| 2019 ANNUAL MEETING AND PROXY STATEMENT |
2018 PROXY STATEMENT NOTICE OF ANNUAL MEETING OF STOCKHOLDERS WEDNESDAY, APRIL 25, 2018 UNLOCKING VALUE CREATING THREE WORLD-LEADING COMPANIES AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
the Securities Exchange Act of 1934
(Amendment No. )
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☐ | Soliciting Material Pursuant to§240.14a-12 | |
DowDuPont Inc.
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| 2019 ANNUAL MEETING AND PROXY STATEMENT |
2018 PROXY STATEMENT NOTICE OF ANNUAL MEETING OF STOCKHOLDERS WEDNESDAY, APRIL 25, 2018 UNLOCKING VALUE CREATING THREE WORLD-LEADING COMPANIES AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder of DowDuPont Inc.:Stockholder:
At the 20182019 Annual Meeting of Stockholders (the “2018“2019 Meeting”), stockholders will vote on the following matters either by proxy or in person:
Date:
Time:
Location:
Wilmington, Delaware 19805 |
Agenda:
1. Election of the
2. Advisory resolution to approve executive compensation.
3.
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How to Vote
Your vote is important. Whether or not you plan on attending the 20182019 Meeting, please vote your shares as soon as possible by internet, telephone or mail.
  | BY INTERNET
www.proxyvote.com |   | BY PHONE
1-800-690-6903 or the number provided on your voting instructions |  | BY MAIL
Use the postage-paid envelope provided |
The Board of Directors of DowDuPont Inc. (the “Board”) has set the close of business on FebruaryApril 26, 2018,2019, as the record date for determining stockholders who are entitled to receive notice of the 20182019 Meeting and to vote.
As permitted by U. S.U.S. Securities and Exchange Commission (the “SEC”) rules, proxy materials were made available via the internet. Notice regarding availability of proxy materials and instructions on how to access those materials were mailed to certain stockholders of record on or about March 16, 2018April 29, 2019 (the “Notice”). The instructions included how to vote online and how to request a paper copy of the proxy materials. This method of notice and access gives the Company a lower-cost way to furnish stockholders with their proxy materials.
Proof of stock ownership is necessary to attend the 20182019 Meeting. Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend. Please see page 2 of the Proxy Statement for information on attending the 2018 Meeting.
If you are unable to attend the 2018 Meeting in person, please listen to the live audio webcast or the replay after the event, atwww.dow-dupont.com/investors.person.
Thank you for your continued support and your interest in DowDuPont Inc.
Stacy Fox
General Counsel and Secretary
March 16, 2018April 29, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON APRILJUNE 25, 20182019
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.www.proxyvote.com.
ABOUT THE DOWDUPONT MERGER TRANSACTION AND INTENDED BUSINESS SEPARATIONS
Effective August 31, 2017, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Dow and DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this Proxy Statement, references to “the Company” refer to DowDuPont.
Each share of common stock of Dow was converted into the right to receive one fully paid andnon-assessable share of common stock of the Company. Each share of common stock of DuPont was converted into the right to receive 1.2820 fully paid andnon-assessable shares of common stock of the Company. Any shares of common stock of Dow and DuPont which were held in treasury immediately prior to the Merger Transaction were automatically cancelled and retired for no consideration.
DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisions into three independent, publicly traded companies (the “Intended Business Separations”). The Intended Business Separations, which are subject to Board approval, are expected to be in the form ofpro-rataspin-off transactions, under which DowDuPont stockholders will receive shares of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science is expected to separate from DowDuPont by the end of the first quarter of 2019, and Agriculture and Specialty Products are each expected to separate from one another by June 1, 2019.
DowDuPont recently announced brand names for the Intended Business Separations reflecting its ongoing progress toward the separations.
Dow was determined to be the accounting acquirer in the Merger Transaction and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods prior to the Merger Transaction. A further description of the Merger Transaction can be found in the current report on Form8-K filed by DowDuPont on September 1, 2017.
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Anticipated Timeline to Expected Spins 1Q18 3Q18 1Q19 MatCo Spin AgCo Spin Finalize assets and liabilities by spin Complete IT design and test File initial Forms 10 Begin to deploy IT systems and stand up legal entities Forms 10 become effective Complete equity roadshows Complete IT systems and legal entity transitions 3Q19 SpecCo Formed
THREE INDUSTRY-LEADING COMPETITORS WITH STRONG FOUNDATIONS
FOR INDEPENDENT, SUSTAINABLE GROWTH
We expect to complete the separation of the Materials Science division from DowDuPont by the end of first quarter of 2019, and the separation of the Agriculture and Specialty Products divisions from one another by June 1, 2019.
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The intended Agriculture company will become Corteva Agriscience™ and will bring together the strengths of DuPont Pioneer, DuPont Crop Protection and Dow AgroSciences to form a pure-play Agriculture company with the industry’s most comprehensive and balanced portfolio, focused resources, and the scale needed to deliver the innovative solutions its customers need. The highly productive innovation engine and combined robust pipeline of solutions across seed, crop protection, seed-applied technologies, and digital agriculture will enable the intended Agriculture company to bring a broader suite of products to the market faster and be an even better partner to farmers around the world, helping them to increase their productivity and profitability.
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The intended Materials Science company will be called Dow and will be the premier materials science solution provider, focused on three, high-growth market verticals: packaging, infrastructure and consumer care. Built on a foundation of the strongest and deepest chemistry and polymers toolkit, the intended Materials Science company will have robust technology and asset integration, scale and cost-competitive capabilities to enable truly differentiated and sustainable solutions for customers.
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The intended Specialty Products company will be the new DuPont and will be a premier innovation leader composed of technology-based differentiated materials, ingredients and solutions that transform multiple industries and everyday life. It will apply its market knowledge and deep expertise in science and application development to solve customer needs in attractive markets and accelerate the adoption of electronic functionality and biotechnology into consumer and industrial applications. Bringing together science and market insights, Specialty Products will be well positioned for growth opportunities where customer collaboration and innovation are central to value creation.
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AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS 2017 Pro Forma Sales1 2017 Pro Forma Sales1 2017 Pro Forma Sales1 Crop Protection Seed Packaging & Specialty Plastics Industrial Intermediates & Infrastructure Performance Materials & Coatings Electronics & Imaging Transportation & Advanced Polymers Nutrition & Biosciences Safety & Construction
Cautionary Statement About Forward-Looking Statements
This communicationproxy statement contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” and similar expressions and variations or negatives of these words.
Forward-looking statements by their nature address matters that are, to varying degrees, uncertain, including statements about the intended separation, subject to approvaldistribution of all of the Company’s Boardshares of Directors,common stock of DowDuPont’s Agriculture, Materials Science and Specialty Products businesses in one or more tax efficient transactions on anticipated termswholly-owned subsidiary, Corteva, Inc. (the “Intended Business Separations”“Corteva Distribution”). Forward-looking statements, including those related to the DowDuPont’s ability to complete, or to make any filing or take any other action required to be taken to complete, the Corteva Distribution, are not guarantees of future performanceresults and are based on certainsubject to risks, uncertainties and assumptions and expectations of future events which may not be realized.that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements also involve risks and uncertainties, many of which that are beyond the Company’sDowDuPont’s control. Some of the important factors that could cause DowDuPont’s Dow’s or DuPont’s actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) ability and costs to achieve all the expected benefits from the Corteva Distribution and achieving the successful integrationApril 1, 2019 distribution by DowDuPont of all of the respective Agriculture, Materials Science and Specialty Products businessesshares of common stock of Dow Inc. on a pro rata basis to the holders of DowDuPont common stock (the “Dow Distribution”); (ii) restrictions under intellectual property cross license agreements entered into or to be entered into in connection with the Corteva Distribution and DuPont, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, productivity actions, economic performance, indebtedness, financial condition, losses, future prospects, businessthe Dow Distribution; (iii) ability to receive third-party consents required under the separation agreement entered into in connection with the Corteva Distribution and management strategies for the management, expansionDow Distribution;(iv) non-compete restrictions under the separation agreement entered into in connection with the Corteva Distribution and growththe Dow Distribution; (v) the incurrence of significant costs in connection with the Corteva Distribution and the Dow Distribution, including increased costs from supply, service and other arrangements that prior to the Dow Distribution were between entities under the common control of DowDuPont; (vi) risks outside the control of DowDuPont which could impact the decision of the combined operations; (ii) costsDowDuPont Board of Directors to achieveproceed with the Corteva Distribution, including, among others, global economic conditions, instability in credit markets, declining consumer and achievementbusiness confidence, fluctuating commodity prices and interest rates, volatile foreign currency exchange rates, tax considerations, other challenges that could affect the global economy, specific market conditions in one or more of the anticipated synergies byindustries of the combined Agriculture, Materials Sciencebusinesses proposed to be separated, and Specialty Products businesses; (iii) risks associatedchanges in the regulatory or legal environment and the requirement to redeem $12.7 billion of DowDuPont notes if the Corteva Distribution is abandoned or delayed beyond May 1, 2020; (vii) potential liability arising from fraudulent conveyance and similar laws in connection with the Intended Business Separations, including conditions which could delay, preventCorteva Distribution and/ or otherwise adversely affect the proposed transactions, including possible issues or delays in obtaining required regulatory approvals or clearances related to the Intended Business Separations, associated costs, disruptions in the financial markets or other potential barriers; (iv)Dow Distribution; (viii) disruptions or business uncertainty, including from the Intended Business Separations,Corteva Distribution, could adversely impact DowDuPont’s business (either directly or as conducted by and through Dow or DuPont), or financial performance and its ability to retain and hire key personnel; (v)(ix) uncertainty as to the long-term value of DowDuPont common stock; (x) potential inability to access the capital markets; and (vi)(xi) risks to DowDuPont’s Dow’s and DuPont’s business, operations and results of operations from: the availability of and fluctuations in the cost of energyfeedstocks and feedstocks;energy; balance of supply and demand and the impact of balance on prices; failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, including trade disputes and retaliatory actions; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could result in a significant operational event for the Company,DowDuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce the Company’sDowDuPont’s intellectual property rights; failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. These risks are and will be more fully discussed in theDowDuPont’s current, quarterly and annual reports filedand other filings made with the U.S. Securities and Exchange Commission by DowDuPont.(the “SEC”), as may be amended from time to time in future filings with the SEC. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DowDuPont’s Dow’s or DuPont’sCorteva, Inc.’s consolidated financial condition, results of operations, credit rating or liquidity. NoneYou should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DowDuPont Dow or DuPont assumes anyno obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” (Part I, Item 1A1A) of DowDuPont’s 20172018 Annual Report onForm10-K). 10-K as may be modified by DowDuPont’s 2019 quarterly reports on Form 10-Q and current reports on Form 8-K.
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Annual Meeting of Stockholders
| Date and Time | Place | Record Date | ||
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Wilmington, Delaware 19805 |
Meeting Agenda and Voting Recommendations
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1:
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FOR EACH NOMINEE |
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| ADVISORY RESOLUTION
| FOR
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| 57
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| RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| FOR | ||||||||
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| 58 | ||||||||
| 4: | AGAINST | 62 | ||||||||
| 5: | STOCKHOLDER PROPOSAL – PREPARATION OF AN EXECUTIVE COMPENSATION REPORT
| AGAINST | 64 | |||||||
| STOCKHOLDER PROPOSAL –
| AGAINST | 66 | |||||||
| STOCKHOLDER PROPOSAL –
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This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all information that you should consider, and you should read the entire Proxy Statement carefully before voting.
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PROXY STATEMENT SUMMARY (continued)
Board Nominees
Each Director nominee is elected annually by a majority of votes cast to serve for a one-year term that expires at the Annual Meeting in 2019 or until their successors are elected and qualified. While nominated for re-election, the Company has announced that Mr. Liveris will serve as a Director of DowDuPont only through July 1, 2018, at which time he will retire from the Company and the Board of Directors. As set forth in the Bylaws, the Continuing Dow Directors will identify a replacement to fill the vacancy at that time. The following table provides summary information about each Director nominee. The information is current as of the date of this Proxy Statement and the age listed is as of the 2018 Meeting.
Overview of Business
DowDuPont Merger TransactionExecutive Summary
Effective August 31, 2017, The Dow Chemical Company and its consolidated subsidiaries (“Historical Dow”) and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Historical Dow and Historical DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this Proxy Statement, references to “the Company” refer to DowDuPont.
Dow was determined to be the accounting acquirer inFollowing the Merger Transaction, and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods priorDowDuPont began taking steps to the Merger Transaction. A further description of the Merger Transaction can be found on page i of the Proxy Statement and in the current report onForm 8-K filed by DowDuPont on September 1, 2017.
DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisionsseparate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses (the “Intended Business Separations”). The and the transactions to accomplish the Intended Business Separations, the “separations”). Dow Inc. (“Dow”) was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business and Corteva Inc. (“Corteva”) was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the agriculture business.
The separation of Dow was completed on April 1, 2019 when DowDuPont stockholders received a pro rata dividend of all of the outstanding shares of common stock of Dow (the “Dow Distribution”). DowDuPont expects to complete the separation and distribution of Corteva on June 1, 2019 through a pro rata dividend of the shares of the capital stock of Corteva (the “Corteva Distribution” and, together with the Dow Distribution, the “distributions”). Following the distributions, DowDuPont will continue to hold the specialty products business, expects to change its corporate name to DuPont de Nemours Inc. and will become known as DuPont. References to “DuPont” in this Proxy Statement refer to the Company after the consummation of the Corteva Distribution.
DowDuPont intends to complete a reverse stock split to increase the market price of its common stock in connection with the Corteva Distribution. DowDuPont will hold a special meeting of stockholders at which are subjectstockholders will be asked to vote on a proposal to adopt and approve the reverse stock split to reflect a ratio of not less than2-for-5 and not greater than1-for-3, with the exact ratio to be determined by the Board approval,(the “Reverse Stock Split”). DowDuPont will provide stockholders with a separate proxy statement in connection with the matters to be voted on at the special meeting. This Proxy Statement does not relate to the special meeting and only relates to the items of business described herein which are expected to be considered at the 2019 Meeting.
The Proxy Statement contains certain information regarding the year ended December 31, 2018, including information with respect to director and executive compensation and certain other matters, as required by the rules and regulations of the SEC. The 2018 information presented in the formProxy Statement is information for DowDuPont and does not give effect to the Dow Distribution or the intended distribution ofpro-rataspin-off transactions, under which DowDuPont stockholders will receive shares Corteva. The Proxy Statement also includes information as of capital stockthe record date for the 2019 Meeting and as of the date hereof. All information as of the record date and as of the date hereof presented in the resulting companies. DowDuPont recently announced dates forProxy Statement gives effect to the Intended Business Separations: Materials Sciencecompletion of the Dow Distribution, but does not give effect to the distribution of Corteva, which will be called Dow, is expected to separate from DowDuPont byoccur after the enddate hereof and prior to the date of the first quarter of 2019 and Agriculture,Meeting. Finally, the Proxy Statement includes certain information with respect to DuPont which will become Corteva Agriscience™, and Specialty Products, which will be the new DuPont, are each expected to separate from one another by June 1, 2019.
DowDuPont is led by a management team that reflects the strengths and capabilities of both Dow and DuPont. Each of the three divisions leads its respective industry through productive, science-based innovation to meet the needs of customers and help solve global challenges.
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Lamberto Andreotti Age: 67 Independent Director Since: 2012 Legacy: DuPont James A. Bell Age: 69 Independent Director Since: 2005 Legacy: Dow Edward D. Breen Age: 62 Director Since: 2015 Legacy: DuPont Robert A. Brown Age: 66 Independent Director Since: 2007 Legacy: DuPont Alexander M. Cutler Age: 66 Independent Director Since: 2008 Legacy: DuPont Jeff M. Fettig Age: 61 Independent Director Since: 2003 Legacy: Dow Marillyn A. Hewson Age: 64 Independent Director Since: 2007 Legacy: DuPont Lois D. Juliber Age: 69 Independent Director Since: 1995 Legacy: DuPont Andrew N. Liveris Age: 63 Director Since: 2004 Legacy: Dow Raymond J. Milchovich Age: 68 Independent Director Since: 2015 Legacy: Dow Paul Polman Age: 61 Independent Director Since: 2010 Legacy: Dow Dennis H. Reilley Age: 65 Independent Director Since: 2007 Legacy: Dow James M. Ringler Age: 72 Independent Director Since: 2001 Legacy: Dow Ruth G. Shaw Age: 70 Independent Director Since: 2005 Legacy: Dow Lee M. Thomas Age: 73 Independent Director Since: 2011 Legacy: DuPont Patrick J. Ward Age: 54 Independent Director Since: 2013 Legacy: DuPont
PROXY STATEMENT SUMMARY (continued)
The management team seeks to deliver value at DowDuPont through:
Performance Highlights
Meeting.
See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measures.
