Cabot Corporation
20182020 Proxy Statement
The Annual Meeting of Stockholders
of Cabot Corporation will be held:
Thursday,March 8, 201812, 2020 at 4:00 p.m. ET
Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, MA 02210-2019 USA
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Cabot Corporation
(Name of Registrant as Specified In Its Charter)
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Cabot Corporation
20182020 Proxy Statement
The Annual Meeting of Stockholders
of Cabot Corporation will be held:
Thursday,March 8, 201812, 2020 at 4:00 p.m. ET
Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, MA 02210-2019 USA
January 26, 201824, 2020
Dear Fellow Cabot Corporation Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders of Cabot Corporation, which will be held on Thursday, March 8, 2018,12, 2020, at 4:00 pm, Eastern Time, at the Corporate Headquarters of Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts.
At the Annual Meeting, we will ask you to elect fourthree members of our Board of Directors, provide your advisory approval of our executive compensation, and ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending September 30, 2018.2020. We will also discuss any other business matters properly brought before the meeting. The attached Proxy Statement explains our voting procedures, describes the business we will conduct, and provides information about the Company that you should consider when you vote your shares.
We are using the “Notice and Access” method of providing proxy materials to you via the Internet. We are mailing to you a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the proxy materials and 20172019 Annual Report. Notice and Access provides a convenient and environmentally friendly way for you to access Cabot’s proxy materials. The Notice includes instructions on how to access our proxy statement and our 20172019 Annual Report and how to vote your shares. The Notice also contains instructions on how to receive a paper copy of the proxy materials and our 20172019 Annual Report, if you prefer.
Your vote is very important to us. Whether or not you plan to attend the Annual Meeting in person, we encourage you to vote promptly. You may vote by mailing a completed proxy card, by phone or the Internet.
Thank you for your continued support of Cabot Corporation.
Sincerely,
SEAN D. KEOHANE
President and
Chief Executive Officer
Notice of Annual Meeting of Stockholders
Date: | March |
Time: | 4:00 p.m., Eastern Time |
Place: | Corporate Headquarters of Cabot Corporation |
| Two Seaport Lane, Suite 1300 |
| Boston, Massachusetts 02210-2019 |
Record Date: | You may vote if you were a stockholder of record at the close of business on January |
Voting by Proxy: | To ensure that your vote is properly recorded, please vote as soon as possible, even if you plan to attend the annual meeting. Stockholders who own shares in their own name (a record owner) have three options for submitting their vote by proxy: (1) by Internet, (2) by phone or (3) by mail. You may also vote in person if you attend the annual meeting. For further details about voting, please refer to the section entitled “About the Annual Meeting” beginning on page 1 of this proxy statement. |
| If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide your broker, bank or other nominee with instructions on how to vote your shares in order for your shares to be voted on |
Items of Business | • | To elect |
To approve, in an advisory vote, our executive compensation;
To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2018;2020; and
To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
This notice and proxy statement are first being made available to stockholders on or about January 26, 2018.24, 2020. Our 20172019 Annual Report is available at http://www.cabotcorp.com/2018annualmeeting.www.edocumentview.com/cbt.
By order of the Board of Directors,
Jane A. Bell
Secretary
Boston, Massachusetts 02210-2019
January 26, 201824, 2020
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Proposal 3 — Ratification of Appointment of Independent Registered Public Accounting Firm | ||||
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Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, Massachusetts 02210-2019
Proxy Statement
References to “the Company”, “Cabot”, “we”, “us”, and “our” in this proxy statement mean Cabot Corporation.
About the Annual Meeting
Who is soliciting my vote?
The Board of Directors of Cabot Corporation is soliciting your vote at the 20182020 Annual Meeting of Stockholders (“20182020 Annual Meeting” or the “meeting”).
What am I voting on?
You are voting on:
| • | Proposal 1: Election of |
| • | Proposal 2: Advisory approval of our executive compensation (see page |
| • | Proposal 3: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, |
Any other business properly coming before the meeting.
How does the Board recommend that I vote my shares?
The Board’s recommendation can be found with the description of each item in this proxy statement. In summary, the Board recommends that you vote:
FOR each of the fourthree nominees for director;
FOR the advisory approval of our executive compensation (commonly referred to as“say-on-pay”);
FORthe ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2018.2020.
Who is entitled to vote?
Only stockholders of record at the close of business on January 16, 201815, 2020 will be entitled to vote at the 20182020 Annual Meeting. As of that date, there were 61,803,49356,676,158 shares of our common stock outstanding. Each share of common stock is entitled to one vote. There is no cumulative voting.
The Vanguard Fiduciary Trust Company is the trustee of the Cabot Common Stock Fund and the Cabot Common ESOP Fund portions of the Cabot 401(k) Plan and is the record owner of all of those shares. The trustee is authorized to vote such shares in accordance with instructions from participants in, and the terms of, the Cabot 401(k) Plan.
Why did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials?
We are distributing our proxy materials to certain stockholders via the Internet under the “Notice and Access” approach permitted by rules of the Securities and Exchange Commission (“SEC”). This approach benefits the environment, while
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About the Annual Meeting(continued)
providing a timely and convenient method of accessing the materials and voting. On January 26, 2018,24, 2020, we will begin mailing a “Notice of Internet Availability of Proxy Materials” (the “Notice”) to participating stockholders. The Notice includes instructions on how to access our proxy statement and our 20172019 Annual Report and how to vote your shares. The Notice also contains instructions on how to receive a paper copy of the proxy materials and our 20172019 Annual Report, if you prefer.
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2020 PROXY STATEMENT |
About the Annual Meeting(continued)
How many votes must be present to hold the meeting?
Your shares are counted as present at the 20182020 Annual Meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. In order for us to hold our meeting, holders of a majority of our outstanding shares of common stock as of January 16, 201815, 2020 must be present in person or by proxy at the meeting. This majority is referred to as a quorum. Proxy cards or broker voting instruction forms that reflect abstentions and brokernon-votes will be counted as shares present to determine whether a quorum exists to hold the 20182020 Annual Meeting.
What is a brokernon-vote?
Under the rules that govern brokers who have record ownership of shares that they hold in “street name” for their clients who are the beneficial owners of the shares, brokers normally have discretion to vote such shares on routine matters, such as ratifications of independent registered public accounting firms, but not onnon-routine matters. Brokernon-votes generally occur when the beneficial owner of shares held by a broker does not give the broker voting instructions on anon-routine matter for which the broker lacks discretionary authority to vote the shares. Proposals 1 and 2 arenon-routine matters.
Therefore, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted on proposals 1 and 2, your broker will not be able to vote your shares on these proposals. We urge you to provide instructions to your broker so that your votes may be counted on these important matters.
How are votes counted? How many votes are needed to approve each of the proposals?
For each of proposals 1, 2 and 3, you may vote “FOR”, “AGAINST”, or “ABSTAIN”.
| • | Proposal 1 — Election of Directors. Pursuant to our bylaws, a nominee will be elected to the Board of Directors if the votes properly cast “for” his or her election exceed the votes properly cast “against” such nominee’s election. Brokernon-votes and abstentions will have no effect on the results of this vote. |
| • | Proposal 2 —Say-on-Pay. Because proposal 2 is an advisory vote, there is no minimum vote requirement that constitutes approval of this proposal. |
| • | Proposal 3 — Ratification of Independent Registered Public Accounting Firm.The affirmative vote of a majority of the votes properly cast on proposal 3 is required to ratify the appointment of Cabot’s independent registered public accounting firm. Under Delaware law, abstentions are not considered “votes cast” and, therefore, will have no effect on the results of this vote. Brokers generally have discretionary authority to vote on the ratification of our independent registered public accounting firm, thus we do not expect any brokernon-votes on this proposal. To the extent there are any brokernon-votes, they will also have no effect on the results of this vote. |
What if there are more votes “AGAINST” a nominee for director than votes “FOR”?
Each of the nominees is an incumbent director who has tendered a conditional resignation that is effective upon (i) the failure to receive a majority of the votes cast for his or herre-election at the 20182020 Annual Meeting and (ii) the Board’s acceptance of this resignation. The Governance and Nominating Committee of the Board of Directors (the “Governance Committee”) iswould be responsible for initially considering the resignation and making a recommendation to the Board of Directors. The director whose resignation is under consideration is expected to abstain from participating in any decision regarding his or her resignation. The Governance Committee may consider any factors it deems relevant in deciding whether to accept a director’s resignation. If the resignation is not accepted, the director will continue to serve until his or her successor is elected and qualified.
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About the Annual Meeting(continued)
How do I vote?
You can vote either in person at the meeting or by proxy without attending the meeting. Even if you plan to attend the 20182020 Annual Meeting, we encourage you to vote your shares by proxy. If your shares are held in “street name” in a brokerage account or by a bank or other nominee and you wish to vote in person at the meeting, you must request a
2 CABOT CORPORATION
2020 PROXY STATEMENT |
About the Annual Meeting(continued)
legal proxy from your bank, broker or other nominee and bring that proxy to the meeting. Stockholders who own shares in their own name (a record owner), have three options for submitting their votes by proxy:
| 1. | by Internet – go to www.envisionreports.com/ |
| 2. | by phone – call the toll-free number1-800-652-VOTE and follow the instructions on your proxy card and the recorded telephone instructions, or |
| 3. | by mail – mark, sign and date the proxy card and return it promptly in accordance with the voting instructions on your proxy card. |
Proxies submittedIn order for your vote to be counted you must return your completed and signed proxy card so that it is received by the InternetCompany’s transfer agent by March 11, 2020 or you must vote by telephone must be receivedor over the Internet by 1:00 p.m.,pm, Eastern Time, on March 8, 2018.12, 2020.
If you hold your Cabot stock is held in a brokerage account or by a bank or other nominee, your ability to vote by telephone or over the Internet depends on your broker’s, bank’s or nominee’s voting process. Please follow the directions on your voting instruction form carefully.
How do I vote if I hold my stock through the Cabot 401(k) plan?
The Vanguard Fiduciary Trust Company is the trustee of the Cabot Common Stock Fund and the Cabot Common ESOP Fund portions of the Cabot 401(k) plan and is the record owner of all of those shares. If you hold yourCabot stock through the Cabot 401(k) plan, you have the right to instruct the trustee of the planVanguard how to vote your shares. The trusteeVanguard will havetabulate the voting instructions of each participant in the plan tabulated and will vote the shares of theall participants by submitting a final proxy card representing the plan’s shares for inclusion in the tally at the 20182020 Annual Meeting.
Your vote will influence how the trustee of the planVanguard votes those shares for which no instructions are received from other plan participants as those shares will be voted in the same proportion as shares for which instructions are received. If you hold shares in the plan and do not vote, the plan trusteeVanguard will vote your shares (along with all other shares in the plan for which instructions are not provided) in the same proportion as those shares for which instructions are received from other participants in the plan.
In order for your instructions to be followed, you must provide instructions for the shares you hold through the Cabot 401(k) plan by returning your completed and signed proxy card toso that it is received by the Company’s transfer agent by March 5, 20189, 2020 or by voting over theby telephone or over the Internet by 9:00 a.m., Eastern Time, on March 6, 2018.10, 2020.
Can I change or revoke my vote?
Yes. You can change or revoke your vote by(1) re-voting by telephone or byover the Internet as instructed above (only your latest telephone or Internet vote will be counted), (2) signing and dating a new proxy card or voting instruction form and submitting it as instructed above (only your latest proxy card or voting instruction form will be counted), or (3) attending the meeting and voting in person. If your shares are registered in your name, you may also revoke your vote by delivering timely notice to the Secretary, Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts 02210. Attending the meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request it. If you hold shares through a bank or broker, you must follow the instructions on your voting instruction form to revoke or change any prior voting instructions.
Who counts the votes?
We have hired Computershare Trust Company, N.A., our transfer agent, to count the votes represented by proxies cast by ballot, telephone and the Internet. A representative of Computershare and either Cabot’s Secretary or Assistant Secretary will act as Inspectors of Election.
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About the Annual Meeting(continued)
What if I return my proxy card but don’t vote for some of the matters listed?
If you return a signed proxy card without indicating your vote, your shares will be voted in line with the recommendation of the Board of Directors for each of the proposals for which you did not indicate a vote.
Can other matters be decided at the 20182020 Annual Meeting?
We are not aware of any other matters that will be considered at the 20182020 Annual Meeting. If any other matters properly arise that require a vote, the named proxies will vote in accordance with their best judgment.
Who can attend the meeting?
The 20182020 Annual Meeting is open to all Cabot stockholders. If you need directions to the meeting, please call Cabot’s Investor Relations Group at(617) 342-6255. When you arrive at Cabot’s Corporate Headquarters, please go to the 13th Floor and signs will direct you to the meeting room. You need not attend the 20182020 Annual Meeting to vote.
Important Notice Regarding the Availability of Proxy Materials for the 20182020 Annual Meeting
This proxy statement and our 20172019 Annual Report on Form10-K are available at the following Internet address: http://www.cabotcorp.com/2018annualmeeting.www.edocumentview.com/CBT.
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Proposal 1 — Election of Directors
Board of Directors
Our Board of Directors currently has twelve members and is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires. FourThree directors are proposed to be elected at the 20182020 Annual Meeting. The terms of Cynthia A. Arnold, John F. O’Brien, John K. McGillicuddy,Juan Enriquez, Sean D. Keohane and Mark S. WrightonWilliam C. Kirby expire this yearat the 2020 Annual Meeting and our Board of Directors has nominated each of them for a three-year term that will expire at the annual meeting in 2021.2023. All of them are current directors and with the exception of Dr. Arnold, have been elected by stockholders at previous annual meetings.
Roderick C.G. MacLeod,Patrick M. Prevost, whose term of office expires at the 20192020 Annual Meeting, hasand John F. O’Brien, whose term of office expires at the 2021 Annual Meeting, have decided to retire from the Board effective at the 20182020 Annual Meeting. Upon the election of the nominated directors, and with this retirement,Mr. Prevost’s and Mr. O’Brien’s retirements, Cabot’s Board of Directors will have eleventen members. We expect that all of the nominees will be available for election, but if any of the nominees is not available at the time of the 20182020 Annual Meeting, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than fourthree nominees.
Vote Required
A nominee will be elected to the Board of Directors if the votes properly cast “for” his or her election exceed the votes properly cast “against” such nominee’s election.
Recommendation
The Board of Directors recommends that you vote “FOR” the election of its fourthree nominees.
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Proposal 1 — Election of Directors(continued)
Certain Information Regarding Directors
In addition to the information presented below regarding the specific experience, qualifications, attributes and skills that qualify the nominees and the directors whose terms of office will continue after the 20182020 Annual Meeting to serve as a director of the Company, all the nominees and directors have a reputation for honesty, integrity, sound judgment and adherence to high ethical standards. Each of the nominees and directors has demonstrated the willingness and ability to make the significant commitment of time and energy to serve on our Board and its Committees, and to engage management and each other openly and constructively. Our Directors are committed to having a Board that reflects a balanced set of skills that is aligned with our strategic goals and reflects our diversity objectives.
(Nominee for Election) |
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| Director Since: 2005 Committee Memberships: Audit Term of Office Expires: 2020 Age: Independent Business Experience: • Chairman and CEO, Biotechonomy Ventures, a life sciences research and investment firm, since 2003 • Managing Director, Excel Venture Management, a life sciences investment company, since March 2008 • Director, Life Science Project at Harvard Business School, 2001 to 2003 Other Boards and Positions: • Director, variousstart-up companies • Boston Museum of Science • Harvard Medical School Advisory Council • Trustee, WGBH Mr. Enriquez has significant expertise in technology,start-up companies and international business, and leadership experience from his broad experience in technology ventures. |
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Proposal 1 — Election of Directors (continued)
Sean D. Keohane (Nominee for Election) | Director Since:2016 Committee Memberships: Executive Term of Office Expires: 2020 Age: Business Experience: • President and CEO, Cabot Corporation, since March 2016 • EVP, President, Reinforcement Materials, November 2014 to March 2016; SVP, President, Performance Chemicals, March 2012 to November 2014; General Manager, Performance Chemicals, May 2008 to March 2012; Vice President in March 2005; joined Cabot Corporation August 2002 • General management positions, Pratt & Whitney, a division of United Technologies, prior to 2002 Other Boards and Positions: • Director, The Chemours Company, a global provider of performance chemicals (2018 to present) • Director, American Chemistry Council, a trade association representing the business of chemistry at the global, national and state levels (2016 to present) Mr. Keohane has a deep understanding of Cabot’s businesses, strong knowledge of the chemicals industry and significant experience in management, strategic planning, manufacturing, international business and marketing. |
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2020 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
William C. Kirby (Nominee for Election) |
Director Since: 2012 Committee Memberships: Term of Office Expires: 2020 Age: Independent Business Experience: • Spangler Family Professor of Business Administration, Harvard Business School; T.M. Chang Professor of China Studies, Harvard University, since July 2008 • Harvard University Distinguished Service Professor and Chairman of the Harvard China Fund, since July 2006 • Harvard faculty member since 1992, served as Chair of Harvard’s History Department, Director of the Harvard University Asia Center, Dean of the Faculty of Arts and Sciences and Director of the Fairbank Center for Chinese Studies Other Boards and Positions: • Director, The China Fund, Inc., anon-diversified closed-ended management investment company (2007 to • Director, The Taiwan Fund, Inc., a diversified closed-ended management investment company (2013 to present) • Director, Harvard University Press • Director, Harvard Magazine • Director, JAMM Active Limited, a global producer of innovative performance fabrics for athletic use (2016 to present) Mr. Kirby has extensive business knowledge and particular expertise regarding the business, economic and political environment in China.
