR | | 3. | Ratification of Deloitte & Touche LLP as the Company’s
Independent Registered Public Accounting Firm | FOR |
| How do I vote shares held by my broker, bank or other nominee? | | | If a broker, bank or other nominee holds shares of Company stock for your benefit and the shares are not in your name on the Transfer Agent’s records, then you are considered a “beneficial owner” of those shares. If your shares are held this way, sometimes referred to as being held in “street name,” your broker, bank or other nominee will send you instructions on how to vote. If you have not heard from the broker, bank or other nominee who holds your Company stock, please contact them as soon as possible. If you plan to attend the meeting and would like to vote your shares held by a bank, broker or other nominee in person, you must obtain a legal proxy, as described in the admission procedures section on page 60. If you do not give your broker instructions as to how to vote, under NYSE rules, your broker has discretionary authority to vote your shares for you on Item 3 to ratify the appointment of auditors. Your broker may not vote for you without your instructions on the other items of business. Shares not voted on these other matters by your broker because you have not provided instructions are sometimes referred to as “broker nonvotes.” | | May I change my vote? | | | Yes. You may revoke your proxy at any time before the Annual Meeting by submitting a later dated proxy card, by a later telephone or on-line vote, by notifying us that you have revoked your proxy or by attending the Annual Meeting and giving notice of revocation in person. | | How is Company stock in the Company’s Retirement Savings Plan voted? | | | If you are an employee who owns shares of Company stock under the Retirement Savings Plan and you have regular access to a computer for performing your job, you were sent an e-mail with instructions on how to view the proxy materials and provide your voting instructions. Other participants in the Retirement Savings Plan will receive proxy materials and a proxy card in the mail. The Trustee, Fidelity Management Trust Company, will vote shares of Company stock allocated to your Plan account on the record date in accordance with the directions you give on how to vote. The Trustee will cast your vote in a manner that will protect your voting privacy. If you do not give voting instructions or your instructions are unclear, the Trustee will vote the shares in the same proportions and manner as overall Retirement Savings Plan participants instruct the Trustee to vote shares allocated to their Plan accounts. | | What is a “quorum”? | | | A quorum is necessary to hold a valid meeting of shareholders. A quorum exists if a majority of the outstanding shares of Company stock are present in person at the Annual Meeting or represented there by proxy. If you vote, including by Internet, telephone or proxy card, your shares voted will be counted towards the quorum for the Annual Meeting. Proxies marked as abstentions and broker discretionary votes are also treated as present for purposes of determining a quorum. |
| 58 | 2019 Annual Meeting Proxy Statement |
Table of Contents Questions and Answers on Voting and the Annual Meeting | What vote is necessary to pass the items of business at the Annual Meeting? | | | Election of Directors. Our Bylaws provide that if a quorum is present at the Annual Meeting and the number of director nominees does not exceed the number of directors to be elected (i.e., an uncontested election), director nominees will be elected if they receive a majority of the votes cast at the meeting in person or by proxy. This means that in uncontested elections the nominees will be elected if the number of shares voted “for” the nominee exceeds the number of shares voted “against” the nominee. In a contested election, nominees would be elected by a plurality of votes cast. Abstentions and broker nonvotes are not counted as votes cast and therefore will have no effect. Under our Corporate Governance Guidelines, any incumbent director who is not reelected by a majority of the votes cast must tender his or her resignation to the Corporate Governance and Nominating Committee of the Board for its consideration. The Corporate Governance and Nominating Committee then recommends to the Board whether to accept the resignation. The director will continue to serve until the Board decides whether to accept the resignation but will not participate in the Committee’s recommendation or the Board’s action regarding whether to accept the resignation. The Board will publicly disclose its decision and rationale within 90 days after certification of the election results by the inspector of election. If the Board does not accept the director’s resignation, the director will continue to serve. All Other Items. The other two items of business will be approved if shares voted in favor of the proposal exceed shares voted against the proposal. Abstentions and broker nonvotes will not affect the outcome of the vote. | | How will voting on any other business be conducted? | | | We do not know of any business or proposals to be considered at the Annual Meeting other than the items described in this proxy statement. If any other business is proposed and the chairman of the Annual Meeting permits it to be presented at the Annual Meeting, the signed proxies received from you and other shareholders give the persons voting the proxies the authority to vote on the matter according to their judgment. | | When are Shareholder proposals for the Annual Meeting to be held in 2020 due? | | | To be considered for inclusion in next year’s proxy statement, shareholder proposals must be delivered in writing to the