Age72 Director Since2015 Committees
Audit and Finance Corporate
Governance and
Nominating | | Charles I. CogutIndependent
Retired Partner, Simpson Thacher & Bartlett LLP Background Charles “Casey” Cogut is a retired partner of Simpson Thacher & Bartlett LLP (“STB”). Mr. Cogut joined the New York-based law firm in 1973 and served as partner in STB from 1980 to 2012 and as a Senior Mergers and Acquisitions Counsel at STB from 2013 to 2016. For many years he was a leading member of STB’s merger and acquisitions and private equity practices. He specialized in domestic, international and cross-border mergers and acquisitions, the representation of special committees of boards of directors, and buyouts and other transactions involving private equity firms. In addition, he regularly advised boards of directors with respect to corporate governance matters and fiduciary responsibilities. From 1990 to joining Ingersoll-Rand, from 2009 to 2013, Ms. Carter served as Executive Vice President and Chief Financial Officer of KBR, Inc., a global engineering, construction and services company; Executive Vice President and Chief Financial Officer of Lennox International Inc., a global provider of climate control solutions for heating, air conditioning, and refrigeration markets from 2004 to 2009; and Vice President and Chief Accounting Officer of Cummins, Inc. from 2002 to 2004. She also held senior financial and accounting roles at Honeywell International Inc., DeKalb Corporation, and Crane Co. She is a former director of Lyondell Chemical Company. Ms. Carter received a Bachelor’s degree in Accounting from Indiana University and received a Master’s degree in Business Administration from Northern Illinois University. She is a Certified Public Accountant. As the chief financial officer of global publicly-held corporations, Ms. Carter has significant experience in financial reporting, information technology, accounting, finance and capital management, investor relations, and international operations. Her background provides the Board with broad expertise in international financial and operational issues.
CHARLES I. COGUT,age 70.
Retired Partner, Simpson Thacher & Bartlett LLP.
Director of the Company since 2015.
Charles “Casey” Cogut is a retired partner of Simpson Thacher & Bartlett LLP (“STB”). Mr. Cogut joined the New York-based law firm in 1973 and served as partner in STB from 1980-2012, and as a Senior Mergers and Acquisitions (“M&A”) Counsel at STB from 2013-2016. For many years he was a leading member of STB’s M&A and private equity practices. He specialized in domestic, international and cross-border mergers and acquisitions, the representation of special committees of boards of directors, and buyouts and other transactions involving private equity firms. In addition, he regularly advised boards of directors with respect to corporate governance matters and fiduciary responsibilities. From 1990 – 1993, he served as senior resident partner in the firm’s London office. Mr. Cogut received his J.D. in 1973 from the University of Pennsylvania Law School after graduating summa cum laude from Lehigh University in 1969. He is a member of the Board of Overseers of the University of Pennsylvania Law School, andCo-Chair of the Board of Advisors of the University’s Institute for Law and Economics. He also is a director of The Williams Companies, Inc. and a member of the Board of Overseers of the University of Pennsylvania Law School. He also is a director of The Williams Companies, Inc. and a Vice Chair of the Board of Trustees and a member of the Executive Committee of Cold Spring Harbor Laboratory. He was formerly a director of Patheon N.V.
Qualifications Mr. Cogut brings to the Board expertise in governance and fiduciary responsibilities of directors. He also has extensive experience in multi-jurisdictional mergers and acquisitions and other complex transactions. He has been recognized as one of the leading corporate lawyers in the United States. AIR PRODUCTS AND CHEMICALS, INC.
THE BOARD OF DIRECTORS
CHADWICK C. DEATON,age 65.
Retired Chairman and Chief Executive Officer of Baker Hughes Inc.
Director of the Company since 2010.
Chadwick “Chad” Deaton is the retired Executive Chairman of Baker Hughes, Inc. an oilfield services and products provider with operations in over 90 countries. He joined Baker Hughes in 2004 and served as Chairman and Chief Executive Officer through 2011. He became Executive Chairman in January 2012. He retired as Executive Chairman in April 2013. Previously, Mr. Deaton was President and Chief Executive Officer of Hanover Compressor Company (now Exterran Holdings, Inc.); and Senior Advisor and Executive Vice President of Schlumberger Oilfield Services. Mr. Deaton is a director of Ariel Corporation, a private manufacturer of gas compressor equipment, CARBO Ceramics, Inc., Marathon Oil Corporation and Transocean Ltd. He is also a former director of Hanover Compression Company and Baker Hughes. He is a director of Houston Achievement Place and a member of the Society of Petroleum Engineers’, and the Governor of Wyoming’s Engineering Task Force for the University of Wyoming. He also serves as a director for the University of Wyoming Foundation. Mr. Deaton earned a Bachelor’s degree in Geology from the University of Wyoming.
As a former chairman and chief executive officer of a global publicly held corporation, Mr. Deaton brings to the Board international business experience and executive leadership experience in operations, technology, talent management, and governance. In addition, his30-year career in petrochemicals and energy businesses provides him with expertise in key customer segments for the Company.
SEIFOLLAH (“SEIFI”) GHASEMI,age 73.
Chairman, President and Chief Executive Officer of the Company.
Director of the Company since 2013.
Prior to joining Air Products, from 2001-2014, Mr. Ghasemi served as Chairman and Chief Executive Officer of Rockwood Holdings, Inc., a global leader in inorganic specialty chemicals and advanced materials that was acquired by Albemarle Corporation in January 2015. From 1997-2001, he held leadership roles at GKN, a global industrial company, including positions as director of the Main Board of GKN, plc, and chairman and chief executive officer of GKN Sinter Metals, Inc. and Hoeganes Corporation. Earlier in his career, Mr. Ghasemi spent nearly 20 years with The BOC Group (the industrial gas company which is now part of Linde AG) in positions including director of the Main Board of BOC Group, plc; president of BOC Gases Americas; and chairman and chief executive officer of BOC Process Plants, Ltd. and Cryostar. He is a former director of Rockwood Holdings, Inc. and EnerSys. Mr. Ghasemi also serves asnon-executive chairman of Versum Materials, Inc. Mr. Ghasemi earned his undergraduate degree from Abadan Institute of Technology and holds a Master’s degree in Mechanical Engineering from Stanford University, and was awarded an honorary Doctor of Science degree from Lafayette College.
Mr. Ghasemi brings to the Board strong leadership and extensive management and operating experience, including deep experience in the industrial gases and specialty chemicals industries, and a solid understanding of key end markets for the Company. His prior executive leadership of an international chemical company also provides substantial experience in governance and portfolio management, strategic planning, talent management, and international operations. He provides the Board with candid insights into the Company’s industry, operations, management team, and strategic strengths and weaknesses.
AIR PRODUCTS AND CHEMICALS, INC.
THE BOARD OF DIRECTORS
DAVID H. Y. HO,age 58.
Chairman and Founder of Kiina Investment Ltd.
Director of the Company since 2013.
David H. Y. Ho is Chairman and Founder of Kiina Investment Ltd., a venture capital firm that invests instart-up companies in the technology, media, and telecommunications industries. Mr. Ho previously served as Chairman of Greater China for Nokia Siemens Networks, President of Greater China for Nokia Corporation, and Senior Vice President of the Nokia Networks Business Group. He has also held senior leadership roles with Nortel Networks and Motorola in China and Canada. Mr. Ho currently serves as a member of the board of Pentair plc and Qorvo, Inc. in the United States and two Chinese state-owned enterprises: China COSCO Shipping Corporation and China Mobile Communications Corporation. Mr. Ho served as a director of Triquent Semiconductor, Inc. prior to its merger with R. F. Micro Devices to form Qorvo, Inc., and as a director of China Ocean Shipping Company prior to its merger with China Shipping Group. Mr. Ho also previously served as a director of Dong Fang Electric Corporation and Owens Illinois, Inc. He holds a Bachelor’s degree in Engineering and a Master’s degree in Management Sciences from the University of Waterloo in Canada.
Mr. Ho has extensive experience establishing and building businesses in China and in international joint venture operations, government relations, and Asian operations and marketing. His background brings significant value to the Company as we execute on our Asian strategy. He also has executive leadership experience in the electronics and technology industries, key customer markets for the Company.
MARGARET G. McGLYNN,age 58.
Retired President, International AIDS Vaccine Initiative and Merck & Co., Inc. Global Vaccine and Infectious Disease Division. Director of the Company since 2005.
Margaret G. McGlynn is the retired President and Chief Executive Officer of International AIDS Vaccine Initiative, a globalnot-for-profit, public-private partnership working to accelerate the development of vaccines to prevent HIV infection and AIDS. She joined its board in 2010 and served as President and Chief Executive Officer from 2011 until her retirement in 2015. Ms. McGlynn previously served as President, Global Vaccine and Infectious Disease Division of Merck & Co., Inc., a global pharmaceutical company, from 2007 until her retirement in 2009, where she was responsible for a portfolio of more than $7 billion in global sales. She led the introduction of several new vaccine products and anti-infective therapies, expanded Merck’s vaccine and infectious disease business globally, and launched several initiatives to provide access to its vaccines and HIV therapies in the developing world. Earlier she served as President, U.S. Human Health at Merck, from 2003 to 2005, and in 2005 she was named President, Merck Vaccine Division. Ms. McGlynn was a member of the Global Alliance for Vaccines and Immunization board of directors and executive committee from 2006 to 2008. She is also a director of Amicus Therapeutics, Inc., Vertex Pharmaceuticals, Inc., Orphan Technologies Ltd., and a former director of Quidel Diagnostics. She earned a Bachelor’s degree in Pharmacy and a Master’s of Business Administration in Marketing from State University of New York at Buffalo.
From her management of a global business and service as chief executive officer of a global organization, Ms. McGlynn brings extensive experience in government relations and public policy, international marketing, mergers and acquisitions and talent management. She has expertise in productivity, and a deep understanding of the healthcare business, an important customer base for the Company. Her service on other boards also provides financial and governance experience.
AIR PRODUCTS AND CHEMICALS, INC.
THE BOARD OF DIRECTORS
EDWARD L. MONSER,age 67.
President of Emerson Electric Company
Director of the Company since 2013.
Mr. Monser is currently President of Emerson Electric Company, a global industrial controls products company. Mr. Monser has more than 30 years of experience in senior operational positions at Emerson and has played key roles in globalizing the company, having held increasingly senior positions at the company, including chief operating officer (2001-2015), president of its Rosemount Inc. subsidiary (1996-2001), and various operations, new product development, engineering and technology positions. He is Vice Chairman of theU.S-India Strategic Partnership Forum, a member of the Economic Development Board for China’s Guangdong Province, and a past board member and past Vice Chairman of the U.S.-China Business Council. He holds a Bachelor’s degree in Electrical Engineering from the Illinois Institute of Technology and a Bachelor’s degree in Education from Eastern Michigan University.
As president and former chief operating officer of a premier global industrial organization, Mr. Monser provides the Board with a solid understanding of industrial operations, supply chain optimization, and continuous improvement; extensive experience in international business operations, particularly in emerging markets; and demonstrated capability in strategic planning and organizational development.
MATTHEW H. PAULL,age 66.
Retired Senior Executive Vice President and Chief Financial Officer of McDonald’s Corporation.
Director of the Company since 2013.
Mr. Paull was Senior Executive Vice President and Chief Financial Officer of McDonald’s Corporation from 2001 until he retired from that position in 2008. Prior to joining McDonald’s in 1993, he was a partner at Ernst & Young where he managed a variety of financial practices during his18-year career and consulted with many leading multinational corporations. Mr. Paull currently serves as a director of Canadian Pacific Railway Ltd., Chipolte Mexican Grill Inc. and KapStone Paper and Packaging Corporation. He was a former director of WMS Industries Inc. and the former lead director of Best Buy Co. He is a member of the Advisory Board of Pershing Square Capital Management, L.P. He also served as an advisory council member for the Federal Reserve Bank of Chicago. He holds a Master’s degree in Accounting and a Bachelor’s degree from the University of Illinois. He is a Certified Public Accountant.
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 afterexpertise in corporate governance and fiduciary responsibilities of directors. He also has extensive experience in multi-jurisdictional mergers and acquisitions and other complex transactions. He has been recognized as one of the Annual Meeting receiveleading corporate lawyers in the United States.