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Agriculture Materials Science Specialty Products Crop Protection Seed Packaging & Specialty Plastics Industrial Intermediates & Infrastructure Performance Materials & Coatings Electronics & Imaging Transportation & Advanced Polymers Nutrition & Biosciences Safety & Construction
PROXY STATEMENT SUMMARY (continued)
Corporate Governance Best Practices2018 Performance Highlights
| • | 2018 GAAP earnings per share from continuing operations totaled $1.65. Adjusted earnings per share* was $4.11, up 21 percent versus pro forma results in 2017. Adjusted earnings per share excludes significant items totaling net charges of $2.02 per share, as well as a $0.44 per share charge for Historical DuPont amortization of intangible assets. |
| • | 2018 GAAP net sales increased 38 percent. Net sales increased 8 percent to $86.0 billion versus pro forma results in 2017, with gains in all regions. |
| • | 2018 GAAP Net Income from Continuing Operations totaled $4.0 billion. Operating EBITDA* increased 13 percent to $18.3 billion versus pro forma results in 2017, as cost synergies; local price gains; volume growth, including the benefit of new capacity additions; lower pension/OPEB costs; and higher equity earnings more than offset higher raw material costs. |
| • | Net income available for common stockholders was $3,844 million ($1.65 per share) in 2018, compared with $1,460 million ($0.91 per share) in 2017. |
| • | In 2018, Historical Dow and Historical DuPont each made discretionary contributions of $1,100 million to their respective principal U.S. pension plans. On November 1, 2018, the Company announced a new $3.0 billion share buyback program, which expired on March 31, 2019 - commensurate with the expected timing of the materials sciencespin-off. At December 31, 2018, the Company had repurchased $1.4 billion of shares under this program. |
| • | On November 1, 2018, the Company increased its cost synergy target under the DowDuPont Synergy Program to $3.6 billion. DowDuPont achieved year-over-year cost synergy savings of $1.6 billion. |
| • | Cash flow from operations totaled $4.7 billion in 2018 and included discretionary pension contributions of approximately $2.2 billion. Excluding these discretionary contributions, cash flow from operations would have been $6.9 billion in 2018. |
| • | The Company completed steps to establish the initial capital structure of Dow, Corteva and DuPont, including the issuance of $12.7 billion of senior unsecured notes by the Company. |
| * | See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measures. |
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As part of DowDuPont’s commitment
PROXY STATEMENT SUMMARY (continued)
Director Nominees
You are being asked to high ethical standards, the Board follows sound governance practices. These practices are described in more detail beginning on page 3 of the Proxy Statement andvote on the Company’s website atwww.dow-dupont.com/investors/corporate-governance.election of 12 directors. All directors are elected annually. Detailed information about each Director’s background, skills and expertise can be found inProposal 1 — Election of Directors. The committee memberships referenced in the following table reflect the expected committee composition following the Corteva Distribution.
(As of the date of the Proxy) Name Age Current Position | Independent | Audit Committee | Nomination Governance Committee | People and Committee | Sustainability, Health & Safety Committee | Other Current Public Boards | ||||||||||||||||||
Edward D. Breen | ||||||||||||||||||||||||
Age 63 Chair and Chief Executive Officer, DowDuPont | 1 | |||||||||||||||||||||||
Ruby R. Chandy | ||||||||||||||||||||||||
Age 57 Chief Executive Officer & President, Lumina Advisory Services | X | X | CH | 2 | ||||||||||||||||||||
Franklin K. Clyburn, Jr. | ||||||||||||||||||||||||
Age 54 EVP, Chief Commercial Officer, Merck | X | X | X | |||||||||||||||||||||
Terrence R. Curtin | ||||||||||||||||||||||||
Age 50 Chief Executive Officer, TE Connectivity | X | X | X | 1 | ||||||||||||||||||||
Alexander M. Cutler | ||||||||||||||||||||||||
Age 67 Retired Chair and Chief Executive Officer, Eaton | X | CH | X | 1 | ||||||||||||||||||||
C. Marc Doyle | ||||||||||||||||||||||||
Age 50 Chief Operating Officer, Specialty Products Division, DowDuPont | ||||||||||||||||||||||||
Eleuthère I. du Pont | ||||||||||||||||||||||||
Age 52 President, Longwood Foundation | X | X | X | |||||||||||||||||||||
Rajiv L. Gupta | ||||||||||||||||||||||||
Age 73 Chairman of Aptiv, PLC | X | CH | X | 3 | ||||||||||||||||||||
Luther C. Kissam | ||||||||||||||||||||||||
Age 54 Chair, President & Chief Executive Officer, Albemarle Corp. | X | X | X | 1 | ||||||||||||||||||||
Frederick M. Lowery | ||||||||||||||||||||||||
Age 48 SVP, Thermo Fisher, President Life Sciences and Laboratory Products Groups | X | X | X | |||||||||||||||||||||
Raymond J. Milchovich | ||||||||||||||||||||||||
Age 69 Former Chair and Chief Executive Officer, Foster Wheeler AG | X | X | X | |||||||||||||||||||||
Steven M. Sterin | ||||||||||||||||||||||||
Age 47 Former EVP & Chief Financial Officer, Andeavor | X | CH | X | |||||||||||||||||||||
CH = Chair
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PROXY STATEMENT SUMMARY (continued)
Corporate Governance Best Practices
As part of DowDuPont’s commitment to high ethical standards, the Board follows sound governance practices. These practices, which are summarized below, are described in more detail beginning on page 3 of the Proxy Statement and on the Company’s website atwww.dow-dupont.com/investors/corporate-governance.
Board Independence | Director Elections | Board Practices | Stock Ownership | Stockholder Rights | ||||||||||||||||||||
Director
independent
| Annual Board elections
Directors are elected by a majority of votes cast
Directors not elected by a majority of votes cast are subject to the resignation policy | Non-employee executive session without management at each
Annual Board and Committee evaluations
Director orientation programs | Non-employee
Directors are required to with stock ownership guidelines Directors are
retirement
Executives and prohibited from Company stock
| Stockholder right to callspecial meetings (with a 25% ownership threshold)
stockholder voting
Eligible
proxy access |
Company Leadership and Board Composition
Company Leadership
In order to ensure that DowDuPont benefited from the experience and expertise of both Dow’s and DuPont’s leadership teams and Directors, it was determined priorPrior to the Merger Transaction that Andrew N. Liveris, Chairman and CEOcompletion of the Dow would serveDistribution on April 1, 2019, Jeff Fettig served as the Executive Chairman of DowDuPontthe Board and Edward D. Breen Chairman and CEO of DuPont, would serveserved as the Chief Executive Officer of DowDuPont. In connection with the Dow Distribution, Mr. Fettig resigned from the Board of DowDuPont and became thenon-executive chairman of Dow. Following the Dow Distribution, Mr. Breen was appointed as the Chair and Chief Executive Officer of DowDuPont. Following the Corteva Distribution, Mr. Breen will serve as the Executive Chair of DuPont and Marc Doyle, currently chief operating officer of the Specialty Products Division, will be Chief Executive Officer of DuPont.
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PROXY STATEMENT SUMMARY (continued)
Board Composition and Director Experience
Additionally, in order to ensure effective oversightAs of DowDuPont,the date of the Proxy Statement the Board consistswas composed of sixteen Directors; eightthe Directors listed below. As indicated in the table, certain of whom werethe current Directors are expected to resign in connection with the Corteva Distribution and become directors of Corteva and certain of the current Directors are expected to continue as Directors of DuPont and are nominated forre-electionat Dowthe 2019 Meeting.
| Expected Board Affiliation Following Corteva Distribution | ||||
Current DowDuPont Directors | Corteva | DuPont | ||
Lamberto Andreotti | X | |||
Edward D. Breen | X | X | ||
Robert A. Brown | X | |||
Alexander M. Cutler | X | |||
Lois D. Juliber | X | |||
Lee M. Thomas | X | |||
Patrick J. Ward | X | |||
Following the Corteva Distribution and prior to the closing of2019 Meeting, the Merger Transaction (including Andrew N. Liveris and Jeff M. Fettig, former Lead Independent Director) and eight of whom were Directors at DuPont priorfollowing individuals are expected to be appointed to the closingBoard of DuPont (prior to the Merger Transaction (including Edward D.Corteva Distribution, DowDuPont): Ruby R. Chandy, Franklin K. Clyburn, Jr., Terrence R. Curtin, C. Marc Doyle, Eleuthère I. du Pont, Rajiv L. Gupta, Luther C. Kissam, Frederick M. Lowery, Raymond J. Milchovich and Steven M. Sterin (collectively, the “New DuPont Directors”). Mr. Milchovich previously served on the DowDuPont Board from September 1, 2017 until July 1, 2018. These ten directors, as well as Messrs. Breen and Alexander M. Cutler, former Lead Independent Director). will stand forre-election at the 2019 Meeting.
The Directors collectively possess a variety of skills, professional experience, and diversity of backgrounds that allow them to
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PROXY STATEMENT SUMMARY (continued)
effectively oversee DowDuPont’s business including: leadership experience, international experience, operational experience in a variety of relevant fields and industries, public company board experience, board or other significant experience with academic research and philanthropic institutions and trade and industry organizations, and prior government or public policy experience. Each Director’s relevant experiences
ExecutiveCompensation
Compensation of the executive officers of DowDuPont is overseen by the People and attributes collectively provideCompensation Committee (or, in the Boardcase of both the former Executive Chairman and the CEO, by the Compensation Committee and the independent members of the Board). For 2018 compensation decisions, the Compensation Committee delegated certain responsibilities relating to the compensation and benefits provided to employees of Historical Dow and Historical DuPont to the Historical Dow Compensation Subcommittee and the Historical DuPont Compensation Subcommittee respectively, with a balancethe exception of perspectives that contribute to its effectivenessthe Executive Officers of DowDuPont, in overseeingwhich case oversight remained with the business, preparing forCompensation Committee and the Intended Business Separations, and advising the Company on navigating the regulatory environment for the Intended Business Separations.
Board Committees
Board. The Board, maintains an Audit Committee;the Compensation Committee; Corporate Governance Committee and Environment, Health, Safety and Technology Committee (the “Standing Committees”). In addition to the Standing Committees, three Advisory Committeesrespective Subcommittees were established to oversee the business and affairsassisted in performance of each of DowDuPont’s Agriculture, Materials Science and Specialty Products divisions in preparation for the Intended Business Separations. Each Advisory Committee is responsible for overseeing their respective divisions. The responsibilities of each Standing Committee and Advisory Committee are stated in the Bylaws as well as in their respective charters. The Committees are described in more detail beginning on page 4 of the Proxy Statement.
A list of the Directors and their respective Committee memberships is below:
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* = Independent CH = Chairman or, as applicable,Co-Chairman A = Additional Ex Officio Attendee
In addition, Advisory Committee members may participate in other Advisory Committee meetings as an attendee. Such attendees may not vote or be counted for quorum purposes. Advisory Committees also include ex officio members from the legacy Dow and legacy DuPont Boards who are not serving on the Board, as well as additional members who participate in an ex officio capacity as appointedoversight duties by the Board to provide the Advisory Committees with the business context and knowledge needed to ensure an efficient and timely transition for the Intended Business Separations. Such ex officio members may not vote or be counted for quorum purposes.independent compensation consultants.
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PROXY STATEMENT SUMMARY (continued)
ExecutiveCompensation
Program Structure and Alignment with Core Principles
Both Dow and DuPont have a history of designingThe following summarizes key governance characteristics related to the executive compensation programs to attract, motivate, reward and retainin which the high-quality executives necessary for Company leadership and strategy execution. This legacy continues at DowDuPont and positions the Company well in order to deliver on the commitment to create three independent, industry-leading companies.
The legacy Dow and DuPont compensation programs are designed and administered to follow these core principles:
DowDuPont is focused on implementing pay practices to ensure continued alignment with the Company’s core principles. The following summarizes DowDuPont’s keynamed executive compensation governance practices:officers participate:
KEY EXECUTIVE COMPENSATION PRACTICES
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✓ Active stockholder engagement
✓ Strong links between executive compensation outcomes and company financial and market performance
✓
✓ Significant focus on performance-based pay
✓ Each component of target pay benchmarked with respect to
✓ Carefully structured peer group with regular Compensation Committee review
✓ Stock ownership requirements of six times base salary for the
✓ 100% independent Compensation Committee
✓ Clawback policy
✓ Anti-hedging/Anti-pledging policies
✓ Independent compensation consultants reporting to the Compensation Committee
✓ No new single-trigger change in control agreements
✓ Stock incentive plans prohibit option repricing, reloads, exchanges or options granted below market value without stockholder approval
✓ Regular review of the Compensation Committee Charter to ensure best practices and priorities
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As implementationFollowing the Dow Distribution and the Corteva Distribution, the future compensation committees of the Intended Business Separations continues, the Compensation Committee will continueeach of Dow, Corteva and DuPont are expected to review best practices in governance and modify the executive compensation structures applicable to ensure that the compensation programs align with the Company’s core principles.each company.
Executive Compensation Program Summary
2017 was a unique year, as both Dow and DuPont operated as standalone companies prior to the Merger Transaction, each with its own executive compensation and benefit programs and practices. Given the Intended Business Separations within a relatively short period of time after the closing of the Merger Transaction, a decision was made not to not develop separate executive compensation programs at the DowDuPont level for 2017. Rather, the executive officers of DowDuPont continue to be employees of, and participants in, the compensation and benefit programs of Dow and DuPont, respectively. The only exception to this structure is related to a post-merger grant of Performance Share Units (“PSUs”) which were awarded to certain senior executives and which is discussed more fully in the section entitled “DowDuPont – Post Merger Grant” which can be found on page 45 of the Proxy Statement.
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PROXY STATEMENT SUMMARY (continued)
level. Each of the Historical Dow and Historical DuPont executive compensation programs delivers value through three primary forms of compensation: base salary, annual incentives, and long-term incentives. The compensation outcomes under the programs’ annual and long-term incentives are determined by respective company performance (and, in the case of the post-merger PSUs awarded, by the overall performance of DowDuPont).
The following table summarizes the two companies’ respective 2017 legacy executive compensation programs.
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The following merger-related compensation actions were taken in 2017:
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2018
2019 Annual Meeting of Stockholders
DowDuPont Inc.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON APRILJUNE 25, 20182019
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
Stockholders may request their proxy materials be delivered to them electronically in 20192020 by visiting
https://enroll.icsdelivery.com/dwdp.dwdp.
The Proxy Statement contains certain information regarding the year ended December 31, 2018, including information with respect to director and executive compensation and certain other matters, as required by the rules and regulations of the SEC. The 2018 information presented in the Proxy Statement is information for DowDuPont and does not give effect to the Dow Distribution or the intended distribution of Corteva. The Proxy Statement also includes information as of the record date for the 2019 Meeting and as of the date hereof. All information as of the record date and as of the date hereof presented in the Proxy Statement gives effect to the completion of the Dow Distribution, but does not give effect to the distribution of Corteva, which is expected to occur after the date hereof and prior to the date of the 2019 Meeting. Finally, the Proxy Statement includes certain information with respect to DuPont which is expected to be the remaining business of the Company after the completion of the distributions and as of the date of the 2019 Meeting.
VOTING AND ATTENDANCE PROCEDURES
In this Proxy Statement, you will find information on the Board of Directors of DowDuPont Inc. (the “Board”), the candidates for election to the Board, and eightsix other items to be voted upon at the 20182019 Annual Meeting of Stockholders (the “2018“2019 Meeting”) and any adjournment or postponement of the 20182019 Meeting. The background information in this Proxy Statement has been supplied to you at the request of the Board to help you decide how to vote and to provide information on the Company’s corporate governance and compensation practices. References in this document to “the Company” and “DowDuPont” mean DowDuPont Inc., to “Dow” means The Dow Chemical Company, and to “DuPont” means E. I. du Pont de Nemours and Company. This Proxy Statement is first being distributed to stockholders on or about March 16, 2018.April 29, 2019.
Vote Your Shares in Advance
You may vote your shares by internet, telephone or signing and returning the enclosed proxy or other voting instruction form.Your shares will be voted only if the proxy or voting instruction form is properly executed and received by the independent Inspectors of Election prior to the 20182019 Meeting. Except as provided below with respect to shares held in employee savings plans, if no specific instructions are given by you when you execute your voting instruction form, as explained on the form, your shares will be voted as recommended by the Board.
You may revoke your proxy or voting instructions at any time before their use at the 20182019 Meeting by sending a written revocation, by submitting another proxy or voting form on a later date, or by attending the 20182019 Meeting and voting in person. No matter which voting method you choose, however, you should not vote any single account more than once unless you wish to change your vote. Be sure to submit votes for each separate account in which you hold DowDuPont common stock.
Confidential Voting
The Company maintains vote confidentiality. Proxies and ballots of all stockholders are kept confidential from the Company’s management and Board unless disclosure is required by law and in other limited circumstances. The policy further provides that employees may confidentially vote their shares of Company stock held by employee savings plans, and requires the appointment of an independent tabulator and Inspectors of Election for the 20182019 Meeting.
Dividend Reinvestment Plan Shares and Employee Savings Plan Shares
If you are enrolled in the direct stock purchase and dividend reinvestment plan administered by Computershare Trust Company, N.A. (the “Computershare CIP”), the DowDuPont common stock owned on the record date by you directly in registered form, plus all shares of common stock held for you in the Computershare CIP, will appear together on a single proxy voting form. If no instructions are provided by you on an executed proxy voting form, your Computershare CIP shares will be voted as recommended by the Board.