Secretary of the Company, Air Products and Chemicals, Inc., 7201 Hamilton Boulevard, Allentown, PA 18195-1501 no later than August 14, 2019. To be presented at the 2020 Annual Meeting, our Bylaws require that adequate written notice of a proposal to be presented or nomination must be delivered in writing to the Secretary of the Company in person or by mail at the address stated above on or after September 26, 2019 but no later than October 26, 2019. To be considered adequate, the notice must contain other information specified in the Bylaws about the matter to be presented at the meeting and the shareholder proposing the matter. A copy of our Bylaws can be found in the “Governance” section of our website at www.airproducts.com. A proposal received after October 26, 2019 will be considered untimely and will not be entitled to be presented at the meeting. | | What are the costs of this proxy solicitation? | | | We hired Morrow Sodali, 470 West Ave., Stamford CT 06902 to help distribute materials and solicit votes for the Annual Meeting. We will pay them a fee of $13,000, plus out-of-pocket costs and expenses. We also reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy materials to you, because they hold title to Company stock for you. In addition to using the mail, our directors, officers and employees may solicit proxies by personal interview, telephone, telegram or otherwise, although they will not be paid any additional compensation. The Company will bear all expenses of solicitation. |
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Table of Contents Questions and Answers on Voting and the Annual Meeting | May I inspect the shareholder list? | | | For a period of 10 days prior to the Annual Meeting, a list of shareholders registered on the books of our Transfer Agent as of the record date will be available for examination by registered shareholders during normal business hours at the Company’s principal offices as long as the examination is for a purpose germane to the meeting. | | How can I get materials for the Annual Meeting? | | | Under rules adopted by the SEC, we are furnishing proxy materials to most of our shareholders via the Internet instead of mailing printed copies of those materials to each shareholder. On December 12, 2018, we mailed to our shareholders (other than those who previously requested electronic or paper delivery) a Notice of Availability of Proxy Materials containing instructions on how to access our proxy materials, including our proxy statement and our 2018 Annual Report to Shareholders. The Notice of Availability of Proxy Materials also instructs you on how to access your proxy card to vote through the Internet. This process is designed to expedite shareholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Availability of Proxy Materials. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise. Current Employees. If you are an employee of the Company or an affiliate who is a participant in the Retirement Savings Plan or who has outstanding stock options, with an internal Company e-mail address as of the record date, you should have received e-mail notice of electronic access to the Notice of Annual Meeting, the proxy statement and the 2018 Annual Report to Shareholders on or about December 12, 2018. You may request a paper copy of these materials by contacting the Corporate Secretary’s Office. If you do not have an internal Company e-mail address, paper copies of these materials were mailed to your home. Instructions on how to vote shares in your Plan account are contained in the e-mail notice or accompany the paper proxy materials mailed to you. If you have employee stock options awarded to you by the Company or an affiliate but do not otherwise own any Company stock on the record date, you are not eligible to vote and will not receive a proxy card for voting. You are being furnished this proxy statement and the 2018 Annual Report to Shareholders for your information and as required by law. | | What are the admission procedures for the Annual Meeting? | | | To gain admission to the Annual Meeting, if not a Company employee, you must present your admission ticket at the Visitor’s Entrance to the Air Products Corporate Headquarters. Registered Shareholders. If you received a “Notice of Availability of Proxy Materials,” the Notice is your admission ticket. If you received these proxy materials by mail or e-mail, your admission ticket is on the top half of the reverse side of your proxy card, which must be printed if you received it by e-mail. Shares held through broker, bank or other nominee. When you vote your shares, either electronically or via the voting instruction form you receive from your broker, bank or other nominee, you will be given the opportunity to check a box indicating that you intend to attend the Annual Meeting. If you check the box, you will be sent a “legal proxy”, which will serve as your admission ticket. (Please note, if you check this box, your shares must be voted in person.) Alternatively, you will be admitted if you present a Notice of Availability of Proxy Materials or Voting Instruction Form relating to the Air Products Annual Meeting; however, you must present a legal proxy if you wish to vote your shares in person. |
| 60 | 2019 Annual Meeting Proxy Statement |
Table of Contents Questions and Answers on Voting and the Annual Meeting | How can I reach the Company to request materials or information referred to in these Questions and Answers? | | | You may reach us by mail addressed to: Corporate Secretary’s Office
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501, or by calling 610-481-4880. |
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Table of Contents AIR PRODUCTS AND CHEMICALS, INC.