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Table of Contents Age67 Director Since2010 Committees
Corporate
Governance and
Nominating
(Chair) Executive Management
Development and
Compensation
| | Chadwick C. DeatonIndependent, Lead Director
Retired Chairman and Chief Executive Officer of Baker Hughes Incorporated Background Chadwick “Chad” Deaton is the retired Chairman of Baker Hughes Incorporated, an oilfield services and products provider with operations in over 90 countries. He joined Baker Hughes in 2004 and served as Chairman and Chief Executive Officer through 2011. He became Executive Chairman in January 2012 and retired from that position in April 2013. Previously, Mr. Deaton was President and Chief Executive Officer of Hanover Compressor Company (now Exterran Holdings, Inc.) and Senior Advisor and Executive Vice President of Schlumberger Oilfield Services. Mr. Deaton is a prorated grantdirector of deferred stock units basedCARBO Ceramics, Inc. and Marathon Oil Corporation and Chairman of Transocean Ltd. He is also a former director of Hanover Compression Company and Baker Hughes. He is a director of Houston Achievement Place, a member of the Society of Petroleum Engineers and the Governor of Wyoming’s Engineering Task Force for the University of Wyoming. He also serves as a director for the University of Wyoming Foundation. Mr. Deaton earned a Bachelor’s degree in Geology from the University of Wyoming. Qualifications As a former chairman and chief executive officer of a public company with global operations, Mr. Deaton brings to the Board international business experience and executive leadership experience in operations, technology, talent management and corporate governance. In addition, his 30-year career in the petrochemicals and energy businesses provides him with expertise in key customer segments for the Company. |
Age75 Director Since2013 Committees
Executive (Chair) | | Seifollah (“Seifi”) Ghasemi
Chairman, President and Chief Executive Officer of the Company Background Prior to joining Air Products, from 2001 to 2014, Mr. Ghasemi served as Chairman and Chief Executive Officer of Rockwood Holdings, Inc., a global leader in inorganic specialty chemicals and advanced materials that was acquired by Albemarle Corporation in January 2015. From 1997 to 2001, he held leadership roles at GKN, a global industrial company, including positions as director of the Main Board of GKN, plc and Chairman and Chief Executive Officer of GKN Sinter Metals, Inc. and Hoeganes Corporation. Earlier in his career, Mr. Ghasemi spent nearly 20 years with The BOC Group (an industrial gas company that is now part of Linde AG) in positions including director of the Main Board of BOC Group, plc, President of BOC Gases Americas and Chairman and Chief Executive Officer of BOC Process Plants, Ltd. and Cryostar. He is a former director of Rockwood Holdings, Inc. and EnerSys. Mr. Ghasemi also served as non-executive Chairman of Versum Materials, Inc. (“Versum”) until its acquisition by Merck KGaA on October 7, 2019. Mr. Ghasemi earned his undergraduate degree from Abadan Institute of Technology and holds a Master’s degree in Mechanical Engineering from Stanford University. Mr. Ghasemi also was awarded an honorary Doctor of Science degree from Lafayette College. Qualifications Mr. Ghasemi brings to the Board strong leadership and extensive management and operating experience, including deep experience in the industrial gases and specialty chemicals industries, and a solid understanding of key end markets for the Company. His prior executive leadership of an international chemical company also provides substantial experience in governance and portfolio management, strategic planning, talent management and international operations. He provides the Board with candid insights into the Company’s industry, operations, management team and strategic opportunities and threats. |
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Table of Contents Age60 Director Since2013 Committees
Audit and Finance Management
Development and
Compensation | | David H.Y. HoIndependent
Chairman and Founder of Kiina Investment Ltd. Background David H.Y. Ho is Chairman and Founder of Kiina Investment Ltd., a venture capital firm that invests in start-up companies in the technology, media and telecommunications industries. Mr. Ho previously served as Chairman of Greater China for Nokia Siemens Networks, President of Greater China for Nokia Corporation and Senior Vice President of the Nokia Networks Business Group. He has also held senior leadership roles with Nortel Networks and Motorola in China and Canada. Mr. Ho currently serves as a member of the board of directors of two public companies, nVent Electric plc and Qorvo, Inc. He also serves as a member of the board of directors of two state-owned enterprises in China, China COSCO Shipping Corporation and China Mobile Communications Corporation, and also serves on the numberboard of months remaining untildirectors of DBS Bank Hong Kong Limited, the next Annual Meeting.Hong Kong subsidiary of DBS Group Holdings. Mr. Ho previously served as a director of Pentair plc prior to the separation of its electrical business now held by nVent Electric plc, a director of Triquent Semiconductor, Inc. prior to its merger with R. F. Micro Devices to form Qorvo, Inc. and as a director of China Ocean Shipping Company prior to its merger with China Shipping Group. Mr. Ho also previously served as a director of Dong Fang Electric Corporation and Owens Illinois, Inc. He holds a Bachelor’s degree in Engineering and a Master’s degree in Management Sciences from the University of Waterloo in Canada. Qualifications Mr. Ho has extensive experience establishing and building businesses in China and in international joint venture operations, government relations and Asian operations and marketing. His background brings significant value to the Company as we execute on our Asian strategy. He also has executive leadership experience in the electronics and technology industries, which are key customer segments for the Company. |
Age60 Director Since2005 Committees
Corporate
Governance and
Nominating Management
Development and
Compensation | | Margaret G. McGlynnIndependent
Retired President, Merck & Co., Inc. Global Vaccine and Infectious Disease Division, and Retired President and Chief Executive Officer, International AIDS Vaccine Initiative Background Margaret G. McGlynn is the retired President of the Global Vaccine and Infectious Disease Division of Merck & Co., a global pharmaceutical company, where she worked for 26 years until her retirement in 2009. Following retirement, she served as President and Chief Executive Officer of International AIDS Vaccine Initiative, a global not-for-profit, public-private partnership working to accelerate the development of vaccines to prevent HIV infection and AIDS. She joined its board of directors in 2010 and served as President and Chief Executive Officer from 2011 until her retirement in 2015. As President of the Global Vaccine and Infectious Disease Division of Merck & Co., Inc., from 2006 until her retirement in 2009, she was responsible for a portfolio of more than $7 billion in global sales. She led the introduction of several new vaccine products and anti-infective therapies, expanded Merck’s vaccine and infectious disease business globally and launched several initiatives to provide access to its vaccines and HIV therapies in the developing world. While at Merck, she also led several other divisions, including U.S. Human Health and Hospital and Specialty Products and Global Marketing. Ms. McGlynn is a director of Amicus Therapeutics, Inc. and Vertex Pharmaceuticals, Inc. She formerly served as a director of Quidel Diagnostics. She earned a Bachelor’s degree in Pharmacy and a Master’s of Business Administration in Marketing from State University of New York at Buffalo. Qualifications From her management of a global business and service as chief executive officer of a global organization, Ms. McGlynn brings extensive experience in government relations and public policy, international marketing, mergers and acquisitions and talent management. She has expertise in productivity and a deep understanding of the healthcare business, an important customer segment for the Company. Her service on other boards also provides financial and governance experience. |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF DIRECTORS
Directors may voluntarily defer all or a partTable 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, 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-offContents 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 | |
1Age69 Director Since2013 Committees
Audit and Finance Executive Management
Development and
Compensation
(Chair) | | Certain directors voluntarily electedEdward L. MonserIndependent
Retired President and Chief Operating Officer of Emerson Electric Co.
Background Mr. Monser was the President of Emerson Electric Co., a global industrial controls products company, from 2010 until his retirement in 2018. At the time of his retirement, Mr. Monser had more than 30 years of experience in senior operational positions at Emerson and played key roles in globalizing the company, having held increasingly senior positions, including Chief Operating Officer from 2001 to defer some or all2015 and President of their cash retainersits Rosemount Inc. subsidiary from 1996 to 2001, as well as holding various operations, new product development, engineering and meeting fees. Any voluntary deferrals are includedtechnology positions. Mr. Monser currently serves as a director of Vertiv, a private company that provides equipment and services for datacenters, and Canadian Pacific Railway Ltd. He was Vice Chairman of the U.S.-India Strategic Partnership Forum and a member of the Economic Development Board for China’s Guangdong Province and a former director and Vice Chairman of the U.S.-China Business Council. He holds a Bachelor’s degree in this column. This column includes annual retainers, meeting fees,Electrical Engineering from the Illinois Institute of Technology and committee chaira Bachelor’s degree in Education from Eastern Michigan University. Qualifications As former president and presiding director retainers.chief operating officer of a premier global industrial organization, Mr. Monser provides the Board with a solid understanding of industrial operations, supply chain optimization and continuous improvement, extensive experience in international business operations, particularly in emerging markets, and a demonstrated capability in strategic planning and organizational development. |
2Age68 Director Since2013 Committees
Audit and Finance
(Chair) Corporate
Governance and
Nominating Executive | | This column showsMatthew H. PaullIndependent
Retired Senior Executive Vice President and Chief Financial Officer of McDonald’s Corporation
Background Mr. Paull was Senior Executive Vice President and Chief Financial Officer of McDonald’s Corporation from 2001 until he retired from that position in 2008. Prior to joining McDonald’s in 1993, he was a partner at Ernst & Young where he managed a variety of financial practices during his 18-year career and consulted with many leading multinational corporations. Mr. Paull currently serves as a director of Canadian Pacific Railway Ltd. and Chipotle Mexican Grill Inc. He was formerly a director of KapStone Paper and Packaging Corporation, WMS Industries Inc. and the grant date fair valuelead director of Best Buy Co. He is a member of the annual deferred stock unit grantAdvisory Board of Pershing Square Capital Management, L.P. He also served as an advisory council member for 2017 calculatedthe Federal Reserve Bank of Chicago. He holds a Master’s degree in accordanceAccounting and a Bachelor’s degree from the University of Illinois. He is a Certified Public Accountant. Qualifications Mr. Paull brings to the Board significant financial expertise with FASB ASC Topic 718. Deferred stock units earned by directors are fully expensed on the Company’sa deep understanding of financial statements at the market valuemarkets, corporate finance, accounting and controls and investor relations. As a former chief financial officer 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.multinational corporation, he also has extensive experience in international operations and marketing. |
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Table of Contents Amounts in this column reflect matching contributions under the Company’s charitable matching gift program for Mr. Deaton and Ms. McGlynn. For Mr. Cogut, the amount reflects 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 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.Director Independence
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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 NYSENew York Stock Exchange (“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 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 terms and conditions similar to those with unrelated parties. In making its independence 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 whichthat 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 directorany relationship he or she has (or anany of his or her immediate family member),members have) with the Company and/or the Executive Officersexecutive officers of the Company.
Table of Contents 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 (amountingemployer, Ingersoll-Rand (amounted to less than 1% of the Company’s and eachIngersoll-Rand’s consolidated revenues). 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, backgrounds and competencies currently represented by the other Board members; diversity considerations; 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.If reelected at the Annual Meeting, Ms. McGlynn will complete her 15thyear of service in 2020. The Board has not made any determinations with respect to director nominations at the 2021 Annual Meeting or future application of the Board Tenure Policy to Ms. McGlynn. | |  | | | | | | 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. | |
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Table of Contents 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 employer’s consolidated revenues)candidates. The policy provides that candidates recommended by shareholders will be considered by the Committee. Submissions of candidates must be made in writing and Mr. Paull’s service onmust be received not later than 120 days prior to the advisory boardanniversary 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 recommended by the Board. In addition to the foregoing procedures for shareholder nomination, in November 2019, the Board amended our Bylaws to implement “shareholder proxy access”, which allows a shareholder were determinedor group of shareholders meeting certain conditions to nominate director candidates for election at annual meetings of shareholders using our proxy statement. This provision allows a shareholder, or group of up to 20 shareholders, to nominate up to two director candidates or, if greater, up to 20% of the number of directors then serving on our Board. The shareholder or group must have owned continuously for at least three years a number of shares equal to at least three percent of our outstanding common stock measured as of the date we receive the nomination. A proxy access nomination must be made not earlier than 150 days and not later than 120 days prior to interfere with their independence. Shareholder Engagement
The Board believes that fostering long-termthe anniversary date of the proxy statement for the prior Annual Meeting and institution-wide relationships with shareholders, listening to their concernscontain certain information described above concerning the candidate and maintaining their trust and goodwill is a prerequisite to good governance. Management conducts extensive engagements with key shareholders. These engagements may cover governance, compensation, and safety,the nominating shareholder(s) as well as certain additional information required by our proxy access Bylaw. The number of director candidates who may be nominated under our proxy access Bylaw will be reduced by the number of director nominations made using the shareholder nomination process described above.