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VOTING AND ATTENDANCE PROCEDURES (continued)
Participants in various employee savings plans including The Dow Chemical Company Employees’ Savings Plan and the DuPont Retirement Savings Plan (each a “Plan” or collectively the “Plans”), will receive a voting instruction form. Your executed form will provide voting instructions to the respective Plan Trustee (Fidelity Management Trust Company for the Dow Plan and Merrill Lynch, Pierce, Fenner & Smith, Incorporated for the DuPont Plan).plan trustee. If no instructions are provided, the Trusteesplan trustees and/or administrators offor the Plansrelevant employee savings plan will vote the respective Plan shares according to the provisions of each Plan.the relevant employee savings plan. To allow sufficient time for voting, your voting instructions must be received by 11:59 P.M. Eastern Time on AprilJune 20, 2018, or, if you are voting via the Internet or by phone, by 11:59 P.M. Eastern Time on April 22, 2018. Accordingly, you2019. You may not vote your Plan shares held in an employee savings plan in person at the Annual Meeting.
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VOTING AND ATTENDANCE PROCEDURES (continued)
DowDuPont Shares Outstanding and Quorum
At the close of business on the record date, FebruaryApril 26, 2018,2019, there were 2,325,945,2192,246,370,461 shares of DowDuPont common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote. The holders of at least 50% of the issued and outstanding shares of common stock entitled to vote that are present in person or represented by proxy constitute a quorum for the transaction of business at the 20182019 Meeting.
For Agenda Item 1: Election of Directors, each nominee must receive more FOR votes than AGAINST votes in order to be elected. For Agenda Item 3: Advisory Resolutions on the Frequency of Future Advisory Votes to Approve Executive Compensation, the frequency (every one year, every two years or every three years) that receives the most FOR votes will be approved. For all other Agenda Items to be presented for a vote at the 20182019 Meeting (2 and 4 through 9)7), each such item must receive more FOR votes than AGAINST votes in order to be approved. Abstentions and brokernon-votes will be included in determining the presence of a quorum at the 20182019 Meeting, but will not be counted or have an effect on the outcome of any matter except as specified below with respect to Agenda Item 4. 3.
Brokernon-votes occur when a person holding shares through a bank or broker, meaning that their shares are held in a nominee name or beneficially through such bank or broker, does not provide instructions as to how to vote their shares and the bank or broker is not permitted to exercise voting discretion. Under New York Stock Exchange (“NYSE”) rules, your bank or broker may vote shares held in beneficial name only on Agenda Item 4:3: Ratification of the Appointment of the Independent Registered Public Accounting Firm, without instruction from you, but may not vote on any other matter to be voted on at the 20182019 Meeting. A list of stockholders of record entitled to vote shall be open to any stockholder for any purpose relevant to the 20182019 Meeting for ten days before the 20182019 Meeting, during normal business hours, at the Office of the Corporate Secretary.
Proxy Solicitation on Behalf of the Board
The Board is soliciting proxies to provide an opportunity for all stockholders to vote, whether or not the stockholders are able to attend the 20182019 Meeting or an adjournment or postponement thereof. Directors, officers and employees may solicit proxies on behalf of the Board in person, by mail, by telephone or by electronic communication. The proxy representatives of the Board will not be specially compensated for their services in this regard.
DowDuPont has retained Innisfree M&A Incorporated to aid in the solicitation of stockholders (primarily brokers, banks and other institutional investors) for an estimated fee of $25,000, plus reasonable expenses. Arrangements have been made with brokerage houses, nominees and other custodians and fiduciaries to send materials to their principals, and their reasonable expenses will be reimbursed by DowDuPont on request. The cost of solicitation will be borne by the Company.
Attending the 20182019 Meeting
An approved form of proof of stock ownership is necessary to attend the 20182019 Meeting. If you hold your shares through a bank or broker, you will need proof of record date ownership for admission to the 20182019 Meeting, such as a letter from the bank or broker. In addition, such holders who wish to vote in person at the 20182019 Meeting must obtain a “legal proxy” from the bank, broker or other holder of record that holds their shares in order to be entitled to vote at the 20182019 Meeting.
Since seating is limited, the Board has established the rule that only stockholders or one person holding a proxy for any stockholder or account (in addition to those named as Board proxies on the proxy forms) may attend.
All stockholders and proxy holders wishing to attend the 20182019 Meeting should bring and present valid government issued photo identification for admittance. Proxy holders will also be asked to present credentials for admittance.
Please note that cameras, sound or video recording equipment, or other similar equipment, electronic devices, large bags or packages will not be permitted in the Annual2019 Meeting.
If you are unable to attend the 2018 Meeting in person, please listen to the live audio webcast or the replay after the event, atwww.dow-dupont.com/investors.
Other Matters
The Board does not intend to present any business at the 20182019 Meeting that is not described in this Proxy Statement. The enclosed proxy or other voting instruction form confers upon the designated persons the discretion to vote the shares represented in accordance with their best judgment. Such discretionary authority extends to any other properly presented matter. The Board is not aware of any other matter that may properly be presented for action at the 20182019 Meeting.
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Strong corporate governance is an integral part of both Historical Dow’s and Historical DuPont’s historic core values, and, as a result, DowDuPont is committed to applying the same sound corporate governance and leadership principles and practices. Within this section, you will find information about the Board and its governance structure and processes. This section provides an overview of the current corporate governance structure of DowDuPont which was modified in connection with the separations and will be in place for DuPont going forward.
DowDuPont Board Corporate Governance Guidelines
The Corporate Governance Guidelines form an important framework for the Board’s corporate governance practices and assist the Board in carrying out its responsibilities. The Board reviews these guidelines periodically to consider the need for amendments or enhancements. Among other things, these guidelines delineate the Board’s responsibilities, leadership structure, independence, qualifications, election, annual self-evaluation, and access to management and advisors.
We invite you to visit the Company’s website atwww.dow-dupont.com/investors/corporate-governance to review the following governance documents:
Director Code of Conduct
Employee Code of Conduct
Amended and Restated Certificate of Incorporation
Third Amended and Restated Bylaws
Corporate Governance Guidelines
Code of Financial Ethics
Conflict Minerals and Human Rights Reports and Policies
Board Composition
As of the date of the Proxy Statement the Board was composed of the Directors listed below. As indicated in the table below, certain of the current Directors are expected to resign in connection with the Corteva Distribution and become directors of Corteva and certain of the current Directors are expected to continue as Directors of DuPont and are nominated forre-election at the 2019 Meeting.
| Expected Board Affiliation Following Corteva Distribution | ||||||
Current DowDuPont Directors | Corteva | DuPont | ||||
Lamberto Andreotti | X | |||||
Edward D. Breen | X | X | ||||
Robert A. Brown | X | |||||
Alexander M. Cutler | X | |||||
Lois D. Juliber | X | |||||
Lee M. Thomas | X | |||||
Patrick J. Ward | X | |||||
Following the Corteva Distribution and prior to the 2019 Meeting, the following individuals are expected to be appointed to the Board of DuPont Political Policy(prior to the Corteva Distribution, DowDuPont): Ruby R. Chandy, Franklin K. Clyburn, Jr., Terrence R. Curtin, C. Marc Doyle, Eleuthère I. du Pont, Rajiv L. Gupta, Luther C. Kissam, Frederick M. Lowery, Raymond J. Milchovich and Engagement ReportsSteven M. Sterin (collectively, the “New DuPont Directors”). Mr. Milchovich previously served on the DowDuPont Board from September 1, 2017 until July 1, 2018. These ten directors, as well as Messrs. Breen and PoliciesCutler, will stand forre-election at the 2019 Meeting.
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CORPORATE GOVERNANCE (continued)
Director Independence
The Board has assessed the independence of eachnon-employee Director in accordance with the standards of independence of the NYSE, SEC rules and as described in the Corporate Governance Guidelines. Based upon these standards, the Board has determined that the following fourteen membersall of the Boardcurrent Directors other than Mr. Breen are independent Directors: Lamberto Andreotti, James A. Bell, Robert A. Brown, Alexander M. Cutler, Jeff M. Fettig, Marillyn A. Hewson, Lois D. Juliber, Raymond J. Milchovich, Paul Polman, Dennis H. Reilley, James M. Ringler, Ruth G. Shaw, Lee M. Thomas and Patrick J. Ward.independent. These independent Directors constitute a “substantial majority” of the Board, consistent with Board policy. In addition, the Board has determined that each of the nominees for Director other than Messrs. Breen and Doyle is independent. The CorporateNomination and Governance Committee, as well as the Board, will annually review relationships that Directors may have with the Company and members of management to make a determination as to whether there are any material relationships that would preclude a Director from being independent.
All members of the Audit, People and Compensation, and CorporateNomination and Governance Committees are independent Directors under the Corporate Governance Guidelines and applicable regulatory and listing standards.
The Board had previously determined that the following individuals who served as Directors on the DowDowDuPont Board until the effective date of the Merger TransactionDow Distribution were also independent Directors: Ajay Banga, Jacqueline K. Barton, James A. Bell, Richard K. Davis, Mark Loughridge,Jeff M. Fettig and Robert S. (Steve) Miller.Ruth G. Shaw. In addition, the Board had previously determined that each of Dennis H. Reilley, who retired from the Board on December 31, 2018, Marillyn A. Hewson, who retired from the Board on March 31, 2019, Paul Polman, who retired from the Board on April 1, 2019, and James M. Ringler, who retired from the Board on April 1, 2019, was an independent Director.
Board Leadership Structure
The Board is responsible for broad corporate policy and overall performance of the Company through oversight of management and stewardship of the Company. Among other duties, the Board appoints the Company’s officers, assigns to them responsibility for management of the Company’s operations, and reviews their performance.
As described in Prior to the Company’s Amended and Restated Bylaws effectivecompletion of the Dow Distribution on April 1, 2019, Jeff Fettig served as of September 11, 2017 (“Bylaws”), Andrew N. Liveris currently serves as thenon-employee Executive Chairman of DowDuPont and Edward D. Breen servesserved as the Chief Executive Officer of DowDuPont. As announced by the Company on March 12, 2018,Mr. Fettig also served as of April 1, 2018, Mr. Liveris will no longer serve as Executive Chairman. Effective April 1, 2018, Jeff M. Fettig will serve as a non-employee Executive Chairman. Following this transition, Mr. Liveris will continue as a Director of DowDuPont through his previously announced retirement from the Company on July 1, 2018. The previous Lead Independent Directors of each of Dow and DuPont serve asCo-Lead Independent DirectorsDirector, along with Alexander M. Cutler. Following the Dow Distribution, Mr. Breen became the Chair and Chief Executive Officer of DowDuPont and Mr. Cutler became the Board with responsibilities set forth in the Corporate Governance Guidelines. Further detail on the responsibilities of those roles follows.
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CORPORATE GOVERNANCE (continued)
sole Lead Independent Director.
Executive ChairmanChair
The Executive ChairmanChair has the lead responsibility for chairing the Board. The Executive Chairman hasChair presides at all meetings of the following corporate-wide responsibilities:
The Executive Chairman has allstockholders and the Board and performs such other duties and may exercise such other powers andas may perform such other duties as mayfrom time to time be assigned by the Board from time to time.Bylaws or by the Board.
Chief Executive Officer
The Chief Executive Officer of DowDuPont reports to the Board and has general charge and supervision of the following corporate-wide responsibilities:
business of the Company subject to the direction of the Board. The Chief Executive Officer performs all duties and has all powers that are commonly incident to the office of chief executive or that are delegated to such other powers and may perform such other duties as may be assignedofficer by the Board from time to time.Board.
Co-Lead Independent Director Roles
The Board hasCo-Lead Independent Directors, designated in accordance with the Bylaws, whose shared responsibilities are to:
Committees
Committees perform many important functions. The responsibilities of each Committee are stated in the Bylaws and in their respective Committee charters. The Board, upon the recommendation of the CorporateNomination and Governance Committee, elects members to each Committee and has the authority to change Committee chairs, memberships and the responsibilities of any Committee as set forth in the Bylaws.
The Board currently has four Standing CommitteesCommittees: (i) Audit Committee; (ii) Nomination and three Advisory Committees (individually a “Committee”Governance Committee; (iii) People and collectively the “Committees”Compensation Committee; and (iv) Sustainability, Public Policy, Environment and Health and Safety Committee (“SPEH&S Committee”):.
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CORPORATE GOVERNANCE (continued)
A brief description of the responsibilities of the Committees are as follows:
Standing Committees
Audit Committee
All members of the Audit Committee are independent Directors under the Board’s Corporate Governance Guidelines and applicable regulatory and listing standards.
The Board has determined that all members of the Audit Committee are “audit committee financial experts” within the meaning of applicable SEC rules. Held 11 meetings during 2018. | • Nominates, engages and replaces, as appropriate, the Company’s independent registered public accounting firm, subject to stockholder ratification, to audit the Company’s Consolidated Financial Statements.
• Reviews and approves the Audit Committee
• Provides oversight on the external reporting process and the adequacy of the Company’s internal controls.
• Reviews effectiveness of the Company’s systems, procedures and programs designed to promote and monitor compliance with applicable laws and regulations and receives prompt reports on any compliance matter that could adversely impact the Company’s external reporting process or adequacy of internal controls.
• Reviews the scope of the audit activities of the independent registered public accounting firm and the Company’s internal auditors and appraises audit efforts of both.
• Reviews services provided by the Company’s independent registered public accounting firm and other disclosed relationships as they bear on the independence of the Company’s independent registered public accounting firm.
• Establishes procedures for the receipt, retention and resolution of complaints regarding accounting, internal controls or auditing matters.
A Summary of the
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All members of the |
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CORPORATE GOVERNANCE (continued)
Held four meetings during 2018. | • Develops and recommends to the Board a set of corporate governance guidelines for the Company. • Establishes the process for identifying and evaluating director nominees, determines the qualifications, qualities, skills and other expertise required to be a director, and recommends to the Board nominees for election to the Board.
• Monitors the functioning of Board Committees.
• Oversees the Board’s new director orientation program.
• Oversees the annual assessment of the Board and its Committees.
• Oversees the Company’s corporate governance practices, including reviewing and recommending to the Board for approval any changes to the Company’s Code of Conduct and Code of Financial Ethics, Certificate of Incorporation, Bylaws and Committee charters.
• Oversees the Company’s
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CORPORATE GOVERNANCE (continued)
People and All members of the People and Compensation Committee are independent Directors under the Board’s Corporate Governance Guidelines and applicable regulatory and listing standards. Held five meetings during 2018. | • Retains any compensation consultants that the Committee, in its sole discretion, deems appropriate to fulfill its duties and responsibilities; the Committee sets the compensation and oversees the work of the consultants, including approval of an applicable executive compensation peer group. • Assesses current and future senior leadership talent for Company officers. • Assists the Board in the CEO succession planning process. • Reviews and approves the Company’s programs for executive development, performance and skills evaluations. • Conducts an annual review of the Company’s diversity talent and diversity representation on the slate for key positions. • Reviews and approves the goals and objectives relevant to the CEO’s compensation, oversees the performance evaluation of the CEO based on such goals and objectives and, together with the other independent members of the Board of Directors, determines and approves the CEO’s compensation based on this evaluation. • Reviews and approves all compensation and employment arrangements, including severance agreements, of the Company’s executive officers and named executive officers other than the CEO. • Reviews the Company’s
• Works with management to develop the Compensation Discussion and Analysis and other compensation disclosures for inclusion in the Company’s Annual Report on Form10-K, annual meeting Proxy Statement or any other filings with the SEC. • Considers the voting results of anysay-on-pay or related stockholder proposals. • Recommendsnon-employee directors’ compensation to the Board of Directors. | |
SPEH&S Committee Held one meeting during 2018. | • Assesses the effectiveness of, and advises the Board on, corporate responsibility programs and initiatives, including the Company’s public policy, environment, health and safety (“EH&S”) and sustainability policies and programs and matters impacting the Company’s public reputation. • Oversees and advises the Board • Reviews the Company’s public
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Advisory Committees
The Advisory Committees were established to oversee the business and affairs of each of DowDuPont’s Agriculture, Materials Science and Specialty Products divisions in preparation for the Intended Business Separations. Each Advisory Committee is responsible for overseeing the business and affairs of its respective division including:
• Assesses the Company’s EH&S and sustainability policies and performance and makes recommendations to the Board and the management of DowDuPont with regard to the same.