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Cynthia A. Arnold | Director Since: 2018 Committee Memberships: SHE&S Term of Office Expires: 2021 Age: 62 Independent Business Experience: • Chief Technology Officer, The Valspar Corporation, a global paint and coatings company, January 2011 until retirement in May 2017 • Chief Technology Officer, Sun Chemical Corporation, a producer of inks, coatings and supplies, pigments, polymers, liquid compounds, solid compounds and application materials, 2004 to December 2010 • Vice President of Coatings, Adhesives and Specialty Chemicals Technology, Eastman • Management and technology leadership positions, General Electric Company, a high technology industrial leader, 1994 to 2003 Other Boards and Positions: • Director, Milliken & Company, a global diversified industrial company for specialty chemicals, performance materials and textiles (April 2019 to present) • Director, Citrine Informatics, a globalAI-driven materials data management company (2018 to present) • Member, Advisory Board, University of Minnesota Dept of Chemical Engineering and Materials Science • Member, Materials Advisory Board, Carbon 3D, Inc. • Board Member, Minnesota Zoo(Co-chair, Technology Task Force) Dr. Arnold has a depth of global experience in the specialty chemicals industry, particularly in technology and innovation, with an understanding of the value chains in which Cabot participates. |
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2020 PROXY STATEMENT |
Proposal 1 — Election of Directors(continued)
Mark S. Wrighton | Director Since: 1997 Committee Memberships: Compensation Term of Office Expires: 2021 Age: 70 Independent Business Experience: • Professor and Chancellor Emeritus, Washington University in St. Louis, June 2019 to present • Trustee, Washington University in St. Louis, July 2019 to present • Chancellor, Washington University in St. Louis, 1995 to May 2019 • Faculty member, Massachusetts Institute of Technology, Provost, 1990 to 1995; Head of Chemistry Department, 1987 to 1990 Other Boards and Positions: • Director, Brooks Automation, Inc., a worldwide provider of automation, vacuum and instrumentation solutions to the global semiconductor and related industries (2005 to present) • Director, Corning, Inc., a specialty glass and ceramics company (2009 to present) • Director, A.G. Edwards, Inc., a financial services company (2000 to 2007) • Director, BJC HealthCare • Director, Donald Danforth Plant Science Center • Ex-officio Director, St. Louis Regional Chamber and Growth Association • Trustee, St. Louis Science Center • Director, Concordance Academy Chancellor Wrighton has extensive scientific knowledge and understanding of complex technology, significant management and leadership experience, and a deep understanding of matters relating to public company management and oversight. | |||
Christine Y. Yan | Director Since: 2019 Committee Memberships: SHE&S Term of Office Expires: 2021 Age: 54 Independent Business Experience: • Vice President, Integration, Stanley Black & Decker, a manufacturer of industrial tools and household hardware and a provider of security products and locks, 2018 until her retirement that same year • President, Asia, Stanley Black & Decker, 2014 to 2018 • President, Stanley Storage and Workspace Systems, Stanley Black & Decker, 2013 to 2014 Other Boards and Positions: • Director, Modine Manufacturing Company, a thermal management company (2014 to present) • Director, ON Semiconductor, a supplier of semiconductor-based solutions (2018 to present) • Director, Ansell Limited, a manufacturer of protective industrial and medical gloves (2019 to present) Ms. Yan has years of experience in global manufacturing and engineering and significant experience with international business, particularly in Asia. |
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2020 PROXY STATEMENT
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Proposal 1 — Election of Directors (continued)
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Michael M. Morrow |
Director Since: 2017 Committee Memberships: Audit Term of Office Expires: Age: Independent Business Experience: • Partner, PricewaterhouseCoopers, a public accounting firm, 1986 until retirement in June 2016, as audit • Consultant, PwC, June 2016 to June 2017 Other Boards and Positions: • Chair, Financial Accounting Standards Advisory Committee (FASAC), an advisory body to the Financial Accounting Standards Board (FASB) (beginning January 2020, and Member from January 2019 to present) • Member, Board of Visitors, Wake Forest University School of Business (2011 to 2017) • Member, Business Advisory Council, University of Rhode Island School of Business (2010 to 2015) Mr. Morrow has substantial expertise in accounting, finance and financial reporting matters, and significant leadership, business and corporate governance experience.
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Proposal 1 — Election of Directors (continued)
Sue H. Rataj
Non-Executive Chair of the Board
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Director Since: Committee Memberships: Executive (Chair), Governance (Chair) Term of Office Expires: Age:
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Proposal 1 — Election of Directors (continued)
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Independent Business Experience: • Chief Executive, Petrochemicals for BP, a global energy company, April 2008 until retirement in April 2011 • Senior management positions with BP, including Group Vice President, Refining and Marketing, July 2007 to April 2008 Other Boards and Positions: • Director, Agilent Technologies, Inc., a global leader providing instruments, software and consumables to laboratories in the life sciences, diagnostics and applied chemical markets (2015 to present) • Supervisory Board Member, Bayer AG, a life science enterprise developing and manufacturing products in the pharmaceuticals, consumer health, animal health and crop science segments (2012 to 2017) Ms. Rataj has substantial management leadership and strategic planning experience, significant expertise in |
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2020 PROXY STATEMENT |
Proposal 1 — Election of Directors(continued)
Frank A. Wilson | Director Since: 2018 Committee Memberships: Audit Term of Office Expires: 2022 Age: 61 Independent Business Experience: • Senior Vice President and Chief Financial Officer, PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company, May 2009 until retirement in May 2018 • Finance, business development and investor relations leadership positions, Danaher Corporation, a life sciences and industrial conglomerate, 1999 to May 2009 Other Boards and Positions: • Director, Alkermes, a fully integrated, global biopharmaceutical company (September 2019 to present) • Director, Spartan Corporation, a provider of design, development and manufacturing services for electromechanical devices (2015 to March 2019) Mr. Wilson has significant financial expertise and skills in strategic planning, investor relations and business development within international public companies. | |||
Matthias L. Wolfgruber | Director Since: 2014 Committee Memberships: Term of Office Expires: Age: Independent Business Experience: • CEO, Altana AG, a global specialty chemicals company, 2007 until retirement in January 2016 • President and CEO, Altana Chemie AG, member of the management board of Altana AG, 2002 to 2007 • Management positions at Wacker-Chemie in the U.S. and Europe, 1985 to 2002 Other Boards and Positions: • Supervisory Board Member, Lanxess AG, a leading global manufacturer of synthetic rubber and chemical intermediates (2015 to present) • Supervisory Board, Altana AG (2016 to present) • Supervisory Board, Grillo-Werke AG, a manufacturer and supplier of zinc alloy products and chemicals (2014 to present) • Chairman, Ardex Group, a global supplier of high-performance specialty building materials (2015 to present) Dr. Wolfgruber has extensive leadership experience managing specialty chemicals businesses with global operations, with particular expertise in manufacturing, strategic investments and acquisitions. |
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Proposal 1 — Election of Directors (continued)
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Board Governance and Composition
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that address director qualifications and independence, Board Committees, director compensation, Board performance evaluations, Board and Committee meetings, access to senior management, and CEOChief Executive Officer (“CEO”) performance evaluation and succession planning, among other matters. Many of the Board’s practices and policies set out in these Guidelines are described in this discussion of Board Governance and Composition. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
The Governance Committee is charged with reviewing the composition of the Board and refreshing it as appropriate to ensure the Board as a whole reflects a range of talents, skills, diversity and expertise needed to meet the evolving needs of our businesses and to oversee the execution of our strategy.
Important Factors in Assessing Director Qualifications
Director Qualifications. The Governance Committee strives to maintain an engaged, independent board with broad and diverse experience and judgment that is committed to representing the interests of our shareholders.stockholders. Board candidates as well as nominees forre-election are evaluated in the context of the current composition of the Board of Directors and in relation to the Board’s requirements at the time.current and anticipated requirements. We expect our directors and any candidate or nominee to have integrity and to demonstrate high ethical standards. The Committee also considers a wide range of factors when recruiting, selecting and nominatingassessing director candidates,qualifications, including:
Ensuring an experienced, qualified Board with expertise in areas relevant to Cabot.The Committee seeks directors who have held significant leadership positions and can bring to the Board specific types of experience relevant to Cabot. It is the Board’s policy that the Board as a whole reflect a range of talents, skills and expertise, particularly in these areas:
Management Leadership and Strategic Planning Experience. We believe that directors who have held significant leadership positions over an extended period of time possess strong leadership qualities and demonstrate a practical understanding of organizations, processes, strategy and risk management andknow-how to drive change and growth. As a publicly traded company, we value experience on the boards of other publicly traded companies and other complex organizations.
Specialty Chemicals Industry and Operations Experience.We have sought directors with leadership and operational experience in the industries and value chains in which we operate.
Global Experience. We value directors with global business experience because our continued success depends, in part, on growing our businesses outside the United States. Further, we have significant manufacturing operations outside the U.S., and a majority of our revenues came from outside of the U.S. in 2017.fiscal 2019.
Accounting and Finance Experience. We use a broad set of financial metrics to measure our performance, and accurate financial reporting and robust auditing are critical to our success. Three of our directors qualify as audit committee financial experts, and we expect all our directors to have an understanding of finance and financial reporting processes.
Technology and Market Experience. As a science and technology company and an innovator, we value directors with an understanding of technology and material science and the value chains in which we participate. We seek to grow organically by developing new products, and identifying new applications and markets for our existing products. This has become increasingly importantUnder our “Advancing the Core” strategy, this is critical as we continue to intensify our focus on application innovation and formulated solutions under our “Advancing the Core” strategy.solutions.
Enhancing the Board’s diversity of background.As a global company, we consider diversity core toan essential element of our culture. At the Board level and throughout our company we value the benefits we receive from different perspectives and strive for a talented and diverse workforce and a diverse Board that is representative of our global business, customers, employees and stockholders. In evaluating the suitability of individual Board nominees, the Governance
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Board Composition(continued)
and stockholders. In evaluating the suitability of individual Board nominees, the Governance Committee takes into account many factors, including general understanding of the disciplines relevant to the success of a publicly traded company with global manufacturing operations in today’s business environment, professional experience, background, education, skill, age, race, gender and national origin. Although the Board does not have a formal written policy that solely addresses diversity, our Corporate Governance Guidelines prioritize diversity of origin, gender, background, experience and thought as important director selection criteria. The Governance Committee reviews its effectiveness in balancing these considerations when assessing the composition of the Board.
Individual Attributes.The Board believes that to function effectively, all directors should demonstrate sound judgment, compassion, a willingness and ability to work with other members of the Board openly and constructively and the ability to communicate clearly and persuasively, and be able to dedicate the time sufficient to ensure the diligent performance of their duties on our behalf.
Complying with the Board’s independence guidelines.When selecting and recruiting candidates, the Board looks at other positions the candidate has held or holds, including other board memberships, to determine whether any material relationship with Cabot exists that could impair the candidate’s independence.
Candidate Recommendations.Generally, weWe identify candidates for election to the Board of Directors through the business and other networks of the directors and management. The Committee may also solicitmanagement and from recommendations for director nominees frommade by third-party search firms and, overupon the request of the Governance Committee. Over the past year, the Governance Committee retained a search firm to help identify potential candidates. We evaluate candidates recommended by our stockholders in the same manner and on the same basis as candidates recommended by our directors, management or third-party search firms. On the recommendation of certain of the independent directors, and the further recommendation of the Governance Committee, Mr. Morrow was elected a director in 2017. Dr. ArnoldMs. Yan was initially identified as a candidate for election to the Board by a third-party search firm, and upon the recommendation of the Governance Committee, the Board elected Dr. ArnoldMs. Yan a director in January 2018.
Changes in Governance Practices made in 2017.Following a review of trends in board composition, succession planning and governance practices,effective May 2019. In considering Ms. Yan’s candidacy, the Board determinedconsidered Ms. Yan’s years of experience in global manufacturing and engineering as well as her significant experience in international business, particularly in Asia.
Board Refreshment.A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to eliminate itsensure that our Board has the right skills and tenures to best oversee management and the execution of our strategy and the associated risks. Taking into account the upcoming retirements of Messrs. Prevost and O’Brien, 40% of our directors have joined the Board in the last three years. Our Board does not have a mandatory retirement policy for directors. Thepolicy. With respect to director tenure, the Board is of the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. The Board does not believe that a mandatory retirement policy is an effective tool for proper Board refreshment. Rather, the Board will continue to proactively manage its composition andmake-up to ensure it has the appropriate mix of tenures and the requisite skills to address the Company’s current and future needs.
How we Assess Director Independence
The Board’s Guidelines.It is the Board’s policy that at least the majority of the Board’s members must be independent under our Corporate Governance Guidelines. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. All our directors are “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO, and Mr. Prevost, our former President and CEO. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with Cabot. The Board’s guidelines for director independence are consistent with the independence requirements in the New York Stock Exchange’s listing standards. In addition to applying these guidelines, the Board evaluates all relevant facts and circumstances in making an independence determination. In assessing director independence, the Board considers all known relationships, transactions and arrangements among directors, their family members, and Cabot. In evaluating Dr. Arnold’s independence, the Governance Committee considered that she had performed a short-term consulting assignment for the Company during the past year and prior to becoming a director for which she received compensation from the Company of less than $10,000 but has noon-going relationship to provide any additional services. The Board concluded that neither Dr. Arnold nor anynone of thenon-management directors who served as directors during the 20172019 fiscal year, other than Mr. Prevost, had a material relationship with Cabot.
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Board Composition(continued)
Our Leadership Structure —Non-Executive Chair of the Board; Executive Sessions
John F. O’Brien currently serves asNon-Executive Chair of the Board. The Board has elected Sue H. Rataj has served asNon-Executive Chair of the Board of Directors effectivesince March 9, 2018.
Although our Corporate Governance Guidelines do not require that our Chair and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing theNon-Executive Chair of the Board to provide independent leadership for the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time and, as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chair of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to set the agenda for and lead the executive sessions of thenon-management directors at Board meetings.meetings and to undertake such other responsibilities as the independent directors designate.
Key Responsibilities.OurNon-Executive Chair of the Board focuses on the Board’s processes and ensuring it is prioritizing the right matters. Specifically, the Chair has the following responsibilities, and may perform other functions at the Board’s request:
presiding over meetings of our Board and stockholders, including executive sessions of thenon-management directors;
serving as anex-officio member of each Board committee of which he or she is not a member and, upon invitation, attending those committee meetings where possible;
establishing an agenda for each Board meeting in collaboration with our CEO and meeting with our CEO following each meeting to discuss any open issues andfollow-up items;
facilitating and coordinating communication among thenon-management directors and our CEO and an open flow of information between management and our Board;
in collaboration with the Governance Committee, leading our Board’s annual performance review;
meeting with eachnon-management director at least annually;
providing assistance to our CEO by attending selected internal business management meetings and meeting with our CEO as necessary;
coordinating the periodic review of management’s strategic plan;
in collaboration with the Compensation Committee, leading our Board’s review of the succession plans for our CEOCEO; and key senior management; and
working with management on effective stockholder communication.communication and engagement.
Our Board of Directors has six scheduled Board meetings to review and discuss Cabot’s performance and prospects as well as the issues we face, with calls and communications between meetings as appropriate. The Board interacts directly with senior management during its meetings. The Board typically dedicates onemultiple-day meeting a year to a discussion of longer-term strategic issues the Company faces. During this meeting, the Board allocates significant time for a discussion of talent management and management succession planning, as well as the Company’s diversity and inclusion objectives and achievements. During fiscal 2017,2019, the Board met six times.times and acted by written consent once.
A significant portion of the Board’s oversight responsibility is carried out through its four operating committees.
Committee Composition.All of the members of our Audit Committee, Governance and Nominating Committee and Compensation Committee satisfy the NYSE’s definition of an independent director.
Committee Operations. Each Committee meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and can retain outside advisors. Each Committee’s meeting materials are available for review by all directors.
Committee Responsibilities. The primary responsibilities of each Committee are listed below. For more detail about the responsibilities and functions of each Committee, see the Committee charters on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
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Board Composition(continued)
Audit Committee
Members
| ||||
|
98 meetings in fiscal 20172019
Financial Acumen.Mr. McGillicuddy, Mr. MacLeod,Morrow and Mr. MorrowWilson are “audit committee financial experts” under SEC rules and each of these directors as well as Mr. Enriquez and Mr. Kirby are “financially literate” under NYSE rules.
Primary Responsibilities
The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of Cabot’s financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function and (v) our risk assessment and risk management processes. The Audit Committee, among other functions:
Has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm.
Monitors the qualifications, independence and performance of our independent registered public accounting firm and approves professional services provided by the independent registered public accounting firm.
Reviews with our independent registered public accounting firm the scope and results of the audit engagement.
Reviews the activities and recommendations of our independent registered public accounting firm.
Discusses Cabot’s annual audited financial statements, quarterly financial statements and earnings releases with management and Cabot’s independent registered public accounting firm, including our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Reviews Cabot’s accounting policies, risk assessment and risk management processes, control systems, legal matters and compliance activities.
During 2017,fiscal 2019, the Committee’s other priorities included Treasurytreasury matters, including cash and debt management, issues, financial process improvement initiativesinternal controls practices, tax matters and tax matters. The Committee also focused on cyber-security risk.
Compensation Committee
Members
| ||||
| Mark S. Wrighton | |||
William C. Kirby |
6
| * | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings and 2 actions by written consent in fiscal 20172019
Primary Responsibilities
The primary responsibilities of the Compensation Committee are to:
Approve the corporate goals and objectives relevant to the compensation of our Chief Executive Officer (“CEO”),CEO, evaluate the CEO’s performance and approve the CEO’s salary and incentive compensation.
Establish policies applicable to the compensation, severance or other remuneration of Cabot’s Management Executive Committee, review and approve performance measures and goals under incentive compensation plans applicable to such employees, and approve their salaries, annual short-term and long-term incentive awards, any severance payments and any other remuneration.
Review and approve the aggregate amount of bonuses to be paid to participants in Cabot’s annual short-term incentive program.
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Board Composition(continued)
Administer Cabot’s incentive compensation plans, equity-based plans and supplemental benefits arrangements, which includes approving the aggregate number of shares of stock granted under Cabot’s long-term incentive program.
Appoint the members of the Company’s Benefits and Investment Committees and monitor their activities.
Review on a periodic basis reports prepared by management of gender pay equity at the Company.
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Board Composition(continued)
An important itemImportant items for 2017 was reviewingfiscal 2019 included establishing the designcompensation arrangements for the newly appointed members of our incentive compensation programs, as further discussed in CD&A, to ensure they will continue to effectively incentivize the achievement of our new “Advancing the Core” strategy.Company’s Management Executive Committee.
Governance Committee
Members
| ||||
| Matthias L. Wolfgruber |
| * | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting |
4 meetings in fiscal 20172019
Primary Responsibilities
The Governance Committee is charged primarily with:
Developing and recommending to the Board corporate governance policies and procedures.
Identifying individuals qualified to become directors of Cabot.
Recommending director candidates to the Board to fill vacancies and to stand for election at the annual meeting of stockholders.
Recommending committeeCommittee assignments.
Leading the annual review of the Board’s performance.
Recommending compensation and benefit policies for Cabot’s directors.
Reviewing and making determinations regarding interested transactions under Cabot’s Related Person Transaction Policy and Procedures.