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 operational mattersbusiness 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 committee meetings.
Table of Contents The CEO and other members of senior management are responsible for assessing and managing the Company’s risk exposure, and the Board understand and address the issues that are important to our shareholders. The Board oversees the discharge by management 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.its committees provide oversight in connection with those efforts. Executive Sessions
The independent directors regularly meet without the chief executive officer (“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 Chairman
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| | 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. The Board primarily exercises its risk oversight responsibility through meetings, discussions and review of management reports and proposals. Evaluation 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, environmental and compliance 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 legal and regulatory compliance, financial instruments, financial transactions, financial policies and strategies, pension funding, 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 the 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, while at the same time not encouraging or rewarding 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 Management Succession Planning |
The Management Development and Compensation Committee. Board Meetings and Attendance
During fiscal year 2017, there were eleven meetings of our Board. No director attended less than 75% of the combined total of meetingsCommittee of the Board, the CEO and our Human Resources organization maintain an ongoing focus on executive development and succession planning to prepare the committees on which he or she was serving.Company for future success. The Board reviews organization and succession plans with our CEO at least annually. In accordance withaddition, the Guidelines, all directors are expected to attend the Annual Meeting unless they haveCompany has an emergency or unavoidable schedule conflict. All directors attendedsuccession procedure for the last Annual Meeting.CEO that is reviewed annually by the Board.
AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
Shareholder Communications
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 the address on page 5. 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 independent directors. A copy of the procedure is available upon request from the Corporate Secretary’s Office. Code of Conduct
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
The Company did not engage in any reportable related person transactions in fiscal year 2017.
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, or 5% or more shareholder; an immediate family member of a director, Executive Officer, or 5% or more shareholder; 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 chairman is authorized to approve related person transactions when it is impractical or undesirable to wait until the next Committee meeting for approval. Such chairman-approved transactions must be reported to the Committee at the next meeting.
Diversity Policy
While the Board has not adopted a formal policy on diversity, the Guidelines provide that, as a whole, the Board should include individuals with a diverse range of experience to give the Board depth and breadth 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, to the Board when director candidates are needed.
Board Leadership 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 interestsinterest of the Company at any given time. AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
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, anddirectors. The Board 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, the Board is satisfied that the independent directors have ample opportunities to execute their responsibilities independently through numerous executive sessions held throughout the year at both the Board and committee levels,levels. The independent directors also have substantial interactions with members of the management team other than the CEO and operate under the leadership of the Lead Director and the committee chairs. The Guidelines provide thatresponsibilities of the Lead Director’s responsibilities include:Director are described below.
Determining the agenda for executive sessions ofnon-management directors; and
Principal authority to convene a meeting of independent directors.
The Lead Director is elected annually by majority vote of the Board upon the nomination of the Corporate Governance and Nominating Committee and serves for a three-year term. Committee. Mr. Deaton is currentlyhas served as the Lead Director.Director since 2014. 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 | | ● | possessing the principal authority to convene a meeting of independent directors. |
The independent directors regularly meet without the CEO or other members of management in executive sessions that are scheduled to occur at each Board Tenure Policy To enable Board succession planningmeeting. In addition, the CEO’s performance review is conducted in executive session, and refreshment, the Board has adopted a policy that anon-executive director may not continue to serve on thecommittees regularly meet in executive session. Board after 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 established by the Corporate Governance and Nominating Committee. In recent years, the format has been an unstructured discussionexecutive sessions are led by the ChairmanLead Director, except for the executive session to conduct the CEO’s performance review, which is led by the Chair 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.Committee.
AIR PRODUCTS AND CHEMICALS, INC.
CORPORATE GOVERNANCE
Role in Risk Oversight
The Board’s role in risk oversight
Standing Committees 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
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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 Committeesthese 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, which is described below. The charters of all the committeesAudit and Finance Committee, the Corporate Governance and Nominating Committee and the Management Development and Compensation Committee can be viewed on the Company website athttp://www.airproducts.com/company/ Company/governance/board-of-directors/committee-composition/commitee-descriptions-and-charters.aspxcommitee-descriptions-and-charters.aspx and 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 | 12 | | |
Table of each committee at the end of fiscal year 2017, the number of meetings held by each committee during fiscal year 2017, and the committee chairs.Contents | | | | | | | | | | | | | | | | 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 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 (“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 contained in the Company’s Annual Report onForm 10-K for the fiscal year ended September 30, 2017 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 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 onForm 10-K 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 | |
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 NYSE listing standards and U.S. Securities and Exchange Commission (“SEC”) regulations, respectively. FY2019 Meetings:7 Committee Report:Page 52 | 1 | 2016 includes audit-related fees
Primary Responsibilities ●The Committee is directly responsible for the appointment, compensation, retention and oversight of $9.9 million associatedthe 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, all systems and processes relating to the integrity of financial statements, internal audit process, programs for compliance with auditlaws and review services provided in connectionregulations and our Code of Conduct and Business Ethics and enterprise processes for risk assessment and management. ●The Committee discusses with the separationCompany’s Internal Audit function and independent registered public accounting firm the overall scope and plans for their respective audits. In addition, the Committee regularly meets with Internal Audit and the independent registered public accounting firm, with and without management present, to discuss the results of Versum Materials.their audits, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. Audit and Finance Committee Charter ●The Audit and Finance Committee operates under a written charter that is available on our website at the address provided on page 12. |
AIR PRODUCTS AND CHEMICALS, INC.
STANDING COMMITTEES OF THE BOARD
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 onForm 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 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 Committee 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;
Members ●Chadwick C. Deaton (Chair) ●Charles I. Cogut ●Margaret G. McGlynn ●Matthew H. Paull FY2019 Meetings:3 | •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 sustainability and other social responsibility matters. Corporate Governance and Nominating Committee Charter ●The Corporate Governance and Nominating Committee operates under a written charter that is available on our website at the address provided on page 12. |
| 2020 Proxy Statement | | Sean D. Major, Executive Vice President and General Counsel;5
13 |
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 componentsTable 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:Contents
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 Committee has reviewed and discussed with management the following Compensation Discussion and Analysis section of the Company’s Proxy Statement for fiscal year 2017. Based on its review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for fiscal year 2017.
Management Development and Compensation Committee Members ●Edward L. Monser (Chair) ●Susan K. Carter ●Chadwick C. Deaton ●David H.Y. Ho ●Margaret G. McGlynn FY2019 Meetings:2 Committee Report:Page 20 | 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 our 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. The Committee charter also permits the Committee to retain a third party compensation consultant as needed. Management Development and Compensation Committee Charter ●The Management Development and Compensation Committee operates under a written charter that is available on our website at the address provided on page 12. |
Executive Committee Members ●Seifi Ghasemi (Chair) ●Chadwick C. Deaton ●Edward L. Monser ●Matthew H. Paull FY2019 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. All action taken by the Executive Committee since the last meeting of the Board is reported to the Board at its next meeting. The Executive Committee meets only as needed when it is not feasible to convene the full Board. The Executive Committee does not have a written charter. |
| 14 | | |
Table of Contents Board Practices, Processes and Policies Board Meetings and Attendance |
During fiscal 2019, there were 10 meetings of the Board. No director attended fewer 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 |
Each year the Board and its committees conduct self-evaluations of their performance. The evaluation format is established by the Corporate Governance and Nominating Committee. In fiscal 2019, the Committee introduced a new survey format for performing Board and committee self-evaluations designed to generate improved performance feedback. The surveys were tailored for the Board and each committee and addressed, among other things, the responsibilities set forth in our Corporate Governance Guidelines and the charters of the respective committees. The results of these surveys were discussed by the Board and committees, respectively. Individual directors are evaluated by the Corporate Governance and Nominating Committee at the time of nomination for reelection. This evaluation is conducted by a member of the Corporate Governance and Nominating Committee after soliciting input from 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 our shareholders. The Guidelines set forth the governance practices the Board follows, including Board leadership, director independence and qualifications, nomination and election of directors, director responsibilities, access to management, authority to retain independent advisors, director compensation, director orientation and education, as well as the CEO performance assessment, management succession planning 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. The Company’s Code of Conduct and Business Ethics (the “Code of Conduct”) applies to all full and part-time employees of the Company and its subsidiaries and other affiliates, including our principal executive officer, principal financial officer and principal accounting officer, as well as our directors. The Code of Conduct addresses such topics as conflicts of interest, confidentiality, protection and proper use of Company assets and compliance with laws and regulations. The Code of Conduct was adopted in fiscal 2019 to replace prior codes of conduct in order to improve readability and communicate more clearly the Company’s expectations regarding ethical business conduct. The Code of Conduct was also organized by subject matter to make it easier for Company personnel to find and apply applicable guidance. The Code of Conduct can be found on the website at www.airproducts.com/company/governance/commitment-ethical-business/employee-code-of-conduct.aspx and is available in print upon request.
Table of Contents | Transactions with Related Persons |
The Company did not engage in any reportable related person transactions in fiscal 2019. 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 the review of related person transactions. A related person transaction is a transaction between the Company and a director, executive officer or 5% or more shareholder, any of their respective immediate family 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 Audit and Finance 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 Chair is authorized to approve related person transactions when it is impractical or undesirable to wait until the next Committee meeting for approval. Such Chair-approved transactions must be reported to the Committee at the next meeting. | 16 | | |
Table of Contents Compensation of Directors In fiscal 2019, our directors received compensation as set forth in the chart below. There were no changes made to the compensation of non-employee directors in fiscal 2019. | 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 2019 when the Committee reviewed a competitive assessment of directors’ compensation levels and practices among the Peer Reference Group described below on pages 33-34 as well as a broader industry component and survey data of companies with annual revenues between $2.5 billion and $10 billion. In connection with this review the Committee retained an external compensation consultant, Pearl Meyer & Partners, LLC (“Pearl Meyer”), to provide independent advice and benchmarking with respect to director compensation practices. Prior to retaining Pearl Meyer, the Committee assessed its independence and concluded that there were no conflicts of interest that would prevent Pearl Meyer from independently advising the Committee. In making this determination, the Committee considered, among other things, the fees to be paid as a percentage of Pearl Meyer’s consolidated revenues, policies and procedures established by Pearl Meyer to mitigate conflicts of interest, and the lack of business and personal relationships between Pearl Meyer team members and the Company’s executive officers or Committee members. Aggregate fees paid to Pearl Meyer for director compensation consulting services rendered in fiscal 2019 were $21,990. As a result of this compensation review, the Committee determined that cash compensation, which was last adjusted in fiscal 2013, paid to the Company’s directors was significantly below the median of the Peer Reference Group on both an individual and aggregated basis and that, as a result, total compensation was significantly below the median as well. The Committee recommended, and the Board approved, an increase in the annual cash retainer to $120,000, beginning in fiscal 2020, which would position cash and total compensation closer to, but below, the median of the Peer Reference Group. This action is expected to maintain the competitiveness of the Company’s director compensation program and accordingly strengthen our ability to recruit and retain qualified directors. |
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, 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. Deferred retainers and dividend equivalents are credited on the last day of the quarter based on the NYSE closing price of a share of Company stock on the preceeding trading day. Directors are reimbursed for expenses incurred in performing their duties as directors. The Company covers directors under its 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 2019 the Company matched donations of up to $10,000 per year made by employees and directors to qualifying non-profit organizations.