• Reviews and |
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CORPORATE GOVERNANCE (continued)
Committee Membership
The following chart showsA list of the current Directors and their respective Committee membership and the number of meetings that each Committee held in 2017. The total number of Standing Committee meetingsmemberships is noted for Dow from January 1, 2017 until the closing of the Merger Transaction on August 31, 2017, and for DowDuPont from September 1, 2017 until December 31, 2017.
| Standing Committees | Advisory Committees | |||||||||||||||
Director | Audit | Compensation | Corporate Governance | Environment, Health, Safety and Technology | Agriculture | Materials Science | Specialty Products | |||||||||
Lamberto Andreotti*
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X |
X | ||||||||||||||
James A. Bell*
|
CH |
X | ||||||||||||||
Edward D. Breen – Chief Executive Officer
|
CH |
CH |
X |
CH | ||||||||||||
Robert A. Brown*
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X |
X | ||||||||||||||
Alexander M. Cutler*
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CH |
X |
A |
A | ||||||||||||
Jeff M. Fettig*
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CH |
X | ||||||||||||||
Marillyn A. Hewson*
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X |
X |
A | |||||||||||||
Lois D. Juliber*
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CH |
X | ||||||||||||||
Andrew N. Liveris – Executive Chairman
|
CH |
X |
CH |
X | ||||||||||||
Raymond J. Milchovich*
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X |
X |
A | |||||||||||||
Paul Polman*
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X |
X | ||||||||||||||
Dennis H. Reilley*
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CH |
X |
A | |||||||||||||
James M. Ringler*
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X |
X | ||||||||||||||
Ruth G. Shaw*
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X |
X | ||||||||||||||
Lee M. Thomas*
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X |
X | ||||||||||||||
Patrick J. Ward*
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CH |
X | ||||||||||||||
Number of Meetings in 2017
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Dow (17 total)
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6 |
4 |
4 |
3 |
n/a |
n/a |
n/a | ||||||||
DowDuPont (14 total)
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3 |
2 |
2 |
1 |
2 |
2 |
2 | |||||||||
* = Independent CH = Chairman or, as applicable,Co-Chairman A = Additional Ex Officio Attendee
In addition, Advisory Committee members may participate in other Advisory Committee meetings as an attendee. Such attendees may not vote or be counted for quorum purposes. Advisory Committees also include ex officio members from the legacy Dow and legacy DuPont Boards who are not serving on the Board, as well as additional members who participate in an ex officio capacity as appointed by the Board to provide the Advisory Committees with the business context and knowledge needed to ensure an efficient and timely transition for the Intended Business Separations. Such ex officio members may not vote or be counted for quorum purposes.
Additional Information about the Advisory Committees
Agriculture Advisory Committee
The Agriculture Advisory Committee is comprised of (i) members of the Board who were designated by the DuPont board, (ii) the Executive Chairman of DowDuPont, (iii) the Chief Executive Officer of DowDuPont, and (iv) former members of the DuPont board who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the DuPont board.
Materials Science Advisory Committee
The Materials Science Advisory Committee is comprised of (i) members of the Board who were designated by the Dow board, (ii) the Executive Chairman of DowDuPont, (iii) the Chief Executive Officer of DowDuPont, and (iv) former members of the Dow board who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the Dow board.below:
| Committees | ||||||||
| Director | | Nomination and Governance | People and Compensation | SPEH&S Committee | ||||
Lamberto Andreotti*# | X | |||||||
Edward D. Breen – Chief Executive Officer | CH | |||||||
Robert A. Brown*# | X | |||||||
Alexander M. Cutler* | X | CH | ||||||
Lois D. Juliber*# | CH | |||||||
Lee M. Thomas*# | X | |||||||
Patrick J. Ward*# | CH | |||||||
* = Independent CH = Chair # = Expected to Resign from the Board at the time of the Corteva Distribution
CORPORATE GOVERNANCE (continued)Following the Corteva Distribution and the appointment of the New DuPont Directors, the Board Committees are expected to be composed as follows:
| Committees | ||||||||
| Director | Audit | Nomination and Governance | People and Compensation | SPEH&S Committee | ||||
Edward D. Breen
| ||||||||
Ruby R. Chandy* | X | CH | ||||||
Franklin K. Clyburn, Jr.* | X | X | ||||||
Terrence R. Curtin* | X | X | ||||||
Alexander M. Cutler* | CH | X | ||||||
C. Marc Doyle | ||||||||
Eleuthère I. du Pont* | X | X | ||||||
Rajiv L. Gupta* | CH | X | ||||||
Luther C. Kissam* | X | X | ||||||
Frederick M. Lowery* | X | X | ||||||
Raymond J. Milchovich* | X | X | ||||||
Steven M. Sterin* | CH | X | ||||||
* = Independent CH = Chair
Specialty Products Advisory Committee
The Specialty Products Advisory Committee is comprised of (i) the Executive Chairman of DowDuPont, (ii) the Chief Executive Officer of DowDuPont, (iii) members of the Board as may be agreed on by the Executive Chairman and the Chief Executive Officer of DowDuPont, (iv) former members of the Dow or DuPont boards who are not members of the DowDuPont Board and who serve in an ex officio capacity by virtue of their prior service on the Dow or DuPont board, and (v) any additional members who participate in an ex officio capacity as appointed by the Executive Chairman and the Chief Executive Officer.
Decision Making and Administration
To the extent there are any disagreements between or among the Advisory Committees regarding the determinations about the capital structure of the three divisions, the matter shall be submitted to a reconciliation committee, consisting of the Chief Executive Officer, the Executive Chairman, and theCo-Lead Independent Directors, for resolution. To the extent the reconciliation committee is unable to come to a determination, a majority of the Board shall make the determination.
Pursuant to the Bylaws, the Board will have the authority to approve the Intended Business Separations or may determine to abandon, by a majority vote, the exploration or pursuit of a separation of the Agriculture division, Materials Science division or Specialty Products division, respectively. In the event that the separation of any division is consummated, the Advisory Committee with respect to such division shall be dissolved, with it being anticipated that its members would continue as members of the Board of Directors of the separated entity, and the provisions in the Bylaws with respect thereto shall be of no further force and effect. To the extent the Board determines to abandon one or more of the anticipated separations, the Advisory Committees may be dissolved at any time following thetwo-year anniversary of the consummation of the merger.
Provisions of the Bylaws regarding the Executive Chairman and Chief Executive Officer, the DowDuPont Board and the Advisory Committees described above may only be modified, amended or repealed, and Bylaw provisions inconsistent with such matters may only be adopted, by an affirmative vote of at least 66 2/3% of: (i) the Board or (ii) the holders of all shares of capital stock of DowDuPont then entitled to vote on such matters.
Board’s Role in the Oversight of Risk Management
The Board is responsible for overseeing the overall risk management process for the Company. Risk management is considered a strategic activity within the Company and responsibility for managing risk rests with executive management while the Standing Committees and the Board as a whole participate in the oversight of the process. Specifically, the Board has responsibility for overseeing the strategic planning process and reviewing and monitoring management’s execution of the corporate and business plan, and each Standing Committee is responsible for oversight of specific risk areas relevant to their respective charters. This process includes an assessment of potential cyber-attacks and the ongoing review of the Company’s comprehensive cyber security program.
| | 7 | |||||||
CORPORATE GOVERNANCE (continued)
The oversight responsibility of the Board, and Standing Committees is enabled by an enterprise risk management model and process implemented by management that is designed to identify, assess, manage and mitigate risks. The Audit Committeeacting through its committee structure, is responsible for overseeing that management implements and follows this risk management process and for coordinating the outcome of reviews by the other Standing Committees in their respective risk areas.
| Area(s) of Risk Management Oversight Responsibility | |
|
| |
Audit Committee |
| |
|
| |
People and Compensation Committee
| The Company’s executive compensation practices | |
SPEH&S Committee |
|
Although each Standing Committee is responsible for overseeing the management of certain risks as described above, the full Board is regularly informed by the Standing Committees about these risks. This enables the Board and the Standing Committees to coordinate risk oversight and the relationships among the various risks faced by the Company.
| | ||||||||
CORPORATE GOVERNANCE (continued)
Stockholder Engagement
Throughout the year, the independent Directors and members of the management teams at Dow, DuPont, and DowDuPontteam continued extensive outreach to stockholders, engaging with investors who collectively held over 50% of outstanding shares of each company.the Company’s common stock. Through this outreach, the management teamsteam updated investors on a range of topics such as the Merger Transaction and Intended Business Separations, the overall business strategy, current business conditions, corporate citizenship and sustainability, corporate governance practices and executive compensation, as well as gained an understanding of the perspectives and concerns of each investor. The BoardsBoard and management teamsteam carefully consider the feedback from these meetings, as well as stockholder support, when reviewing the business, corporate governance and executive compensation profiles.profiles of the Company.
Communications with the Board and Directors
Stockholders and other parties interested in communicating directly with the Board, Executive Chairman,Co-Leadthe Chair, the Lead Independent DirectorsDirector or other independent Directors, may do so by writing in care of the Office of the Corporate Secretary, 974 Centre Road, Wilmington, DE 19805.
The Board’s independent Directors have approved procedures for handling correspondence received by the Company and addressed to the Board, Executive Chairman,Co-Leadthe Chair, the Lead Independent DirectorsDirector or other outside Directors. Communications will be distributed to any or all Directors as appropriate depending upon the individual communication. However, the Directors have requested that communications that do not directly relate to their duties and responsibilities as Directors of the Company be excluded from distribution and deleted from email that they access directly. Such excluded items include “spam”; advertisements; mass mailings; form letters and email campaigns that involve unduly large numbers of similar communications; solicitations for goods, services, employment or contributions; surveys; and individual product inquiries or complaints. Additionally, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will also be screened for omission by the Office of the Corporate Secretary. Any omitted or deleted communication will be made available to any Director upon such Director’s request. Concerns relating to accounting, internal controls, auditing or ethical matters are brought to the attention of the internal audit function and handled in accordance with procedures established by the Audit Committee with respect to such matters.
Board, Standing Committees and Annual Meeting Attendance
From January 1, 2017 until the closing of the Merger Transaction on August 31, 2017, DowDuring 2018, DowDuPont held eightseven Board meetings and seventeen Standing Committee meetings. From September 1, 2017 through December 31, 2017, DowDuPont held three Board meetings and eight Standing21 Committee meetings. All of the incumbent Directors attended more than 75% of the sum of the total number of Board meetings and the total number of meetings of the Standing Committees on which the Director served during the past year. The Directors are encouraged to attend all Annual Meetings of Stockholders, and in 2017 all thirteen2018 fourteen Directors then serving on the DowDowDuPont Board attended the Dow Annual Meeting of Stockholders held on May 11, 2017.April 25, 2018.
| 8 | | |||||||
CORPORATE GOVERNANCE (continued)
Executive Sessions of Directors
Thenon-employee Directors meet in executive session in connection with each regularly scheduled meeting of the Board, and at other times as they may determine appropriate. From January 1, 2017 through closing of the Merger Transaction on August 31, 2017,During 2018, there were five executive sessions of the Dow Board chaired by Mr. Fettig, Lead Independent Director. From September 1, 2017 through December 31, 2017, there were threeseven executive sessions of the Board chaired by Messrs. Cutler and Fettig,theCo-Lead Independent Directors for the Board. The Standing Committees typically meet in executive session in connection with every Committee meeting.
Director Qualifications and Diversity
There are certain minimum qualifications for Board membership that Director candidates should possess, including strong valuesThe Nomination and discipline, high ethical standards, a commitment to full participation on the Board and its Committees, relevant career experience, and a commitment to ethnic, racial and gender diversity. The Corporate Governance Committee has adopted guidelines to be used in evaluating candidates for Board membership in order to ensure a diverse and highly qualified Board of Directors. In addition toDirectors are selected for their integrity and character; sound, independent judgment; breadth of experience, insight and knowledge; and business acumen. Leadership skills, scientific or technology expertise, familiarity with issues affecting global businesses in diverse industries, prior government service, diversity, time availability in light of other commitments, dedication and conflicts of interest are among the characteristics mentioned above,relevant criteria, which will vary depending on the guidelines provide that candidates should possess
| | ||||||||
CORPORATE GOVERNANCE (continued)
individual skills, experience and demonstrated abilities that help meet the current needs of the Board. In addition, the Board and provide for diversitylimits the number of membership, such as experience or expertise in some of the following areas: the chemical industry, global business, science and technology, finance and/or economics, corporate governance,other public affairs, government affairs, and experience as chiefcompany boards that a director may serve on. No director who is an executive officer, chief operating officer or chief financial officer of a major company. Other factors thatpublic company may serve as a director of the Company if he or she serves on more than a total of three public company boards, including the Board and the board of the company with which the director is employed. If a director is not an executive officer of a public company, he or she may serve on a maximum of four public company boards, including the Board. Directors are considered include independencerequired to advise the Chair in advance of thought, willingness to comply with Director stock ownership guidelines, meeting applicable Director independence standards (where independence is desired) and absence of conflicts of interest. The Corporate Governance Committee may modify the minimum qualifications and evaluation guidelines from time to time as it deems appropriate.serving on another company’s board.
Guidelines for Director qualifications are included in the Corporate Governance Guidelines. The guidelines for Director qualifications provide that a commitment to diversity is a consideration in the identification and nomination of Director candidates, and that candidates are evaluated to provide for a diverse and highly qualified Board. The CorporateNomination and Governance Committee and the full Board implement and assess the effectiveness of these guidelines and the commitment to diversity by referring to these guidelines in the review and discussion of Board candidates when assessing the composition of the Board and by including questions regarding the diversity of the Board membership in the Board’s annual self-evaluations.
Identifying Director Candidates
Among the CorporateNomination and Governance Committee’s most important functions is the selection of Directors who are recommended to the Board as candidates for election. The CorporateNomination and Governance Committee has adopted a process for identifying new Director candidates. Recommendations may be received by the CorporateNomination and Governance Committee from various sources, including current or former Directors, a search firm retained by the CorporateNomination and Governance Committee to assist in identifying and evaluating potential candidates, stockholders, Company executives, and by self-nomination. The CorporateNomination and Governance Committee is open to accepting stockholders’ suggestions of candidates to consider as potential Board members as part of the CorporateNomination and Governance Committee’s periodic review of the size and composition of the Board and its Committees. Such recommendations should be sent to the CorporateNomination and Governance Committee through the Office of the Corporate Secretary. The CorporateNomination and Governance Committee uses the same process to evaluate Director nominees recommended by stockholders as it does to evaluate nominees identified by other sources.
Director Candidate Nominations through Proxy Access
The Bylaws set forth procedural and content requirements for director candidate nominations through proxy access. As more specifically provided in the Bylaws, a stockholder or group of up to twenty stockholders owning 3% or more of the Company’s outstanding shares of common stock continuously for at least three years, may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of two individuals or 20% of the Board, provided that the stockholder(s) and the nominee(s) satisfy the requirements detailed in the Bylaws. Nominations should be sent to the Office of the Corporate Secretary in accordance with the procedural and content requirements set forth in the Bylaws, the full text of which is available atwww.dow-dupont.com/investors/corporate-governance.
Board Term and Director Retirement Policy
The Certificate of Incorporation provides that all Directors stand for election at each Annual Meeting of Stockholders.
| | 9 | |||||||
CORPORATE GOVERNANCE (continued)
The Corporate Governance Guidelines provide that Directors should not be nominated for election to the Board after reaching age 72,75, unless it is determined that it is in the best interests of the Company to extend the retirement date. Messrs. Ringler and Thomas are current Directors who are nominated forre-election to the Board at the 2018 Meeting, although they have already reached age 72. The Corporate Governance Committee and the Board have determined that, due to the current needs of the Board and the unique circumstances of the Intended Business Separations, the nomination of Messrs. Ringler and Thomas to stand forre-election as Directors is warranted.
Code of Conduct
The Board has adopted a Code of Conduct for all Directors and Officersof the Company and a Code of Financial Ethics applicable to the Chief Executive Officer, Chief Financial Officer andCo-Controllers.principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. In addition, the operating subsidiaries of DowDuPont have codesCompany has a code of conduct applicable to their respectiveall employees. The full text of DowDuPont’sDirector’s Code of Conduct, as well asCode of Financial Ethics and the codesEmployee Code of conduct for Dow and DuPontConduct are available atwww.dow-dupont.com/investors/corporate-governance. In addition, DowDuPont discloses on its website any waiver of or amendment to the Director Code of Conduct and the Code of Financial Ethics requiring disclosure under applicable rules.
| | ||||||||
CORPORATE GOVERNANCE (continued)
Related Person Transactions
The Board adopted written policies and procedures relating to the approval or ratification of each “Related Person Transaction.” Under the policies and procedures, the CorporateNomination and Governance Committee (or itsCo-Chairs, under some circumstances)any other committee comprised of independent directors designated by the Board) reviews the relevant facts of all proposed Related Person Transactions and either approves, disapproves or disapproves ofratifies the entry into a particular Related Person Transaction, by taking into account, among other factors it deems appropriate:
| (i) | the commercial reasonableness of the transaction; |
| (ii) | the materiality of the Related Person’s direct or indirect interest in the transaction; |
| (iii) | whether the transaction may involve a conflict of interest, or the appearance of one; |
| (iv) | whether the transaction was in the ordinary course of business; and |
| (v) | the impact of the transaction on the Related Person’s independence under the Corporate Governance Guidelines and applicable regulatory and listing standards. |
No Director may participate in any discussion or approval of a Related Person Transaction for which he/she or any of his/her immediate family members is the Related Person. Related Person Transactions are approved or ratified only if they are determined to be in the best interests of DowDuPont and its stockholders.
If a Related Person Transaction that has not been previously approved or previously ratified is discovered, the Related Person Transaction will be presented to the CorporateNomination and Governance Committee for ratification. If the Nomination and Corporate Governance Committee does not ratify the Related Person Transaction, then the Company either ensures all appropriate disclosures regarding the transaction are made or, if appropriate, takes all reasonable actions to attempt to terminate the Company’s participation in the transaction.