During 2017,fiscal 2019, the Governance Committee focused on Board composition and refreshment and reviewed the competitiveness of our director recruitment, refreshing our Board evaluation process, and reviewing our Corporate Governance Guidelines.compensation program.
Safety, Health, and EnvironmentalEnvironment & Sustainability (“SH&E”SHE&S”) Committee
Members
| Matthias L. Wolfgruber, Chair | Patrick M. | |||||
| ||||||
|
|
|
| * | Mr. |
43 meetings in fiscal 20172019
Primary Responsibilities
The SH&ESHE&S Committee reviews all aspects of Cabot’s safety, health, environmental and environmental managementsustainability performance, process safety, security, product stewardship, programscommunity engagement and performance.governmental affairs. In particular, the Committee reviews the following:
Cabot’s environmental reserve and risk assessment and risk management processes.
Environmental and safety audit programs, performance metrics, performance as benchmarked against industry peer groups, assessed fines or penalties,risk and site security and safety issues.opportunity assessments.
Management processes related to our safety, health, environment and environmental budget and capital expenditures.sustainability programs.
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Board Composition(continued)
During 2017,fiscal 2019, the Committee focused on the Company’s safety improvement plans, chemical risks and hazard assessments program, sustainability program and reporting, product classificationsafety and toxicology matters, and environmental remediation activities.
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Board Composition(continued)
Executive Committee
Members
| ||||
Sue H. Rataj, Chair | Michael M. Morrow | |||
Sean D. Keohane | John |
| * | Mr. O’Brien is retiring from the Board at the 2020 Annual Meeting. |
Did not meet or act in fiscal 20172019
Primary Responsibilities
The Executive Committee reviews and, where appropriate, approves corporate action with respect to the conduct of our business between Board of Directors’ meetings. Actions taken by the Executive Committee are reported to the Board at its next meeting.
How We Evaluate the Board’s Effectiveness
Annual Evaluation Process.Each year, the Chair of the Governance Committee leads our Board’s annual evaluation process. The process focuses on the effectiveness of the Board as a whole, prioritizing issues, and identifying specific issues for future discussion. In 2017, we refreshed2019, our approach to the Board’s evaluation process. Our General Counsel conducted individual interviews with each director. The conversations were guided by a series of questions that had been provided to the directors in advance covering Board and Committee membership, operations and responsibilities, as well as open-ended questions so that each director had leeway to discuss the issues he or she believesbelieved to be the most pertinent. The key themes, observations and suggestions were summarized and discussed first with the Governance Committee and later with the full Board. Based on these discussions, opportunities to further enhance the Board’s effectiveness have been and are being implemented. In addition, to the above described Board evaluation process, weourNon-Executive Chair conductedone-on-one discussions with each director and also instituted a new process for seekingsolicited feedback on individual director performance from other directors. This process was managed by the Non-Executive Chair.performance.
Our Board’s Role in Risk Oversight
Our Board oversees our enterprise-wide program of risk management. Cabot management is primarily responsible forday-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment is updated on a continual basis and includes a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance and managerial risks which may potentially affect the Company. From this assessment, the most significant risks in terms of their likelihood and severity are identified, and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full Board or the relevant Committee of the Board our major risk exposures, their potential operational or financial impact on Cabot, and the steps we take to manage them.
Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure, market exposure and country specific risks. Each Committee also has responsibility for risk oversight. The Audit Committee focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm, our CFO, our Controller, our Director of Internal Audit and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processes.processes and cybersecurity program. The SH&ESHE&S Committee assists the Board in fulfilling its oversight responsibility by reviewing the effectiveness of our safety, health, environment and environmentalsustainability programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes. The Compensation Committee considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistent with our business strategy. The Compensation Committee also oversees senior management succession planning and development. Finally, the Governance Committee considers
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Board Composition(continued)
governance and Board succession risks, and evaluates director skills and qualifications to ensure each Committee has directors with the requisite skills to oversee the applicable risks that are the focus of that Committee. The Company has a robust risk management program, the strength of which is not dependent on the Board’s leadership structure.
Our Compensation Discussion and Analysis (“CD&A”) describes our compensation policies, programs and practices for our named executive officers. Our corporate goal-setting, assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate short- and long-term incentive programs.
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Board Composition(continued)
Participants in our long-term incentive program receive awards consisting of time-based restricted stock units and performance-based restricted stock units, and, in the case of members of the Management Executive Committee and a limited number of other participants, stock options. Beyond our corporate short- and long-term incentive programs, a substantial number of our facilities offer an annual cash incentive plan.
The Compensation Committee directed management, working with the Committee’s independent consultant, Pearl Meyer,Meridian Compensation Partners, to provide an evaluation on the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment is presented to and reviewed by the Compensation Committee. Among the program features evaluated are the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelines for members of the Management Executive Committee; a company compensation recoupment policy; and significant controls for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designed to mitigate risk, including the oversight provided by the Compensation Committee, which reviews and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
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Other Governance Policies and Practices
Transactions with Related Persons
Policy and Procedures for the Review of Related Person Transactions
Our Board has adopted a written policy for the review and approval or ratification of transactions involving related persons. “Related persons” consist of any person who is or was (since the beginning of the fiscal year) a director, nominee for director or executive officer of Cabot, any greater than 5% stockholder of Cabot and the immediate family members of any of those persons. The Governance Committee is responsible for applying the policy with the assistance of our General Counsel.
Transactions covered by the policy consist of any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which (1) the aggregate amount involved will or may be expected to exceed $100,000 with respect to any fiscal year, (2) Cabot is a participant and (3) any related person has or will have a direct or indirect interest, other than solely as a result of being a director or a less than 10% beneficial owner of another entity (an “interested transaction”). Under the policy, the following interested transactions have a standingpre-approval from the Governance Committee, even if the aggregate amount is greater than $100,000:
| • | Certain sales of stock by executive officers to Cabot. (1) Sales of Cabot stock by an executive officer (including the CEO) to Cabot pursuant to the terms of our long-term incentive program or (2) other sales by executive officers (excluding the CEO) provided that the sale has been approved by our CEO, the per share purchase price is the fair market value of our common stock on the date of sale, the proceeds from the sale to the executive officer do not exceed $500,000, and the sale does not take place during a quarterly blackout period. |
| • | Certain transactions with other companies. Any transaction between Cabot and another company if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total revenues, or any transaction where Cabot is indebted to another company if the total amount of Cabot’s indebtedness to the other company does not exceed 1% of that company’s total consolidated assets. In both cases, thepre-approval applies if the related person’s only relationship is as an employee (other than executive officer), director or beneficial owner of less than 10% of the other company’s shares. |
| • | Employment of executive officers; director compensation. Any employment by Cabot of an executive officer if the related compensation is required to be reported in our proxy statement or if the compensation was approved by our Compensation Committee. Any compensation paid to a director if the compensation is required to be reported in our proxy statement. |
| • | Other transactions. Competitively bid or regulated public utility services transactions; transactions involving trustee-type services; and transactions where the related person’s interest arises solely from the ownership of our common stock and all common stockholders received the same benefit on a pro rata basis. |
Each interested transaction by a related person that does not have standingpre-approval under the policy should be reported to our General Counsel for presentation to the Governance Committee for approval before its consummation or for ratification, if necessary, after its consummation. The Chair of the Governance Committee has the authority topre-approve or ratify (as applicable) any interested transaction with a related person in which the aggregate amount involved is expected to be less than $500,000. In determining whether to approve or ratify an interested transaction, the Governance Committee and the Chair may take into account such factors as they deem appropriate, which may include whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Transactions with Related Persons
Since the beginning of fiscal 2017,2019, Cabot and its subsidiaries had no transactions, nor are there any currently proposed transactions in which Cabot or its subsidiaries was or is to be a participant in whichand the amount involved exceeds $120,000 and any related person (as defined above) had or will have a direct or indirect material interest reportable under SEC rules.
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Other Governance Policies and Practices(continued)
The Company welcomes stockholder engagement. Our directors are available to answer questions from stockholders at the 2020 Annual Meeting. In addition, management of the Company conducts stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. We provide regular updates regarding the Company’s performance and strategic actions to the investor community, and we participate in numerous investor conferences,one-on-one meetings, earnings calls, investor days, and educational investor and analyst conversations. We also communicate with stockholders and other stakeholders through various media, including our annual report, proxy statement and other filings with the SEC, news releases and our website. We believe ongoing stockholder engagement allows us to respond effectively to stockholder concerns.
Procedures for Stockholders to Recommend Director Nominees
The Governance Committee has a policy with respect to the submission of recommendations by shareholdersstockholders of candidates for director nominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the date that Cabot released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be submitted to the Company’s Secretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1300,1400, Boston, Massachusetts 02210. The notice to the Secretary should include all information about the candidate that Cabot would be required to disclose in a proxy statement in accordance with Securities and Exchange Act rules or as required by the Company’sby-laws, consent of the candidate to serve on the Board of Directors, if nominated and elected, and agreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with applicable Company policies.
Director Attendance at Meetings
Board/Committee Meetings. During fiscal 2017,2019, each director attended at least 85%75% of the aggregate of the total Board meetings and the total meetings held by all of the Committees on which he or she served during the periods that he or she served.
Annual Meeting of Stockholders.Recognizing that director attendance at the annual meeting can provide our stockholders with an opportunity to communicate with Board members about issues affecting Cabot, we actively encourage our directors to attend the annual meeting. In 2017, all of our directors whose term of office continued after the annual meeting attended the annual meeting.
We have adopted a code of ethics that applies to all of our employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Controller and other senior financial officers. In fiscal 2019, each of our directors completed our Code of Business Ethicson-line compliance training program that we require our employees to complete. The Code of Business Ethics is posted on our website (www.cabotcorp.com) under the caption “Company — About Cabot — Code of Business Ethics.”
Stockholders or other interested parties wishing to communicate with the Board, thenon-management directors or any individual director may contact theNon-Executive ChairmanChair of the Board by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Board of Directors, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277.
Anyone who has a complaint or concern regarding our accounting, internal accounting controls or auditing matters may communicate that concern to the Chair of the Audit Committee by calling1-800-853-7602; by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Audit Committee, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277. All such communications to the Board of Directors or the Audit Committee will also be sent to Cabot’s Office of Compliance.
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Annual compensation for ournon-employee directors is comprised of cash compensation and a grant of Cabot common stock. The Governance Committee is responsible for reviewing the form and amount of compensation paid to ournon-employee directors and recommends changes to our Board of Directors as appropriate. TheIn November 2018, the Governance Committee, regularly reviews competitive market data with the assistance of Mercer LLC, a national executive compensation firm, engaged by this Committee, to evaluateevaluated the reasonableness of our director compensation and the appropriate mix of cash and equity compensation. This assessment included a review of director compensation data prepared for the Governance Committee by Mercer using the same peer group of companies our Compensation Committee uses for assessing the reasonableness of our executive compensation decisions. Based on this evaluation, and upon the recommendation of the Governance Committee, our Board of Directors approved, effective January 1, 2019, the following changes in our director compensation:
increased the annual equity compensation component of this program from a value of $110,000 to a value of $120,000
increased the annual cash retainer from $75,000 to $90,000
eliminated the separate $16,000 annual cash retainer for serving on the Audit Committee and the separate $7,000 annual cash retainer for serving on the Compensation, Governance or SHE&S Committee
reduced the annual retainer paid to the Chair of the Audit Committee from $25,000 to $20,000
increased the annual retainer paid to the Chair of the Compensation Committee from $10,000 to $15,000
retained the $10,000 cash retainer paid to the Chairs of the Governance and SHE&S Committees
eliminated the separate cash retainer paid to the Chair of the Governance Committee when the Chair of that Committee is also serving as Non-Executive Chair of the Board
retained the $110,000 annual cash retainer paid to our Non-Executive Chair of the Board.
Directors who are Cabot employees do not receive compensation for their services as directors.
Cash Compensation
CashEffective January 1, 2019, the annual cash compensation for ournon-employee directors consists of an annual retainer of $75,000, plus the following annual retainers for specific roles:components:
retainer of $90,000
$16,000 for serving on the Audit Committee (plus another $25,00020,000 for serving as Chair of the Audit Committee).Committee
$7,000 for serving on each of the Compensation, SH&E or Governance Committees (plus another $10,00015,000 for serving as Chair of the Compensation SH&E orCommittee
$10,000 for serving as Chair of the SHE&S Committee
$10,000 for serving as Chair of the Governance Committees).Committee, except when the Chair of the Governance Committee is also serving as Non-Executive Chair of the Board of Directors, in which case this retainer is waived
$110,000 for serving as Non-Executive Chair of the Board of Directors.Directors
Mr. O’Brien has elected to not receive the cash compensation described above for his role as Chair of the Governance Committee while he is serving as our Non-Executive Chair of the Board. Cash compensation is paid quarterly and, when changes occur in Board or Committee membership during a quarter, the compensation ispro-rated.
Stock Compensation
Under the Cabot Corporation 2015 Directors’ Stock Compensation Plan (the “Directors’ Stock Plan”), eachnon-employee director is eligible to receive each calendar year shares of Cabot common stock as part of his or her compensation for services to be performed in that year. For calendar year 2017,2019, eachnon-employee director whose term of office continued after the 20172019 Annual Meeting of Stockholders received an award of shares having a grant date value as close as possible to $110,000 (2,052$120,000 (2,613 shares). Lydia W. Thomas,John K. McGillicuddy, who retired at the 20172019 Annual Meeting, received apro-rated grant of 513653 shares. The closing price of our common stock on January 13, 2017,10, 2019, the date such shares were granted, was $53.61.$45.92. Upon hisher election to the Board on September 8, 2017, Mr. Morroweffective May 13, 2019, Ms. Yan received a pro-rated grant of 7001,818 shares as compensation for hisher services as anon-employee director to be performed in 2017.calendar 2019. The closing price of our common stock on September 8, 2017May 13, 2019 was $52.41.$44.01.
As of January 16, 2018,10, 2020, there were 295,549239,675 shares available for issuance under the Directors’ Stock Plan.
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Director Compensation(continued)
We believe that it is desirable for directors to have an equity interest in Cabot and we encourage all directors to own a reasonable amount of Cabot stock to align director and stockholder interests and to enhance a director’s long-term perspective. Accordingly, our Corporate Governance Guidelines requirenon-employee directors to have an equity ownership in Cabot of at least 10,000 shares. It is expected that this ownership level will generally be achieved within a five-year period beginning when a director is first elected to the Board. For purposes of determining a director’s compliance with this ownership requirement, any deferred shares held by a director are considered owned by the director. In addition, eachnon-employee director is required to retain the shares granted in any given year for a period of at least three years from the date of issuance or until the director’s earlier retirement.
Reimbursement of Certain Expenses; Charitable Giving
Our Corporate Governance Guidelines state that Cabot will not provide retirement or other benefits or perquisites tonon-employee directors. Directors, however, are reimbursed for reasonable travel andout-of-pocket expenses incurred in connection with attending Board and Committee meetings and other Cabot business-related events and are covered by Cabot’s travel accident insurance policy for such travel. In connection with the retirement of Dr. ThomasMr. McGillicuddy from the Board of Directors at the 20172019 Annual Meeting and in recognition for herhis many years of service, we made contributions totalingan aggregate contribution on his behalf of $25,000 on her behalf to charities that shehe selected.
CABOT CORPORATION 21
|
Director Compensation(continued)
Deferred Compensation
Under the Cabot CorporationNon-Employee Directors’ Deferral Plan (the “Deferred Compensation Plan”), directors can elect to defer receipt of any cash compensation payable in a calendar year for a period of at least three years or until they cease to be members of the Board of Directors. In any year, these deferred amounts are, at the director’s choice, either (i) credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable year or (ii) treated as invested in Cabot phantom stock units, based on the market price of shares of Cabot common stock at the time of deferral (with dividends paid on shares credited and treated as if reinvested in Cabot phantom stock units). Mr. Enriquez and Dr. Wolfgruber elected to defer receipt of their calendar year 20172019 cash compensation and treat the deferred amounts as invested in Cabot phantom stock units. Messrs. Kirby and Prevost elected to defer receipt of their calendar year 20172019 cash compensation and have it credited with interest at a rate equal to the Moody’s Corporate Bond Rate. The Moody’s Corporate Bond Rate used to calculate interest during calendar year 20172019 was 4.19%4.64%.
Under the Deferred Compensation Plan, directors also may defer receipt of the shares of common stock issuable to them under the Directors’ Stock Plan. For each share of stock deferred, a director is credited with one Cabot phantom stock unit to a notional account created in the director’s name. Dividends that would otherwise be payable on the deferred shares accrue in the account and are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the year. The rate used to calculate interest during calendar year 20172019 was 4.19%4.64%. At the end of the deferral period, the deferred shares of Cabot common stock are issued to the director, along with the accrued cash dividends and interest earned, either in one issuance or in installments over a period of up to ten years, as selected by the director. Messrs. Enriquez, Kirby, McGillicuddy, Morrow, and Prevost and Drs. ThomasWilson, Ms. Yan and Dr. Wolfgruber elected to defer their calendar year 20172019 stock awards.