Table of Contents To emphasize the importance of long-term alignment with shareholders, the Board has adopted stock ownership requirements for directors. Directors are expected to own shares or share equivalents with a value (based on the NYSE closing price) equal to five times the annual cash retainer by the end of the fifth fiscal year after joining the Board. Directors are expected to increase their holdings to reflect an adjustment in the annual cash retainer within a reasonable period of time following the adjustment. Once a director has met the requirement, if there is a subsequent decline in the Company’s share price that causes the director’s ownership level to fall below this guideline, the director is not expected to purchase additional shares to meet the guideline but is expected to refrain from selling or transferring shares until the guideline is again satisfied. All directors are currently in compliance with the stock ownership guidelines for directors. | FISCAL 2019 DIRECTOR COMPENSATION | | |
| Name | | Annual Retainers(1)
($) | | Stock Awards(2)
($) | | All Other
Compensation(3)
($) | | Total
($) | | Susan K. Carter | | 100,000 | | 150,140 | | — | | 250,140 | | Charles I. Cogut | | 100,000 | | 150,140 | | 13,123 | | 263,263 | | Chadwick C. Deaton | | 140,000 | | 150,140 | | 10,000 | | 300,140 | | David H.Y. Ho | | 100,000 | | 150,140 | | — | | 250,140 | | Margaret G. McGlynn | | 100,000 | | 150,140 | | 10,000 | | 260,140 | | Edward L. Monser | | 120,000 | | 150,140 | | 10,000 | | 280,140 | | Matthew H. Paull | | 125,000 | | 150,140 | | 6,834 | | 281,974 |
| (1) | This column includes annual retainers and committee chair and presiding director retainers. Certain directors voluntarily elected to defer some or all of their cash retainers. Any amounts that have been deferred are included in this column. | | (2) | This column shows the grant date fair value of the annual deferred stock unit grant for 2019 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. Deaton, Ms. McGlynn and Mr. Monser. 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 $800 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. |
| 18 | | |
Table of Contents 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 2019 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 2021 Annual Meeting. |  | | The Board recommends a vote“FOR” this resolution. | | | | | | As 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 shareholder value. It is aligned with the 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. |
Table of Contents 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. 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 2020 Annual Meeting of Shareholders and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019. Management Development and Compensation Committee Edward L. Monser, Chairman Chair
Susan K. Carter
Chadwick C. Deaton
David H. Y.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. It2019. For fiscal 2019, 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; and | | ● | Dr. Samir J. Serhan, Executive Vice President. |
The Compensation Discussion and Analysis is organized into 46 sections: | SECTION | | Page Number |  | | Highlights of Fiscal 2019 Company Performance and Compensation Actions | | 21 |  | | Fiscal 2019 Executive Officer Compensation Program Overview | | 24 |  | | Fiscal 2019 Total Direct Compensation Components | | 26 |  | | Employee Benefit and Other Compensation | | 31 |  | | Executive Compensation Decision-Making Process | | 32 |  | | Key Compensation Practices and Policies | | 35 |
| 20 | | |
Table of Contents 
| Highlights of Fiscal 2019 Company Performance and Compensation Actions |
Fiscal 2019 Performance and Strategic Highlights Financial Performance | EARNINGS PER SHARE | | | NET INCOME | | | | | Section | | Page Number |  | Highlights of 2017 Company Performance and Compensation ActionsIncreased 20%over fiscal 2018.
| | Increased 18%over fiscal 2018. |
| ADJUSTED EARNINGS PER SHARE1 | | | 26ADJUSTED EBITDA1 | | Fiscal Year 2017 Executive Officer Compensation Program Overview
| | | 30 | | Fiscal Year 2017 Direct Compensation Components
 | | | 35 |  | Employee Benefits and other Compensation Practices and PoliciesIncreased 10%over fiscal 2018.
| | | 40 | |
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 11%over prior year. Adjusted earnings per share7 increased 12%, representing the third consecutive year of double digit growth.fiscal 2018.
|
 | •Safety
Performance |  | Operational
Performance |  | Returns to
Shareholders | Although the Company did not achieve its safety objectives in fiscal 2019, our safety record has improved significantly since fiscal year 2014, with a 63% improvement in the employee lost time injury rate and a 22% improvement in the employee recordable injury rate over that time. | Net incomeThe Company continued to execute its gasification strategy, including major projects in Saudi Arabia and China, and completed an acquisition of gasification technology from continuing operations increased 3%. Adjusted EBITDA7 increased 7%.General Electric.
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| • | | The Company returned nearly $800 million$1 billion to shareholders through dividends, increasing dividends for the 3537thconsecutive 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
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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.
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8 | October 3, 2016 NYSE closing price of $28.00 compared to November 30, 2017 NYSE closing price of $38.40.
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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 point planorganization, changed the culture, controlled capital and related goals were announced,costs and aligned our incentive compensation structure. We subsequently evolved our Five-Point Plan to guide our success over the coming years. Today, our strategic 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. |
Table of Contents Fiscal 2019 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 Compensation Committee has supported(within this Compensation Discussion and Analysis, the Company’s strategy by focusing“Committee”) established fiscal 2019 target total direct compensation for the Company’sexecutive officers. Mr. Ghasemi’s compensation was determined pursuant to his amended and restated employment agreement, dated November 14, 2017 (the “Employment Agreement”), which is described on page 26. The table below indicates the target 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 2019. 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 were again basedthat 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 2019 compensation in the format required by SEC rules. | Officer | | Base Salary
($) | | Annual
Incentive
Target
($) | | Grant Value of
Long-Term
Incentives
($) | | Target
Total Direct
Compensation
($) | | Seifi Ghasemi | | 1,350,000 | | 2,025,000 | | 10,000,000 | | 13,375,000 | | M. Scott Crocco | | 650,000 | | 552,500 | | 1,700,000 | | 2,902,500 | | Sean D. Major | | 550,000 | | 467,500 | | 1,000,000 | | 2,017,500 | | Samir J. Serhan | | 650,000 | | 552,500 | | 1,700,000 | | 2,902,500 |
For fiscal 2019, total direct compensation opportunities established by the Committee for all executive officers (excluding the CEO as referenced below) approximated the market median. Based on adjusted earnings per share,Mr. Ghasemi’s superior performance across his tenure with Air Products, his fiscal 2019 pay was set to approximate the 75thpercentile of the market. Performance-Based Compensation The majority of compensation provided to the Company’s executive officers is dependent upon total returns delivered to shareholders and the adjusted earnings per share targets were translatedachievement of performance objectives. Approximately 90% of the CEO’s total direct compensation opportunity is performance-based to adjusted EBITDA targets forensure that compensation directly reflects the business units belowcreation of shareholder value. CEO TARGET COMPENSATION MIX | | | OTHER NAMED EXECUTIVE OFFICER | | | | | | TARGET COMPENSATION MIX | | | | |  | |
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| 22 | | |
Table of Contents Incentive Plan Metrics and Goals In fiscal 2019, the Executive Officer levelCommittee continued to align rewards with value-creating performance. Target level payouts for 2017 were conditioned on meeting or exceedinggrant incentive compensation opportunities designed to support the Company’s adjusted earnings per share goal of approximately 10% growth for 2017.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 2019, 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 2019 were conditioned on meeting or exceeding the Company’s adjusted earnings per share goal of approximately 8% growth. |
For fiscal year 2017,2019, 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 33-34. 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 2019 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.
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AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Committee Determined Fiscal Year 2017 Incentive Compensation Payouts.
In fiscal year 20172019, the Company significantly improveddelivered excellent financial results and continued to successfully execute its safety performance, exceeded its adjusted earnings per share target, achieved multiple strategic milestones, executed well ongasification strategy, including major projects across the globe, announced several major project winsin Saudi Arabia and met or exceeded shareholders’ expectations.China. Following the end of the year, the Committee determined actual annual incentive awards for the Executive Officers.named 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 27-28. Based on the Company’s outstandingstrong performance, the annual incentive award payout factor was 182%120% for all Executive Officers.named executive officers. The Committee also determined final payout levels for performance share awards granted in fiscal year 20152017 with a performance cycle ending at the end of fiscal year 2017,2019, 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 76%; the resultant TSR percentile rank was 64%. The payout metrics and calculation methodology are described on pages 38-39. The Committee determined to award a target payout for fiscal year 2017.page 29. 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 20172019 Annual Meeting, the Committee reviewed the results of the shareholder advisory vote on Executive Officerexecutive officer compensation. With over 97%approximately 97.25% of votes cast voted in favor of approval, the Committee determined that the great majority of shareholders were satisfied with theour executive compensation program. Compensation Governance Best Practices AIR PRODUCTS AND CHEMICALS, INC.In fiscal 2019, the Committee maintained strong compensation governance practices. See page ix of Proxy Statement Highlights.
Table of Contents  | Fiscal 2019 Executive Officer Compensation Program Overview |
COMPENSATION OF EXECUTIVE OFFICERS
Our Compensation Philosophy Fiscal Year 2017 Executive Officer Compensation ProgramOverview
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.shareholder value. 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.delivering shareholder value. 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.target payouts. Long-term incentives are delivered in stock, the majority of which is 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 employment 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 or 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’sFiscal 2019 Total 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 lesserless 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 Companyour stock price. | 24 | | |
Direct compensation for fiscal year 2017 was delivered to the CEO and other Executive Officers through the components listed in theTable of Contents
The table below which provides a brief description of the principal types of total 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. 26. | | | | | | | | | | | | 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. The Committee has discretion to adjust the Annual Incentive Plan upward or downward for factors such as safety performance. | | 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 onupon 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 yeara four-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.business holistically. 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.
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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.
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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.
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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 2017.2019
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, inGroup. In the case of the CEO and CFO, the projected median level is derived from two data sources—the Survey Reference Group and the Peer Reference Group.17Group, each weighted equally. Additional information regarding these peer groups is provided on pages 33-34. 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 we compete against for talent. The Survey Reference Group is comprised of companies that are similar in revenue size to the Company to benchmark specific pay levels. The Peer Reference Group is comprised of peer chemical and industrial companies to determine the Company’s relative TSR performance for purposes of performance share payouts. Total Direct Compensationdirect 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.
Table of Contents For fiscal year 2017 Total Direct Compensation2019, total direct compensation opportunities established by the Committee for all Executive Officersnamed executive officers (excluding the CEO as described 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 lesserless 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 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
Mr. Ghasemi Mr. Ghasemi’s Employment Agreement was amended and restated on November 14, 2017, and provided that Mr. Ghasemi 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, its independent compensation consultant, Willis Towers Watson (“WTW”), performed a competitive assessment of Mr. Ghasemi’s total direct compensation at the beginning of fiscal 2019 and determined that the target total direct compensation position was between the 5017th and 75th percentile for the Peer Reference Group. Based on Mr. Ghasemi’s superior performance across his tenure with Air Products, Mr. Ghasemi’s long-term incentive opportunity was increased from $8,500,000 to $10,000,000. For fiscal 2019, Mr. Ghasemi’s pay was set to approximate the 75th percentile of the market. |
 | Consistent with industry practice, the Company considersFiscal 2019 Total Direct Compensation within 15% of median to be competitive with median. This margin allows foryear-to-yearComponents 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.
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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
Within the competitive target value for an Executive Officer’s Total Direct Compensationexecutive 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; sotherefore, the amounts reflected in the Summary Compensation Table reflect the fiscal year 20162018 base salary rate for the first quarter of the Company’s fiscal year and the fiscal year 20172019 base salary rate for the remainder of the fiscal year. For fiscal year 2017, all Executive Officers’ base salaries approximated Market Median.21 2019, Mr. Ghasemi, Mr. Crocco, and Mr. Painter received no increase inCrocco’s base salary for 2017. Ms. Grant received a modest increasewas increased to more closely align hermaintain competitive positioning with Market Median positioning.the market median. Dr. Serhan’s base salary was negotiated duringincreased to reflect the expanded scope of his recruitment. duties. For the other named executive officers, Mr. Ghasemi and Mr. Major, base salaries remained the same. Base salaries approved for the Executive Officersexecutive officers for 2016fiscal 2018 and 2017fiscal 2019 were as follows: | Officer | 2018 Base
Salary Rate
($) | | 2019 Base
Salary Rate
($) | | %
Increase | | Seifi Ghasemi | 1,350,000 | | 1,350,000 | | 0 | | M. Scott Crocco | 600,000 | | 650,000 | | 8 | | Sean D. Major | 550,000 | | 550,000 | | 0 | | Samir J. Serhan | 550,000 | | 650,000 | | 18 |
| 26 | | |
Table of Contents | | | | | | | | | | | | | | | | | | | 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 | |
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 2017,2019, the target award level for Mr. GhasemiMajor was increased as described above.to enhance his overall amount of performance-based compensation and to align target bonus opportunities reflective of his 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).2019. | | | | | | | | | | | | | | | | | | | 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 | 2018 Target
(% of Base Salary) | | 2019 Target
(% of Base Salary) | | 2019 Target
Value ($) | | Seifi Ghasemi | 150 | | 150 | | 2,025,000 | | M. Scott Crocco | 85 | | 85 | | 552,500 | | Sean D. Major | 75 | | 85 | | 467,500 | | Samir J. Serhan | 85 | | 85 | | 552,500 |
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 20172019 the Committee selected rigorous adjusted earnings per share(1)targets as the performance measure for the Annual Incentive Plan to drive towardsincentivize the executive officers to help sustain the Company’s goal of beingposition as the most profitable industrial gas company in the world. Target adjusted earnings per share of $8.05 represents an 8% increase from fiscal 2018 adjusted earnings per share of $7.45. The threshold, target and maximum factors for each measure are set out below. (Factors are interpolated between points.) 2019 Adjusted
Earnings per Share(1) | Initial Payout
Factor % | | <$7.45 | 0 | | $7.45 | 50 | | $8.05 | 100 | | $8.45 | 200 |
| (1) | Adjusted earnings per share is a non-GAAP financial measure and is defined and reconciled to diluted earnings per share in Appendix A. |
| | | | | | 2017 Adjusted Earnings per Share22 (% increase from 2016) | | Initial Payout Factor% | <$ 5.64 | | 0% | $5.64 | | 50% | $6.20 (10%) | | 100% | $6.51 (15%) | | 200% |
Further, consistent with the Company’s goal of being the safest industrial gas company in the world and other nonfinancial and strategic goals, theThe Committee also reserved the ability to exercise discretion to adjust the payout within a range to reflect performance in areas such as safety, sustainability, diversity, and productivity, progress on strategic objectives or other individual performance factors. The actual payout factor can range is from 30 percentage points below the initial payout factor determined using the scheduledescribed 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.
factor based on this application of discretion.