Under DowDuPont’s policies and procedures, a “Related Person Transaction” is generally any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which:
| (i) | DowDuPont was, is or will be a participant; |
| (ii) | the aggregate amount involved exceeds $120,000 in any fiscal year; and |
| (iii) | any Related Person had, has or will have a direct or indirect material interest. |
A “Related Person” is generally any person who is, or at any time since the beginning of DowDuPont’s last fiscal year was:
| (i) | a Director or an executive officer of DowDuPont or a nominee to become a Director of DowDuPont; |
| (ii) | any person who is known to be the beneficial owner of more than 5% of any class of DowDuPont’s outstanding common stock; or |
| (iii) | any immediate family member of any of the persons mentioned above. |
Certain Relationships and Related Transactions
DowDuPont and its subsidiaries purchase products and services from and/or sell products and services to companies of which certain of the Directors and executive officers of DowDuPont, or their immediate family
| 10 | | |||||||
CORPORATE GOVERNANCE (continued)
members, are employees. The CorporateNomination and Governance Committee and the Board have reviewed such transactions and relationships and do not consider the amounts involved in such transactions material. Such purchases from and sales to each company involve less than either $1,000,000 or 2% of the consolidated gross revenues of each of the purchaser and the seller, and all such transactions are in the ordinary course of business. Some such transactions are continuing and it is anticipated that similar transactions will occur from time to time. From time to time, the Company may have employees who are related to DowDuPont executive officers and Directors. An adult child of Mr. Charles J. Kalil, who served as the Special Counsellor to the Executive Chairman and General Counsel, Materials Science Division until October 1, 2018, is employed by Dow in anon-executive position. In 2017,2018, she received compensation in the approximate amount of $180,000,$248,000, which amount and other terms of her employment, including equity awards, are commensurate with that of her peers and determined on a basis consistent with Dow’s human resources policies.
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CORPORATE GOVERNANCE (continued)In connection with the Dow Distribution and the Corteva Distribution, we entered into or will enter into certain agreements that will effect the separation, provide for the allocation of DowDuPont’s assets, employees, liabilities and obligations (including its investments, property and employee benefits andtax-related assets and liabilities) among the Company, Dow, and Corteva, and provide a framework for our relationship with Dow and Corteva following the separation and distribution.
Separation and Distribution Agreement
The Company entered into a Separation and Distribution Agreement, effective as of April 1, 2019, with Dow and Corteva (collectively with the Company, the “Parties”) that sets forth, among other things, the agreements among the Parties regarding the principal transactions necessary to effect the distributions. It also sets forth other agreements that govern certain aspects of the Parties’ ongoing relationships after the completion of the distributions.
Tax Matters Agreement
The Parties entered into a Tax Matters Agreement, effective as of April 1, 2019, that governs their respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.
Employee Matters Agreement
The Parties entered into an Employee Matters Agreement, effective as of April 1, 2019. The Employee Matters Agreement identifies employees and employee-related liabilities (and attributable assets) to be allocated (either retained, transferred and accepted, or assigned and assumed, as applicable) to the Parties as part of the Distributions and describes when and how the relevant transfers and assignments will occur.
Intellectual Property Cross-License Agreements
DowDuPont entered into an Intellectual Property Cross-License Agreement with Dow, effective as of April 1, 2019 (the“DowDuPont-Dow IP Cross-License Agreement”). In addition, Dow and Corteva entered into an Intellectual Property Cross-License Agreement, effective as of April 1, 2019 (the“Dow-Corteva IP Cross-License Agreement”). The Intellectual Property Cross-License Agreements set forth the terms and conditions under which the applicable Parties may use in their respective businesses, following each of the Distributions, certainknow-how (including trade secrets), copyrights, and software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution Agreement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s Directors and executive officers and persons who own more than 10% of a registered class of the Company’s equity securities (“Reporting Persons”) to file with the SEC reports on Forms 3, 4 and 5 concerning their ownership of and transactions in the common stock and other equity securities of the Company, generally within two business days of a reportable transaction. As a practical matter, the Company seeks to assist its Directors and executives by monitoring transactions and completing and filing reports on their behalf.
| | 11 | |||||||
CORPORATE GOVERNANCE (continued)
Based solely upon a review of SEC filings furnished to the Company and written representations that no other reports were required, all Reporting Persons complied with these reporting requirements during fiscal year 2017,2018, except for Formsa Form 3 for Messrs. Reilley and Thomas, and Ms. FoxJuliber which werewas amended to properly state holding information as of the Merger Transaction closing.
Sustainability Initiatives
SinceDowDuPont is committed to carrying forward the 1980s, bothlegacy of Historical Dow and Historical DuPont have demonstrated industry leadership in sustainability. That commitment resulted in DowDuPont being namedits agriculture and specialty products businesses by continuing to drive sustainable innovation that helps to bring progress and prosperity for future generations.
DowDuPont’s agriculture business is focused onsustainable food production, which means more than expanding the 2017 Dow Jones Sustainability World Index, recognizingfood supply. It also encompasses social, economic and ecological considerations, such as infrastructure, storage, waste reduction and improving and preserving water quality—all of which are critical to achieving global food security. It includes producing sustainable nutrition alternatives by boosting the nutritional benefits of soy, encouraging sustainable planting methods by developing corn hybrids resistant to insects, diseases and herbicides and developing sustainable pest control methods.
Essential to DowDuPont’s continuing sustainability performanceSpecialty Products Division’s overall strategy is the concept of Sustainable Growth, which it defines as creating stockholder and societal value while reducing environmental impacts across its value chains. The business’ vision is to be the world’s most dynamic science company, creating sustainable solutions essential to a better, safer, healthier life for people everywhere.
DowDuPont believes that companies contribute to sustainable growth efforts by engaging in regular, open dialogue with all stakeholders about community and company issues and working together to solve problems.
The Specialty Products Division is actively pursuing sustainable growth by using stakeholder feedback to:
Set footprint reduction goals to continually reduce our energy and water use, greenhouse gas and other manufacturing emissions;
Set market facing goals to drive R&D investments and revenue growth; and
Remain a welcome neighbor to communities in which the top 10%Company operates, as well as a positive presence in society. This requires meeting the public’s expectations of the industry.
Both Dow and DuPont have displayed a proven, decades-long track record of consistently integrating industry-leading sustainability, environmental,economic competitiveness and social metrics into the company strategy and using those metrics to drive company performance.
In 2015, Dow launched its third set of industry-leading, aspirational 2025 Sustainability Goals, which link sustainability metrics directly to company strategy in every business unit, function and geography. Dow’s emphasis on integrating sustainability metrics into the everyday plans of the company has been key to its economic,responsibility, including environmental and social metric successes over the past two decades.protection.
In 2015, DuPont continued its sustainability leadership effort by announcing a set of 2020 Sustainability Goals that integrate sustainability with its innovation process, further improve its operational footprint and continue its efforts to enhance global food security.
Both Dow and DuPont have notable accomplishments toward fulfillment of these sustainability goals:
| 12 | | |||||||
CORPORATE GOVERNANCE (continued)
DowDuPont continues to drive a new era of sustainable growth as it pursues the Intended Business Separations. Dow and DuPont will continue to work toward achievement of their respective sustainability goals that create value for all stakeholders, and through product innovation, business strategy and operations, the Company will meet those goals.
More information about Dow’s and DuPont’s legacy sustainability programs, goals, and reports can be found online atwww.dow-dupont.com/about-dow-dupont/sustainability.
Political Engagement and Disclosure
Government policy is one of the most powerful external forces affecting DowDuPont today. New laws and changes to existing laws can fundamentally impact the Company’s operations and the markets where it does business – and in turn, the Company’s bottom line, thereby affecting DowDuPont and its subsidiaries, employees, retirees, suppliers, customers, communities and stockholders.
Because the impact of government policy is so critical to the Company’s survival and success, DowDuPont subsidiaries actively participate in both policymaking and political processes, through legally allowed advocacy efforts and by making political contributions to candidates, parties and causes. DowDuPont subsidiaries are committed to the highest standard of ethical conduct in their involvement in policymaking and political process. As part of DowDuPont’s commitment to transparency, materials on political policy and engagement are available atwww.dow-dupont.com/investors/corporate-governance.
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AGENDA ITEM 1: ELECTION OF DIRECTORS
Board Composition
The Board currently consists of sixteenseven members, – eight Directors from the legacy Dow Boardwith Mr. Breen serving as Chair and eight Directors from the legacy DuPont Board. There are twoCo-Lead Independent Directors: Mr. Jeff M. Fettig, who previously served as the Lead Independent Director for Dow; and Mr. Alexander M. Cutler, who previously served as the Lead Independent Director for DuPont. Mr. Andrew N. Liveris serves as the Executive Chairman of the Board and Mr. Edward D. Breen, Chief Executive Officer also serves onand Mr. Cutler serving as Lead Independent Director. Each of Messrs. Andreotti, Brown, Thomas and Ward and Ms. Juliber is expected to resign from the Board.Board in connection with the Corteva Distribution and will not stand forre-election at the 2019 Meeting.
Recommendations and Nominations for Director
In accordance with the recommendation of the CorporateNomination and Governance Committee, the Board has nominated the individuals listed in the following individualstable for election as Directors, to serve for aone-year term that expires at the Annual Meeting in 20192020 or until their successors are elected and qualified: Lamberto Andreotti, James A. Bell, Edward D. Breen, Robert A. Brown, Alexander M. Cutler, Jeff M. Fettig, Marillyn A. Hewson, Lois D. Juliber, Andrew N. Liveris, Raymond J. Milchovich, Paul Polman, Dennis H. Reilley, James M. Ringler, Ruth G. Shaw, Lee M. Thomas and Patrick J. Ward. A biography is included for each nominee beginning on page 17 of the Proxy Statement. While nominated for re-election, the Company has announced that Mr. Liveris will serve as a Director of DowDuPont only through July 1, 2018, at which time he will retire from the Company and the Board of Directors. As set forthqualified. The committee memberships referenced in the Bylaws,following table reflect the Continuing Dow Directors will identify a replacement to fillexpected committee composition following the vacancy at that time.
The Board of Directors unanimously recommends a vote FOR the election of ALL of these nominees as Directors.
(As of the date of the Proxy) Name Age Current Position | Independent | Audit Committee | Nomination Governance Committee | People and Committee | SPEH&S Committee | Other Current Public Boards | ||||||
Edward D. Breen | ||||||||||||
Age 63 Chair and Chief Executive Officer, DowDuPont | 1 | |||||||||||
Ruby R. Chandy | ||||||||||||
Age 57 Chief Executive Officer & President, Lumina Advisory Services | X | X | | 2 | ||||||||
Franklin K. Clyburn, Jr. | ||||||||||||
Age 54 EVP, Chief Commercial Officer, Merck | X | X | X | |||||||||
Terrence R. Curtin | ||||||||||||
Age 50 Chief Executive Officer, TE Connectivity | X | X | X | 1 | ||||||||
Alexander M. Cutler | ||||||||||||
Age 67 Retired Chair and Chief Executive Officer, Eaton | X | CH | X | 1 | ||||||||
C. Marc Doyle | ||||||||||||
Age 50 Chief Operating Officer, Specialty Products Division, DowDuPont | ||||||||||||
Eleuthère I. du Pont | ||||||||||||
Age 52 President, Longwood Foundation | X | X | X | |||||||||
Rajiv L. Gupta | ||||||||||||
Age 73 Chairman of Aptiv, PLC | X | CH | X | 3 | ||||||||
Luther C. Kissam | ||||||||||||
Age 54 Chair, President & Chief Executive Officer, Albemarle Corp. | X | X | X | 1 | ||||||||
Frederick M. Lowery | ||||||||||||
Age 48 SVP, Thermo Fisher, President Life Sciences and Laboratory Products Groups | X | X | X | |||||||||
Raymond J. Milchovich | ||||||||||||
Age 69 Former Chair and Chief Executive Officer, Foster Wheeler AG | X | X | X | |||||||||
Steven M. Sterin | ||||||||||||
Age 47 Former EVP & Chief Financial Officer, Andeavor | X | CH | ||||||||||
| X |
AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
Overview of Board Composition
|  |  |
Qualifications
The Corporate Governance Committee and the Board believe that the qualifications, skills, experience and attributes set forth in this Proxy Statement for all Directors nominated for election support the conclusion that these individuals are qualified to serve as Directors of the Company and collectively possess a variety of skills, professional experience, and diversity of backgrounds allowing them to effectively oversee the Company’s business. The Directors have a diverse combination of the following backgrounds and qualifications:
Leadership Experience
Directors who have held leadership positions in a public company possess an understanding of the regulations and considerations that are unique to a public company.
International / Global Experience
Directors who have experience and knowledge of international business operations are particularly important given the global presence and financial aspects of the Company.
Science / Technology Expertise
Directors who have expertise in the science or technology field are particularly important given the Company’s focus on research and innovation.
Finance and Accounting Expertise
Numerous financial metrics are used to measure performance. An advanced understanding of finance and accounting is an important qualification for Directors in the preparation of financial statements and risk management.
Public Company Board Experience
Directors with previous public company board experience provide additional corporate governance, compensation experience and financial expertise.
Industries and Markets Expertise
Directors who have experience in the industry and markets served by the Company offer valuable perspective.
Each of these experiences provides the Board with a balance of perspectives that contribute to its effectiveness in overseeing the business, preparing for the Intended Business Separations, and advising the Company on navigating the regulatory environment for the Intended Business Separations. The Corporate Governance Committee and Board have determined that the Directors nominated for election are qualified to serve as Directors of the Company. As the business evolves and preparation for the Intended Business Separations continues, the Corporate Governance Committee and Board will continue to evaluate the membership of the Board to ensure that the skills and experiences on the Board are aligned with the needs of the Company.
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
The Board unanimously recommends a vote FOR the election of ALL of these nominees as Directors.
The Company’s Bylaws prescribe the voting standard for election of Directors as a majority of the votes cast in an uncontested election, such as this one, where the number of nominees does not exceed the number of Directors to be elected. Under the Corporate Governance Guidelines, if a nominee who already serves as a Director is not elected, that nominee shall offer to tender his or her resignation to the Board. The CorporateNomination and Governance Committee will then recommend to the Board whether to accept or reject the resignation, or whether other action should be taken. Within ninety days of the certification of election results, the Board will publicly disclose its decision regarding whether to accept or reject the resignation. As explained on the accompanying proxy card or voting information, it is the intention of the persons named as proxies to vote executed proxies FOR the candidates nominated by the Board unless contrary voting instructions are provided. If something unanticipated should occur prior to the 20182019 Meeting making it impossible for one or more of the candidates to serve as a Director, votes will be cast in the best judgment of the persons authorized as proxies.
The NYSE rules do not permit brokers with discretionary authority to vote in the election of Directors. Therefore, if you hold your shares beneficially and do not provide voting instructions to your bank or broker, your bank or broker will abstain from voting on your behalf and your shares will not be voted in the election of Directors. We urge you to promptly provide voting instructions to your broker to ensure that your shares are voted on this matter. Please follow the instructions set forth in the voting information provided by your bank or broker.