APPENDIX AReconciliation of Non-GAAP Financial Measures
RECONCILIATION OFNON-GAAP FINANCIAL MEASURES
(Millions of dollars unless otherwise indicated, except for per share data) The Company has presented certain financial measures on anon-GAAP (“adjusted”) basis and has provided a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These financial measures are not meant to be considered in isolation or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. The Company believes thesenon-GAAP measures provide investors, potential investors, securities analysts, and others with useful supplemental information to evaluate the performance of the business because such measures, when viewed together with our financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance and projected future results. In many cases, ournon-GAAP measures are determined by adjusting the most directly comparable GAAP financial measure to exclude certain disclosed items(“ (“non-GAAP adjustments”) that we believe are not representative of the underlying business performance. For example, Air Products has executed its strategic plan to restructurein fiscal years 2017 and 2016, we restructured the Company to focus on its core Industrial Gases business. This resulted in significant cost reduction and asset actions that we believe arewere important for investors to understand separately from the performance of the underlying business. Additionally, in fiscal year 2018, we recorded discrete impacts associated with the Tax Act. The reader should be aware that we may incur similar expenses in the future. The tax impact ofon our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax expense impact of the transactions and is impacted primarily by the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions. Investors should also consider the limitations associated with thesenon-GAAP measures, including the potential lack of comparability of these measures from one company to another. The followingnon-GAAP reconciliation is on a continuing operations basis. | A-1 |
Consolidated ResultsTable of Contents
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change vs Prior Year | | | | | Sales | | | Operating
Income | | | Operating
Margin | | | Diluted
EPS | | | Operating
Income | | | Operating
Margin | | | Diluted
EPS | | 2014 GAAP | | $ | 8,384.0 | | | $ | 924.2 | | | | 11.0 | % | | $ | 3.24 | | | | | | | | | | | | | | Business restructuring and cost reduction actions | | | | | | | 11.1 | | | | .1 | % | | | .03 | | | | | | | | | | | | | | Pension settlement loss | | | | | | | 5.2 | | | | .1 | % | | | .02 | | | | | | | | | | | | | | Goodwill and intangible asset impairment charge | | | | | | | 310.1 | | | | 3.7 | % | | | 1.27 | | | | | | | | | | | | | | Chilean tax rate change | | | | | | | — | | | | — | | | | .10 | | | | | | | | | | | | | | Tax election benefit | | | | | | | — | | | | — | | | | (.24 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2014Non-GAAP Measure | | $ | 8,384.0 | | | $ | 1,250.6 | | | | 14.9 | % | | $ | 4.42 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2015 GAAP | | $ | 7,824.3 | | | $ | 1,233.2 | | | | 15.8 | % | | $ | 4.29 | | | | 33 | % | | | 480bp | | | | 32 | % | Business separation costs | | | | | | | 7.5 | | | | .1 | % | | | .03 | | | | | | | | | | | | | | Business restructuring and cost reduction actions | | | | | | | 180.1 | | | | 2.3 | % | | | .61 | | | | | | | | | | | | | | Pension settlement loss | | | | | | | 19.3 | | | | .2 | % | | | .06 | | | | | | | | | | | | | | Gain on previously held equity interest | | | | | | | (17.9 | ) | | | (.3 | )% | | | (.05 | ) | | | | | | | | | | | | | Gain on land sales | | | | | | | (33.6 | ) | | | (.4 | )% | | | (.13 | ) | | | | | | | | | | | | | Loss on extinguishment of debt(A) | | | | | | | | | | | — | | | | .07 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2015Non-GAAP Measure | | $ | 7,824.3 | | | $ | 1,388.6 | | | | 17.7 | % | | $ | 4.88 | | | | 11 | % | | | 280bp | | | | 10 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 GAAP | | $ | 7,503.7 | | | $ | 1,529.7 | | | | 20.4 | % | | $ | 5.04 | | | | 24 | % | | | 460bp | | | | 17 | % | Business separation costs | | | | | | | 50.6 | | | | .7 | % | | | .21 | | | | | | | | | | | | | | Tax costs associated with separation | | | | | | | — | | | | — | | | | .24 | | | | | | | | | | | | | | Business restructuring and cost reduction actions | | | | | | | 34.5 | | | | .4 | % | | | .11 | | | | | | | | | | | | | | Pension settlement loss | | | | | | | 5.1 | | | | .1 | % | | | .02 | | | | | | | | | | | | | | Loss on extinguishment of debt(A) | | | | | | | — | | | | — | | | | .02 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016Non-GAAP Measure | | $ | 7,503.7 | | | $ | 1,619.9 | | | | 21.6 | % | | $ | 5.64 | | | | 17 | % | | | 390bp | | | | 16 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change vs Prior Year | | | | | Sales | | | Operating
Income | | | Operating
Margin | | | Diluted
EPS | | | Operating
Income | | | Operating
Margin | | | Diluted
EPS | | 2017 GAAP | | $ | 8,187.6 | | | $ | 1,427.6 | | | | 17.4 | % | | $ | 5.16 | | | | (7 | )% | | | (300 | )bp | | | 2 | % | Business separation costs | | | | | | | 30.2 | | | | .4 | % | | | .12 | | | | | | | | | | | | | | Tax benefit associated with separation | | | | | | | — | | | | — | | | | (.02 | ) | | | | | | | | | | | | | Business restructuring and cost reduction actions(B) | | | | | | | 151.4 | | | | 1.8 | % | | | .49 | | | | | | | | | | | | | | Pension settlement loss | | | | | | | 10.5 | | | | .1 | % | | | .03 | | | | | | | | | | | | | | Goodwill and intangible asset impairment charge(C) | | | | | | | 162.1 | | | | 2.0 | % | | | .70 | | | | | | | | | | | | | | Gain on land sale | | | | | | | (12.2 | ) | | | (.1 | )% | | | (.03 | ) | | | | | | | | | | | | | Equity method investment impairment charge | | | | | | | — | | | | — | | | | .36 | | | | | | | | | | | | | | Tax election benefit | | | | | | | — | | | | — | | | | (.50 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017Non-GAAP Measure | | $ | 8,187.6 | | | $ | 1,769.6 | | | | 21.6 | % | | $ | 6.31 | | | | 9 | % | | | -bp | | | | 12 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016Non-GAAP Measure | | | | | | | | | | | | | | | 5.64 | | | | | | | | | | | | | | | | | | | | | | 2017Non-GAAP Measure | | | | | | | | | | | | | | | 6.31 | | | | | | | | | | | | | | Currency and foreign exchange impact | | | | | | | | | | | | | | | .02 | | | | | | | | | | | | | | Gain on land sale impact | | | | | | | | | | | | | | | .03 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017Non-GAAP Measure for compensation purposes | | | | | | | | | | | | | | $ | 6.36 | | | | | | | | | | | | 13 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Appendix A (A) | Income from continuing operations before taxes impact of $6.9 and $16.6 in 2016 and 2015, respectively.
Consolidated Results |
| | 2018 | | | 2017 | | | GAAP EPS | | $ | 6.59 | | | $ | 5.16 | | | Change in inventory valuation method | | | (.08 | ) | | | — | | | Business separation costs | | | — | | | | .12 | | | Tax benefit associated with business separation | | | — | | | | (.02 | ) | | Cost reduction and asset actions | | | — | | | | .49 | | | Goodwill and intangible asset impairment charge | | | — | | | | .70 | | | Gain on land sale | | | — | | | | (.03 | ) | | Equity method investment impairment charge | | | — | | | | .36 | | | Pension settlement loss | | | .15 | | | | .03 | | | Tax reform repatriation | | | 2.16 | | | | — | | | Tax reform benefit related to deemed foreign dividends | | | (.25 | ) | | | — | | | Tax reform rate change and other | | | (.96 | ) | | | — | | | Tax restructuring | | | (.16 | ) | | | — | | | Tax election benefit | | | — | | | | (.50 | ) | | Non-GAAP EPS | | | 7.45 | | | | 6.31 | | | GAAP Change from prior year | | $ | 1.43 | | | | | | | GAAP % Change from prior year | | | 28 | % | | | | | | Non-GAAP Change from prior year | | $ | 1.14 | | | | | | | Non-GAAP % Change from prior year | | | 18 | % | | | | |
(B)A-2 | Noncontrolling interests impact of $.5 in fiscal year 2017.