Table of Contents | DETERMINATION OF ANNUAL INCENTIVE PLAN PAYOUT | | | | Determination of Annual Incentive Plan Payout |
| | | | | | | Determine Target Award (Beginning(beginning of fiscal year) |  |  | | Determine Payout Factor Range (After(after fiscal year-end) | | | | Adjust Payout Factor Within the Range to Determine Actual Payout Factor | | | | Multiply Actual Payout Factor by Target Award | | | | | | | | | | | | | | | | | | | |
For fiscal year 2017,2019, adjusted earnings per share for purposes of the Annual Incentive Plan were $6.36.23 Thewas $8.21, which resulted in an initial payout factor was 152%of 140%. The potential payout range was 122%110% to 182%170%; however, the Committee decided to exercise its discretion to adjust the initial payout factor. The Committee applied 20 percentage points of negative discretion to amounts payable under the annual incentive compensation plan for fiscal 2019 due to safety performance, for a final payout factor of 120%. The Committee determinedamount of fiscal 2019 awards paid to award annual incentive payouts at the top of the 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.
Fiscal year 2017 awards determined for Executive Officers appearexecutive officers appears in the NonequityNon-Equity Incentive Plan Compensation column of the Summary Compensation Table.
One-time Cash Incentive Award.Discretionary Bonuses
In addition to amounts paid under the annual incentive award,Annual Incentive Plan, we from time to time pay discretionary cash bonuses as recruitment or retention incentives or in recognition of outstanding performance. In November 2019, the Committee approvedawarded Dr. Serhan a specialone-time cash award$1,000,000 bonus in recognition of $250,000his fiscal 2019 performance, which included significant contributions to Mr. Crocco to recognize his extraordinary effortswin and execute the largest and most complex projects in executing the sale ofCompany’s history and driving transformation in the Performance Materials business. The award was paid in February 2017.Global Engineering, Manufacturing, Technology and Equipment organization. 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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Long-Term Incentives 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,long-term and to reward sustainable growth, disciplined capital investment, sustainable cost reduction and consistent operational excellence. For 2017fiscal 2019, 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 20172019 grants, relative total shareholder returnTSR for fiscal year 2017-2019)2019-2021); and restricted stock unitsRSUs, which link Executive Officers’executive officers’ interests to shareholder returns and provide a retention incentive.
For fiscal year 2017,2019, 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 20172019 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 Mr. Ghasemi 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 whichthat 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 grant levels and other recent compensation actions with respect to the individual such as specialone-time retention awards. For fiscal year 2017,2019, all intended | 28 | | |
Table of Contents long-term incentive values approximated the projected Market Median.market median (except for the CEO value, which approximated the 75thpercentile). 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.10,000,000
| | M. Scott Crocco | 1,700,000 | | Sean D. Major | 1,000,000 | Samir J. Serhan due to the uniqueness of his position. | 1,700,000 |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
2017 Performance Shares. The primary componentShares
| FISCAL 2019 PERFORMANCE SHARE GRANTS | | |
In fiscal 2019, performance shares made up the majority of the long-term incentive program for 2017 was performance shares.incentives granted to our executive officers. 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 the achievement of specified performance if threshold performance goals are met.goals. Payouts of performance shares range from 0% to 215%200% of the target level of shares awarded. The target level for fiscal year 20172019 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 (+/- 15 percentage points) to address performance factors that may not be reflected in relative TSR results. Fiscal year 20172019 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)2019-2021). 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 | % | 50th %ile | | %ile | 100 | % | 30th %ile | | %ile | 30 | % | <30th %ile | | %ile | 0 | % |
| * | The Committee may increase or decrease the Payout Factorpayout factor by up to 15 percentage points. |
The target number of fiscal year 20172019 performance shares granted to each Executive Officernamed executive officer was as follows: | Officer | | | | Target
Performance
Shares | | Seifi Ghasemi | 37,697 | OfficerM. Scott Crocco | 6,408 | | Sean D. Major | 3,769 | | Samir J. Serhan | 6,408 |
| 2020 Proxy Statement | | Target Performance Shares29 |
Table of Contents | FISCAL 2017-2019 PERFORMANCE SHARES PAYOUT | | S. Ghasemi
| | | 36,267 | | M. S. Crocco
| | | 6,400 | | J. Grant
| | | 2,773 | | C. F. Painter
| | | 5,546 | | S. Serhan
| | | 4,267 | |
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. The Committee determined the most logical way to reflect thespin-off was to calculate the TSRfinal payout levels for performance as if one half ofshare awards granted in fiscal 2017 with a share of Versum Materials (the distribution received by shareholders for each share of Company stock) was included in the Company’s TSR throughperformance cycle ending at the end of the performance period. The resulting cumulative TSR was 35.6%, which was the 46th percentile rank versus the Peer Reference Group, resultingfiscal 2019.
This resulted in aan initial payout factor range of71%-101%. 157% percent for the fiscal 2017-2019 performance cycle. The Committee establishedutilized its discretion to adjust the payout factor at 100% for the following reasons: | • | | 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 reorganize the Company, reduce costs, refocus the Company on its core industrial gases business and strengthen its balance sheet.
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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 bottomfactor by 15 percentage points (full positive discretion) to 172% in recognition of the range based onsignificant shareholder value creation that was achieved through sustained execution of the underperformance of certain large capital investments made duringFive-Point Plan. The final payout for the applicablefiscal 2017-2019 performance periods.cycle is outlined in the following table.
| Officer | Target
Performance
Shares Grant | | Performance
Shares Earned(2) | | Seifi Ghasemi | 36,267 | | 62,379 | | M. Scott Crocco | 6,400 | | 11,008 | | Sean D. Major(1) | — | | — | | Samir J. Serhan | 4,267 | | 7,339 |
| (1) | Mr. Major joined the Company in fiscal 2017 and did not participate in these awards. | | (2) | Based on final payout factor of 172%. |
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.44-46. 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 20172019 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 NYSE 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 2019, 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.25,131 | Restricted Stock UnitsM. Scott Crocco | | The number of restricted stock units was adjusted.4,272 | Performance Shares
Sean D. Major | 2,513 | | Samir J. Serhan | The number of performance shares was adjusted.4,272 |
Executive Officers who held unvested Air Products restricted stockIn December 2018, the Committee granted Dr. Serhan 9,424 RSUs as a special retention award that will vest in three equal annual installments. 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.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Employee Benefit Plansleadership role he will play in winning and Other Compensation Practicesexecuting the Company’s largest projects and Policiesbuilding out and integrating our global gasification technologies.
| 30 | | |
Table of Contents  | 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. Retirement Benefits Executive Officers. Retirement Benefits. Executive Officersofficers participate in the Company’sour 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 has been closed to new entrants)entrants since August 2014, 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. The Company providesBenefits We provide 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 44. 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 practices, 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)defined in the severance agreement) or he or she terminates employment for “good reason” (as defined).defined in the severance agreement) in exchange for certain post-employment restrictions. Details of the agreements are described below on pages 56-57.47-48.
Table of Contents 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 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. The Company provided relocation benefits to Dr. Serhan consistent with its domestic relocation policy, including reimbursement for loss on the sale of his home and certain tax preparation services. The Company also paidprovides certain legal fees on behalf ofexecutive officers with access to a diagnostic medical exam. Effective February 1, 2019, the Company placed Dr. Serhan on an International Business Assignment. In connection with this assignment, Dr. Serhan received certain allowances. Dr. Serhan’s assignment perquisites include a Company-provided apartment and utilities, a Company-provided car, a miscellaneous expenditure allowance and a daily living allowance.
 | Executive Compensation Decision-Making Process |
Roles of the Committee, Compensation Consultant and Management in the Compensation Process Committee Responsibilities The Committee is responsible to facilitate his employmentthe 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 total 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 Chair in between meetings. Management reports fees paid for executive compensation consulting services performed by the Company.consultant to the Committee at each meeting, and the Committee approves in advance the executive compensation consulting services to be performed. | 32 | | |
Table of Contents The Committee retained WTW as its external consultant for fiscal 2019. Aggregate fees for WTW’s executive compensation consulting services provided to the Committee were $298,000. During fiscal 2019, WTW also performed global retirement plan actuarial, administrative and consulting, health care exchange and aviation insurance brokering services for the Company and provided Talent & Rewards data surveys in addition to the work performed for the Committee. The aggregate fees for those services were $656,000. 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 that 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. During fiscal 2019, WTW provided advice and analysis to the Committee on total 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, a governance and regulatory update, a third party independent review of the Company’s executive compensation disclosures 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 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 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 2019 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 2019.
Table of Contents 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 used for performance share relative TSR measure | Compiled from proxy statement filings |
For purposes of assessing competitiveness and recommending compensation levels for fiscal 2019, 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 2018 revenue of $8.9 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 2019 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 | | | Eastman Chemical Co. | Linde plc. | |
For fiscal 2019, the Peer Reference Group was updated to remove Praxair, Inc. and replace it with Linde plc., its successor in interest following its merger with Linde AG in October of 2018. Risk Assessment During fiscal 2019, 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 Company, 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 weighting compensation to long-term incentives; |
| 34 | | |
Table of Contents | ● | 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; and | | ● | 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.  | 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 whichthat 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 isExecutive officers and directors are also the policy of the Company thatprohibited from holding shares of Company stock owned by Executive Officers or directors may not be held in a margin account or pledgedpledging shares of Company stock as collateral on a loan. Employees, other than executive officers, are generally permitted to engage in transactions that are designed to hedge or offset market risk. 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., must be repaid to the Company)Company (or “clawed back”) 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 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. Granting Practices AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION TABLES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 (except for off-cycle recruiting and retention awards) and 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. (1)2020 Proxy Statement | | 35 |
Table of Contents Executive Compensation Tables Ms. Grant and Dr. Serhan were not Executive Officers for 2015 or 2016; so their compensation is not shown for those years.Fiscal 2019 Summary Compensation Table
|
Officer 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 | | 2019 | | 1,350,000 | | | | 12,842,935 | | 2,430,000 | | 7,300 | | 401,722 | | 17,031,957 | | 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 | M. Scott Crocco,
Executive Vice President
and Chief Financial Officer | | 2019 | | 634,615 | | | | 2,183,142 | | 663,000 | | 1,270,253 | | 10,005 | | 4,761,015 | | 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 | Sean D. Major,
Executive Vice President,
General Counsel
and Secretary(1) | | 2019 | | 550,000 | | | | 1,284,116 | | 561,000 | | 755 | | 58,884 | | 2,454,755 | | 2018 | | 550,000 | | | | 1,151,372 | | 523,875 | | 187 | | 45,140 | | 2,270,574 | | | | | | | | | | | | | | | | | | Samir J. Serhan,
Executive Vice President | | 2019 | | 619,231 | | 1,000,000 | | 3,753,368 | | 663,000 | | 767 | | 275,930 | | 6,312,296 | | 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 |
| (1) | Mr. Major joined the Company in fiscal 2017 and became a named executive officer in fiscal 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-ondiscretionary bonus paid to Dr. Serhan. Serhan based on his 2019 performance in recognition of his contribution to winning and executing the largest and most complex projects in Air Products’ history and driving transformation across our businesses, as well as sign-on bonuses paid to Dr. 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), restricted stock (2016 and 2015) 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 19,20, Share-Based Compensation, to our audited financial statements included in our Annual Report on Form10-K for the fiscal year ended September 30, 2017,2019, filed with the SEC on November 16, 2017.26, 2019. 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. MaximumThe maximum grant date values of performance share grants are displayedreflected in the table below. Maximum values use the NYSE closing stock price on date of grant at the maximum calculated payout at 200% as well as the maximum discretion that could be applied at 15%. For additional information on awards made in fiscal 2017,2019, see the Grants of Plan-Based Awards Table and Outstanding Equity Awards Table on pages 4538 and 47,39, respectively. |
| FISCAL 2019 PERFORMANCE SHARES GRANT DATE VALUES | | | |
| | Officer | | Value Included
($) | | Maximum Value
($) | | Seifi Ghasemi | | 8,655,608 | | 13,504,309 | | M. Scott Crocco | | 1,471,341 | | 2,295,557 | | Sean D. Major | | 865,400 | | 1,350,180 | | Samir J. Serhan | | 1,471,341 | | 2,295,557 |
| 36 | | |
| | | | | | | | | | | | 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
Table of Contents | (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.