CABOT CORPORATION 21
2020 PROXY STATEMENT |
Director Compensation(continued)
The following table sets forth the compensation earned by ournon-employee directors in fiscal 2017:2019:
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Change in Value and | All Other Compensation ($)(4) | Total($) | Fees Earned or Paid in Cash ($)(1)
| Stock Awards ($)(2)
| Change in Pension Value and Earnings($)(3)
| All Other ($)(4)
| Total($)
| |||||||||||||||||||||||||||||||||
Cynthia A. Arnold
|
88,000
|
|
119,989
|
| — |
|
—
|
|
|
207,989
|
| ||||||||||||||||||||||||||||||||
Juan Enriquez | 98,000 | 110,008 | 2,539 | — | 210,547 |
90,250
|
|
119,989
|
|
|
1,805
|
|
|
—
|
|
|
212,044
|
| |||||||||||||||||||||||||
William C. Kirby | 98,000 | 110,008 | 13,819 | — | 221,827 |
88,000
|
|
119,989
|
|
|
9,218
|
|
|
—
|
|
|
217,207
|
| |||||||||||||||||||||||||
Roderick C.G. MacLeod | 98,000 | 110,008 | — | — | 208,008 | ||||||||||||||||||||||||||||||||||||||
John K. McGillicuddy | 123,000 | 110,008 | 1,304 | — | 234,312 |
49,250
|
|
29,986
|
|
|
1,022
|
|
|
25,000
|
|
|
105,258
|
| |||||||||||||||||||||||||
Michael M. Morrow | 8,166 | 36,687 | — | — | 44,853 |
109,250
|
|
119,989
|
|
|
36
|
|
|
—
|
|
|
229,275
|
| |||||||||||||||||||||||||
John F. O’Brien | 192,000 | 110,008 | — | — | 302,008 |
103,500
|
|
119,989
|
|
|
—
|
|
|
—
|
|
|
223,489
|
| |||||||||||||||||||||||||
Patrick M. Prevost | 82,000 | 110,008 | 1,559 | — | 193,567 |
88,000
|
|
119,989
|
|
|
3,208
|
|
|
—
|
|
|
211,197
|
| |||||||||||||||||||||||||
Sue H. Rataj | 99,000 | 110,008 | — | — | 209,008 |
200,500
|
|
119,989
|
|
|
—
|
|
|
—
|
|
|
320,489
|
| |||||||||||||||||||||||||
Lydia W. Thomas | 54,000 | 27,502 | 44 | 25,000 | 106,546 | ||||||||||||||||||||||||||||||||||||||
Frank A. Wilson
|
90,250
|
|
119,989
|
|
|
9
|
|
|
—
|
|
|
210,248
|
| ||||||||||||||||||||||||||||||
Matthias L. Wolfgruber | 94,000 | 110,008 | 140 | — | 204,148 |
99,750
|
|
119,989
|
|
|
219
|
|
|
—
|
|
|
219,958
|
| |||||||||||||||||||||||||
Mark S. Wrighton | 89,000 | 110,008 | 15,010 | — | 214,018 |
88,000
|
|
119,986
|
|
|
7,518
|
|
|
—
|
|
|
215,507
|
| |||||||||||||||||||||||||
Christine Y. Yan
|
34,620
|
|
80,010
|
|
|
2
|
|
|
—
|
|
|
114,632
|
| ||||||||||||||||||||||||||||||
| 1. | Cash compensation |
| 2. | Reflects the grant date fair value of shares of stock granted to eachnon-employee director computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the number of shares granted to the director by the closing price of our common stock on the date of grant, which, for all directors other than |
| 3. | Represents above-market interest (the portion exceeding 120% of the applicable long-term rate) on compensation deferred under the Deferred Compensation Plan by Messrs. Enriquez, Kirby, McGillicuddy, Morrow, Prevost, Wilson, Wrighton, Ms. Yan and |
| 4. | Consists of a charitable |
22 CABOT CORPORATION
|
Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock
The following table shows the amount of Cabot common stock beneficially owned as of January 16, 201815, 2020 (unless otherwise indicated) by each person known by Cabot to beneficially own more than 5% of our outstanding common stock, by each director of Cabot, by each of our named executive officers and by all directors, nominees for director and executive officers of Cabot as a group. Unless otherwise indicated, each person has sole investment and voting power over the securities listed in the table.
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Name
| Total Number of Shares(1) | Percent of Class(2) | ||||||
Holders of More than Five Percent of Common Stock | ||||||||
BlackRock, Inc. | 5,839,996 | (3) | 9.70 | % | ||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
The Vanguard Group | 5,103,090 | (4) | 8.50 | % | ||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355 | ||||||||
Wellington Management Group LLP | 2,938,778 | (5) | 5.16 | % | ||||
Wellington Group Holdings LLP | ||||||||
Wellington Investment Advisors Holdings LLP | ||||||||
c/o Wellington Management Company LLP | ||||||||
280 Congress Street | ||||||||
Boston, MA 02210 | ||||||||
Directors and Executive Officers | ||||||||
Cynthia A. Arnold | 6,902 | * | ||||||
Brian A. Berube | 99,831 | (6) | * | |||||
John R. Doubman | 54,859 | (7) | * | |||||
Juan Enriquez | 34,468 | (8) | * | |||||
Karen A. Kalita | 6,336 | (9) | * | |||||
Hobart C. Kalkstein | 95,677 | (10) | * | |||||
Sean D. Keohane | 365,593 | (11) | * | |||||
William C. Kirby | 16,782 | (12) | * | |||||
Erica McLaughlin | 31,250 | (13) | * | |||||
Michael M. Morrow | 9,584 | (14) | * | |||||
John F. O’Brien | 53,992 | * | ||||||
Patrick M. Prevost | 220,219 | (15) | * | |||||
Sue H. Rataj | 18,828 | * | ||||||
CABOT CORPORATION 23
|
Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock(continued)
Name
| Total Number of Shares(1) | Percent of Class(2) | ||||||
Frank A. Wilson | 5,834 | (16) | * | |||||
Matthias L. Wolfgruber | 13,123 | (17) | * | |||||
Mark S. Wrighton | 47,068 | (18) | * | |||||
Christine Y. Yan | 4,453 | (19) | * | |||||
Directors and executive officers as a group (18 persons) | 1,192,950 | (20) | 2.08 | % | ||||
| * | Less than one percent. |
| 1. | For Cabot’s executive officers the number includes shares of Cabot common stock held for their benefit by the trustee of Cabot’s 401(k) Plan. The shares of common stock allocated to the accounts of Cabot’s executive officers in the 401(k) Plan constitute less than 1% of our common stock. |
| 2. | The calculation of percentage of ownership of each listed beneficial owner is based on |
| 3. | Based on an amendment to a Schedule 13G filed with the SEC on |
| 4. | Based on an amendment to a Schedule 13G filed with the SEC on February |
| 5. | Based on an amendment to a Schedule 13G filed with the SEC on |
| 6. |
Includes |
Includes |
Includes |
Includes |
| 10. | Includes 50,271 shares of common stock that Mr. Kalkstein has the right to acquire within 60 days of January |
Includes |
Mr. Kirby has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
Includes |
| 14. | Includes 7,584 shares the receipt of which Mr. Morrow has deferred under applicable Cabot deferred compensation plans. |
| 15. | Includes 6,301 shares the receipt of which Mr. Prevost has deferred under applicable Cabot deferred compensation plans, and |
Mr. Wilson has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
| 17. | Dr. Wolfgruber has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
Includes 100 shares held by Dr. Wrighton’s wife, who retains sole voting control over the shares. Dr. Wrighton disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
| 19. | Ms. Yan has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
| 20. | Shares of our common stock shown as being beneficially owned by directors and executive officers as a group includes |
24 CABOT CORPORATION
|
The Compensation Committee of the Board of Directors (referred to as the “Compensation Committee” or the “Committee”) has reviewed the Compensation Discussion and Analysis (“CD&A”) section included in this Proxy Statement. The Compensation Committee has also reviewed and discussed the CD&A with the members of management who are involved in the compensation process.
Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated by reference into our Annual Report on Form10-K for the fiscal year ended September 30, 2017.2019.
Sue H. Rataj,John F. O’Brien, Chair
Matthias L. WolfgruberWilliam C. Kirby
Mark S. Wrighton
Compensation Discussion and Analysis
As context for our named executive officers’ 2017 fiscal year2019 compensation, below we summarize Cabot’s fiscal 20172019 performance and provide a brief overview of the decisions made with respect to executive compensation in fiscal 20172019 and our executive compensation programs for thisthat fiscal year. We then describe our compensation philosophy and objectives, our compensation setting process and other compensation-compensation and governance-relatedgovernance related policies, and compensation awarded, earned and paid for fiscal 2017.2019. For fiscal 2017,2019, our named executive officers (“NEO”s) and their current positions are:
Sean D. Keohane, President and Chief Executive Officer;
Erica McLaughlin, Senior Vice President and Chief Financial Officer, and President, Americas region;Officer;
Karen A. Berube,Kalita, Senior Vice President and General Counsel; and
Hobart C. Kalkstein, Senior Vice President and President, Reinforcement Materials segment.Segment, and President, Americas Region;
| • | Brian A. Berube, former Senior Vice President and General Counsel(1); and |
| • | John R. Doubman, former Senior Vice President and President, Performance Additives business(2). |
| (1) | Mr. |
| (2) | Mr. Doubman stepped down from this |
Executive Summary
Our Performance in Fiscal 20172019
In 2016, we launched ourOur “Advancing the Core” strategy is designed to extend our leadership in performance materials by (i) investing for growth in our core businesses, (ii) driving application innovation with our customers, and (iii) generating strong cash flows through efficiency and optimization. The aim of this strategy is to deliver sustained and attractive total shareholder return (TSR)(“TSR”), built on earnings growth and a balanced capital allocation frameworkframework. This strategy is intended to ensure that we invest sufficiently in our core businesses to capture opportunities and drive long-term earnings growth while also providing our shareholders with a meaningful cash return.
Fiscal 2017 was a year of tremendous progress for us. WeDuring fiscal 2019, we delivered onsolid results despite challenging end markets. With respect to our financial goals, andperformance, we:
generated adjusteddiluted earnings per share (“EPS”) of $3.43*$2.63 and adjusted EPS of $3.91*, representingwhich we believe was solid in light of weakening macroeconomic and key sector indicators we experienced during the fiscal year, including, most notably, a 9% increase compared with fiscal 2016;
CABOT CORPORATION 25
|
Executive Compensation(continued)
| • | generated cash flow from operating activities of $363 million and free cash flow* of $139 million, which allowed us to increase our quarterly cash dividend in 2019 by 6%; and |
We also advancedmaintained a numberstrong balance sheet and liquidity position by improving our net working capital days performance and through the issuance of10-year bonds, which we believe improves our financial and operational flexibility.
While fiscal 2019 market fundamentals were weaker than we anticipated, we remained focused on our long-term strategic investmentsstrategy and capital allocation framework and executed important initiatives to extend our leadership positions and position us to drive sustained growth of earnings and free cash flow. Our investments for growth in our core businesses included:During the year, we:
completed the performance capabilities our products deliver in various applications;
managed our investments to strengthen our core manufacturing asset footprint;
executed the successfulstart-up of a new fumed silica plantsplant in Wuhai,China;
commenced work to upgrade the carbon black plant we purchased in China and Carrollton, Kentucky, which will allow us to meet growing demandin 2018 for our high-performance products and strengthen our relationships with key leadersthe production of specialty carbons;
improved the performance of the Purification Solutions segment through strong execution of the transformation plan we implemented early in the silicones industry;year intended to focus the segment’s portfolio, optimize its assets, and streamline its organizational structure; and
returned $253 million of cash to our shareholders, consisting of $173 million through share repurchases and $80 million in dividend payments.
We also continued to make progress driving application innovation in new markets. For example, with respect to our energy materials product line, we completed in November 2017), which extends ourhave achieved customer technical qualification with most of the top global footprint in black masterbatchbattery manufacturers and compounds and provideslaunched a platform to grow in the strategic areasuite of conductive formulations.
carbon additives that will form the base for long-term growth. We made notable progressbelieve our continued efforts to broaden our range of conductive carbon additives and build formulation capability will differentiate our product offerings in this important high-growth application. Additionally, we continued to fund important growth investments in Cabot Elastomer Composites and achieved critical customer qualification milestones that are expected to lead to long-term growth of this transformative material in tires.
To improve our efficiency and optimize our operations, we implemented a number of cost reduction initiatives across the Company during the year. These included organizational structural changes and asset decisions that reduced headcount, and achieved, inclusive of savings derived from the Purification Solutions transformation plan, an approximately $30 million reduction in our efforts to drive application innovation. This is best exemplified by:costs.
Our efficiency and optimization achievements included:
international registrar, BSI. In addition, we made continued progress in our safety, health and environmental performance, which included top tier performance in Total Recordable Incident Rate (“TRIR”), a notable reduction in environmentalnon-conformances andreceived a Gold rating from EcovadisEcoVadis, an independent sustainability monitoring organization, for our 2016 Sustainability report.Report, which is the fourth consecutive year that we have received a Gold rating, and in 2019 we were named among the 100 Best Corporate Citizens by Corporate Responsibility Magazine for the second consecutive year. Further, we continued to make progress toward creating a more inclusive and diverse organization. Mr. Keohane signed the CEO Action for Diversity and Inclusion™ during the year, and we made further progress in increasing gender diversity representation on our Management Executive Committee. Currently, three of the ten members of our Management Executive Committee are women.
Executive Transitions
In June 2019, Mr. Berube, the Company’s former Senior Vice President and General Counsel, voluntarily resigned from Cabot. Ms. Kalita assumed responsibility as the Company’s chief legal officer, and was appointed Senior Vice President and General Counsel at that time. In addition, Mr. Doubman stepped down from his position as Senior Vice President and President, Performance Additives business, effective October 2, 2019, and his responsibilities were transitioned to other senior leaders within Cabot. Mr. Doubman’s employment with Cabot terminated effective November 15, 2019. The compensation decisions made in connection with the adoption and implementation of our Advancing the Core strategy, at the beginning of fiscal 2017 management and the Compensation Committee reviewed the design of our executive compensation programs to determine whether they would continue to effectively drive the achievement of, and reward the delivery of the commitments we made under,these changes are described later in this new strategy. From this review, we made modest adjustments to the terms of our performance-based incentive compensation awards, which are reflected in the awards we granted in fiscal 2017. Specifically, under our short-term incentive compensation (“STI”) program for fiscal 2017, the principal financial metric to measure corporate performance and determine payouts was adjusted earnings before interest and taxes (“EBIT”). In previous years, the principal financial metric was adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Because we are a capital intensive company, the Compensation Committee determined that the use of adjusted EBIT, which includes our depreciation expense, as a performance metric under this program better ties short-term incentive compensation to the achievement of our earnings growth and capital efficiency goals than EBITDA. In addition, we believe adjusted EBIT is more closely correlated to our TSR. We retained net working capital (“NWC”) days as the second financial metric under our STI program for fiscal 2017 because we believe it effectively measures how efficiently we manage our investments in working capital to generate earnings. The calculation of this measure was modified for fiscal 2017 STI awards, however, to include the NWC days used in our Purification Solutions and Aerogel businesses, which we had not included in past years. The Committee also reviewed the financial metrics used in the performance-based restricted stock unit (“PSU”) awards made under our long-term incentive compensation (“LTI”) program and determined that the use of adjusted EPS and adjusted return on net assets (“RONA”) continue to be appropriate in light of the Company’s new strategy because adjusted EPS reflects our goal of improving ourafter-tax profitability and adjusted RONA measures how effectively and efficiently we use our operating assets to generate earnings. The Committee did modify the terms of our fiscal 2017 PSU awards to reinforce the capital allocation framework contained in our new strategy, so that dividend equivalent payments will be made in respect of PSUs that are earned based on the achievement of applicable performance metrics, but have not yet vested based on time, on the same terms as our time-based restricted stock unit (“TSU”) awards.CD&A.
| * | Adjusted EPS and free cash flow are not measures of performance under U.S. generally accepted accounting principles (“GAAP”). Please see Appendix A for reconciliations to the most comparable GAAP financial measures. |
26 CABOT CORPORATION
|
Executive Compensation(continued)
Highlights of our Fiscal Year 2017 NEO2019 Named Executive Officer Compensation Decisions and the Impact of Company Performance on Compensation.
We believe fiscal 20172019 compensation appropriately aligned named executive officers’ pay with our corporate performance, with a significant portion of the compensation paid to our named executive officers based on our performance againstpre-established corporate financial goals. Specifically, 65% of the total direct compensation opportunity (base salary, target STI award and LTI awards (with PSUs valued at target)) for our CEO was performance-based and not guaranteed, and, on average, the total direct compensation opportunities for our other named executive officers that was performance-based was 53%. The charts below show the total direct compensation opportunities provided to our named executive officers for fiscal 2019, as well as the mix between short- and long-term compensation, and the performance-based compensation.
 |  |
Base Salary.All of our named executive officers received a base salary increase for calendar 20172019 during our annual salary review process that took place in November 2016.2018, with the exception of Mr. Doubman, who received a 10% increase in his base salary effective October 1, 2018, at the time of his promotion to President, Performance Additives business. The increases whichin the base salaries of our named executive officers other than Mr. Doubman made during the annual review process ranged from 3% to 7%,15% and were made in recognition of the officers’ strong individual performance and leadership.leadership, and, in the case of Ms. McLaughlin and Mr. Kalkstein, to bring their base salaries closer to the market median of the benchmark compensation data used by the Committee, as further described below. In addition, Ms. Kalita received a 29% increase in her base salary effective at the time of her promotion in June 2019, after a review of benchmark compensation data and in recognition of the associated expanded job responsibilities she assumed. With these increases, overall,we believe the base salaries of our named executive officers arefor fiscal 2019 were aligned and consistent with our compensation philosophy, which considers individual performance and leadership, scope of responsibilities, the number of years the executive has held the position, and benchmark compensation data to arrive at a market competitive base level of compensation appropriate for the individual. (See pages 38-4039-42 for further details).
STI Awards and Payouts. The Company achieved performance betweenbelow the stretch and maximum levelstarget level of the adjusted EBIT metricearnings before interest and betweentaxes (“EBIT”) goal and within the target and stretch levelsrange level of the NWCnet working capital (“NWC”) days metricgoal established by the Committee under our STIshort-term incentive (“STI”) program for fiscal 2019, resulting in a payout of the portion of the award that is based on our financial performance of 147.3%74.1% of target. The balance of the amounts paid in respect of STI awards to members of our Management Executive Committee, including our named executive officers, reflected their strong individual performance and leadership, (rangingand ranged from 90%75% to 145%110% of target), with thetarget. The total STI awards rangingmade to the members of our Management Executive Committee, including our named executive officers, ranged from 130%74% to 147%85% of the named executive officer’s target award. (Seepages 38-4039-42 for further details)details about awards and payouts made to our named executive officers).
CABOT CORPORATION 27
2020 PROXY STATEMENT |
Executive Compensation(continued)
LTI Awards and Payouts. Our LTI awards consistlong-term incentive (“LTI”) program is 70% performance-based and 30% time-based, consisting of a combination of PSUsperformance-based restricted stock units (“PSUs”) (35%), TSUs (30%) and stock options (35%) and time-based restricted stock units (“TSUs”) (30%) (with percentages measured based on the awards’ grant date values, assuming target level achievement of applicable performance metricsgoals in the case of PSUs). The grant date value of the awards granted in fiscal 20172019 to each named executive officer was based on an assessment of the named executive officer’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation, and internal equity (the relationship of pay among the executive officers in the context of their responsibilities) considerations. In addition, as described below, Ms. Kalita received a supplemental LTI award in connection with her promotion to the role of Senior Vice President and General Counsel. (See pages 39-42 for further details.)