2019 Annual Meeting Proxy Statement |
Table of Contents Appendix A (C) | Noncontrolling interests impact of $3.4 in fiscal year 2017.
Adjusted EBITDA |
Adjusted EBITDA
We define Adjusted EBITDA as income from continuing operations (including noncontrolling interests) excluding certain disclosed items, which the Company does not believe to be indicative of underlying business trends, before interest expense, othernon-operating income (expense), net, income tax provision, and depreciation and amortization expense. Adjusted EBITDA provides a useful metric for management to assess operating performance. | | 2018 | | | 2017 | | | Income from Continuing Operations(A) | | $ | 1,490.7 | | | $ | 1,155.2 | | | Less: Change in inventory valuation method | | | 24.1 | | | | — | | | Add: Interest expense | | | 130.5 | | | | 120.6 | | | Less: Other non-operating income (expense), net | | | 5.1 | | | | 16.6 | | | Add: Income tax provision | | | 524.3 | | | | 260.9 | | | Add: Depreciation and amortization | | | 970.7 | | | | 865.8 | | | Add: Business separation costs | | | — | | | | 32.5 | | | Add: Cost reduction and asset actions | | | — | | | | 151.4 | | | Add: Goodwill and intangible asset impairment charge | | | — | | | | 162.1 | | | Less: Gain on land sale | | | — | | | | 12.2 | | | Add: Equity method investment impairment charge | | | — | | | | 79.5 | | | Add: Tax reform repatriation- equity method investment | | | 28.5 | | | | — | | | Adjusted EBITDA | | $ | 3,115.5 | | | | 2,799.2 | | | Income from Continuing Operations Change from prior year | | | 335.5 | | | | | | | Income from Continuing Operations % Change from prior year | | | 29 | % | | | | | | Adjusted EBITDA Change from prior year | | | 316.3 | | | | | | | Adjusted EBITDA % Change from prior year | | | 11 | % | | | | | | | | | | | | | | | | (A) Includes net income attributable to noncontrolling interests. | | | | | | | | | | | | | | | | | | | | | | 2018 | | | | 2017 | | | Adjusted EBITDA Margin | | | 34.9 | % | | | 34.2 | % | | Change from prior year | | | 70bp | | | | | |
| A-3 |
| | | | | | | | | | | | 2017 | | | 2016 | | Income from Continuing Operations(A) | | $ | 1,155.2 | | | $ | 1,122.0 | | Add: Interest expense | | | 120.6 | | | | 115.2 | | Less: Othernon-operating income (expense), net | | | 29.0 | | | | — | | Add: Income tax provision | | | 260.9 | | | | 432.6 | | Add: Depreciation and amortization | | | 865.8 | | | | 854.6 | | Add: Business separation costs | | | 30.2 | | | | 50.6 | | Add: Business restructuring and cost reduction actions | | | 151.4 | | | | 34.5 | | Add: Pension settlement loss | | | 10.5 | | | | 5.1 | | Add: Goodwill and intangible asset impairment charge | | | 162.1 | | | | — | | Less: Gain on land sale | | | 12.2 | | | | — | | Add: Equity method investment impairment charge | | | 79.5 | | | | — | | Add: Loss on extinguishment of debt | | | — | | | | 6.9 | | | | | | | | | | | Adjusted EBITDA | | $ | 2,795.0 | | | $ | 2,621.5 | | | | | | | | | | | Income from Continuing Operations Change from prior year | | | 33.2 | | | | | | Income from Continuing Operations % change from prior year | | | 3 | % | | | | | Adjusted EBITDA Change from prior year | | | 173.5 | | | | | | Adjusted EBITDA % change from prior year | | | 7 | % | | | | |
Table of Contents (A) | Includes net income attributable to noncontrolling interests.