|
(5) | Amounts in this column reflect Annual Incentive Plan awards. At their election, Executive Officersexecutive officers may defer awards received under this Plan. |
(6)(5) | Amounts in this column reflect the annual change in the actuarial present value of each Executive Officers’executive officers’ 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 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, 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 | | $ | 7,300 | | M. Scott Crocco | | $ | 6,267 | | Sean D. Major | | $ | 755 | | Samir J. Serhan | | $ | 767 | | The pension accrual amounts represent the difference between the September 30, 2018 and September 30, 2019 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 | | $ | 1,263,986 |
| 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 | | Contributions
Under Defined
Contribution Plans
($) | | Group Term
Life Insurance
Premiums
($) | | International
Assignments
Policy(i)
($) | | Perquisites or
Personal Benefits(ii)
($) | | Seifi Ghasemi | | 170,147 | | 1,236 | | — | | 230,339 | | M. Scott Crocco | | 5,769 | | 1,236 | | — | | 3,000 | | Sean D. Major | | 53,109 | | 1,236 | | — | | 4,539 | | Samir J. Serhan | | 62,257 | | 1,236 | | 212,437 | | — |
(i) | (i) | Dr. Serhan was on temporary international commuter assignment during fiscal 2019 in support of our operations and business development initiatives around the globe. In connection with this assignment, the Company’s standard International Assignment Policy provides reimbursement of expenses over and above those Dr. Serhan would have incurred if he remained solely in the U.S. This amount includes a housing allowance of $74,134; car lease of $34,502; miscellaneous expenditure allowance of $51,467; tax gross up of $45,204 and other miscellaneous items of $7,130. | | (ii) | The Company provides one diagnostic medical exam per year for certain executives. The value of this benefit was $8,066 for Mr. Ghasemi, $4,539 for Mr. Major and $3,000 for Mr. Crocco | | | This amount also includes the incremental cost to the Company of providing Mr. Ghasemi a car and driver for occasional personal use ($ 24,810),of $29,654, including for occasional use by his spouse, to mitigate security concerns, and of providing Mr. Ghasemi personal use of corporate aircraft ($31,886).of $192,619. These benefits were provided to allow Mr. Ghasemi to focus on Company business and to mitigate security concerns. The incremental cost for the car and driver iswas 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 tollstoll 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, there was no incremental cost to the Company for this accompanying travel. Mr. Ghasemi pays all taxes associated with his personal use of the aircraft. |
Table of Contents Fiscal 2019 Grants of Plan-Based Awards Table |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
| | | | | |
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
($) | | Officer | | Award Type | | Grant Date | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | | | Seifi Ghasemi | | Annual Incentive Plan | | | | 0 | | 2,025,000 | | 4,000,000 | | | | | | | | | | | | | Performance Shares | | 12/3/2018 | | | | | | | | 0 | | 37,697 | | 81,049 | | | | 8,655,608 | | | Restricted Stock Units | | 12/3/2018 | | | | | | | | | | | | | | 25,131 | | 4,187,327 | | M. Scott Crocco | | Annual Incentive Plan | | | | 0 | | 552,500 | | 1,270,750 | | | | | | | | | | | | | Performance Shares | | 12/3/2018 | | | | | | | | 0 | | 6,408 | | 13,777 | | | | 1,471,341 | | | Restricted Stock Units | | 12/3/2018 | | | | | | | | | | | | | | 4,272 | | 711,801 | | Sean D. Major | | Annual Incentive Plan | | | | 0 | | 467,500 | | 1,075,250 | | | | | | | | | | | | | Performance Shares | | 12/3/2018 | | | | | | | | 0 | | 3,769 | | 8,103 | | | | 865,400 | | | Restricted Stock Units | | 12/3/2018 | | | | | | | | | | | | | | 2,513 | | 418,716 | | Samir J. Serhan | | Annual Incentive Plan | | | | 0 | | $552,500 | | 1,270,750 | | | | | | | | | | | | | Performance Shares | | 12/3/2018 | | | | | | | | 0 | | 6,408 | | 13,777 | | | | 1,471,341 | | | Restricted Stock Units | | 12/3/2018 | | | | | | | | | | | | | | 13,696 | | 2,282,028 |
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 2019 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 2017.2019. 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 2017.2019. 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 20172019 targets and the award determination, see page 36.pages 27-28. 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. The performance shares reflected in the table have a three-year performance cycle which will be completed at the end of fiscal year 2019.2021. 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 38.29. 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 or she 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 53-54,44-46, the terms of that Program regarding treatment of equity compensation will apply. | 38 | | |
Table of Contents 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 20172019 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 thehis Employment Agreement.). If another Executive Officer’sexecutive officer’s employment termination is covered by the Executive Separation Program described on pages 53-5444-46, the terms of that Program regarding treatment of equity compensation will apply. AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Outstanding Equity Awards at FiscalYear-End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 2019 Fiscal Year-End Table |
| | Option Awards(1) | | Stock Awards | | | | |
Number of
Securities Underlying
Unexercised Options (#) | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number of
Shares
or Units
of Stock
Held that
have not
Vested
(#)(2) | | Market
Value of
Shares
or Units
of Stock
held that
have not
Vested
($)(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 | | Option
Grant Date | | Exercisable | | Unexercisable | | | | | | | | Seifi Ghasemi | | | | | | | | | | | | 90,426 | | 20,061,912 | | 211,129 | | 46,841,080 | | | 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 | | | | | | | | | | | | 16,474 | | 3,654,922 | | 38,324 | | 8,502,563 | | | 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 | | | | | | | | | | | | 4,982 | | 1,105,307 | | 16,067 | | 3,564,625 | | Samir J. Serhan | | | | | | | | | | | | 22,211 | | 4,927,732 | | 29,080 | | 6,451,689 |
| (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 a voluntary termination of employment and unexercisable options are forfeited upon voluntary termination.employment. 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 44-46, 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 his Employment Agreement.) Stock options are also subject to special vesting rules upon a change in control of the Company. Company as described on pages 47-48. |
| (2) | This column reflects unvested restricted stock and deferred stock units which, upon vesting, entitle the holder to a share of Company Stockcommon stock and dividend equivalents accumulated since the date of grant. |
| |
| 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 |
Table of Contents | 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 5445 for the definition 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 53-54,44-46, the terms of that Program regarding treatment of equity compensation will apply. Shares of restricted stock granted in fiscal year 20142016 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, 20182019 or the Executive Officer’sexecutive 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
| 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. PainterCrocco 3,738. Restricted stock is subject to special vesting rules for terminations upon a change in control of the Company.
Company as described on pages 47-48. |
|
| | 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 Company 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. Performance shares have a three-year performance period. This column reflects threetwo kinds of deferred stock units: (i) four-year restricted stock units granted to Executive Officersexecutive 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 December 3, 2018; 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 53-5444-46 or upon a change in control.control as described on pages 47-48. |
| | | (i) | Fiscal year 2017 four-yearUnvested restricted stock units showngranted in fiscal 2017, fiscal 2018 and fiscal 2019 are as follows:
|
| | Officer | | FY17 | | FY18 | | FY19 | | Total | | Seifi Ghasemi | | 24,178 | | 20,992 | | 25,131 | | 70,301 | | M. Scott Crocco | | 4,266 | | 4,198 | | 4,272 | | 12,736 | | Sean D. Major | | — | | 2,469 | | 2,513 | | 4,982 | | Samir J. Serhan | | 2,845 | | 2,469 | | 4,272 | | 9,586 |
| (ii) | | | | | | | 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:
|
| | | | | | | 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, 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) | This column also shows a special recruiting grantand retention grants, and are as follows: |
| Officer | | Number of 3201 three-yearUnits | | Samir J. Serhan* | | 3,201 | | Samir J. Serhan** | | 9,424 |
| * | Three-year vesting restricted stock units made to Dr. Serhan ongranted December 1, 2016. These will vestvested on December 1, 2019. | | ** | Three-year vesting restricted stock units granted December 3, 2018, which will vest in three equal installments, with the first vesting date having occurred on December 3, 2019. |
| (3) | These amounts are based on the 20172019 fiscalyear-end NYSE closing marketstock price of $151.22. $221.86. |
| (4) | This column reflects performance shares granted in fiscal years 20162017, fiscal 2018 and 2017.fiscal 2019. These shares are conditioned upon performance during three-year cycles ending on September 30, 20182019, September 30, 2020 and September 30, 2019,2021, respectively. These awards will earn outearn-out and be paid following the end of the relevant performance period as indicated in the chart below. The dollar values and numbersshare counts for fiscal year 2017 are shown at the final payout factor of these172% as approved by the Committee and paid out in December 2019. The dollar values and share counts for fiscal year 2018 and fiscal year 2019 awards are shown in the table at the target215% payout level. level (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. |
| | | Fiscal 2017-2019 Unearned
Performance Shares at End of
Performance Period | | | Officer | | 09/30/2019 | | 09/30/2020 | | 09/30/2021 | | Seifi Ghasemi | | 62,379 | | 67,701 | | 81,049 | | M. Scott Crocco | | 11,008 | | 13,539 | | 13,777 | | Sean D. Major | | — | | 7,964 | | 8,103 | | Samir J. Serhan | | 7,339 | | 7,964 | | 13,777 |
| 40 | | |
| | | | | | | | | | | | | | | 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 Contents2017 Option Exercises and Stock Vested | | | | | | | | | | | | | | | | | | | | | | | | 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 2019 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 | | — | | — | | 12,145 | | 2,023,600 | | M. Scott Crocco | | 7,954 | | 850,760 | | 2,082 | | 346,903 | | Sean D. Major | | — | | — | | 3,520 | | 720,016 | | Samir J. Serhan | | — | | — | | — | | — |
| (1) | The shares in this column include restricted stock granted to Mr. Ghasemi and Mr. Crocco in fiscal year 2013 which2015 that vested in December 2016; performance shares granted in fiscal year 2014 which vested in December 2016; and restricted stock units granted in 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 of restricted stock units made to Mr. Painter in 2012 which vested in September 2017,2018, and a special restricted stock unit recruiting grant of restricted stock units made to Ms. Grant whichMr. Major in May 2017 that vested in February 2017. May 2019. |
| (2) | The following dividend equivalents were paid on the performance share awards and the restricted stock units but are not included in the Value 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
($) | | Sean D. Major | 29,603 |
| Fiscal 2019 Pension Benefits Table |
| Officer | | Plan Name | | Number of
Years Credited
Service
(#) | | Present Value
of Accumulated
Benefit
($) | | M. Scott Crocco | | Air Products and Chemicals, Inc.
Pension Plan for Salaried Employees | | 29 | | 1,466,113 | | | Air Products and Chemicals, Inc.