With respectAs described below, each PSU award is allocated evenly into three tranches, with each tranche having a separate fiscal year performance period and the entire award having a three-year vesting period. All performance goals for each performance period are established at the time of grant to outstanding PSUs,cover the three-year period. Our financial performance in each fiscal year determines the percentage of the target award earned for that fiscal 2017year performance period in three outstanding PSU awards. The percentage of the target awards earned for fiscal 2019 performance with respect to outstanding PSUs is set forth below. For each performance metric, adjusted EPS and adjusted return on net assets (“RONA”), achieving the target level of performance results in a payout of 100% of the portion of the award that is payable with respectrelates to that metric.metric being earned. We believe that the PSUs earned based on our fiscal 2019 financial results properly aligned our LTI compensation with our solid fiscal 2019 financial performance, consistent with the role of these awards in advancing ourpay-for-performance philosophy.
|
Performance Metrics and % of Target Earned based on Fiscal
| Total % of Target PSU
| ||
Fiscal
| Adjusted EPS
|
| ||
Fiscal
| Adjusted EPS
|
| ||
Fiscal
| Adjusted EPS
|
|
The performance targets for the 2015 grants were established in November 2014, and they reflect the long-term goals in place at that time. In November 2015, the Committee revised the target setting methodology it had been using and in November 2016 it further refined that methodology to align it with our new Advancing the Core strategy and the growth expectations under that strategy. The Committee believed that the revised methodology would better incentivize our executives to achieve our strategic goals.
28CABOT CORPORATION 27
|
Executive Compensation(continued)
Characteristics of our Executive Compensation Programs
Our executive compensation programs include a number of practices intended to align the interests of management and our shareholders.
| What We Do | What We Don’t Do | |
✓ Link pay to performance; significant portion of executive pay is not guaranteed
✓ Tie performance-based awards to achievement of
✓ Use our STI awards to recognize individual performance and leadership and achievement of
✓ Balance the mix of pay components, including cash, stock options, and restricted stock units (both performance- and time-based)
✓ Cap incentive awards under our STI and LTI programs
✓ Provide
✓ Maintain stock ownership guidelines
✓ Subject STI and LTI program compensation to our recoupment policy
✓ Provide modest perquisites consisting primarily of financial planning and an executive physical examination |
|
Consideration of Results of Shareholder Advisory Votes on Executive Compensation
At our 20172019 Annual Meeting, we conducted an advisory(non-binding) shareholder vote on executive compensation, as required by the Dodd-Frank Act. Over 95%Approximately 94% of the shares voted approved the executive compensation discussed and disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and other related tabular and narrative disclosures contained in our fiscal 20162019 proxy statement. In considering the results of this most recent favorable advisory vote on executive compensation, among other things, the Compensation Committee noteddetermined that the Company’s current executive compensation programs have been effective in implementing the Company’s stated compensation philosophy and objectives, and directly aligning compensation paid or earned with Company performance. Therefore, the Committee did not make any changes into the structure of these programs in response to shareholder concerns.during fiscal 2019.
The Compensation Committee recognizes that executive pay practices and notions of sound corporate governance principles continue to evolve. Accordingly, it will continue to monitor executive compensation practices and make adjustments as necessary to ensure that our executive compensation programs continue to support our corporate goals and objectives and reflect good corporate governance principles.
The Compensation Committee continues to paypays close attention to the advice of its compensation advisors and continues to provideprovides access for our shareholders who would like to communicate on executive compensation directly with the Compensation Committee or the Board. You may contact the Board of Directors through our website at “Company — About Cabot — Governance — Contact the Board of Directors”.
Compensation Philosophy, Objectives and Process
Continuing to position Cabot for future success requires the talent to support our business and Advancing the Core strategy. Our executive compensation programs are designed to provide a competitive and internally equitable compensation and benefits package that rewards individual and Company performance and reflects job complexity and the strategic value of the individual’s position while promoting long-term retention and motivation. We seek to accomplish these goals in a way that is aligned with the long-term interests of our shareholders.
To achieve these goals, our executive compensation programs follow these principles:
28CABOT CORPORATION 29
|
Executive Compensation(continued)
To achieve these goals, our executive compensation programs follow these principles:
Offer a total compensation opportunity and a benefits package that are competitive in our industry;
Reward executives based on our business performance by closely aligning a meaningful portion of their compensation with the performance of the Company on both a short- and long-term basis;
Set challenging but achievable performance goals that support the Company’s short- and long-term financial goals;
Motivate individual performance by rewarding the specific performance and achievements of individual executives and their demonstrated leadership; and
Align the interests of our executives and our shareholders through performance-based compensation, equity grants and share retentionstock ownership guidelines.
Our Compensation Setting Process
The Compensation Committee
As discussed under “Board Composition — How our Board Operates — Compensation Committee”, on page 15,14, the Compensation Committee is responsible for all compensation decisions related to members of the Company’s Management Executive Committee.Committee, which includes all our named executive officers.
The annual compensation process for the preceding fiscal year concludes at the Committee’s meeting in November, when the Committee evaluates the Company’s performance against the corporate performance goals set for the just-concluded fiscal year and also evaluates each executive officer’s individual performance and, on this basis, determines the amounts payable or earned, as applicable, in respect of the fiscal year under our STI and LTI programs. Each November, the Compensation Committee also (i) determines any adjustments to base salaries, with any adjustment typically effective the following January, (ii) sets corporate performance metrics applicable to our STI and LTI programs for the newcurrent fiscal year, (iii) grants LTI awards, and (iv) establishes compensationperformance goals and maximum payment levels under our STI programand LTI programs for the newcurrent fiscal year, in each case, for each named executive officer. The annual compensation process for the preceding fiscal year also concludes at the Committee’s meeting in November, when the Committee evaluates the Company’s performance against the corporate performance metrics set for the just-concluded fiscal year and also evaluates each executive officer’s individual performance and, on this basis, determines amounts payable or earned, as applicable, in respect of the fiscal year under our STI and LTI programs.
A description of the Compensation Committee’s roles and responsibilities is set forth in its written charter adopted by the Board of Directors, which can be found atwww.cabotcorp.com under “Company — About Cabot — Governance — Resources.”
Role of the Compensation Consultant
The Compensation Committee has retained Pearl MeyerMeridian Compensation Partners (“Meridian”) as its independent compensation consultant for purposes of advising on executive compensation matters. Pearl Meyer providesmatters since March 2018. During fiscal 2019, Meridian provided the Committee with advice on a broad range of executive compensation matters. The scope of their services includesmatters, including the following:
Apprising the Committee of compensation-related trends and developments in the marketplace;
Informing the Committee of regulatory developments relating to executive compensation practices;
Reviewing and assessing the composition of the group of peer companies used for benchmarking purposes;
Providing the Committee with an assessment of the market competitiveness of our executive compensation programs;
Assessing the relationship between executive compensation actually paid and corporate performance;
Identifying potential changes to our executive compensation programs to maintain market competitiveness and consistency with business strategies, good governance practices and alignment with shareholder interests;
Providing the Committee with an assessment of the proposed compensation arrangements for newly appointed members of the Company’s Management Executive Committee; and
Reviewing the disclosure of the Company’sour executive compensation programprograms in itsthe proxy statement.
During fiscal 2017, Pearl Meyer also advised the Committee on the terms of our 2017 Long-Term Incentive Plan.
During fiscal 2017, Pearl MeyerMeridian attended all regularly scheduled meetings of the Compensation Committee.Committee during fiscal 2019.
The Compensation Committee has assessed the independence of Pearl MeyerMeridian pursuant to SEC rules and concluded that no conflict of interest exists that would prevent Pearl Meyerprevents Meridian from independently advising the Compensation Committee.
Role of the Chief Executive Officer and Other Officers
Each year, our CEO and our Chief Human Resources Officer (“CHRO”), working with internal resources as well as Pearl Meyer,Meridian, review the design of our executive compensation programs and recommend modifications to existing, and/or the adoption of new, plans and programs to the Compensation Committee. In addition, our CEO recommends to the
30 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Committee the performance metrics and goals to be used to determine payouts under our STI and LTI programs, and each named executive officer’s individual performance goals (other than the CEO’s) are jointly developed by the executive and the CEO.
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Executive Compensation(continued)
Before the Compensation Committee makes compensation decisions regarding the compensation of our named executive officers, the CEO provides his assessment of each named executive officer’s performance, other than his own, addressingtaking into consideration such factors as the officer’s achievement of individual goals, leadership accomplishments, contribution to Cabot’s performance and the achievement of Company goals, and areas of strength and areas for development. He then makes specific award recommendations. In preparing compensation recommendations for the Committee, our CEO, our Chief Human Resources OfficerCHRO and other members of management involved in the process review compensation and survey data compiled by Pearl Meyerthe Committee’s independent compensation consultant for similarly-situated executives at our peer group of companies and external competitive market data provided by Pearl Meyer,such consultant, as described below. Our CEO attends Compensation Committee meetings but is not present for, and does not participate in, any discussions concerning his own compensation. All decisions relating to the compensation of our named executive officers are made solely by the Committee and are reported to the full Board of Directors.
Use of Benchmarking Comparison Data
The companies we have included in our compensation peer group consist of companies in the diversified chemicals or specialty chemicals industries with similar products and services and with revenues and a market capitalization generally betweenone-third and three times the Company’s revenue and market capitalization. The Compensation Committee reviews executive compensation data for executives with comparable positions at these peer group companies to gauge the reasonableness and competitiveness of its executive compensation decisions.decisions and the competitiveness of our executive compensation programs. The Compensation Committee believes thismaintaining market-competitive executive compensation programs allows us to successfully attract and retain experienced executive talent who are critical to our long-term success.
The Compensation Committee annually reviews the companies included in our compensation peer group and may add or eliminate companies as it determines to be appropriate. For purposes of fiscal 20172019 compensation matters our compensation peer group consisted of the following 1520 companies:
• • Ashland Inc. • Axalta Coating Systems • Celanese Corporation • The Chemours Company • FMC Corporation • Ferro Corporation • H.B. Fuller Company • Huntsman Corporation • Innospec Inc. | • Kraton Corporation • Minerals Technologies | |
• | • Element Solutions, Inc. (formerly Platform Specialty Products Corporation) • PolyOne Corporation | |
| • RPM International Inc. | |
| • Stepan Company | |
• | • | |
|
| |
| • W.R. Grace & Co. | |
| ||
In preparation for the 2018fiscal 2020 executive compensation review season and the decisions that the Compensation Committee has made and will make with respect to 2018fiscal 2020 compensation, the Compensation Committee reviewed, with Meridian, the peer group companies listed above and added Axalta Coating Systems, Ferro Corporation and Tronox Limited and removed Valspar Corporation, which was acquired by Sherman-Williamsconfirmed the continued appropriateness of the peer group for benchmarking the Company’s executive compensation programs. As a result, the Compensation Committee did not make any changes in June 2017.our compensation peer group for fiscal 2020 compensation decisions.
The Compensation Committee and management also consider executive compensation survey data. The survey data used is based on information reported in the Willis Towers Watson and Mercer Executive Compensation surveys.survey. For positions where compensation peer group and survey data are available, the peer group and survey data are averaged to provide a market composite perspective for compensation, other than long-term incentive compensation for which only compensation peer group data is used.compensation.
At least annually the Compensation Committee reviews tally sheets that detail all elements of each named executive officer’s compensation and benefits for the current and prior fiscal years, as well as a projection of his or her compensation for the upcoming fiscal year. These are provided to the Committee as a means to review the total compensation and benefits package for each named executive officer and the impact of any compensation decisions on such compensation
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2020 PROXY STATEMENT |
Executive Compensation(continued)
and benefits levels. The Compensation Committee made no changes to our current executive compensation programs or any individual named executive officer’s proposed compensation for fiscal 20172019 based on the information set forth in the tally sheets.
30 CABOT CORPORATION
|
Executive Compensation(continued)
Factors Considered in Determining Amounts of Compensation
The Compensation Committee considers the following factors in determining each named executive officer’s total annual and long-term compensation opportunity:opportunities:
the officer’s role, level of responsibility, performance, leadership, and experience;
the number of years the officer has held the position;
the current target total compensation for each officer;
employee retention and internal equity considerations; and
external competitiveness.
The Compensation Committee has targeted our namedadopted a targeting strategy for executive officers’ base salaries andcompensation decisions that defines competitiveness as a “range around the market 50thpercentile” for all elements of total direct compensation (base salary, target STI opportunities generallyawards and LTI awards (with PSUs valued at target)). The Committee believes that themid-market use of a range provides the Committee with the framework to target the market median of the benchmarking data used by the Committee, as further described under “Use of Benchmarking Comparison Data”, above, but to vary compensation opportunities as it deems appropriate based on individual and target LTI award values generally at the 65th percentile of this benchmarking data. The actual compensation for each named executive officer may be above or below the officer’s target compensation opportunity and above or below the intended market level depending largely on the degree to which Company and individual performance objectives are achieved, their experience and time in the position, and internal equity considerations.circumstances.
Developing Company Performance Metrics
The performance metrics we setuse for our STI and LTI programs are intended to support our short- and long-term business plans and strategies. In fiscal 2017,2019, we used four financial metrics to promote well-rounded Company and management performance, as described below.
For our STI awards we used adjusted EBIT as the principal financial performance metric because it reflects an important near-term goal of improving our operating profitability and is a key driver of TSR. To increase the focus on efficiently managing our investments in working capital, and to measure our short-term financial health, we also used a NWC days metric in our STI awards. The calculation of this measure includes the NWC days used in our Purification Solutions and Aerogel businesses, which were not included in past years.
For our PSU awards, we used adjusted EPS as the principal financial performance metric because it reflects an important longer-term financial goal of improving ourafter-tax profitability. Because our business is capital intensive, we believedbelieve it was also appropriate to include a return metric under our LTI program and, as a result, used adjusted RONA, which measures how effectively and efficiently we use our operating assets to generate earnings.
In selectingOur philosophy in setting goals for each of the metrics is to establish goals that will drive the achievement of our short- and long-term financial performance metricsobjectives under our Advancing the Core strategy. Accordingly, in setting our adjusted EBIT and setting theadjusted EPS goals under each of the metrics, we begin with our annualperformance in the just completed fiscal year and long-term business plansset a growth target from that base. In setting our NWC days goals we consider the prior fiscal year’s performance to establish goals that are intended to incentivize a reduction in our net working capital days and consider other factors, including thecontinued improvement in our NWC management. Finally, in setting adjusted RONA goals, we seek to drive earnings growth expectations underat return levels greater than our corporate strategy, our past variance to targeted performance, economic and industry conditions and industry sector performance. Weweighted average cost of capital. Overall, we intend to set challenging, but realizable, goals, including those that are realizable only as a result of exceptional performance, for the Companystrong execution and our executives in order to drive the achievement of our short- and long-term objectives.performance. We recognize that from time to time we may need to change the metrics we use to reflect new priorities and business circumstances. We expect to continue to reassess our performance metrics and goal setting process annually.
CABOT CORPORATION 31
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Executive Compensation(continued)
Our Performance-based Compensation Philosophy
Our executive compensation programs are designed to provide more than 50% of each named executive officer’s total direct compensation (base salary, target STI award and LTI awards (with PSUs valued at target)) opportunity in the form of performance-based compensation.compensation (STI awards, stock options and PSUs). For fiscal 2017, 62%2019, 65% of the total direct compensation opportunity for our CEO was performance-based and not guaranteed. The performance-based portion of the total direct compensation opportunities for our other named executive officers (other than our CEO) for fiscal 2017,2019 on average, was 55%53%. The charts below show the total direct compensation opportunity provided to our named executive officers for fiscal 2017, as well as the mix between short- and long-term compensation andat-risk and notat-risk compensation.
32 CABOT CORPORATION
 |  2020 PROXY STATEMENT |
Executive Compensation(continued)
How Did our Fiscal 2019 STI Program Work for Fiscal 2017?Operate?
We provide annual STI awards to drive the achievement of key short-term business results and to recognize individuals based on their contributions to those results and Cabot’s overall performance. Each named executive officer has an annual target incentive opportunity under our STI program, which is expressed as a percentage of his or her base salary. Ms. Kalita’s target incentive opportunity was increased from 28% of her base salary to 55% of her base salary at the time of her promotion to the role of Senior Vice President and General Counsel. This increase was intended to bring her total direct compensation closer to the market median of the benchmark compensation data used by the Committee and in recognition of the expanded job responsibilities she assumed as a result of her promotion. Prior to her promotion, Ms. Kalita participated in our fiscal 2019 STI program on the same basis as non-executive employees, which is weighted 50/50 as between pre-established corporate financial goals and individual goals and achievements. Ms. Kalita’s fiscal 2019 STI payout was based on her blended base salary and target bonus opportunities for fiscal 2019 and a blended weighting between corporate financial goals and individual goals and achievements.
The actual amounts payable in respect of STI awards range from 0% to 200% of the target award opportunity, with 70% of each award based on the achievement ofpre-established corporate financial goals and the remaining 30% of each award based on individual performance and achievements. We used two financial metrics to measure corporate performance for determining payouts under our STI program for fiscal 2017:2019: adjusted EBIT, which had an 80% weighting, and NWC days, which had a 20% weighting. The Committee established a threshold, target, stretch and maximum performance level goals for each financial metric, and for adjusted EBIT, also a stretch performance level goal, with payout for performance between performance levels determined on a straight-line basis. For NWC days, the target level was a narrow “dead band” of days so that small variations around demonstrated performance levels would not be rewarded or penalized. If the threshold adjusted EBIT goal was not achieved, no payouts in respect of corporate performance under our STI program would be made. Even if theIf threshold levels of performance wereare achieved, the Committee nonetheless retainedretains the discretion to decreaseadjust the amount of the awards earned under our STI program based on our level of achievement of other corporate goals in the areas of safety, environmental performance, customers, innovation and people.people or such other factors as it determines appropriate, but did not exercise such discretion with respect to fiscal 2019 awards.
At the beginning of each fiscal year, thenon-Executive Chair, with input from the other independent directors, develops the individual performance objectivesgoals for our CEO, which are then approved by the Committee. Each of our other executive officers develops with the CEO his or her individual performance objectivesgoals for the year. In assessing each executive officer’s individual performance, the Committee considers the officer’s personal achievements, including his or her achievements against his established individual performance objectives,goals, as well as his individual contributions to the management team hisand to the Company, and leadership and his management of histhe executive officer’s business, region or function, as applicable. The Committee does not assign specific numerical weightings or ratings to the individual performance objectivesgoals and the performance of each officer is evaluated as a whole. Furthermore, there are no formal threshold levels of achievement applicable to the individual performance component of our STI program. Ultimately, the determination of the payout of the portion of the STI awards based on individual performance is based on the judgment of the CEOCommittee (with respect to his direct reports)our CEO) and our CEO and the Committee (with respect to our CEO’s direct reports), in each case, after reviewing all relevant factors, with the final determination made by the Committee.