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
Information in the biographies summarizes key qualifications and diversity attributes as they apply to the individual Directors to support the conclusion that these individuals are highly qualified to serve on the Board. The information is current as of the date of this Proxy Statement and the age listed is as of the 2018 Meeting.Statement. Each nominee is currently serving as a Director and each has consented to serve if elected for the new term.elected.
| Chief Executive Officer, DowDuPont | |
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
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Prior to his role at DowDuPont, Mr. Breen was the Chairman of the Historical DuPont Board and Chief Executive Officer of Historical DuPont. He was named Interim Chairman of the Historical DuPont Board and Chief Executive Officer on October 16, 2015, and assumed those roles permanently on November 9, 2015. He served as Chairman, from July 2002 to March 2016, and Chief Executive Officer, from July 2002 to September 2012, of Tyco International, plc, a leading global provider of security products and services, fire detection and suppression products and services and life safety products. Prior to joining Tyco, Mr. Breen held senior management positions at Motorola, including as President and Chief Operating Officer, and General Instrument Corporation, including as Chairman, President and Chief Executive Officer. Mr. Breen is a director of Comcast Corporation (since 2014 and 2005 to 2011). Mr. Breen is a member of the Advisory Board of New Mountain Capital LLC, a private equity firm. Mr. Breen served as a Director of Historical DuPont from February 2015 until the effective date of the Merger Transaction when he became a Director of DowDuPont. Mr. Breen is expected to be appointed to Executive Chair of the Board of Directors of DuPont as of June 1, 2019. | |
Skills and Expertise
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| Former President of the Industrial Division of Pall Corporation | |
| Ms. Chandy was the President of the Industrial Division of Pall Corporation, a leading supplier of filtration, separation, and purification technologies, from April 2012 to November 2015. Prior to her time at Pall, Ms. Chandy held leadership positions with several major, global companies including The Dow Chemical Company, Rohm and Haas Corporation, Thermo Fisher Scientific Corporation and Boston
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Skills and Expertise Ms. Chandy has experience in industrial, medical, life science, specialty materials and microelectronics companies. She is a proven executive with experience in international growth and innovation. Her financial, management, environmental and global expertise will bring value to the Board. |
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
FRANKLIN K. CLYBURN, JR. | Chief Commercial Officer and Executive Vice President, Merck | |
Age 54 | Mr. Clyburn also serves as a member of Merck’s Executive Committee. In his roles at Merck, a publicly traded global pharmaceutical company, Mr. Clyburn is responsible for all operations and P&L across the human health commercial portfolio globally. He previously held various senior leadership positions within the company, most recently serving as President of | |
Skills and Mr. Clyburn’s tenure at Merck has provided him with vast experience in research and development operations, the regulatory environment, and marketing and sales. He is globally focused and has great depth in sales and marketing of complex, science-based products. Mr. Clyburn also has extensive management experience. |
TERRENCE R. CURTIN | Chief Executive Officer and Board Member, TE Connectivity | |
Age 50 | Mr. Curtin assumed the role of CEO at TE Connectivity, a June 1, 2019. | |
Skills and Expertise
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
ALEXANDER M. CUTLER
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| Former Chairman and Chief Executive Officer, Eaton
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Age 67 | Mr. Cutler served as the Chairman and Chief Executive Officer of Eaton, a global, diversified industrial manufacturer, from 2000 to 2016. Mr. Cutler formerly served as Eaton’s President and Chief Operating Officer, Executive Vice President and Chief Operating Officer-Controls and Executive Vice President-Operations. He serves on the boards of KeyCorp,
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Skills and Expertise
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| Chief Operations Officer, Specialty Products Division, DowDuPont | |
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As the future Chief Executive Officer of
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
| President, Longwood Foundation
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Age 52 |
chief financial officer of drugstore.com from 2007 to 2008. Prior to that time, Mr. Skills and Expertise From his experiences as president, chief financial officer and corporate director, Mr. du Pont brings to the Board expertise on corporate governance, accounting, finance, human resources, information technology, investment management, investor relations and procurement. He also brings a | |
RAJIV L. GUPTA | Chairman of
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Age 73 |
Mr. Gupta’s professional experience, including as Chairman and CEO of a global public | |
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
LUTHER C. KISSAM | Chair, President and Chief Executive Officer, Albemarle Corporation | |
| Mr. Kissam was elected Chief Executive Officer of Albemarle Corporation, a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts, effective September of 2011. He was elected to the company’s board | |
Skills and As the CEO of a global company, Mr. Kissam has developed extensive knowledge in the areas of leadership, global business, corporate corporate governance. |
| Senior Vice President and President, Life Sciences Solutions and Laboratory Products, Thermo Fisher Scientific Inc. | |
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Thermo Fisher Scientific Inc. is a publicly traded provider of products and services for life sciences, healthcare and applied markets. In his role, Mr. Lowery leads the BioProduction, Laboratory Products and Laboratory Chemicals businesses, as well as several functions within Life Sciences Solutions. Since joining Thermo Fisher in 2005, he has held a number of senior leadership positions across businesses. Prior to his time at Thermo Fisher, Mr. Lowery was with Maytag Corporate from 1999 to 2005 and began his career as an engineer at General Motors Company. Mr. Lowery is a member of the Boston Renaissance Charter Public School Board of Trustees and a member of the Tennessee Tech University Foundation Board. Mr. Lowery is expected to be appointed to the board of Directors of DuPont as of June 1, 2019. | |
Skills and Expertise With his engineering and science backgrounds, Mr. Lowery will bring science and technology perspective combined with senior management capabilities to the Board. Mr. Lowery has a wealth of global experience and has developed operating teams, launched innovative new products and acquired businesses. Additionally, he brings strong manufacturing knowledge and experience. |
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
RAYMOND J. MILCHOVICH | Former Chairman and Chief Executive Officer, Foster Wheeler AG | |
Age 69 | Mr. Milchovich served as Chief Executive Officer from 2001 to 2010 andNon-Executive Chairman of the Board and Consultant from 2010 to November 2011 of Foster Wheeler AG, a company that engineered and constructed facilities for oil and gas, liquid natural gas, refining, chemical, pharmaceutical and power industries. He also served Nucor Corporation as Director from 2002 to 2007 and 2012 to May 2017 and Lead Director from September 2013 to February 2017. Mr. Milchovich served as a Director of Historical Dow from 2015 until the effective date of the Merger Transaction when he became a Director of DowDuPont. Mr. Milchovich resigned from the DowDuPont Board of Directors as of June 30, 2018, at which time he joined the Specialty Products Advisory Committee and then served as anex-officio member of the DowDuPont Board of Directors. Mr. Milchovich is expected to be appointed to the Board of Directors of DuPont as of June 1, 2019. | |
Skills and Expertise
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
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expertise. |
| Former Executive Vice President and Chief Financial Officer, Andeavor | |
Age 47 |
a global technology and specialty material company. He earlier served as Corporate Controller and Principal Accounting Officer with Celanese. Mr. Directors of DuPont as of June 1, 2019. | |
Skills and
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
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AGENDA ITEM 1: ELECTION OF DIRECTORS (continued)
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| AGENDA ITEM 1: ELECTION OF DIRECTORS The Board of Directors recommends that you vote FOR all |
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DowDuPont compares itsnon-employee Director compensation programs, designs and compensation elements to the same peer group used for executive compensation, as described in the “Peer Group and Benchmarking” section of the Compensation Discussion and Analysis. DowDuPont targets the median compensation of the peer group for all Director compensation elements. The following tables provide information concerning the compensation provided to DowDuPont’snon-employee Directors in 2017.2018.
For the period from January 1, 2017 through August 31, 2017, Dow providednon-employee director fees as described below. These fees were adjusted in April 2017 as part of regular review of peer group benchmarking. Since the Merger Transaction, fees were adjusted to provide equitable treatment of legacy Dow and legacy DuPont Directors also as described below. These factors and others noted account for differences among the compensation of thenon-employee Directors in the tables below.
Non-Employee Directors’ Fees
20172018 Directors’ fees as stated below are paid only to Directors who are not employees of the Company. An overview of the 20172018 Compensation Elements for Dow, DuPont and DowDuPont respectively is below.
Compensation Element | Dow Pre-Merger ($) | DuPont Pre-Merger ($) | DowDuPont ($) | |||||||||||
Cash Retainer | 115,000 | 115,000 | 115,000 | |||||||||||
Equity Retainer | 170,000 | 150,000 | 170,000 | |||||||||||
Total Retainer | 285,000 | 265,000 | 285,000 | |||||||||||
Audit | 35,000 | 25,000 | 35,000 | |||||||||||
Annual Committee Chair Fees | Compensation | 20,000 | 25,000 | 25,000 | ||||||||||
All Other | 20,000 | 20,000 | 20,000 | |||||||||||
Lead Independent Director Fees | 50,000 | 30,000 | 50,000 | |||||||||||
| Compensation Element | ($) | |||||||
Cash Retainer | 115,000 | |||||||
Equity Retainer | 170,000 | |||||||
Total Retainer | 285,000 | |||||||
| Audit | 35,000 | |||||||
Annual Committee Chair Fees | Compensation | 25,000 | ||||||
| All Other | 20,000 | |||||||
Non-Employee Executive Chairman Fee | 250,000 | |||||||
Lead Independent Director Fees | 50,000 | |||||||
Director Compensation for 2018
| Name | Fees Earned or Paid in Cash ($)(a) | Stock Awards ($)(b) | Change in Pension Value and | All Other Compensation ($)(d) | Total ($) | |||||||||||||||
Lamberto Andreotti | 115,000 | 170,555 | 300 | 285,855 | ||||||||||||||||
Jacqueline K. Barton | 57,500 | - | 238,055(e) | 295,555 | ||||||||||||||||
James A. Bell | 150,000 | 170,555 | 320,555 | |||||||||||||||||
Robert A. Brown | 115,000 | 170,555 | (41,801) | 243,754 | ||||||||||||||||
Alexander M. Cutler | 185,000 | 170,555 | (41,092) | 314,463 | ||||||||||||||||
Richard K. Davis | 57,500 | - | 228,055(e) | 285,555 | ||||||||||||||||
Jeff M. Fettig | 372,500 | 170,555 | 543,055 | |||||||||||||||||
Marillyn A. Hewson | 115,000 | 170,555 | (44,836) | 240,719 | ||||||||||||||||
Lois D. Juliber | 140,000 | 170,555 | 2,962 | (41,548) | 271,969 | |||||||||||||||
Raymond J. Milchovich | 124,583 | 170,555 | 295,138 | |||||||||||||||||
Paul Polman | 115,000 | 170,555 | 285,555 | |||||||||||||||||
Dennis H. Reilley | 140,000 | 170,555 | 310,555 | |||||||||||||||||
James M. Ringler | 115,000 | 170,555 | 285,555 | |||||||||||||||||
Ruth G. Shaw | 115,000 | 170,555 | 285,555 | |||||||||||||||||
Lee M. Thomas | 115,000 | 170,555 | 300 | 285,855 | ||||||||||||||||
Patrick J. Ward | 150,000 | 170,555 | 300 | 320,855 | ||||||||||||||||
| (a) | In addition to the annual retainer, the amount in this column includes lead director and committee chair fees. |
| (b) | The April 25, 2018 full grant date fair value of Restricted Stock (Historical Dow) or Restricted Stock Units (Historical DuPont) granted is $63.64 per share with a total value of $170,555 in accordance with the same standard applied for financial accounting purposes. |
| (c) | Represents the estimated change in the actuarial present value of a Director’s accumulated pension benefits under Historical DuPont’s discontinued Retirement Income Plan forNon-Employee Directors. |
| (d) | Includes Historical DuPont-paid accidental death and disability insurance premiums, along with accruals made in 2018 fornon-employee directors under Historical DuPont’s discontinued Directors’ Charitable Gift Plan. |
| (e) | Represents compensation in the form of a restricted stock grant and cash retainer for service on the Materials Science Advisory Board from January 1, 2018 through June 30, 2018. |
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DIRECTOR COMPENSATION (continued)
Director Compensation for 2017
Name | Fees Earned or Paid in Cash ($)(a) | Stock Awards ($)(b) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(c) | All Other Compensation ($)(d) | Total ($) | |||||||||||||||
Lamberto Andreotti | 38,333 | 13,346 | 300 | 51,979 | ||||||||||||||||
Ajay Banga | 76,667 | 170,610 | 247,277 | |||||||||||||||||
Jacqueline K. Barton | 88,750 | 170,610 | 259,360 | |||||||||||||||||
James A. Bell | 150,000 | 170,610 | 320,610 | |||||||||||||||||
Robert A. Brown | 39,444 | 13,346 | 57,822 | 110,612 | ||||||||||||||||
Alexander M. Cutler | 60,556 | 13,346 | 57,648 | 131,550 | ||||||||||||||||
Richard K. Davis | 86,667 | 170,610 | 257,277 | |||||||||||||||||
Jeff M. Fettig | 178,750 | 170,610 | 349,360 | |||||||||||||||||
Marillyn A. Hewson | 38,333 | 13,346 | 58,713 | 110,392 | ||||||||||||||||
Lois D. Juliber | 35,000 | 13,346 | 5,973 | 58,679 | 112,998 | |||||||||||||||
Mark Loughridge | 86,667 | 170,610 | 257,277 | |||||||||||||||||
Raymond J. Milchovich | 115,000 | 170,610 | 285,610 | |||||||||||||||||
Robert S. (Steve) Miller | 76,667 | 170,610 | 247,277 | |||||||||||||||||
Paul Polman | 115,000 | 170,610 | 285,610 | |||||||||||||||||
Dennis H. Reilley | 136,250 | 170,610 | 306,860 | |||||||||||||||||
James M. Ringler | 126,250 | 170,610 | 296,860 | |||||||||||||||||
Ruth G. Shaw | 115,000 | 170,610 | 285,610 | |||||||||||||||||
Lee M. Thomas | 39,444 | 13,346 | 300 | 53,090 | ||||||||||||||||
Patrick J. Ward | 37,083 | 13,346 | 300 | 50,729 | ||||||||||||||||
Non-Employee Directors Stock Grant
In May 2017,April 2018, eachnon-employee legacy Historical Dow Director received a grant of 2,7502,680 shares of Restricted Stock, with provisions limiting transfer until retirement or termination of service to the Company or two years from the date of grant, whichever is longer.
In November 2017,April 2018, eachnon-employee legacy Historical DuPont Director serving on the Board received a grant of 1902,680 Restricted Stock Units (“RSUs”), with provisions limiting transfer until retirement or termination of service to the Company. This transition grant was intended to create parity among the DowDuPont Directors for calendar year 2017.
Non-Employee Directors’ Stock Ownership Guidelines
Equity, in the form of Restricted Stock, RSUs or Deferred Stock, is a key component of director compensation. Directors are subject to stock ownership guidelines as previously set by Historical Dow and Historical DuPont. Legacy Historical Dow Directors have a guideline of owning at least five times the amount of the annual Board retainer fee, with a five year time period after first election to achieve this level, and are also required to retain all equity awards until retirement or termination of service to the Company. Legacy Historical DuPont Directors are required to hold until retirement all equity awards granted since 2011.
As of December 31, 2017,2018, all Directors were in compliance with the stock ownership guidelines.
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DIRECTOR COMPENSATION (continued)
Non-Employee Directors Deferred Compensation Plan
Non-employee Directors may choose, prior to the beginning of each year, to have all or part of their fees credited to deferred compensation accounts in either legacy Historical Dow or legacy Historical DuPont programs, as applicable.
For legacy Historical Dow Directors, at the election of the Director, fees are deferred into one of several hypothetical investment accounts that accrue investment returns according to the account selected. Investment choices include a fund with an interest rate equal to the sum of the60-month rolling average often-year U.S. Treasury Note yield plus the current five-year Historical Dow credit spread, a phantom Historical Dow stock account tracking the market value of DowDuPont common stock with market dividends paid and reinvested, as well as funds tracking the performance of several mutual funds. These funds are identical to funds offered as part of the Elective Deferral Plan for management level employees. Such deferred amounts will be paid in installments as elected by the Director at the time of deferral commencing in July following the Director’s retirement or termination of service to the Company, in the following July or in July of the calendar year following the Director’s 72nd birthday. If the Director elects to receive payment in July following his or her 72nd birthday and if he or she remains on the Board beyond his or her 72nd birthday, payments shall start in the July following retirement or termination of service to the Company.
Under the legacy Historical DuPont Stock Accumulation and Deferred Compensation Plan for Directors, a Director may defer all or part of the Board retainer and Committee Chair fees in cash or stock units until retirement as a Director or until a specified year after retirement. Interest accrues on deferred cash payments and dividend equivalents accrue on deferred stock units. As part of the retention requirements, equity grants will be held until retirement. However, a Director may defer payments beyond retirement.
Business Travel Accident Insurance forNon-Employee Directors
Historical Dow and Historical DuPont maintain a rider on their Business Travel Accident insurance policies covering each legacynon-employee Director, which will cover accidental death and dismemberment if the Director is traveling on DowDuPont business.
Historical DuPont Directors’ Retirement Income Plan
In 1998, Historical DuPont discontinued its legacy Historical DuPont retirement income plan fornon-employee Directors.Non-employee Directors who began their service on the Historical DuPont Board prior to the plan’s discontinuation continue to be eligible to receive benefits under the plan. Upon retirement, annual benefits payable under the plan equalone-half of the annual Board retainer (up to $85,000 and exclusive of any Committee compensation and stock, RSU or stock option grants) in effect at the Director’s retirement. Benefits are payable for the lesser of life or ten years.
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DIRECTOR COMPENSATION (continued)
Historical DuPont Directors’ Charitable Gift Plan
In October 2008, Historical DuPont discontinued its legacy Historical DuPont charitable gift plan with respect to future Directors. After the death of a Director, DuPont will donatedonated five consecutive annual installments of up to $200,000 each totax-exempt educational institutions or charitable organizations recommended by the Director and approved by Historical DuPont.
A Director was fully vested in the plan after five years of service as a Director or upon death or disability. The plan is unfunded. Historical DuPont does not purchase insurance policies to satisfy its obligations under the plan. The Directors do not receive any personal financial or tax benefit from this program because any charitable,tax-deductible donations accrue solely to the benefit of Historical DuPont. Employee Directors were able to participate in the plan if they made a required annual contribution.
Additional Compensation from Third Point LLC
In addition to thenon-employee director compensation described above to be paid by DowDuPont, Mr. Milchovich received additional compensation from a third party in connection with his election to the Board of Directors of Historical Dow. Specifically, Mr. Milchovich was appointed to the Historical Dow Board and/or nominated for election for the 2015 Annual Meeting of Stockholders (“2015 Meeting”) pursuant to an agreement dated as of November 20, 2014, between the CompanyHistorical Dow and certain investment funds (Third Point LLC, Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., Third Point Ultra Master Fund L.P. and Third Point Reinsurance Co. Ltd. (collectively “Third Point”)).