Supplementary Pension Plan | | 29 | | 6,728,158 |
The table above illustrates the actuarial present value of accrued pension benefits for each ofMr. Crocco, who was the Executive Officers underonly executive officer who participated in the Company’s defined benefit plans as of September 30, 2017.2019. 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 16,17, 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, 2017,2019, filed with the SEC on November 16, 2017.26, 2019. 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 20172019 annual incentive awards in the calculation; whereas the value in the financial statements is based on estimated annual incentive awards. The Company’sSalaried Pension Plan for Salaried Employees (“Salaried Pension 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.annuity or as a lump sum, if the value of the benefit is less than $100,000. 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)
Table of Contents “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 2019 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)
($) | | Seifi Ghasemi | | — | | 142,331 | | 44,626 | | — | | 1,162,493 | | M. Scott Crocco | | 22,615 | | — | | 38,157 | | — | | 958,211 | | Sean D. Major | | 63,388 | | 29,417 | | 4,729 | | — | | 145,161 | | Samir J. Serhan | | 32,981 | | 34,134 | | 4,710 | | — | | 151,390 |
| (1) | All amountsAmounts reported in this column were voluntary deferrals of base salary by the Executive Officers.executive officers. These amounts are also reported in the Summary Compensation Table. |
| (2) | Amounts reported in this column include Company matching credits based on each Executive Officer’s voluntary deferrals of base salary. In the case of Mr. Ghasemi, Ms. GrantMr. Major and Dr. Serhan, receive a Company contribution credit of a percentage of their base salaries in excess of tax law limits on Retirement Savings Plan contributions and their Annual Incentive Plan awards is also included because they receive their primary retirement benefit under the Company’s defined contribution plansRetirement Savings Plan (“RSP”) rather than the pension plans. The percentage is based on years of serviceSalaried Pension Plan and for fiscal year 2017 was 4%.Supplementary Plan. Amounts reported in this column are also reported in the Summary Compensation Table.
|
| (3) | A portion of the earnings reflected in this column are reported in the Summary Compensation Table as above-market interest, as described in footnote 5 to such table. | | (4) | The following portion of these accumulated balances has been previously reported as compensation in the Summary Compensation Table of the Company’s proxy statements for prior years: |
| Officer | Amount
Previously
Reported
($) | | Seifi Ghasemi | 913,504 | | M. Scott Crocco | 544,572 | | Sean D. Major | 46,630 | | Samir J. Serhan | 77,225 |
| 42 | | |
Table of Contents | | | | | | | | | Officer | | Amount Previously Reported | | S. Ghasemi | | $ | 448,524 | | S. Crocco | | $ | 336,244 | | J. Grant | | $ | 0 | | C. Painter | | $ | 148,221 | | S. Serhan | | $ | 0 | |
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. 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, 2017and Mr. Crocco would be regarded as 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 the earnings thereon. Upon attainment of age 55, Mr. Crocco or Mr. Painter couldmay commence accrued benefits under the qualified plan and will commence accrued benefits under the nonqualified pension plansplan 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,However, if an Executive Officerexecutive officer is retirement eligible, upon voluntary termination his bonus would be prorated at the discretion of the Committee. If an executive 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, 2017,2019, he would be eligible for a fiscal year 20172019 Annual Incentive Plan award in an amount, if any, determined by the Committee in its discretion.
Table of Contents 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 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.
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.
| ● | 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. |
The table below shows the value of Mr. Ghasemi’sGhasemi and Mr. Crocco’s outstanding long-term incentive awards that would have vested had heeach retired as of September 30, 2017,2019, 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, 2017.2019. Other Executive Officersexecutive officers were not eligible for retirement on September 30, 2017; so no amounts are shown for them.2019. | | | | | | | | | | | | | | | | | | | | | | | | 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 | | — | | 4,464,933 | | 10,509,968 | | 19,464,436 | | 16,648,171 | | M. Scott Crocco | | — | | 829,313 | | 1,968,387 | | 3,548,712 | | 2,902,598 |
| (1) | Actual payout amounts are shown for Performance sharesShares granted in fiscal year 2017. Fiscal year 2018 and 2019 Performance Shares are shown at the target payout level. Amounts include accumulated dividend equivalents. The 20172019 grant and a prorated portion of the fiscal year 20162018 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”. 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
| ● | 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. |
| 44 | | |
Table of his duties or authority, or assignment to him of duties or responsibilities inconsistent with his status;Contents 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/orand 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 amendedEmployment 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 restated employment agreement.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. |
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(or a plea of nolo contenderecontendere) 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.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Estimated Payments on Severance
AsTable of September 30, 2017Contents
Estimated Payments on Severance As of September 30, 2019 |
The table below shows estimated cash payments that would have been made to each Executive Officerexecutive officer upon an involuntary termination on September 30, 20172019 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 | 2,430,000 | 350,340 | 26,914 | — | — | 5,690,664 | 10,957,508 | | M. Scott Crocco(6) | 1,202,500 | 663,000 | 314,431 | 15,731 | — | — | 201,532 | 483,676 | | Sean D. Major | 1,017,500 | 561,000 | 42,955 | 35,164 | — | — | 379,605 | 854,135 | | Samir J. Serhan | 1,202,500 | 663,000 | 50,658 | 35,164 | — | — | 3,777,552 | 2,773,588 |
| (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, 20172019 NYSE closing price of $151.22. $221.86. |
| (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 the actual payout level for fiscal year 2017 grants and at target payout level for fiscal year 2018 and amounts2019 grants. Amounts include accumulated dividend equivalents. |
| (6) | Values of Mr. Ghasemi’s and Mr. Crocco’s long-term incentive awards that would have vested upon histheir voluntary termination due to his retirement eligibility are not shown. |
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 |
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.
Executive Officers or their beneficiaries may also receive an Annual Incentive Plan award at the discretion of the Committee.
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
| ● | 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. | | ● | 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. | 46 | | |
Change in Control ArrangementsTable of Contents
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;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;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
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A cash payment of apro-rata target bonus for the year;
| ● | •a cash payment of a pro-rata target bonus for the year; | | ● | | Forfor 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
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| ● | • | | 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 the ages of 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 principal workplace more than 50 miles from the existing location.
29● | Except for Mr. Ghasemi,a material adverse change in the payment is reduced onceexecutive officer’s position;
| | ● | a decrease in the Executive Officer attains age 63, by a prorated amount for each month asexecutive officer’s salary, benefits or incentive compensation if not applied to other highly compensated employees; or | | ● | relocation of the Executive Officer approaches age 65.executive officer’s principal workplace more than 50 miles from the existing location. |
AIR PRODUCTS AND CHEMICALS, INC.
COMPENSATION OF EXECUTIVE OFFICERS
Table of Contents 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, 20172019 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
($) | Pro-rata
Bonus
($) | Retirement
Plan Payment(1)
($) | Outplacement/
Financial
($) | Benefits(2)
($) | | Seifi Ghasemi | 10,287,000 | 2,025,000 | 525,510 | 14,500 | 37,733 | | M. Scott Crocco | 2,444,000 | 552,500 | 628,861 | 14,500 | 6,829 | | Sean D. Major | 2,079,000 | 467,500 | 85,910 | 14,500 | 37,708 | | Samir J. Serhan | 2,457,000 | 552,500 | 101,315 | 14,500 | 37,708 |
| (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. |
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, 20172019 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, and Mr. Crocco, who was retirement eligible on March 19, 2019, 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 | | 71,590,353 | | M. Scott Crocco | | 14,951,462 | | Sean D. Major | | 1,992,752 | | Samir J. Serhan | | 7,861,666 |
Finally, accrued benefits under the nonqualified pension and deferred compensation plansplan (described onpages 49-50)41-42) would be paid out upon a change in control. | 48 | | |
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, 2019. 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.
| ● | For purposes of the 2019 CEO pay ratio set forth above, we used the same median employee identified with respect to our 2018 CEO pay ratio, as there has been no meaningful change in the composition of our employee population or pay design that we believe would significantly impact the pay ratio disclosure. | | ● | The median employee annual total compensation was $61,035. | | ● | The annual total compensation of our CEO, as reported in the Summary Compensation Table of this Proxy Statement was $17,031,957. | | ● | 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 279 to 1. | | ● | 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. |
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. The Audit and Finance Committee has appointed Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2020. 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, 2021. 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 2020. | | | | | | As discussed in more detail below, in fiscal 2018 the Audit and Finance Committee conducted a competitive process to determine our independent registered public accounting firm. Following the review and evaluation of proposals, the Audit and Finance Committee approved the engagement of Deloitte for fiscal 2019 and Deloitte recently completed its first audit of our financial statements. The Audit and Finance Committee has again appointed Deloitte as our independent registered public accounting firm for fiscal 2020. The Board believes that the engagement of Deloitte as our independent registered public accounting firm for fiscal 2020 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. |
Ratification of 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 in fiscal 2018 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 LLP (“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, on July 24, 2018 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. KPMG was informed of this decision on the same date and its dismissal took effect on November 20, 2018, which was the date it issued its report on our consolidated financial statements and internal control over financial reporting for our fiscal year that ended September 30, 2018 that was included in our Annual Report on Form 10-K for the year ended September 30, 2018. Deloitte recently completed its first audit of our financial statements and the Audit and Finance Committee has appointed Deloitte as our independent registered public accounting firm for our fiscal year ending September 30, 2020. The Board believes that the engagement of Deloitte as the Company’s independent registered public accounting firm for fiscal 2020 is in the best interests of the Company and our shareholders and has recommended that our shareholder ratify the Audit and Finance Committee’s appointment.| 50 | | |
INFORMATION ABOUT STOCK OWNERSHIPTable of Contents
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. 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 2020. 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 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 2019, all services performed by the independent registered public accounting firm were preapproved. Fees paid to Deloitte in fiscal 2019 and KPMG in fiscal 2018 consisted of the following amounts (in millions) for each category of services set forth below: | Fees | | KPMG Fees
2018
($) | | Deloitte Fees
2019
($) | | Audit Fees | | 6.8 | | 5.4 | | Audit-related Fees | | 1.1 | | 0.5 | | Tax Fees | | 0.3 | | 0.0 | | All Other Fees | | 0.0 | | 0.0 | | Total Fees | | 8.2 | | 5.9 |
Table of Contents 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, 2019 with the Company’s management and Deloitte, which was the independent registered public accounting firm that audited such financial statements. The Committee has discussed with Deloitte the matters that are required to be discussed under Public Company Accounting Oversight Board standards governing communications with audit committees, including the scope of Deloitte’s audit, the Company’s critical accounting policies and estimates, new accounting guidance and the critical audit matter addressed during the audit. Deloitte 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 Deloitte 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, 2019. INFORMATION ABOUT STOCK OWNERSHIPAudit and Finance Committee
Matthew H. Paull, Chair
Susan K. Carter
Charles I. Cogut
David H.Y. Ho
Edward L. Monser | 52 | | |
Table of Contents
Information About Stock Ownership |
Persons Owning More than 5% of Air Products Stock as of September 30, 20172019 | | | | | | | | | | 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 | | 19,162,335 | | 8.72 | % | Black Rock, Inc.(2)
55 East 52nd Street
New York, NY 10055 | | 17,129,190 | | 7.80 | % | State Farm Mutual Automobile Insurance Company (“State Farm”)(3)
One State Farm Plaza
Bloomington, IL 61710 | | 15,480,754 | | 7.05 | % |
| (1) | InAs reported in Amendment No. 7 to its Schedule 13G filed with the aggregate,SEC on February 11, 2019, Vanguard has sole voting power over 331,503253,681 shares, shared voting power over 40,22649,203 shares, sole power to direct the disposition of 15,630,41218,864,018 shares and shared power to direct disposition of 370,989298,317 shares.
|
| (2) | InAs reported in Amendment No. 3 to its Schedule 13G filed with the SEC on February 4, 2019, Black Rock, Inc. has sole voting power over 15,089,660 shares and sole power to direct the disposition of 17,129,190 shares.
| | (3) | As reported on its Schedule 13G filed with the SEC on February 5, 2019, in the aggregate entities affiliated with State Farm hashave sole voting power over 15,393,100 shares, shared voting power over 105,96987,654 shares, sole power to direct the disposition of 15,393,100 shares and shared power to direct the disposition of 105,96987,654 shares. |
(3)2020 Proxy Statement | 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.
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Table of Contents AIR PRODUCTS AND CHEMICALS, INC.