Appendix B |
| | | | | | | | | | | | 2017 | | | 2016 | | Adjusted EBITDA Margin | | | 34.1 | % | | | 34.9 | % | Change from prior year | | | (80 | )bp | | | | |
APPENDIX B
SURVEY REFERENCE GROUP
Survey Reference Group | Alticor | Estee Lauder | PVH | Alticor
Avon Products
Arkema | Federated-Mogul | Quanta Services | | Baker Hughes | Hershey | R.R. Donnelley | | Ball | Hormel Foods | Reynolds American | Becton DickonsonDickinson | Illinois Tool Works | Rockwell Automation | | BorgWarner | Jabil Circuit | S.C. Johnson & Son | | Boston Scientific | Jacobs Engineering | Sealed Air | | Cameron International Campbell Soup
| Kellogg | Sherwin-Williams | | Chesapeake Energy | Kinder Morgan | Stanley Black & Decker | | Coca-Cola Enterprises | Land O’Lakes | Stryker | | Commercial Metals | Masco | TE Connectivity | | Corning | Medline | Terex | | Covestro | MillerCoors | Textron | | Dairy Farmers of America Dania
| Mohawk | United States Steel | | Dana Holding | Mosaic | VF Corporation | | Dean Foods | Navistar International | Waste Management | | Devon Energy | ONEOK | WestRock | | Dover | Parker Hannifin | Weyerhaeuser | | Eastman Chemical Ecolab
Federal-Mogul
Hormel Foods
Huntsman
Ingersoll Rand
Illinois Toolworks
Kellogg
Kinder Morgan
L-3 Communications
Land O’Lakes
Masco Corporation
MillerCoors
| | Mohawk Industries
Mosaic
Navistar International
Oneok
Owens Illinois
Oshkosh
Parker Hannifin
Peabody Energy Perdue Farms
| Williams Companies | | Ecolab | Performance Food Phillips-Van Heusen
Group | | | EOG Resources | Praxair Reynolds American
Rock Tenn
Rockwell Automation
SC Johnson & Son
Sherwin Williams
Stanley Black & Decker
Stryker
TE Connectivity
Terex
Textron
The Hershey Company
Univar USA
VF Corporation
Visteon
W. W. Grainger
Weyerhaeuser
Williams Companies
| |
| B-1 |
Table of Contents Driving Directions to
Air Products and Chemicals, Inc. Corporate Headquarters Air Products and Chemicals, Inc.
7201Hamilton Boulevard
Allentown, PA18195-1501
610-481-4911
610-481-4911
From Pennsylvania Turnpike (US 476)
– | From Pennsylvania Turnpike (US 476) | |  | Take Lehigh Valley Exit 56 (formerly exitExit 33) from Turnpike to Route 22 West, Harrisburg. |
– | Follow Route 22 West to Trexlertown Exit (Exit 49A off Route 22 andI-78) onto Route 100 South. |
– | Proceed on Route 100 South for 3 miles; continue straight and at this point Route 100 becomes Trexlertown Road. |
– | Proceed one more mile to the traffic light at Trexlertown Road and Hamilton Boulevard. |
– | Turn left onto Hamilton Boulevard. Go under the RR bridge and proceed to the second traffic light. |
– | Turn left at the “Visitor Entrance” sign (Gate 2) into the Air Products complex. | | |
From Route 22
– | From Route 22 | |  | Take Exit 49A from Route 22 andI-78 onto Route 100 South. |
– | Proceed on Route 100 South for 3 miles; continue straight, and at this point Route 100 becomes Trexlertown Road. |
– | Proceed one more mile to a traffic light at Trexlertown Road and Hamilton Boulevard. |
– | Turn left onto Hamilton Boulevard. Go under the RR bridge and proceed to the second traffic light. |
– | Turn left at the “Visitor Entrance” sign (Gate 2) into the Air Products complex. |
From Route 309 North andI-78 West
– | From Route 309 North and I-78 West | |  | Take Exit 54A to Route 222 South. |
– | Follow 222 South to the traffic light at Mill Creek Road. |
– | Turn left on Millcreek Road Proceedand proceed to Hamilton Boulevard. |
– | Proceed south on Hamilton Boulevard. |
– | Corporate Office is located on right side of highway. Turn right at the “Visitor Entrance” sign (Gate 2) into the Air Products complex. |
From Route 309 South andI-78 East
– | From Route 309 South and I-78 East | |  | Take Exit 54. At the bottom of the ramp, turn right onto Route 222 South. |
– | Follow 222 South to the traffic light at Mill Creek Road. |
– | Turn left on Millcreek Road Proceedand proceed to Hamilton Boulevard. |
– | Proceed south on Hamilton Boulevard. |
– | Corporate Office is located on right side of highway. Turn right at the “Visitor Entrance” sign (Gate 2) into the Air Products complex. |
Table of Contents For more information,
please contact us at: 
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
T 610-481-4911
F 610-481-5900
Sean D. Major
Executive Vice President,
General Counsel and Secretary
T 610-481-4880
Investor Relations Office
Simon Moore, Vice President,
Investor Relations and
Corporate Relations
T 610-481-5775
Table of Contents
AIR PRODUCTS AND CHEMICALS, INC.