32
CABOT CORPORATION 33
|
Executive Compensation(continued)
We believe that the fiscal 20172019 STI payouts properly aligned annual incentive compensation with the Company’s fiscal 20172019 financial performance, consistent with the STI program’s role in our overall compensation program. The adjusted EBIT and NWC days targets for the fiscal 20172019 STI awards and our actual fiscal 20172019 performance were as follows:
Fiscal 20172019 STI Program Targets and Results
Threshold (50% | Target Level (100% | Stretch Level (150% | Maximum (200% | Fiscal 2017 Results | Percent Payout |
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal 2019
|
Percent
| |||||||||||||||||||||||||||||||||||||||||||
Adjusted EBIT (80%) | $ | 286 million | $ | 341 million | $ | 357 million | $ | 374 million | $ | 358 million | 152.9 | % |
|
$369 million
|
|
|
$440 million
|
|
|
$461 million
|
|
|
$503 million
|
|
|
$394 million
|
|
|
67.6
|
%
| ||||||||||||||||||||||||
NWC Days (20%) | 90 | 82 | 80 | 78 | 81 | 125.0 | % |
|
85
|
|
|
80-78
|
|
|
—
|
|
|
73
|
|
|
80
|
|
|
100.0
|
%
| |||||||||||||||||||||||||||||
Weighted average payout | 147.3 | % |
|
74.1
|
%
| |||||||||||||||||||||||||||||||||||||||||||||||||
The balanceportion of the amounts paid in respect of STI awards to ouraward that was earned by each named executive officersofficer based on individual performance reflected their stronghis or her individual performance and leadership in fiscal 20172019 (ranging from 90%75% to 145%110% of target), with the total STI awards earned ranging from 130%74% to 147%85% of the named executive officer’s target award. Detailed information about each named executive officer’s fiscal 20172019 STI payout is set forth in the discussion below under the heading “Fiscal 20172019 Compensation Decisions”.
How Did our Fiscal 2019 LTI Program Work in Fiscal 2017?Operate?
We provide our named executive officers with LTI awards to promote retention, to incentivize sustainable growth and long-term value creation, and to further align the interests of our executives with those of our shareholders by tying the executives’ realized compensation to stock price changes during the performance andand/or vesting periods. The grant date value of LTI awards granted to each named executive officer for a given year is based on an assessment of the individual’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation opportunity, and internal equity considerations. The Committee also considers compensation peer group and other market data for a general understanding of competitive equity compensation practices as well asand considers the impact of the grants on equity incentive plan usage and share dilution, as well as the Company’s compensation expense and employee retention concerns.
70% of the target value of our executives’ LTI awards is performance-based, consisting of a combination of PSUs and stock options, which only provide value when the share price increases above the share price on the date of grant. When making LTI awards for fiscal 2017,2019, the Compensation Committee first determined the total grant date value of the awards to be granted to each executive, and then delivered that value in three components: PSUs representing 35%, stock options representing 35%, and TSUs representing 30%, respectively, of the total grant date value of the award,
CABOT CORPORATION 33
|
Executive Compensation(continued)
assuming target level achievement of applicable performance metricsgoals for PSUs. The terms of each type of LTI award are described in further detail below, which terms are generally applicable to LTI awards granted in fiscal 20172019 and in previous fiscal years.
PSUs reward performance and the execution of our goal to deliver year-over-year and long-term growth in earnings and to increase the operating profit we generate relative to the capital we invest in our businesses. Stock options are performance-based because no value is created unless the value of our common stock appreciates after grant and they encourage employee retention through the use of a time-based vesting schedule. TSUs encourage employee retention by providing some level of value to executives who remain employed for three years. PSUs, stock options and TSUs also support an ownership culture and thereby encourage our executives to take actions that are best for Cabot’s long-term success. Importantly, although each of these equity awards provides a competitive economic value on the date of grant, their ultimate value to an executive will depend upon the degree to which we achieve objectively measurable performance metrics and/or the market value of our common stock after the end of the relevant vesting period. That value will be largely dependent upon our performance and the performance of our stock price appreciation and market dynamics.stock.
34 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
PSUs
EachTo reinforce the long-term nature of the PSU awards and to reward performance and the execution of our long-term growth goals, at the time of grant the performance metrics and goals for each of the threeone-year performance periods of the award are established. Specifically, each award of PSUs is allocated evenly into three tranches, with each tranche having aone-year performance period and the entire award having a three-year vesting period. When the award vests at the end of the applicable three-year period, the number of shares of stock issuable, if any, will depend on the degree of achievement of corporate performance metricsgoals for each year within the three-year performance period. Based on the degree to which we achieve the performance metrics,goals, an executive may earn between 0% to 200% of the number of PSUs allocated to each tranche of his or her award.
Threshold,To drive long-term performance, threshold, target, stretch and maximum goals are established for the corporate performance metrics for each yeartranche in the three-year performance period at or before the time of grant of the PSUs,PSUs. In November 2018, at the time it approved the grant of PSU awards, the Committee established the specific performance metrics and goals for the fiscal 2019, fiscal 2020 and fiscal 2021 performance periods of these awards, based on the Company’s prior fiscal year performance and management’s expectations for incremental earnings growth and performance over that three-year period and taking into account our Advancing the Core strategy. Setting metrics and goals in this way serves to both reinforce the long-term nature of these awards and to incentivize our leaders to achieve incrementally more challenging goals for each fiscal year included in the award. Our actual performance against those metricsgoals determines the number of shares that will be issuable in respect of the PSUs when the awards vest. The payoutvest, with the number of shares issuable for performance between performance levels is interpolated on a straight-line basis. The financial metrics used to measure corporate performance are adjusted EPS, with an 80% weighting, and adjusted RONA, with a 20% weighting.
CABOT CORPORATION 35
2020 PROXY STATEMENT |
Executive Compensation(continued)
To reinforce the capital allocation goal of returning a substantial portion of discretionary free cash flow to shareholders under our new Advancing the Core strategy, for PSUs granted in or after November 2016, dividend equivalent payments are made in cash in respect of PSUs that are earned based on the achievement of applicable performance metrics, but that have not vested based on time, when and if dividends are declared and paid on the Company’s common stock. The objective of providing such dividend equivalent payments is to help focus our executives on, and to reward them for, managing the business so as to produce cash that is capable of being distributed to shareholders in the form of a dividend. Dividend equivalents also mirror the income generation associated with stock ownership.
34 CABOT CORPORATION
|
Executive Compensation(continued)
Stock options
Stock options are granted with an exercise price equal to 100% of the closing price of Cabot’s common stock on the date of grant. They generally vest, subject to continued employment, over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant) and have aten-year term.
TSUs
TSUs generally vest, subject to continued employment, in their entirety at the end of three years. When the TSUs vest, they are settled in shares of Cabot common stock. During the vesting period, dividend equivalents are paid in cash on each restricted stock unitTSU when and if dividends are declared and paid on the Company’s common stock.
Practices Regarding the Grant of Equity Awards
Annual equity grants are made at the Compensation Committee’s regularly scheduled meeting in November to align the timing of grants with our fiscal year, most importantly for PSUs, which are earned based on a fiscal year performance period. The November meeting usually occurs two weeksapproximately one week following our release of earnings for our fourth fiscal quarter. The Compensation Committee determines the exercise price of stock options which is the closing price of Cabot stock on the NYSE on the date the options are granted. From time to time, equity awards outside of the annual grant program are made for recruiting or retention purposes or in connection with promotions or to recognize specific achievements or performance. These awards are effective on the later of the approval of the grant or the date the employee’s employment commences.In fiscal 2019, we granted Ms. Kalita an LTI award in connection with her promotion to SVP and General Counsel, as described in further detail below. We do not have a program, plan, or practice to time“off-cycle” awards in coordination with the release of materialnon-public information.
36CABOT CORPORATION 35
|
Executive Compensation(continued)
PSUs Earned under PSU Award that Vested in 20172019
The chartschart below showshows the overall percentage of PSUs earnedcomposite 2017 PSU achievement under the PSU awards granted in November 20142016 that vested in November 2017.2019. The performance periods of these awards were our 2015, 20162017, 2018, and 20172019 fiscal years. As described above, the Committee established the performance metrics and goals for each of these performance periods based on the Company’s expectations for the Company’s earnings growth and performance over that three-year period at the time of grant. We believe setting metrics in this way reinforces the long-term nature of these awards and incentivizes our leaders to achieve incrementally more challenging goals for each year in the award. The adjusted EPS and adjusted RONA targets set in November 2016 for each of the performance periods of the fiscal 2017 awards were higher than our actual adjusted EPS and adjusted RONA performance in fiscal 2016. In addition, in setting the performance goals for the 2017 PSU awards, we simplified the award structure by establishing a fixed range between the threshold and maximum goals. Overall, the number of PSUs earnedcomposite PSU achievement under these awards was 50.9%153% of the target awards.
Results for PSUs granted in Fiscal 2017 that Vested 2019
Performance Year
| Adjusted EPS
| Adjusted
| % Achieved
| Adjusted RONA
| Adjusted
| % Achieved
| Overall
| ||||||||||||||||||||||||||||
2017 (Y1) |
| $3.30 |
|
| $3.43 | * |
| 151.4% |
|
| 12.0% |
|
| 12.9% |
|
| 159.6% |
|
| 153% |
| ||||||||||||||
2018 (Y2) |
| $3.46 |
|
| $4.03 | * |
| 170.6% |
|
| 12.2% |
|
| 14.3% |
|
| 183.3% |
|
| 173% |
| ||||||||||||||
2019 (Y3) |
| $3.63 |
|
| $3.91 |
|
| 137.8% |
|
| 12.4% |
|
| 12.7% |
|
| 115.0% |
|
| 133% |
| ||||||||||||||
Composite |
| 153% |
| ||||||||||||||||||||||||||||||||
| * | Adjusted EPS results for fiscal 2017 in this table do not reflect the change we adopted in fiscal 2018 in our inventory valuation method of accounting for our U.S. carbon black inventories from the LIFO method to the FIFO method. |
36CABOT CORPORATION 37
|
Executive Compensation(continued)
PSUs Earned under Outstanding PSU Awards on the Basis of Fiscal 20172019 Performance
The following tables show the performance metrics and goals and the relative weighting of each metric that the Committee set for the fiscal 20172019 performance period of PSUs granted in fiscal 2015, 20162017, 2018, and 2017,2019, our degree of attainment of these metricsgoals and the percentage of the awards earned, measured against the target award. As the performance metrics and goals for the fiscal 20172019 performance period of these awards were established at different times based on when they were granted, they each reflect the long-term goals and target-setting philosophy in place when the awardsthey were granted. Importantly, the target levels of performance for the adjusted EPS and adjusted RONA performance goals for the fiscal 2017 LTI awards exceeded our actual performance against these metricsawarded.
Performance Goals (set in fiscal 2016.
Company TargetsNovember 2016) and Results for
Performance Year 3 of the PSUs granted in Fiscal 2015
(Performance Period 2015-2017) that Vested in November 20172019
| Threshold Level (50% payout) | Target Level (100% payout) | Maximum Level (150% payout) | Fiscal 2017 Results | Percent Earned |
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| ||||||||||||||||||||||||||||||||||||||||||
Adjusted EPS (80%) | $3.50 | $4.50 | $6.00 | $3.43 | 0% |
|
$2.70
|
|
|
$3.63
|
|
|
$4.00
|
|
|
$4.50
|
|
|
$3.91
|
|
137.8%
| |||||||||||||||||||||||||||||||
Adjusted RONA (20%) | 9.50 | % | 12.00 | % | 15.50 | % | 12.90 | % | 112.9% |
|
9.00
|
%
|
|
12.4
|
%
|
|
13.40
|
%
|
|
15.00
|
%
|
|
12.7
|
%
|
115.0%
| |||||||||||||||||||||||||||
Composite | 22.6% |
133.2%
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Company TargetsPerformance Goals (set in November 2017) and Results for
Performance Year 2 of the PSUs granted in Fiscal 2016
(Performance Period 2016-2018) that Vest in November 20182020
| Threshold Level (50% payout) | Target Level (100% payout) | Stretch Level (150% payout) | Maximum Level (200% payout) | Fiscal 2017 Results | Percent Earned |
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| |||||||||||||||||||||||||||||||||||||||||
Adjusted EPS (80%) | $2.70 | $3.15 | $3.70 | $4.50 | $3.43 | 125.5% |
|
$2.70
|
|
|
$3.71
|
|
|
$4.00
|
|
|
$4.50
|
|
|
$3.91
|
|
134.5%
| ||||||||||||||||||||||||||||||
Adjusted RONA (20%) | 8.00 | % | 10.25 | % | 12.50 | % | 14.00 | % | 12.90 | % | 163.3% |
|
9.00
|
%
|
|
12.10
|
%
|
|
13.0
|
%
|
|
15.00
|
%
|
|
12.7
|
%
|
133.3%
| |||||||||||||||||||||||||
Composite | 133.1% |
134.3%
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Company TargetsPerformance Goals (set in November 2018) and Results for
Performance Year 1 of the PSUs granted in Fiscal 2017
(Performance Period 2017-2019) that Vest in November 20192021
| Threshold Level (50% payout) | Target Level (100% payout) | Stretch Level (150% payout) | Maximum Level (200% payout) | Fiscal 2017 Results | Percent Earned |
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
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Percent
| |||||||||||||||||||||||||||||||||||||||||
Adjusted EPS (80%) | $2.70 | $3.30 | $3.40 | $4.50 | $3.43 | 151.4% |
|
$3.43
|
|
|
$4.31
|
|
|
$4.51
|
|
|
$5.04
|
|
|
$3.91
|
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77.3%
| ||||||||||||||||||||||||||||||
Adjusted RONA (20%) | 9.00 | % | 12.00 | % | 12.40 | % | 15.00 | % | 12.90 | % | 159.6% |
|
11.5
|
%
|
|
14.40
|
%
|
|
15.1
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%
|
|
16.8
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%
|
|
12.7
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%
|
70.7%
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Composite | 153.0% |
76.0%
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38CABOT CORPORATION 37
|
Executive Compensation(continued)
Fiscal 20172019 Compensation Decisions
The compensation decisions the Committee made with respect to our named executive officers for fiscal 20172019 are described below.
In considering each executive’sofficer’s individual performance in fiscal 20172019 and determining his or her STI award payout for fiscal 20172019 and making the other compensation decisions discussed above, the Committee specifically considered the following:
Sean D. Keohane, President and CEO.
Fiscal 20172019 Performance Summary
The Committee believes that Mr. Keohane performed extremely well in 2017.fiscal 2019. The Committee also specifically recognized:recognized Mr. Keohane’s role in:
our solid financial results despite the Company’s delivery on its financial goals in fiscal 2017;weakening of macroeconomic and key sector indicators we experienced throughout the year;
our execution of important strategic initiatives, including the long-term strategicdivestiture of our Specialty Fluids business and the improved performance of the Purification Solutions segment following the implementation of the transformation plan;
the investments we made to extendstrengthen our manufacturing asset footprint, reflected most notably in the Company’s leadership positions and to drive sustained growthsuccessfulstart-up of earnings and cash flow, including the investments in newour additional fumed silica manufacturing capacity in China and the commencement of work to upgrade the carbon black masterbatchplant we purchased in China in 2018 for the production of specialty carbons, which we expect to be completed in 2021;
implementing cost reduction initiatives across the Company that we view as important to our long-term sustainable growth, including organizational structural changes and conductive formulations,asset decisions that reduced headcount;
our progress integrating sustainability throughout Cabot and in the new Asia Technology Center in China;developing a more inclusive and diverse organization;
the strengthening of our investor outreach and efforts to build strong understanding and support forthat resulted in, among other things, an increase in analyst coverage of the Company’s strategy in the investor community; andCompany;
our efforts to build strong and sustainable customer and partner relationships.relationships; and
| • | our recognition for the second consecutive year as one of the 100 Best Corporate Citizens byCorporate Responsibility Magazine,and, for the fourth consecutive year, our achieving a Gold rating from EcoVadis for our performance in sustainability. |
Compensation Decisions for Fiscal 20172019
Base Salary — Mr. Keohane’s annual base salary for calendar 20172019 was $900,000,$1,000,000, an increase of 6%approximately 5% compared to his 20162018 annual base salary.
STI Award —Mr. Keohane’s target STI award for fiscal 20172019 was $900,000 (100%$1,200,000 (120% of his annual base salary) and his actual STI award payout for fiscal 20172019 was$1,252,000, 139%964,272, 80% of target, based on achievement of 147.3%74.1% of target in respect of corporate performance and 120%95% of target in respect of individual performance.
LTI Award — Mr. Keohane was granted an LTI award with a grant date value of $3,200,000,$4,500,000, consisting of 22,19531,500 PSUs, 19,02427,000 TSUs and 87,981137,674 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance metrics.goals.
Eduardo E. Cordeiro, EVPErica McLaughlin, SVP and CFO, and President, Americas Region.CFO.
Fiscal 20172019 Performance Summary
Among Mr. Cordeiro’sMs. McLaughlin’s key achievements that the Committee considered were the following:
her integral role in managing the Company’s strong financial performanceoperating cash flow, which resulted in our generating $363 million of cash flow from operations, including a $25 million decrease in net working capital, and 9%enabled us to increase in adjusted EPS compared with fiscal 2016;our quarterly cash dividend by 6%;
her role in the execution of our capital allocation strategy, which included returning $138$253 million or 57%, of our discretionary free cash flow, to shareholders in the year through dividends and share repurchases;
her commitment to disciplined financial policies and the maintenance of a strong balance sheet and liquidity position, including with the issuance of10-year bonds to support our overallAdvancing the Core strategy;
38CABOT CORPORATION 39
|
Executive Compensation(continued)
her strong leadership of our M&A and other strategic activities, including the divestiture of our Specialty Fluids business and oversight of our transformation plan for our Purification Solutions segment; and
her role leading our investor communications program, including successful outreach efforts that resulted in an increase in analyst coverage of the Company.
Compensation Decisions for Fiscal 20172019
Base Salary — Mr. Cordeiro’sMs. McLaughlin’s annual base salary for calendar 20172019 was $566,500,$460,000, an increase of 3%approximately 15% compared to his 2016 annualher 2018 base salary.