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DIRECTOR COMPENSATION (continued)
In connection with his agreement to serve as a Third Point designee, Mr. Milchovich entered into an agreement with Third Point LLC (the “TP Agreement”). Pursuant to the TP Agreement, Mr. Milchovich received from Third Point LLC:
$250,000 in cash paid upon the execution by Mr. Milchovich of the TP Agreement;
$250,000 in cash paid upon the appointment of Mr. Milchovich to the Board.Board of Historical Dow. The TP Agreement required Mr. Milchovich to invest $250,000 in Historical Dow common stock if he did not already own stock equivalent to that amount at the time of his appointment to the Board of Historical Dow or his nomination by Third Point LLC for election to the Board. As he owned $250,000 worth of Historical Dow common stock at the time of his appointment to the Board, he received $250,000 in cash and was not required to invest this amount in Historical Dow common stock; and
Certain stock appreciation rights (“SARs”) with respect to a total of 396,668 shares of Historical Dow common stock as follows: (a) SARs with respect to 198,334 shares of Historical Dow common stock (now DowDuPont common stock) payable in 2018 (“2018 SARs”); and (b) SARs with respect to 198,334 shares of Historical Dow common stock (now DowDuPont common stock) payable in 2020 (“2020 SARs”). The 2018 SARs and 2020 SARs are each subject to his continued service as a Director on the applicable vesting date, subject to certain exceptions. As described in a Form 3 filed with the SEC on September 11, 2017, for Mr. Milchovich, the appreciation amount payable by Third Point LLC, if any, will be based upon the difference between $50.42 (the closing price of Historical Dow common stock on the date of execution of the TP Agreement) and the volume weighted average price of the Company’s common stock during the 30 day period prior to January 1, 2018, in the case of the 2018 SARs and January 1, 2020, in the case of the 2020 SARs.
The 2018 SARs vested as follows: 50% on January 1, 2017 and 50% on January 1, 2018 and were settled in cash by Third Point LLC in January 2018. The 2020 SARs vest as follows: 50% on January 1, 2019 and 50% on January 1, 2020 and will be settled in cash by Third Point LLC within 30 days following January 1, 2020. The receipt by Mr. Milchovich of each of the payments pursuant to the 2018 SARs and the 2020 SARs is contingent upon him agreeing to stand for election to the Board (whether or notre-nominated) and not resigning from the Board, regardless of whether Third Point LLC remains a stockholder. The payment obligations with respect to the SARs are the subject of the TP agreement. Neither Dow nor the Company is a party to the TP agreement, nor is the Company responsible for any such payments.
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DIRECTOR COMPENSATION (continued)
Equity Compensation Plan Information
The tables below showsshow the Equity Compensation Plan Information as of December 31, 20172018 for Historical Dow and Historical DuPont respectively.
| Dow | (1) | (2) | (3) | |||||||||
Plan Category | # of securities to be issued upon exercise of outstanding options, warrants, rights | Weighted-average exercise price of outstanding options, warrants, rights ($) | # of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) | |||||||||
Equity Compensation Plans Approved by Security Holders | 40,560,311 | 43.61 | (a) | 29,183,052(b) | ||||||||
| Historical Dow | (1) | (2) | (3) | |||||||||
| Plan Category | # of securities to be issued upon exercise of outstanding options, warrants, rights | Weighted-average exercise price of outstanding options, warrants, rights ($) | # of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) | |||||||||
| Equity Compensation Plans Approved by Security Holders | 38,514,814 | 48.52 | (a) | 19,103,849(b) | ||||||||
As of December 31, 20172018
| (a) | Calculation does not include outstanding Performance Shares that have no exercise price. |
| (b) | The 2012 Stock Incentive Plan was approved by stockholders on May 10, 2012 with an initial share pool of 44,500,000 shares and another 50,500,000 shares approved by stockholders on May 15, |
| DuPont | (1) | (2) | (3) | |||||||||
Plan Category | # of securities to be issued upon exercise of outstanding options, warrants, rights | Weighted-average exercise price of outstanding options, warrants, rights ($) | # of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) | |||||||||
Equity Compensation Plans Approved by Security Holders | 20,086,584 | 48.43 | 33,820,428 | |||||||||
| Historical DuPont | (1) | (2) | (3) | |||||||||
| Plan Category | # of securities to be issued upon exercise of outstanding options, warrants, rights | Weighted-average exercise price of outstanding options, warrants, rights ($) | # of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) | |||||||||
| Equity Compensation Plans Approved by Security Holders | 20,226,154 | 53.26 | 29,780,727 | |||||||||
As of December 31, 20172018
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BENEFICIAL OWNERSHIP OF COMPANY STOCK
The following table presents the beneficial ownership of DowDuPont’s Common Stock as of February 20, 2018,March 31, 2019, except as noted, for (i) each Director of the Company, (ii) each nominee for Director (iii) each of our named executive officer of the Companyofficers listed in the Summary Compensation Table, (iii)(iv) all Directors and executive officers as a group, and (iv)(v) each person beneficially owning more than 5% of the outstanding shares of DowDuPont’s Common Stock.
Name | Current Shares Beneficially Owned(a) | Rights to Acquire Beneficial Ownership of Shares(b) | Total | Percent of Shares Beneficially Owned(c) | Current Shares Beneficially Owned(a) | Rights to Acquire Beneficial Ownership of Shares(b) | Total | Percent of Shares Beneficially Owned(c) | ||||||||||||||||||||||||
| Lamberto Andreotti | 0.0 | 18,632.0 | 18,632.0 | * | 0.0 | 21,961.0 | 21,961.0 | * | ||||||||||||||||||||||||
| James A. Bell | 35,656.0 | 0.0 | 35,656.0 | * | ||||||||||||||||||||||||||||
| Edward D. Breen | 67,512.0 | 460,680.0 | 528,192.0 | * | 175,244.0 | 1,055,437.0 | 1,230,681.0 | * | ||||||||||||||||||||||||
| Robert A. Brown | 146.0 | 42,465.0 | 42,611.0 | * | 146.0 | 46,538.0 | 46,684.0 | * | ||||||||||||||||||||||||
Ruby R. Chandy | 0.0 | 2,748.0 | 2,748.0 | * | ||||||||||||||||||||||||||||
Franklin K. Clyburn, Jr. | 0.0 | 0.0 | 0.0 | * | ||||||||||||||||||||||||||||
| James C. Collins | 161,194.0 | 67,425.0 | 228,619.0 | * | 179,297.0 | 191,167.0 | 370,464.0 | * | ||||||||||||||||||||||||
Terrence R. Curtin | 0.0 | 0.0 | 0.0 | * | ||||||||||||||||||||||||||||
| Alexander M. Cutler | 6,410.0 | 78,139.0 | 84,549.0 | * | 6,410.0 | 87,078.0 | 93,488.0 | * | ||||||||||||||||||||||||
| Jeff M. Fettig | 43,330.0 | 0.0 | 43,330.0 | * | ||||||||||||||||||||||||||||
C. Marc Doyle | 35,817.0 | 200,922.0 | 236,739.0 | * | ||||||||||||||||||||||||||||
Eleuthère I. du Pont | 2,759.0 | 46,538.0 | 49,297.0 | * | ||||||||||||||||||||||||||||
| James R. Fitterling | 225,961.8 | 618,284.0 | 844,245.8 | * | 241,628.6 | 786,477.0 | 1,028,105.6 | * | ||||||||||||||||||||||||
| Joe E. Harlan | 174,393.3 | 274,938.0 | 449,331.3 | * | ||||||||||||||||||||||||||||
| Marillyn A. Hewson | 3,712.0 | 55,107.0 | 58,819.0 | * | ||||||||||||||||||||||||||||
Rajiv L. Gupta | 36,907.0 | 2,201.0 | 39,108.0 | * | ||||||||||||||||||||||||||||
| Lois D. Juliber | 2,051.0 | 97,555.0 | 99,606.0 | * | 2,215.0 | 104,767.0 | 106,982.0 | * | ||||||||||||||||||||||||
| Charles J. Kalil | 274,803.7 | 509,459.0 | 784,262.7 | * | 99,267.7 | 560,677.0 | 659,944.7 | * | ||||||||||||||||||||||||
Luther C. Kissam | 0.0 | 2,748.0 | 2,748.0 | * | ||||||||||||||||||||||||||||
| Andrew N. Liveris | 804,690.0 | 4,088,499.0 | 4,893,189.0 | * | 1,294,673.0 | 4,287,285.0 | 5,581,958.0 | * | ||||||||||||||||||||||||
Frederick M. Lowery | 0.0 | 0.0 | 0.0 | * | ||||||||||||||||||||||||||||
| Raymond J. Milchovich | 13,891.3 | 0.0 | 13,891.3 | * | 16,901.8 | 0.0 | 16,901.8 | * | ||||||||||||||||||||||||
| Paul Polman | 48,780.0 | 0.0 | 48,780.0 | * | ||||||||||||||||||||||||||||
| Dennis H. Reilley | 38,646.0 | 0.0 | 38,646.0 | * | ||||||||||||||||||||||||||||
| James M. Ringler | 51,850.0 | 0.0 | 51,850.0 | * | ||||||||||||||||||||||||||||
| Ruth G. Shaw | 42,389.0 | 0.0 | 42,389.0 | * | ||||||||||||||||||||||||||||
Steven M. Sterin | 0.0 | 3,790.0 | 3,790.0 | * | ||||||||||||||||||||||||||||
| Lee M. Thomas | 15,544.0 | 19,171.0 | 34,715.0 | * | 15,544.0 | 22,517.0 | 38,061.0 | * | ||||||||||||||||||||||||
| Howard I. Ungerleider | 129,967.2 | 637,389.0 | 767,356.2 | * | 154,540.9 | 779,936.0 | 934,476.9 | * | ||||||||||||||||||||||||
| Patrick J. Ward | 0.0 | 13,094.0 | 13,094.0 | * | 5.0 | 16,251.0 | 16,256.0 | * | ||||||||||||||||||||||||
| Group Total | 2,140,927.3 | 6,949,111.0 | 9,090,038.3 | 0.39% | ||||||||||||||||||||||||||||
| All Directors and Executive Officers as a Group (25 persons) | 2,361,342.8 | 7,364,760.0 | 9,726,102.8 | 0.42% | ||||||||||||||||||||||||||||
All Directors and Executive Officers as a Group (11 persons) | 475,308.0 | 2,036,003.0 | 2,511,311.0 | * | ||||||||||||||||||||||||||||
| Certain Other Owners: | ||||||||||||||||||||||||||||||||
| BlackRock, Inc. | 156,235,635.0 | (d) | 6.72% | 144,573,722.0 | (d) | 6.44% | ||||||||||||||||||||||||||
| The Vanguard Group | 173,041,983.0 | (e) | 7.44% | 182,534,694.0 | (e) | 8.13% | ||||||||||||||||||||||||||
| Capital World Investors | 125,863,167.0 | (f) | 5.41% | 140,071,804.0 | (f) | 6.24% | ||||||||||||||||||||||||||
| (a) | Except as otherwise noted and for shares held by a spouse and other members of the person’s immediate family who share a household with the named person, the named persons have |
| (b) | This column includes any shares that the person could acquire through |
| (c) | The percentage of shares beneficially owned is calculated based on the number of shares of common stock outstanding as of |
| (d) | Based on a Schedule 13G filed by BlackRock, Inc. on |
| (e) | Based on a Schedule 13G filed by The Vanguard Group on |
| (f) | Based on a Schedule 13G filed by Capital World Investors on |
| * | Less than 1% of the total shares of DowDuPont common stock outstanding. |
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS
In the Compensation Discussion and Analysis, the details of the executive compensation programs applicable to the Named Executive Officers are described.
CD&A Table of Contents
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Defined Terms
CEO – Chief Executive Officer
CD&A – Compensation Discussion & Analysis
CEO – Chief Executive Officer
COO – Chief Operating Officer
EPS – Earnings Per Share
GAAP – Generally Accepted Accounting Principles
IRC – U.S. Internal Revenue Code, as amended
LTI – Long-Term Incentive
NEO – Named Executive Officer
PSU – Performance Share Unit
ROC – Return on Capital
RSU – Restricted Stock Unit
SEC – U.S. Securities & Exchange Commission
STIP – Short-Term Incentive Program
TSR – Total Shareholder Return
EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization and Foreign Exchange Gains (Losses)
Management Operating Cash Flow – Operating Net Income, plus Depreciation and Amortization, minus Capital Spending, and plus the Change in Adjusted Trade Working Capital
Operating Earnings – Income from Continuing Operations Before Taxes, excluding Significant Items
Operating EBITDA – EBITDAEarnings (“Income from continuing operations before income taxes”) Before Interest, Depreciation and Amortization and Foreign Exchange Gains (Losses), excluding the impact of Significant ItemsItems.
Division Operating EBITDA-for the agriculture division is based on Operating EBITDA for the agriculture segment; for the materials sciences division is based on Operating EBITDA for the Performance Materials & Coatings, Industrial Intermediates & Infrastructure and the Packaging & Specialty Plastics segments; for the specialty products division is based on Operating EBITDA for the Electronics & Imaging, Nutrition & Biosciences, Transportation & Advanced Polymers and Safety & Construction segments.
Operating EPS– Net Income Available for Common Stockholders excluding the impact of Significant Items divided by Common Share from Continuing Operations – diluted.
Operating Net Income – Net Income Available“Net income available for Common StockholdersDowDuPont Inc. common stockholders” excluding the impact of Significant Items
Operating ROC – Net Operating Profit after Tax (excluding Significant Items) divided by Total Average Capitaldiscontinued operations,after-tax impact of significant items and theafter-tax impact of amortization expense associated with Historical DuPont’s intangible assets.
Pro Forma – Prepared in accordance with Article 11 of RegulationS-X giving effect to the Merger of Historical DuPont and Historical Dow as it had been consummated on January 1, 2016.
Pro Forma Adjusted EPS – “pro forma earnings“Earnings per common share from continuing operations – diluted” excluding theafter-tax impact of pro forma significant items and theafter-tax impact of pro forma amortization expense associated with Historical DuPont’s intangible assetsassets.
Pro Forma Operating EBITDA – earnings (i.e., “pro forma income from continuing operations before income taxes”) before interest, depreciation, amortization and foreign exchange gains (losses), excludingSee Appendix A for a reconciliation to the impact of significant itemsmost directly comparable U.S. GAAP financial measures.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Effective August 31, 2017, The Dow Chemical Company and its consolidated subsidiaries (“Historical Dow”) and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Transaction”). The Merger Transaction resulted in each of Historical Dow and Historical DuPont surviving as subsidiaries of DowDuPont Inc. (“DowDuPont”). For purposes of this CD&A, references to “the Company” refer to DowDuPont.
Dow was determined to be the accounting acquirer inFollowing the Merger Transaction, and, as a result, certain historical information of Dow is presented in this Proxy Statement for the periods priorDowDuPont began taking steps to the Merger Transaction. A further description of the Merger Transaction can be found on page i of the Proxy Statement and in the current report on Form8-K filed by DowDuPont on September 1, 2017.
DowDuPont is now pursuing the intended separation of the Company’s Agriculture, Materials Science and Specialty Products divisionsseparate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses (the “Intended Business Separations”). The and the transactions to accomplish the Intended Business Separations, which are subjectthe “separations”). Dow Inc. (“Dow”) was formed as a wholly owned subsidiary of DowDuPont to Board approval, are expectedserve as the holding company for the materials science business and Corteva Inc. (“Corteva”) was formed as a wholly owned subsidiary of DowDuPont to be inserve as the formholding company for the agriculture business.
In anticipation ofpro-rataspin-off transactions, under which DowDuPont stockholders will receive shares the completion of capital stock in the resulting companies. DowDuPont recently announced dates for the Intended Business Separations: Materials Science,Separations within a relatively short period of time after the Merger Transaction, the DowDuPont board of directors decided not to develop separate executive compensation programs at the DowDuPont level. Rather, the executive officers of DowDuPont have continued to be employees of, and participants in, the compensation and benefit programs of Historical Dow and Historical DuPont, as applicable. The only significant exception to this structure is related to post-Merger Synergy and Speed to Spin incentives granted in 2017 and 2018 Annual Incentive grants, which were awarded to certain senior executives. The 2018 Annual Incentives are discussed more fully in the section entitled “2018 Compensation Decisions.”
The Dow Distribution was completed on April 1, 2019. After the Corteva Distribution, the Compensation Committee will review the compensation for all of the executive officers of the respective new companies and determine the appropriate compensation, benefits and perquisites for them, and accordingly the compensation, benefits and perquisites provided them after the separation may not necessarily be calledthe same as those discussed below.
2018 GAAP earnings per share from continuing operations of $1.65. Adjusted earnings per share* was $4.11, up 21 percent versus pro forma results in 2017. Adjusted earnings per share (EPS) excludes significant items totaling net charges of $2.02 per share, as well as a $0.44 per share charge for Historical DuPont amortization of intangible assets.
2018 GAAP net sales increased 38 percent. Net sales increased 8 percent to $86.0 billion versus pro forma results in 2017, with gains in all regions.
2018 GAAP Net Income from Continuing Operations of $4.0 billion. Operating EBITDA* increased 13 percent to $18.3 billion versus pro forma results in 2017 as cost synergies; local price gains; volume growth, including the benefit of new capacity additions; lower pension/OPEB costs; and higher equity earnings more than offset higher raw material costs.
Net income available for common stockholders was $3,844 million ($1.65 per share) in 2018, compared with $1,460 million ($0.91 per share) in 2017.