7201 HAMILTON BLVD.
ALLENTOWN, PA 18195-1501 SCAN TO VIEW MATERIALS & VOTE
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| AIR PRODUCTS AND CHEMICALS, INC. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR the following: | | | | | | | | | | | | | | | | 1. | | Election of Directors | | | | | | | | | | | | | | | | | | | | Nominees: | | For | | Against | | Abstain | | | | | | | | | | | | | | 1a. | | Susan K. Carter | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1b. | | Charles I. Cogut | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1c. | | Seifi Ghasemi | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1d. | | Chadwick C. Deaton | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1e. | | David H. Y. Ho | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1f. | | Margaret G. McGlynn | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1g. | | Edward L. Monser | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1h. | | Matthew H. Paull | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR proposals 2 and 3. | | For | | Against | | Abstain | | | | | | | | | | 2. | | Advisory vote approving Executive Officer compensation. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | 3. | | Ratify the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the fiscal year ending September 30, 2019. | | ☐ | | ☐ | | ☐ |
| 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 | |
Table of Directors recommends you vote FOR the following: 1. Election of Directors For Against Abstain Nominees: 1a. Susan K. Carter 1b. Charles I. Cogut 1c. Sei? Ghasemi 1d. Chadwick C. Deaton 1e. David H. Y. Ho 1f. Margaret G. McGlynn 1g. Edward L. Monser 1h. Matthew H. Paull The Board of Directors recommends you vote FOR For Against Abstain proposals 2, 3 and 4. 2. Advisory vote approving Executive Of?cer compensation. 3. Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2018. 4. Approve material terms of the Long Term Incentive Plan to allow the Company a U.S. tax deduction for Executive Of?cer performance based awards. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other ?duciary, 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 of?cer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) DateContents
Admission Ticket Annual Meeting of
Air Products and Chemicals, Inc.
Thursday, January 25, 2018—24, 2019 - 2:00 p.m. Eastern Time
Air Products and Chemicals, Inc. Corporate Headquarters
7201 Hamilton Boulevard
Allentown, PA 18195 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, Telephone/Internet insert (BR supplied) and Annual Report are available at www.proxyvote.com. E34429-P99649-Z71370 Air Products and Chemicals, Inc. Annual Meeting of Shareholders—Shareholders - January 25, 2018 24, 2019 Proxy This proxy is solicited on Behalf of the Board of Directors The undersigned hereby appoints Sei?Seifi Ghasemi, M. Scott Crocco and Sean D. Major, or any one of them, with full power of substitution, to represent the undersigned at the annual meeting of shareholders of Air Products and Chemicals, Inc. on Thursday, January 25, 2018,24, 2019, at 2:00 p.m. (Eastern Time), and at any adjournments thereof, and to vote at such meeting the shares which the undersigned would be entitled to vote if personally present, as directed on the reverse side, and to vote in their judgment upon all other matters which may properly come before the meeting and any adjournments thereof. This proxy will be voted as directed, but if no instructions are given for voting on the matters listed on the reverse side, this proxy will be voted as recommended by the Board of Directors. If any other matters are properly presented for consideration at the Annual Meeting, the proxy holders, or any one of them, will have discretion to vote on those matters in accordance with their best judgment. Shareholders who are present at the meeting may withdraw their Proxy and vote in person if so desired. Air Products and Chemicals, Inc. Retirement Savings Plan Participants The person signing on the reverse directs that Fidelity Management Trust Company, Asas Trustee for the Air Products and Chemicals, Inc. Retirement Savings Plan (the “Plan”"Plan"), vote the shares of common stock of Air Products and Chemicals, Inc. (“shares”("shares") allocated to his or her account under the Plan at the annual meeting of shareholders of Air Products and Chemicals, Inc. to be held on January 25, 201824, 2019 as directed on the reverse side. The Trustee will tabulate the instructions from all participants and vote shares held in the Plan according to the instructions. The Trustee will vote shares held in the Plan for which no voting instructions are received by January 22, 201821, 2019 in the same proportions and manner as shares held in the Plan for which instructions have been received. Continued and to be signed on reverse side
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