STI Award —Mr. Cordeiro’sMs. McLaughlin’s target STI award for fiscal 20172019 was $396,550$322,000 (70% of hisher annual base salary) and hisher actual STI award payout for fiscal 20172019 was$540,000, 136%263,576, 82% of target, based on achievement of 147.3%74.1% of target in respect of corporate performance and 110%100% of target in respect of individual performance.
LTI Award — Mr. CordeiroMs. McLaughlin was granted an LTI award with a grant date value of $1,000,000,$775,000, consisting of 6,9365,425 PSUs, 5,9454,650 TSUs and 27,49423,710 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance metrics.goals.
Nicholas S. Cross, EVPKaren A. Kalita, SVP and General Counsel (since June 3, 2019), previously Chief Counsel, Reinforcement Materials Segment and Purification Solutions Segment and Assistant Corporate Secretary
Fiscal 2019 Performance Summary
Prior to her appointment as SVP and General Counsel, Ms. Kalita served as Chief Counsel for our Reinforcement Materials and Purification Solutions segments, Assistant Corporate Secretary and a member of the Company’s Office of Compliance. Ms. Kalita remains a member of the Office of Compliance. Among her key achievements that the Committee considered in her prior and current roles were the following:
in her position as Chief Counsel for our Reinforcement Materials and our Purification Solutions segments, her strong legal guidance and support of commercial, M&A and other strategic activities involving those segments;
her strong leadership within the Company’s Office of Compliance and to the Company on ethics and compliance matters, and her role in managing our regulatory compliance programs;
the smooth transition of leadership when she assumed responsibility as the Company’s chief legal officer;
her assistance to the Board on governance matters;
her role in overseeing the negotiation of key commercial agreements and providing risk management counsel; and
her effective oversight of complex litigation and environmental matters toward positive outcomes for the Company. .
Compensation Decisions for Fiscal 2019
Base Salary — Ms. Kalita received an annual base salary increase of 3% during the annual salary review in November 2018, resulting in an annual salary for calendar 2019 of $259,284. Her annual base salary was increased by 29% to $335,000, effective June 3, 2019, in connection with her promotion to SVP and General Counsel.
STI Award — Ms. Kalita’s target STI award for fiscal 2019 was $109,813 (based on her blended annual base salary and target opportunities in 2019). Her actual STI award payout for fiscal 2019 was$90,263, 82% of target, based on achievement of 74.1% of target in respect of corporate performance and 95% of target in respect of individual performance (with the blended weighting of such components described under “How Did our Fiscal 2019 STI Program Operate” above).
LTI Award — Ms. Kalita was granted an LTI award with a grant date value of $325,000, including an LTI award with a $250,000 grant date value granted in connection with her promotion to SVP and General Counsel, consisting of 2,738 PSUs in the aggregate, 2,733 TSUs in the aggregate and 11,437 stock options in the aggregate, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals.
40 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Hobart C. Kalkstein, SVP and President, Performance ChemicalsReinforcement Materials Segment, and President, EMEA Region, and until February 2017, President, Specialty Fluids Segment.Americas Region.
Fiscal 20172019 Performance Summary
Among Mr. Cross’sKalkstein’s key achievements that the Committee considered were the following:
his role in the progressstrong business results of our application development activities for important new, differentiated products for specialty applications, particularlyReinforcement Materials Segment, despite a challenging competitive environment in batteriesChina and inkjet technology that enhance the performance of our customers’ products;weak automotive fundamentals globally;
his role in driving volumeeffectively managing the new International Marine Organization regulations and revenue growththeir impact on our feedstock costs;
his leadership in our Performance Chemicals segment that is in linestrengthening strategic customer relationships within the Reinforcement Materials Segment and the successful negotiation of supply agreements with or greater than market;
In addition, in connection with his responsibilities as President, Specialty Fluids until February 2017, the Committee recognized Mr. Cross’s role in the development of an infrastructure and miningour expansion project at our cesium minefacility in Manitoba, Canada that we expect to completeCilegon, Indonesia;
his role in 2018,advancing the Cabot Elastomer Composites business and the growthachievement of key customer qualification milestones; and
his role in leading our fine cesium chemicals business.Americas Region.
Compensation Decisions for Fiscal 20172019
Base Salary — Mr. Cross’sKalkstein’s annual base salary for calendar 20172019 was $448,650,$464,200, an increase of 3%10% compared to his 20162018 annual base salary.
STI Award —Mr. Cross’sKalkstein’s target STI award for fiscal 20172019 was $291,623 (65%$278,520 (60% of his annual base salary). His actual STI award payout for fiscal 2017 was$379,869, 130%2019 was $236,341, 85% of target, based on achievement of 147.3%74.1% of target in respect of corporate performance and 90%110% of target in respect of individual performance.
LTI Award —Mr. Cross wasgrantedKalkstein was granted an LTI award with a grant date value of $850,000,$800,000, consisting of 5,8955,600 PSUs, 5,0534,800 TSUs and 23,36924,475 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance metrics.
Brian A. Berube, former SVP and General Counsel (until June 3, 2019).
Compensation Decisions for Fiscal 2019
Base Salary — Mr. Berube’s annual base salary for calendar 2019 was $461,440, an increase of 3% compared to his 2018 annual base salary.
STI Award — Mr. Berube voluntarily resigned from Cabot during fiscal 2019 and, until April 2017, Interim Chief Human Resources Officer.accordingly, he did not receive an STI award payout for fiscal 2019.
LTI Award —Mr. Berube was granted an LTI award with a grant date value of $750,000, which he forfeited upon his resignation from the Company.
At the time of Mr. Berube’s resignation, the Company extended the exercise period for Mr. Berube’s vested stock options to the earlier of (i) October 14, 2020 and (ii) the original expiration date of the stock options in light of his many contributions during his long and successful career at Cabot.
John R. Doubman, former SVP, and President, Performance Additives business (until October 2, 2019).
Fiscal 20172019 Performance Summary
Among Mr. Berube’sDoubman’s key achievements that the Committee considered were the following:
his continued service as a trusted advisor torole in the Boardsuccessfulstart-up of our additional fumed silica capacity in China and in particular, continuing to advance our capacity expansion project with DowDuPont, which secures access to long-term feedstock and will allow us to meet growing demand for our high-performance fumed silica;
his assistancerole in enabling the Company to upgrade the Board on governance matters;carbon black plant we purchased in China in 2018 for the production of specialty carbons, which we expect to be completed in 2021; and
his strong legal guidanceleadership of the business’s application development activities, particularly in energy materials and support to our M&A and other strategic activities;the successful program qualifications it has obtained with most of the major global battery manufacturers.
CABOT CORPORATION 3941
|
Executive Compensation(continued)
In addition, in connection with his responsibilities as Interim Chief Human Resources Officer until April 2017,determining Mr. Doubman’s STI award, the Committee recognized Mr. Berube’s rolealso considered the results in providing leadership to our human resources function,the Performance Additives business, which refreshed our flagship employee leadership program and other employee development programs, made improvements to our employee compensation programs and conducted a global employee engagement survey.were below management expectations.
Compensation Decisions for Fiscal 20172019
Base Salary — Mr. Berube’sDoubman’s annual base salary for calendar 20172019 was $435,000, an$395,000, which reflects the 10% increase of 7% compared tohe received in his 2016 annual base salary.salary effective as of October 1, 2018 at the time of his promotion.
STI Award —Mr. Berube’sDoubman’s target STI award for fiscal 20172019 was $261,000$237,000 (60% of his annual base salary). His and his actual STI award payout for fiscal 20172019 was$367,000, 141%176,224, 74% of target, based on achievement of 147.3%74.1% of target in respect of corporate performance and 125%75% of target in respect of individual performance.
LTI Award — Mr. BerubeDoubman was granted an LTI award with a grant date value of $750,000,$600,000, consisting of 5,2024,200 PSUs, 4,4583,600 TSUs and 20,62018,356 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance metrics.goals. Of this award, 5,506 stock options vested in November 2019 in accordance with the terms of the award and Mr. Doubman forfeited the balance of the LTI award upon the termination of his employment on November 15, 2019.
Hobart C. Kalkstein,Effective October 2, 2019, Mr. Doubman stepped down from his position as SVP and President, Reinforcement Materials Segment.
Fiscal 2017 Performance Summary
AmongAdditives business of the Company. Mr. Kalkstein’s key achievements thatDoubman’s employment with the Company terminated effective November 15, 2019. Under the terms of his transition and separation agreement with Cabot, commencing on his termination of employment, the Company will pay to Mr. Doubman a total of $592,500, payable over an18-month period. In addition, the Company extended the exercise period for Mr. Doubman’s vested stock options to the earlier of (i) November 15, 2021 and (ii) the original expiration date of the stock options. The Company also agreed to pay a portion of Mr. Doubman’s COBRA premiums for up to 18 months following the termination of his employment, to provide financial planning benefits on the same basis as if he had remained employed for a period of eighteen months following termination in an amount not to exceed $30,000, and to provide Mr. Doubman with outplacement services in an amount not to exceed $40,000. In exchange for the payments and benefits provided in the transition and separation agreement, the Company received a release of claims from Mr. Doubman, and Mr. Doubman agreed to covenants as tonon-competition andnon-solicitation for a period of twelve months following the termination of his employment. When considering the level of separation payments and benefits to be provided to Mr. Doubman, the Committee considered were the following:
Compensation Decisions for Fiscal 2017advice provided by Meridian.
Risk Assessment
We monitor the risks associated with our executive compensation programs and policies on anon-going basis. In May 2017,2019, management presented the Committee with the results of a study it conducted of our compensation programs to
40 CABOT CORPORATION
|
Executive Compensation(continued)
assess the potential risks arising from these programs. We believe the following policies and practices reflect sound risk management practices within our executive compensation programs and mitigate excessive risk-taking that could harm our value or reward poor judgment by our executives:executives and other employees:
Use of short- and long-term performance periods (one, two and three years) in our LTI program and multiple levels of tiered performance (threshold, target, stretch and maximum) in both our STI and LTI programs;
Use of maximum payout caps in both the STI and LTI programs;
Use of different financial performance metrics across the STI and LTI programs;
Ability of the Committee to use discretion to reducemodify STI awards;
Annual Committee review and approval of the STI and LTI program design, performance metrics and goals and earned payouts;
Mix of equity instrumentsawards and multi-year vesting used in the LTI program;
Availability of a Company recoupment policy; and
Use of share ownership guidelines.
Based on these mitigating factors, the Committee agreed with the study’s findings that our executive compensation programs do not encourage inappropriate or unacceptable risk to the Company, and that any risks are within our ability to effectively monitor and manage and are not reasonably likely to have a material adverse effect on the Company.
42 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Share Ownership Guidelines
To further align the interests of our executives and our shareholders, in November 2008 we adopted share ownership guidelines for members of our Management Executive Committee. Under our guidelines, we expect our CEO to own equity in the Company in an amount equal to five times his or her annual base salary, and each other officer who reports directly to the CEO to own equity in an amount equal to three times his or her annual base salary. Each executive has five years from the date he or she becomes subject to the share ownership guidelines to meet his or her target. The Committee reviews compliance with these guidelines annually. At the time of this filing, all of our named executive officers satisfied their share ownership guidelines and all of the other members of the Management Executive Committee who have been subject to these guidelines for five years or longer had also satisfied such share ownership guidelines.
Recoupment of Compensation
The Company adopted a recoupment (clawback) policy in 2012. The policy applies to performance-based compensation, such as STI and LTI compensation, paid to participants in our LTI program (which includes our named executive officers), and covers awards made for fiscal 2013 and thereafter. Under the policy, if the Company is required to restate its financial statements due to materialnon-compliance with financial reporting requirements under applicable securities laws, and the amount of performance-based compensation awarded or paid would have been lower had the achievement of applicable financial performance been calculated based on the restated financial results, the amount of the excess compensation awarded or paid during the three-year period preceding the date on which the Company is required to prepare the restatement is subject to recoupment, in the discretion of the Compensation Committee. In addition, if a participant knowingly engaged in misconduct that is a material factor in the Company’s obligation to restate its financial statements, the Company will have the right to seek recoupment of the proceeds from the sale of shares issued upon the exercise of stock options or upon the vesting of restricted stock units (including TSUs and PSUs) occurring during the twelve-month period following the filing with the SEC of the financial statements required to be restated, in an amount deemed appropriate by the Compensation Committee under the circumstances.
Other Information
Retirement and Other Benefit Programs
Except for Mr. Cross, ourOur named executive officers participate in the full range of benefit programs and are covered by the same retirement plans on the same terms as are generally provided to our full-time U.S. salaried employees, are eligible to participate in and/or receive benefits under our Deferred Compensation Plan and our Death Benefit Protection Plan, and participate in our Senior Management Severance Protection Plan. These plans are described in the footnotes and text that accompany the compensation tables that follow this CD&A.
CABOT CORPORATION 41
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Executive Compensation(continued)
Mr. Cross is a participant in our Senior Management Severance Protection Plan, but as a Swiss-based employee, does not participate in the other retirement and benefit programs described above. Instead, Mr. Cross participates in the same pension plan and other benefit programs that are provided to full-time Cabot employees in Switzerland and, prior to his return to Switzerland in January 2017, participated in the insurance and other benefit programs provided to other employees under our international assignment program. These benefits, and their costs to Cabot, are described in the footnotes and text that accompany the compensation tables that follow this CD&A.
Health and Welfare Plans
The health and welfare plans offered to our named executive officers are the same as those offered to all other employees working in the same country. While on international assignment, Mr. Cross was also covered by the health and welfare plans and life and disability benefits offered to our employees on an international assignment.
Perquisites
We provide our named executive officers a modest level of perquisites, consisting principally of financial planning and tax assistance services and an executive physical examination. We provide these benefits to help our executives maintain their health and manage their finances, in each case, so that they are able to focus their attention on Cabot’s business. Mr. Cross received certain benefits as a result of his international assignment consistent with Cabot’s International Assignment Policy, as described in the footnotes and text that accompany the compensation tables that follow this CD&A.
Employment Arrangements
Our named executive officers other than Mr. Cross, each serve without an employment agreement and theiragreements. The compensation of our named executive officers is set by the Compensation Committee as described above.
Mr. Cross entered into a standard form of employment agreement with Cabot Switzerland when his employment with the Company was transferred to that entity. That agreement was amended in May 2015 to cover the compensation and relocation benefits related to Mr. Cross’ international assignment from August 1, 2015 through December 31, 2016. Consistent with Cabot’s International Assignment Policy, while he was on an international assignment, the Company provided Mr. Cross with, or paid the cost of: furnished housing, including utilities; cost of living adjustments (positive or negative); a taxable annual car allowance of $15,000; one home leave per year; and a payment in the amount of $25,000 annually for the cost of travel necessitated by his assignment. Mr. Cross was also covered by the tax equalization provisions of Cabot’s International Assignment Policy under which Mr. Cross’s tax obligations are equal to the taxes he would have paid had he remained resident in Switzerland and the Company pays all other United States and Swiss taxes associated with the income Mr. Cross earned while on assignment. Mr. Cross relocated back to Switzerland effective January 1, 2017 and his employment agreement was amended to cover his compensation, relocation, and tax equalization and other benefits following such relocation. In connection with his relocation, the Company provided Mr. Cross with movement of household goods and a relocation allowance equal to one month of his base salary and continued his tax equalization benefits to prevent him from paying more individual income tax as a result of his required travel to the U.S. than he would have paid if no such travel occurred.
CABOT CORPORATION 43
2020 PROXY STATEMENT |
Executive Compensation(continued)
Hedging Policy
The Company has aCompany’s insider trading policy that prohibits executives, directors, their family members who share the same address or are financially dependent upon them, and directorsentities owned or controlled by any such persons, from, among other things, engaging in any transaction in which they may profit from short-term speculative swings in“short sales”, including short sales “against the valuebox”, or purchases, sales, or other arrangements involving, puts, calls or other derivative securities on the Company’s common stock, and issuing any standing or limit orders for the sale of the Company’s securities. This includes “short sales” (selling borrowed securitiescommon stock that the seller hopes can be purchased atremain outstanding for more than five days, other than in connection with a lower priceRule 10b5-1 trading plan adopted in the future) or “short sales against the box” (selling owned, but not delivered securities), and “put” and “call” options. In addition, this policy is designed to ensure compliance with all insider trading rules.
42 CABOT CORPORATION
|
Executive Compensation(continued)
the policy. No categories of hedging transactions are specifically permitted and, other than the transactions described above, no other categories of hedging transactions are specifically disallowed.
Tax and Accounting Information
We consider the tax and accounting rules associated with various forms of compensation when designing our compensation programs. However, to maintain flexibility to compensate our executive officers in a manner designed to promote short- and long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible or have the most favorable accounting treatment to the Company.
Section 162(m) of the Internal Revenue Code limits to $1 million the amount a publicly-traded company may deduct for compensation paid to certain executive officers. This limitation does not, however, apply to compensation paid to a company’s chief financial officer or to compensation meeting the definition of “qualifying performance-based compensation.” The group of executive officers whose compensation is subject to Section 162(m)’s limitation on deductibility was expanded, and the exemption for qualifying performance-based compensation was repealed, by recent tax legislation effective for taxable years beginning after December 31, 2017. As a result, compensation paid to our executive officers in future years in excess of $1 million may not be deductible unless it qualifies for certain transition relief (with the scope of such transition relief being uncertain at this time). While the Company will monitor guidance and developments in this area, the Compensation Committee believes that its primary responsibility is to provide a compensation program that attracts, retains and rewards the executive talent necessary for our success. Consequently, the Compensation Committee may pay or provide, and has paid, or provided,and will continue to pay, compensation that is not tax deductible or is otherwise limited as to tax deductibility.deductible.
44CABOT CORPORATION 43
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Executive Compensation(continued)
The following table and footnotes describe the compensation for our named executive officers for the three most recently completed fiscal years. A description of eachyears (or such shorter period as described in the footnotes below). Each component of our executive compensation packageprogram is described under the heading “Compensation Discussion and Analysis,” which begins on page 25.