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, 20172019 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 | |
Director Deferrals As indicated in footnote 3 to the following table, four of our directors, Mr. Ghasemi, Ms. Carter, Ms. McGlynn and Mr. Paull, hold deferred stock units that are not reflected in this table because they are not distributable within 60 days of the completion of board service. Because deferred stock units confer the same economic rights as direct ownership of shares of our common stock, ownership of deferred stock units is counted for purposes of satisfying our stock ownership requirements for directors, even though such units do not constitute beneficial ownership of our common stock under SEC rules. |
| Name of Beneficial Owner | | Common
Stock(1) | | Right to
Acquire(2)(3) | | Total(4) | | Seifi Ghasemi(3) | | 383,769 | | 270,972 | | 654,741 | | M. Scott Crocco | | 38,806 | | 66,353 | | 105,159 | | Sean D. Major | | 2,385 | | 0 | | 2,385 | | Samir J. Serhan | | 189 | | 13,681 | | 13,870 | | Susan K. Carter(3) | | 0 | | 0 | | 0 | | Charles I. Cogut | | 1,200 | | 4,331 | | 5,531 | | Chadwick C. Deaton | | 0 | | 12,198 | | 12,198 | | David H.Y. Ho | | 0 | | 13,211 | | 13,211 | | Margaret G. McGlynn(3) | | 0 | | 12,664 | | 12,664 | | Edward L. Monser | | 0 | | 10,756 | | 10,756 | | Matthew H. Paull(3) | | 4,057 | | 0 | | 4,057 | | Directors and executive officers as a group (11 persons) | | | | | | |
| (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 | 20,125 | | M. Scott Crocco | 3,738 | | All executive officers | 23,863 |
| | | | | | | Name | | Shares | | S. Crocco
| | | 8,141 | | 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, 2019 by exercising outstanding options granted under the Company’s Long-Term Incentive Plan or through the vesting of performance shares or restricted stock unitsRSUs within 60 days.days of November 1, 2019. 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 of November 1, 2019. For additional information regarding such holdings, refer to the Outstanding Equity Awards at 2019 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’sDirector’s retirement or resignation based upon the director’s payout elections under the Deferred Compensation Program for Directors. In addition to the amounts reported in this table, directors held Versum deferred stock units through the Deferred Compensation Program for Directors that were converted into an aggregate of 10,343 Air Products deferred stock units on November 26, 2019. Deferred stock units held by directors who have elected to defer payout for longer periods are disclosed in note (3).footnote 3. 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. |
| 54 | | |
Table of Contents | (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 thosethese units beyond their retirement or resignation. |
| | | | | | | | Name of Beneficial Owner | | Deferred Stock Units | | S. Carter
| Seifi Ghasemi | | 11,646 | 2,653 | S. Ghasemi
| Susan K. Carter | | 2,542 | 15,263 | M.
| Margaret G. McGlynn | | | 20,999 | 24,582 | C. Painter
| Matthew H. Paull | | 1,045 | | M. Paull
| | | 4,425 | 6,508 |
| (4) | Directors, nominees and Executive Officersexecutive officers as a group beneficially own less than 1% of the Company’s outstanding shares. common stock. |
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 2019 all of our directors and Executive Officersexecutive officers met all applicable Section 16(a) filing requirements.
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 29, 2019, there were 220,486,348 shares of Company common stock issued and outstanding. Shares outstanding on the record date 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 Share 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. AIR PRODUCTS AND CHEMICALS, INC.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 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 the “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 59. |
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 online 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. |
Table of ContentsAPPENDIX A | 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. RECONCILIATION OFNON-GAAPAll Other Items. FINANCIAL MEASURESThe 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 on these proposals.
| 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 2021 Annual Meeting 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 13, 2020. |
To be presented at the 2021 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 25, 2020 but no later than October 25, 2020, and a nomination pursuant to our proxy access Bylaw must be delivered on or after August 26, 2020 but no later than September 25, 2020. 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. Proposals and nominations received after the applicable deadlines 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 | 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 11, 2019, 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 2019 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 2019 Annual Report to Shareholders on or about December 11, 2019. 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 2019 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.
Table of Contents | How can I reach the Company to request materials or information referred to in these Questions and Answers? | | | | You may order a copy of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, free of charge, or request other information 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. This information is also available free of charge on the SEC’s website, www.sec.gov, and our website, www.airproducts.com. | 60 | | |
Table of Contents Appendix A Reconciliations of Non-GAAP Financial Measures |
(Millions of dollars unless otherwise indicated, except for per share data) The Company has presentedpresents certain financial measures on anon-GAAP (“adjusted”) basis. These measures include adjusted earnings per share (“EPS”), calculated on a fully-diluted basis, and has providedadjusted EBITDA. For each non-GAAP financial measure, we present below a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These financialU.S. Generally Accepted Accounting Principles (“GAAP”). The Company’s non-GAAP 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 ourthe Company’s 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 or “non-GAAP adjustments”), that we believethe Company believes are not representative of the underlying business performance. For example, Air Products has executed its strategic plan to restructure the Company to focus on its core Industrial Gases business. This resulted in significantpreviously excluded certain expenses associated with cost reduction actions, impairment charges, and asset actions that we believe are important for investors to understand separately from the performance of the underlying business.gains on disclosed transactions. The reader should be aware that wethe Company may incurrecognize similar expenseslosses or gains in the future. The tax impact of ournon-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. InvestorsReaders 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 reconciliationAdjusted Earnings per Share
Adjusted EPS is on acalculated as net income from continuing operations basis.attributable to Air Products, excluding the impact of certain items that we believe are not representative of our underlying business performance, divided by the weighted average common shares that reflects the potential dilution that could occur if stock options or other share-based awards were exercised or converted into common stock. The Company views adjusted EPS as a key performance metric. Among other uses, adjusted EPS is used to assess performance under our incentive compensation program. Consolidated Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2019 | | 2018 | | | Diluted EPS | $7.94 | | $6.59 | | | Change in inventory valuation method | — | | (.08 | ) | | Facility closure | .10 | | — | | | Cost reduction actions | .08 | | — | | | Gain on exchange of equity affiliate investments | (.13 | ) | — | | | Pension settlement loss | .02 | | .15 | | | Tax reform repatriation | (.06 | ) | 2.16 | | | Tax reform adjustment related to deemed foreign dividends | .26 | | (.25 | ) | | Tax reform rate change and other | — | | (.96 | ) | | Tax restructuring | — | | (.16 | ) | | Adjusted EPS | $8.21 | | $7.45 | | | Diluted EPS $ change versus prior year | $1.35 | | | | | Diluted EPS % change versus prior year | 20 | % | | | | Adjusted EPS $ change versus prior year | $.76 | | | | | Adjusted EPS % change versus prior year | 10 | % | | |
(A)2020 Proxy Statement | Income from continuing operations before taxes impact of $6.9 and $16.6 in 2016 and 2015, respectively.
| A-1 |
(C) | Noncontrolling interests impact of $3.4 in fiscal year 2017.
|
Adjusted EBITDA We define Adjusted EBITDA as net income less income (loss) from continuingdiscontinued operations, (including noncontrolling interests)net of tax, and excluding certain disclosed items,non-GAAP adjustments, 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. | 2019 | | 2018 | | Net income | $1,809.4 | | $1,532.9 | | Less: Income from discontinued operations, net of tax | — | | 42.2 | | Add: Interest expense | 137.0 | | 130.5 | | Less: Other non-operating income (expense), net | 66.7 | | 5.1 | | Add: Income tax provision | 480.1 | | 524.3 | | Add: Depreciation and amortization | 1,082.8 | | 970.7 | | Less: Change in inventory valuation method | — | | 24.1 | | Add: Facility closure | 29.0 | | — | | Add: Cost reduction actions | 25.5 | | — | | Less: Gain on exchange of equity affiliate investments | 29.1 | | — | | Add: Tax reform repatriation - equity method investment | — | | 28.5 | | Adjusted EBITDA | $3,468.0 | | $3,115.5 | | Change GAAP versus prior year | | | | | Net income $ change | $276.5 | | | | Net income % change | 18 | % | | | Change Non-GAAP versus prior year | | | | | Adjusted EBITDA $ change | $352.5 | | | | Adjusted EBITDA % change | 11 | % | |
| A-2 | | |
Table of Contents | | | | | | | | | | | | 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 | % | | | | |
Appendix B (A) | Includes net income attributable to noncontrolling interests.Survey Reference Group
|
| | | | | | | | | | | | 2017 | | | 2016 | | Adjusted EBITDA Margin | | | 34.1 | % | | | 34.9 | % | Change from prior year | | | (80 | )bp | | | | |
APPENDIX B
SURVEY REFERENCE GROUP
| Alcoa | Eastman Chemical | Occidental Petroleum | Alticor
Avon Products
Arconic | Ecolab | Parker Hannifin | | Arkema | EOG Resources | Peabody Energy | | Baker Hughes | Estee Lauder | Performance Food Group | | Ball | Hershey | Praxair | | Baxter | HollyFrontier | PVH | Becton DickonsonDickinson | Hormel Foods | Quanta Services | | BorgWarner | Illinois Tool Works | Reynolds American | | Boston Scientific Cameron International
| Ingersoll Rand | Rockwell Automation | | Campbell Soup Coca-Cola Enterprises
Commercial Metals
Corning
Dairy Farmers of America
Dania Holding
Dean Foods
Devon Energy
Dover
Eastman Chemical
Ecolab
Federal-Mogul
Hormel Foods
Huntsman
Ingersoll Rand
Illinois Toolworks
Kellogg
Kinder Morgan
L-3 Communications
Land O’Lakes
Masco Corporation
MillerCoors
| Jabil Circuit | Mohawk Industries
Mosaic
Navistar International
Oneok
Owens Illinois
Oshkosh
Parker Hannifin
Peabody Energy
Perdue Farms
Performance Food
Phillips-Van Heusen
Praxair
Reynolds American
Rock Tenn
Rockwell Automation
SCS.C. Johnson & Son
Sherwin Williams
| | Chemours Company | J.M. Smucker | Sealed Air | | Chesapeake Energy | Jacobs Engineering | Sharp Electronics | | Chicago Bridge & Iron | Kellogg | Sherwin-Williams | | Coca-Cola Enterprises | Kinder Morgan | Stanley Black & Decker | | Commercial Metals | L3 Technologies | Stryker | | ConAgra Foods | Land O’Lakes | TE Connectivity Terex
| | Constellation Brands | Masco | Tesla Motors United States | | Corning | Medline | Textron The Hershey Company
Univar USA
VF Corporation
Visteon
W. W. Grainger
| | Covestro | MillerCoors | United States Steel | | Cummins Engine | Mohawk | WestRock | | Dean Foods | Mosaic | Weyerhaeuser | | Devon Energy | National Oilwell Varco | Williams Companies | | Dover | Nestle USA | Zimmer Biomet Holdings |
Table of Contents Driving Directions to
Air Products and Chemicals, Inc. Corporate Headquarters Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
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 
please contact us at:
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, PA 18195-1501
T 610-481-4911
F 610-481-5900
Corporate Secretary’s Office
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  | SCAN TO
VIEW MATERIALS & VOTE |  |
VOTE BY INTERNET—INTERNET -www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on January 24, 201822, 2020 (January 22, 201820, 2020 for Retirement Savings Plan Participants). Have your proxy card in hand when you access the web sitewebsite and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE—PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on January 24, 201822, 2020 (January 22, 201820, 2020 for Retirement Savings Plan Participants). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E34428-P99649-Z71370 KEEP THIS PORTION FOR YOUR RECORDS | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | E87571-P30535-Z75893 | KEEP THIS PORTION FOR YOUR RECORDS | | DETACH AND RETURN THIS PORTION ONLY | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY WHEN SIGNED AND DATED. |
AIR PRODUCTS AND CHEMICALS, INC. | The Board of Directors recommends you vote FOR each of the following: | | | | | | | | | 1. | Election of Directors | | | | | | | | | | Nominees: | For | Against | Abstain | | | | | | | 1a. | Susan K. Carter | ☐ | ☐ | ☐ | | | | | | | | 1b. | Charles I. Cogut | ☐ | ☐ | ☐ | | | | | | | | 1c. | Chadwick C. Deaton | ☐ | ☐ | ☐ | | | | | | | | 1d. | Seifollah Ghasemi | ☐ | ☐ | ☐ | | | | | | | | 1e. | David H. Y. Ho | ☐ | ☐ | ☐ | | | | | | | | 1f. | Margaret G. McGlynn | ☐ | ☐ | ☐ | | | | | | | | 1g. | Edward L. Monser | ☐ | ☐ | ☐ | | | | | | | | 1h. | Matthew H. Paull | ☐ | ☐ | ☐ | | | | 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. |
| | | | | | | | | | The Board of Directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | | | | | | 2. | Advisory vote approving the compensation of the Company's named executive officers. | ☐ | ☐ | ☐ | | | | | | | 3. | Ratify the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the fiscal year ending September 30, 2020. | ☐ | ☐ | ☐ |
| | | | | | | 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—23, 2020 - 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 23, 2020 Proxy This proxy is solicited on Behalf of the Board of Directors The undersigned hereby appoints Sei?Seifollah 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, 2018,23, 2020, 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, 201823, 2020 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, 201820, 2020 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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