Name and Principal Position | Year | Salary ($)(3) | Stock Awards ($)(4) | Option Awards ($)(5) | Non-Equity Incentive Plan Compensation ($) | Change in Value and | All Other Compensation ($)(7) | Total ($) | ||||||||||||||||||||||||
| Sean D. Keohane | 2017 | 887,500 | 2,079,911 | 1,119,647 | 1,252,000 | — | 232,734 | 5,571,792 | ||||||||||||||||||||||||
President and CEO | | 2016 2015 | | | 681,161 460,900 | | | 1,133,052 503,974 | | | 630,096 279,909 | | | 710,000 85,000 | | | 20,143 4,334 | | | 159,278 68,846 | | | 3,333,730 1,402,963 | | ||||||||
| Eduardo E. Cordeiro | 2017 | 562,375 | 649,976 | 349,889 | 540,000 | 18,988 | 127,815 | 2,249,043 | ||||||||||||||||||||||||
| Executive Vice | 2016 | 550,000 | 1,376,912 | 350,182 | 424,000 | 43,613 | 116,970 | 2,861,677 | ||||||||||||||||||||||||
President and CFO, and President, Americas Region | 2015 | 544,800 | 630,024 | 349,883 | — | 14,574 | 72,240 | 1,611,521 | ||||||||||||||||||||||||
| Nicholas S. Cross(1) | 2017 | 445,383 | 552,436 | 297,395 | 379,869 | 5,600 | 294,114 | 1,974,797 | ||||||||||||||||||||||||
Executive Vice President and President, Performance Chemicals Segment and EMEA Region | | 2016 2015 | | | 437,711 442,691 | | | 501,540 503,974 | | | 280,148 279,909 | | | 277,895 85,821 | | | 95,800 131,400 | | | 498,768 347,699 | | | 2,091,862 1,791,494 | | ||||||||
| Brian A. Berube | 2017 | 427,500 | 487,444 | 262,410 | 367,000 | 11,639 | 95,101 | 1,651,094 | ||||||||||||||||||||||||
| Senior Vice President and | 2016 | 405,000 | 895,477 | 245,132 | 253,000 | 33,358 | 82,340 | 1,914,307 | ||||||||||||||||||||||||
| General Counsel | 2015 | 398,750 | 441,017 | 244,924 | 75,000 | 10,051 | 61,693 | 1,231,435 | ||||||||||||||||||||||||
| Hobart C. Kalkstein(2) | 2017 | 392,250 | 438,699 | 236,170 | 350,000 | 3,604 | 85,875 | 1,506,598 | ||||||||||||||||||||||||
Senior Vice President and President, Reinforcement Materials Segment | 2016 | 346,091 | 297,602 | 115,513 | 226,000 | 13,389 | 58,709 | 1,057,304 | ||||||||||||||||||||||||
Name and Principal Position
| Year
| Salary
| Stock
| Option
| Non-Equity
| Change in Value and
| All Other
| Total ($)
| ||||||||||||||||||||||||
Sean D. Keohane President and CEO |
|
2019
|
|
|
987,500
|
|
|
2,925,000
|
|
|
1,574,578
|
|
|
964,272
|
|
|
15,469
|
|
|
212,560
|
|
|
6,679,379
|
| ||||||||
|
| 2018
|
|
| 937,500
|
|
| 2,599,951
|
|
| 1,399,898
|
|
| 1,567,500
|
|
| —
|
|
| 270,593
|
|
| 6,775,442
|
| |||||||||
| 2017 | 887,500 | 2,079,911 | 1,119,647 | 1,252,000 | — | 232,734 | 5,571,792 | |||||||||||||||||||||||||
Erica McLaughlin(1) Senior Vice President and CFO |
|
2019
|
|
|
445,000
|
|
|
503,750
|
|
|
271,171
|
|
|
263,576
|
|
|
—
|
|
|
84,775
|
|
|
1,568,272
|
| ||||||||
| 2018 | 323,779 | 403,659 | 179,277 | 273,839 | — | 57,770 | 1,238,324 | |||||||||||||||||||||||||
Karen A. Kalita(1) Senior Vice President and General Counsel |
|
2019 |
|
|
281,756 |
|
|
237,454 |
|
|
87,516 |
|
|
90,263 |
|
|
819 |
|
|
39,818 |
|
|
737,626 |
| ||||||||
Hobart C. Kalkstein Senior Vice President, President, Reinforcement Materials Segment, and President, Americas Region |
|
2019
|
|
|
453,650
|
|
|
520,000
|
|
|
279,921
|
|
|
236,341
|
|
|
2,629
|
|
|
88,466
|
|
|
1,581,007
|
| ||||||||
|
| 2018
|
|
| 416,000
|
|
| 487,464
|
|
| 262,474
|
|
| 440,568
|
|
| 2,675
|
|
| 102,224
|
|
| 1,711,405
|
| |||||||||
|
| 2017
|
|
| 392,250
|
|
| 438,699
|
|
| 236,170
|
|
| 350,000
|
|
| 3,604
|
|
| 85,875
|
|
| 1,506,598
|
| |||||||||
Brian A. Berube(2) Former Senior Vice President and General Counsel |
|
2019
|
|
|
320,596
|
|
|
487,500
|
|
|
422,805
|
|
|
—
|
|
|
24,020
|
|
|
44,794
|
|
|
1,299,715
|
| ||||||||
|
| 2018
|
|
| 444,750
|
|
| 487,464
|
|
| 262,474
|
|
| 427,392
|
|
| 7,650
|
|
| 103,059
|
|
| 1,732,789
|
| |||||||||
| 2017 | 427,500 | 487,444 | 262,410 | 367,000 | 11,639 | 95,101 | 1,651,094 | |||||||||||||||||||||||||
John R. Doubman(1)(2) Former Senior Vice President and President, Performance Additives |
|
2019 |
|
|
395,000 |
|
|
390,000 |
|
|
323,158 |
|
|
176,224 |
|
|
1,102 |
|
|
57,429 |
|
|
1,342,913 |
| ||||||||
| 1. | For Ms. Kalita and Mr. |
| 2. | Mr. Berube voluntarily resigned from his position as Senior Vice President and General Counsel effective June 3, 2019 and his employment terminated effective June 14, 2019. Mr. Doubman stepped down from his position as Senior Vice President and President, Performance Additives business, effective October 2, 2019 and his employment terminated effective November 15, 2019. |
| 3. | We review base salaries annually in November and any changes are generally effective on January 1 of the following calendar year. The amounts reported in this column reflect salary earned during each fiscal year. Ms. Kalita was promoted to Senior Vice President and General Counsel effective June 3, 2019, and her base salary was increased effective as of this date to reflect her promotion and the additional responsibilities she assumed as described further in the Compensation Discussion and Analysis section above. |
| 4. | The amounts reported in this column reflect the aggregate grant date fair value of TSUs and PSUs granted in the applicable fiscal year to each named executive officer, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value per unit of the TSUs and PSUs is equal to the closing price of Cabot common stock on the date of |
44CABOT CORPORATION 45
|
Executive Compensation(continued)
| 5. a. | The amounts reported in this column reflect the aggregate grant date fair value |
| b. | As further described in the Compensation Discussion and Analysis section above, in connection with Mr. Berube’s resignation from the Company, the Compensation Committee extended the exercise period of Mr. Berube’s vested stock options to the earlier of (i) October 14, 2020 and (ii) the original expiration date of the stock options. The amount reported in this column for Mr. Berube in fiscal 2019 consists of (i) $262,423, the grant date fair value of the stock options granted to Mr. Berube in fiscal 2019, and (ii) $160,382, the incremental fair value associated with extending the exercise period of his vested stock options, computed in accordance with FASB ASC Topic 718. Mr. Berube forfeited his unvested stock options upon his termination of employment. |
| c. | As further described in the Compensation Discussion and Analysis section above, in connection with Mr. Doubman’s termination of employment, the Compensation Committee extended the exercise period of Mr. Doubman’s vested stock options to the earlier of (i) November 15, 2021 and (ii) the original expiration date of the stock options. The amount reported in this column for Mr. Doubman in fiscal 2019 consists of (i) $209,938, the grant date fair value of the stock options granted to Mr. Doubman in fiscal 2019, and (ii) $113,220, the incremental fair value associated with extending the exercise period of his vested stock options, computed in accordance with FASB ASC Topic 718. Mr. Doubman forfeited his unvested stock options upon termination. |
| 6. | The amounts reported in this column consist of: |
| a. | The aggregate change in the actuarial present value of each named executive officer’s |
| b. |
| Above-market interest (the portion exceeding 120% of the applicable federal long-term rate) credited to deferrals under Cabot’s deferred compensation plan as follows: for Ms. Kalita: $819 in 2019; for Mr. |
| 7. | The table below identifies the amounts shown for fiscal |
| Company Contributions to 401(k) Plan ($)(a) | Company Contributions to Supplemental 401(k) Plan ($)(a) | Company ($)(a) | Financial ($)(b) | Company Car/ ($)(c) | International ($)(d) | Relocation ($)(e) | Other ($)(f) | Total ($) | Company Contributions to 401(k) Plan ($)(a) | Company Contributions to Supplemental 401(k) Plan ($)(a) | Company Contributions to Deferred Compensation Plan ($)(a) | Financial Planning and Tax Assistance ($)(b) | Other ($)(c) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||
Sean D. Keohane | 27,000 | 186,950 | — | 14,016 | — | — | — | 4,768 | 232,734 |
|
28,000 |
|
|
167,158 |
|
|
— |
|
|
14,771 |
|
|
2,631 |
|
|
212,560 |
| |||||||||||||||||||||||||||||||||
Eduardo E. Cordeiro | 27,000 | 29,238 | 54,000 | 14,148 | — | — | — | 3,429 | 127,815 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Nicholas S. Cross | — | — | — | 1,754 | 23,823 | 208,732 | 59,292 | 513 | 294,114 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Erica McLaughlin |
|
28,546 |
|
|
41,471 |
|
|
— |
|
|
13,652 |
|
|
1,106 |
|
|
84,775 |
| ||||||||||||||||||||||||||||||||||||||||||
Karen A. Kalita |
|
29,023 |
|
|
9,181 |
|
|
— |
|
|
1,385 |
|
|
229 |
|
|
39,818 |
| ||||||||||||||||||||||||||||||||||||||||||
Hobart C. Kalkstein |
|
28,000 |
|
|
33,983 |
|
|
7,000 |
|
|
14,974 |
|
|
4,509 |
|
|
88,466 |
| ||||||||||||||||||||||||||||||||||||||||||
Brian A. Berube | 27,000 | 45,110 | 7,340 | 14,527 | — | — | — | 1,124 | 95,101 |
|
22,154 |
|
|
10,338 |
|
|
— |
|
|
11,389 |
|
|
913 |
|
|
44,794 |
| |||||||||||||||||||||||||||||||||
Hobart C. Kalkstein | 27,558 | 40,737 | 5,092 | 11,457 | — | — | — | 1,031 | 85,875 | |||||||||||||||||||||||||||||||||||||||||||||||||||
John R. Doubman |
|
28,000 |
|
|
11,487 |
|
|
— |
|
|
14,962 |
|
|
2,980 |
|
|
57,429 |
| ||||||||||||||||||||||||||||||||||||||||||
| a. | The 401(k) Plan, Supplemental 401(k) Plan, and Deferred Compensation Plan are described under the heading “Deferred Compensation” beginning on page |
| b. | Consists of amounts paid or reimbursed by Cabot for financial planning and tax assistance services during fiscal |
| c. |
CABOT CORPORATION 45
|
Executive Compensation(continued)
| Consists of the amount paid by Cabot for an annual physical exam for Messrs. |
The table does not include any amounts |
46 CABOT CORPORATION
2020 PROXY STATEMENT |
Executive Compensation(continued)
Grant of Plan-Based Awards Table
The following table reports plan-based awards granted to the named executive officers during fiscal 2017.2019. The material terms of our STI and LTI awards are described in “Compensation Discussion and Analysis — Our Performance-based Compensation Philosophy” beginning on page��page 32.
| Name | Grant Date |
Estimated Future Payouts |
Estimated Future Payouts | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of ($)(5) | Grant Date |
Estimated Future Payouts UnderNon-Equity Incentive |
Estimated Future Payouts Under Equity Incentive | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of Stock and Option Awards ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sean D. Keohane | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based Restricted Stock Unit (“RSU”) | 11/11/16 | — | — | — | — | — | — | 19,024 | — | — | 959,951 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/11/16 | — | — | — | 11,098 | 22,195 | 44,390 | — | — | — | 1,119,960 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 27,000 |
|
| — |
|
| — |
|
| 1,350,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 15,750 |
|
| 31,500 |
|
| 63,000 |
|
| — |
|
| — |
|
| — |
|
| 1,575,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/11/16 | — | — | — | — | — | — | — | 87,981 | 50.46 | 1,119,647 |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 137,674 |
|
| 50.00 |
|
| 1,574,578 |
| ||||||||||||||||||||||||||||||||||||||||||||
| Short-Term Incentive Compensation (“STI”) | — | 315,000 | 900,000 | 1,800,000 | — | — | — | — | — | — | — |
| — |
|
| 420,000 |
|
| 1,200,000 |
|
| 2,400,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||
| Eduardo E. Cordeiro | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/11/16 | — | — | — | — | — | — | 5,945 | — | — | 299,985 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/11/16 | — | — | — | 3,468 | 6,936 | 13,872 | — | — | — | 349,991 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Erica McLaughlin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,650 |
|
| — |
|
| — |
|
| 232,500 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,713 |
|
| 5,425 |
|
| 10,850 |
|
| — |
|
| — |
|
| — |
|
| 271,250 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/11/16 | — | — | — | — | — | — | — | 27,494 | 50.46 | 349,889 |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 23,710 |
|
| 50.00 |
|
| 271,171 |
| ||||||||||||||||||||||||||||||||||||||||||||
| STI | — | 138,793 | 396,550 | 793,100 | — | — | — | — | — | — | — |
| — |
|
| 112,700 |
|
| 322,000 |
|
| 644,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||
| Nicholas S. Cross | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/11/16 | — | — | — | — | — | — | 5,053 | — | — | 254,974 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/11/16 | — | — | — | 2,948 | 5,895 | 11,790 | — | — | — | 297,462 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Karen A. Kalita | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 900 |
|
| — |
|
| — |
|
| 45,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 300 |
|
| 600 |
|
| 1,200 |
|
| — |
|
| — |
|
| — |
|
| 30,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 1,833 |
|
| 74,988 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 1,069 |
|
| 2,138 |
|
| 4,276 |
|
| 87,466 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 11,437 |
|
| 40.91 |
|
| 87,516 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STI |
| — |
|
| 33,603 |
|
| 109,813 |
|
| 219,626 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hobart C. Kalkstein | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,800 |
|
| — |
|
| — |
|
| 240,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,800 |
|
| 5,600 |
|
| 11,200 |
|
| — |
|
| — |
|
| — |
|
| 280,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/11/16 | — | — | — | — | — | — | — | 23,369 | 50.46 | 297,395 |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 24,475 |
|
| 50.00 |
|
| 279,921 |
| ||||||||||||||||||||||||||||||||||||||||||||
| STI | — | 102,068 | 291,623 | 583,245 | — | — | — | — | — | — | — |
| — |
|
| 97,482 |
|
| 278,520 |
|
| 557,040 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||
| Brian A. Berube | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/11/16 | — | — | — | — | — | — | 4,458 | — | — | 224,951 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/11/16 | — | — | — | 2,601 | 5,202 | 10,404 | — | — | — | 262,493 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,500 |
|
| — |
|
| — |
|
| 225,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,625 |
|
| 5,250 |
|
| 10,500 |
|
| — |
|
| — |
|
| — |
|
| 262,500 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/11/16 | — | — | — | — | — | — | — | 20,620 | 50.46 | 262,410 |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 22,945 |
|
| 50.00 |
|
| 422,805 |
| ||||||||||||||||||||||||||||||||||||||||||||
| STI | — | 91,350 | 261,000 | 522,000 | — | — | — | — | — | — | — |
| — |
|
| 96,902 |
|
| 276,864 |
|
| 553,728 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||
| Hobart C. Kalkstein | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based RSU | 11/11/16 | — | — | — | — | — | — | 4,013 | — | — | 202,496 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based RSU | 11/11/16 | — | — | — | 2,341 | 4,681 | 9,362 | — | — | — | 236,203 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John R. Doubman | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,600 |
|
| — |
|
| — |
|
| 180,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,100 |
|
| 4,200 |
|
| 8,400 |
|
| — |
|
| — |
|
| — |
|
| 210,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options | 11/11/16 | — | — | — | — | — | — | — | 18,558 | 50.46 | 236,170 |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 18,356 |
|
| 50.00 |
|
| 323,158 |
| ||||||||||||||||||||||||||||||||||||||||||||
| STI | — | 83,580 | 238,800 | 477,600 | — | — | — | — | — | — | — |
| — |
|
| 82,950 |
|
| 237,000 |
|
| 474,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||||||||||||||||||||||
| 1. | The amounts in these columns represent |
46 CABOT CORPORATION
|
Executive Compensation(continued)
| in the “Target” column reflect 100% of the total target bonus opportunity payable for both corporate and individual performance. The amounts included in the “Maximum” column reflect 200% of the total target bonus opportunity payable for both corporate and individual performance. Actual |
CABOT CORPORATION 47
2020 PROXY STATEMENT |
Executive Compensation(continued)
| 2. a. | The amounts in these columns represent PSU awards. |
| b. | The PSUs granted to Mr. Berube and Mr. Doubman in fiscal 2019 were forfeited effective on their respective separation dates with the Company. |
| 3. | The amounts in |
| 4. | All stock options were granted with an exercise price equal to the closing price of our common stock on the date of grant and generally vest, subject to continued employment, over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant). The stock options awarded to Ms. Kalita on June 3, 2019 in connection with her promotion vest as follows, generally subject to her continued employment through the applicable vesting date: 30% on November 9, 2019, 30% on November 9, 2020 and 40% on November 9, 2021. |
| 5. a. | Reflects the grant date fair value of TSUs, PSUs and option awards, calculated in accordance with FASB ASC Topic 718 |
| b. | In connection with Mr. Berube’s termination of |
| c. | In connection with the termination of Mr. Doubman’s employment with the Company, the Compensation Committee extended the exercise period of Mr. Doubman’s vested stock options to the earlier of (i) November 15, 2021, and (ii) the originally expiration date of the stock options. The amount reported in this column for Mr. Doubman in fiscal 2019 consists of (i) $209,938, the grant date fair value of the stock options granted to Mr. Doubman in fiscal 2019 and (ii) $113,220, the incremental value associated with extending the exercise period of his vested stock options, computed in accordance with FAS ASC Topic 718. |
| d. | The grant date fair value per unit for TSUs and PSUs is equal to the closing price of Cabot common stock on the date of grant ($ |
48CABOT CORPORATION 47
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Executive Compensation(continued)
Outstanding Equity Awards at FiscalYear-End Table
The following table shows information regarding outstanding equity awards held by our named executive officers as of September 30, 2017.2019.