In 2018, Historical Dow isand Historical DuPont each made discretionary contributions of $1,100 million to their respective principal U.S. pension plans. On November 1, 2018, the Company announced a new $3.0 billion share buyback program, which expired on March 31, 2019 - commensurate with the expected timing of the materials sciencespin-off. At December 31, 2018, the Company had repurchased $1.4 billion of shares under this program.
On November 1, 2018, the Company increased its cost synergy target under the DowDuPont Synergy Program to separate$3.6 billion. DowDuPont achieved year-over-year cost synergy savings of $1.6 billion.
Cash flow from DowDuPontoperations totaled $4.7 billion and included discretionary pension contributions of approximately $2.2 billion. Excluding these discretionary contributions, cash flow from operations would have been $6.9 billion.
The Company completed steps to establish the initial capital structure of Dow, Corteva and DuPont, including the issuance of $12.7 billion of senior unsecured notes by the end of the first quarter of 2019, and Agriculture, which will become Corteva Agriscience™, and Specialty Products, which will be the new DuPont, are each expected to separate from one another by June 1, 2019.Company.
DowDuPont is led by a management team that reflects the strengths and capabilities of both Dow and DuPont. Each of the three divisions leads its respective industry through productive, science-based innovation to meet the needs of customers and help solve global challenges.
The management team seeks to deliver value at DowDuPont through:
See Appendix A for a reconciliation to the most directly comparable U.S. GAAP |
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measures.
This CD&A discusses the compensation of the following NEOs. Following2018 DowDuPont NEOs listed in the accounting treatment of the Merger Transaction, Dow was determined to be the accounting acquirer. As a result, the NEOs includes table below.
Mr. Liveris as CEO ofand Mr. Kalil retired from the accounting acquirer,company in 2018.
Mr. Ungerleider and Mr. Fitterling resigned from the Company in connection with the Dow and the tables include only compensation earned as executives of DowDuPont since SeptemberDistribution on April 1, 2017 for Messrs. Breen and Collins.2019.
Named Executive
| Legacy Company | 12/31/18 DowDuPont Inc. Title | 4/2/19 DowDuPont Inc. Title | |||
Edward D. Breen | ||||||
| Chief Executive Officer | ||||||
Chief Executive Officer | ||||||
Howard I. Ungerleider | Historical Dow | |||||
| Chief Financial Officer | ||||||
James R. Fitterling | Historical Dow | Chief Operating Officer, Materials Science Division | ||||
C. Marc Doyle | Historical DuPont | Chief Operating Officer, Specialty Products Division | Chief Operating Officer, Specialty Products Division | |||
James C. Collins | Historical DuPont | Chief Operating Officer, Agriculture Division | Chief Operating Officer, Agriculture Division | |||
Andrew N. Liveris | Historical Dow | Former Executive Chairman, DowDuPont | - | |||
Charles J. Kalil | Historical Dow | Former Special Counsellor to the Executive Chairman and General Counsel, Materials Science Division | ||||
|
|
Merger Transaction Considerations for CD&A
With Dow having been determined to be the accounting acquirer in the Merger Transaction, the compensation presented in the “Compensation Tables and Narratives” section of this Proxy Statement with respect to NEOs who are legacy Dow executives includes compensation related to their service with both Dow and DowDuPont during 2017. For those NEOs who are legacy DuPont executives, the compensation presented in the “Compensation Tables and Narratives” section of this Proxy Statement includes only compensation earned relative to their service as executives of DowDuPont (i.e., from September 1, 2017 through December 31, 2017). In other sections of this Proxy Statement, however, reference may be made to full-year, annual compensation for all NEOs. All references are clearly identified as to the basis on which they are presented.
Program Structure and Alignment with Core Principles
BothDuring 2018, DowDuPont continued the structure of the executive compensation program created on the foundations of the programs in place at Historical Dow and Historical DuPont haveprior to the Merger. Both Historical Dow and Historical DuPont had a history of designing executive compensation programs designed to attract, motivate, reward and retain the high-quality executives necessary for Companytheir respective company leadership and strategy execution. This legacy continuescontinued at DowDuPont, and well positionswhich positioned the Company to deliverwell for delivering on the intention of creatingto create three independent, industry-leading companies.
2017 was a unique year, as bothThe DowDuPont, Historical Dow and Historical DuPont operated as standalone companies prior to the Merger Transaction, each with its own executive compensation and benefit programs and practices. Given the Intended Business Separations within a relatively short period of time after the closing of the Merger Transaction, a decision was made to not develop separate executive compensation programs atwere each designed and administered to follow these core principles:
Establish a strong link between pay and performance
Align executives’ interests with stockholders’ interests, particularly over the DowDuPont level for 2017. Rather, the executive officers of DowDuPont continue to be employees of,longer term
Reinforce business strategies and participants in, the compensation and benefit programs of Dow and DuPont, respectively. The only exception to this structure is related to a post-merger grant of PSUs which were awarded to certain senior executives and which is discussed more fully in the section entitled “DowDuPont –Post Merger Grant” which can be found on page 45 of the Proxy Statement.drive long-term sustained stockholder value
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The legacy Dow and DuPont compensation programs are designed and administered to follow these core principles:
Each of the Dow and DuPont executive compensation programs delivers value through three primary forms of compensation: base salary, annual incentives, and long-term incentives. The compensation outcomes under the programs’ annual and long-term incentives are determined by respective company performance (and, in the case of the post-merger PSUs awarded, by the overall performance of DowDuPont).
The following table summarizes the two companies’ respective 2017 legacy executive compensation programs:
| ||||
| ||||
|
| |||
|
| |||
The following merger-related compensation actions were taken in 2017:
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
When determining executive compensation, the DowDuPont People and Compensation Committee, “the Compensation Committee”, has focused on three primary elements of compensation with respect to the executive officers of DowDuPont, together with certain additional employee benefits and limited perquisites, all of which are described in more detail below.
Executive Compensation Structure | ||
| Base Salary (Fixed annual cash compensation) | Targeted to align appropriately for revenue size against a selected peer group or of general industry market data, as applicable | |
| Annual Incentives | Chief Operating Officers: Paid in cash based on: • 50% DowDuPont Operating Net Income • 50% Division Operating EBITDA All Other DowDuPont Officers: Paid in cash based on: • 100% DowDuPont Operating Net Income Individual Performance modifier(0-150%) Entire award capped at 200% of target | |
| Long-Term Incentives | • 100% Stock Options | |
Executive Compensation Governance Practices
Following the Merger Transaction, compensationCompensation of the executive officers of DowDuPont, including that of the NEOs, is overseen by the Compensation Committee (or, in the case of both the former Executive Chairman and the CEO, by the Compensation Committee and the independent members of the Board). TheFor 2018 compensation decisions, the Compensation Committee established the Dow Compensation Subcommittee and the DuPont Compensation Subcommittee and delegated certain responsibilities relating to the compensation and benefits provided to executive officers and employees of Historical Dow and Historical DuPont, respectively.to the Historical Dow Compensation Subcommittee and the Historical DuPont Compensation Subcommittee respectively, with the exception of the Executive Officers of DowDuPont, in which case oversight remained with the Compensation Committee and the Board. The Board, the Compensation Committee and the respective Subcommittees arewere assisted in performance of their oversight duties by independent compensation consultants and management.consultants.
| 30 | | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following summarizes key governance characteristics related to the executive compensation programs in which the NEOs participate:
KEY EXECUTIVE COMPENSATION PRACTICES
|
✓ Active stockholder engagement
✓ Strong links between executive compensation outcomes and company financial and market performance
✓
✓ Significant focus on performance-based pay
✓ Each component of target pay benchmarked with respect to
✓ Carefully structured peer group with regular Compensation Committee review
✓ Stock ownership requirements of six times base salary for the
✓ 100% independent Compensation Committee
✓ Clawback policy
✓ Anti-hedging/Anti-pledging policies
✓ Independent compensation consultants reporting to the Compensation Committee
✓ No new single-trigger change in control agreements
✓ Stock incentive plans prohibit option repricing, reloads, exchanges or options granted below market value without stockholder approval
✓ Regular review of the Compensation Committee Charter to ensure best practices and priorities
|
As implementationFollowing the Dow Distribution and the Corteva Distribution, the future compensation committees of the Intended Business Separations continues, the Compensation Committee will continueeach of Dow, Corteva and DuPont are expected to review best practices in governance and modify the executive compensation structures applicable to ensure that the compensation programs align with the Company’s core principles.each company.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
COMPONENTS OF EXECUTIVE COMPENSATION AND BENEFITS
Executives receive a mix of variable and fixed components of compensation which are aligned with the compensation philosophy as highlighted in the chart below:
| Component | Purpose | |
Base Salary |
Provides a regular source of income for NEOs and acts as a foundation for other pay components (e.g., annual incentive targets for NEOs are expressed as a percentage of base salary)
| |
Annual
Incentive | Rewards employees for achieving critical financial and operational goals
| |
Long-Term Incentive | Aligns the interests of executives with stockholders by linking pay and performance with the goal of accelerating growth, profitability and stockholder
Aids the Company in retaining its NEOs and other key employees
| |
Benefits and Perquisites
| Executives participate in the same benefit programs, within Historical Dow and Historical DuPont respectively, that are offered to other salaried employees
| |
Limited perquisites are provided to executives to facilitate strong performance on the job and enhance their personal security and productivity
| ||
20172018 NEO Targeted Total Direct Compensation Summary
In addition to and separate from the Summary Compensation Table, the following table is provided to aid with understanding the annual compensation of the NEOs, not including certain merger related items.NEOs. The following table lists the targeted annual total direct compensation for each NEO for the full calendar year endingended December 31, 2017, including compensation from (i) legacy companies prior to the Merger Transaction, and (ii) DowDuPont following the Merger Transaction.2018.
Name | 2017 Base Salary ($) | 2017 Target Annual Incentive ($) | 2017 LTI ($) | Targeted Total Direct Compensation ($) | 2018 Base Salary ($) | 2018 Target Annual Incentive ($) | 2018 Target Long-Term Incentive ($) | Targeted Total Direct Compensation ($) | ||||||||||||||||||||||||
Edward D. Breen | 1,930,800 | 3,185,820 | 12,700,000 | 17,816,620 | 1,930,800 | 3,185,820 | 12,700,000 | 17,816,620 | ||||||||||||||||||||||||
Andrew N. Liveris | 1,930,800 | 3,185,820 | 12,700,000 | 17,816,620 | ||||||||||||||||||||||||||||
Howard I. Ungerleider | 1,067,559 | 1,281,071 | 4,150,000 | 6,498,630 | 1,110,261 | 1,332,313 | 4,150,000 | 6,592,575 | ||||||||||||||||||||||||
James R. Fitterling | 1,140,112 | 1,425,140 | 4,750,000 | 7,315,253 | 1,185,717 | 1,482,146 | 4,750,000 | 7,417,863 | ||||||||||||||||||||||||
Charles J. Kalil | 1,050,252 | 1,102,765 | 3,450,000 | 5,603,017 | ||||||||||||||||||||||||||||
C. Marc Doyle | 800,000 | 800,000 | 3,500,000 | 5,100,000 | ||||||||||||||||||||||||||||
James C. Collins | 775,000 | 775,000 | 2,500,000 | 4,050,000 | 800,000 | 800,000 | 3,500,000 | 5,100,000 | ||||||||||||||||||||||||
Joe E. Harlan | 1,057,194 | 1,268,633 | 3,400,000 | 5,725,828 | ||||||||||||||||||||||||||||
Andrew N. Liveris* | 1,930,800 | 3,185,820 | 12,700,000 | 17,816,620 | ||||||||||||||||||||||||||||
Charles J. Kalil* | 1 050,252 | 1,102,765 | 3,450,000 | 5,603,017 | ||||||||||||||||||||||||||||
*Mr. Liveris and Mr. Kalil retired during the 2018 calendar year.
Totals in the above table might not equal the summation of the columns due to rounding amounts to the nearest dollar.
Executive compensation is linked strongly to the financial and operational performance of the business. On average, approximatelyApproximately 90% of the Executive Chairman’s and the CEO’s target annual total compensation is at risk, while over 80% of the other NEOs’ compensation, on average, is at risk.
|
|
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Variable (89%) 71% 11% 18% Variable (83%) 17% 20% 63%
COMPENSATION DISCUSSION & ANALYSIS (continued)
NEO incentive compensation is based on clearly disclosed and measurable goals linked to company performance. Each of the Dow and DuPont compensation programs is targeted to deliver compensation at approximately the median of a core group of companies with whom each company respectively competed globally for business and executive talent. To the extent that an individual NEO’s compensation exceeds the median, it is attributable to factors including executive tenure, experience and stockholder value-enhancing achievement of measurable goals.
20172018 Compensation Decisions
Base salary is a fixed portion of compensation based primarily on an individual’s skills, job responsibilities and experience, as well as more subjective factors such as the assessment by the Compensation Committee of individual NEO performance. Base salaries for executives are benchmarked against similar jobs at other companies and are targeted at the median ofas appropriate versus the respective peer group, after adjusting for each company’s revenue size.
Base salaries for the NEOs as of December 31, 2017 and December 31, 2016, respectively, are shown in the table below. As previously noted, the increase in base salary for Mr. Breen was in reflection of his experience and performance and to align his salary with that of Mr. Liveris. The increases for Messrs. Ungerleider, Fitterling, Kalil and Harlan generally represent merit increases aligned to general increases in base salaries for comparably situated positions. The increase for Mr. Collins was related to his promotion to the position of Chief Operating Officer for the Agricultural division.
Name | 2016 Base Salary ($) | 2017 Base Salary ($) | Percent/ Change in Base Salary | |||||||||
Edward D. Breen | 1,500,000 | 1,930,800 | 29 | % | ||||||||
Andrew N. Liveris | 1,930,800 | 1,930,800 | 0 | % | ||||||||
Howard I. Ungerleider | 1,036,465 | 1,067,559 | 3 | % | ||||||||
James R. Fitterling | 1,106,905 | 1,140,112 | 3 | % | ||||||||
Charles J. Kalil | 1,029,659 | 1,050,252 | 2 | % | ||||||||
James C. Collins | 700,000 | 775,000 | 11 | % | ||||||||
Joe E. Harlan | 1,036,465 | 1,057,194 | 2 | % | ||||||||
During 2017, the DuPont Human Resources and Compensation Committee (the “legacy DuPont Compensation Committee”), the Dow Compensation and Leadership Development Committee (the “legacy Dow Compensation Committee”) and each of the respective company’s Boards, determined that, as a result of the timing of the Merger Transaction, a new DowDuPont annual short-term incentive program would not be adopted for 2017. Rather, participants in each company’s annual short-term incentive program would remain eligible for, and subject to the terms of, their respective company’s program for 2017. The following sections summarize Dow’s and DuPont’s respective 2017 annual incentive programs. There will be a common set of metrics and overall design for all participants under the 2018 annual incentive programs.
Dow Annual Performance Award
The Performance Award is an annual cash incentive program. Dow uses this component of compensation to reward employees for achieving critical annual company goals measured by Operating Net Income and Management Operating Cash Flow. Meeting or exceeding annual business and financial goals is important to executing long-term business strategy and delivering long-term value to stockholders. The rationale for utilizing these metrics is:
Actual award payouts are determined each February following completion of the plan year by measuring the performance against each award component.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
Base salaries for the NEOs as of December 31, 2018 and December 31, 2017, Dow Performance Award Metrics and Design
The amount earned is equal to a participant’s target award times Dow performance results, and adjusted by the individual performance factor assessment, which includes safety performance. The actual results for each financial performance measure can range from 0% to 200% of target, andrespectively, are weighted as indicatedshown in the graphictable below. Even when includingThe increases for Mr. Ungerleider, Mr. Fitterling, and Mr. Collins represent merit increases aligned to the impactapproach generally used across the Company. In the case of Mr. Doyle, the individual performance factorincrease includes an equitable adjustment to align his pay with the Performance Award is capped at a maximum payout of 200%.market for comparable positions.
The metrics used in the Performance Award arenon-GAAP measures and defined as follows:
The 2017 Performance Award corporate target goals and 2017 results are shown below.
Metric | Threshold – ($ in millions) | Target ($ in millions) | Max – 200% ($ in millions) | Actual ($ in millions) | Payout % | Weighting | Actual Factor % | |||||||||||||||||||||
Operating Net Income*
|
|
4,350
|
|
|
5,178
|
|
|
6,006
|
|
|
5,296
|
|
|
114
|
%
|
|
60
|
%
|
|
68
|
%
| |||||||
Management Operating Cash Flow*
|
|
4,174
|
|
|
5,174
|
|
|
6,174
|
|
|
5,197
|
|
|
102
|
%
|
|
40
|
%
|
|
41
|
%
| |||||||
TOTAL
|
|
109
|
%
| |||||||||||||||||||||||||
| Name | 2017 Base Salary ($) | 2018 Base Salary ($) | Percent/ Change in Base Salary | |||||||||
Edward D. Breen | 1,930,800 | 1,930,800 | 0 | % | ||||||||
Howard I. Ungerleider | 1,067,559 | 1,110,261 | 4.0 | % | ||||||||
James R. Fitterling | 1,140,112 | 1,185,717 | 4.0 | % | ||||||||
C. Marc Doyle1 | 725,000 | 800,000 | 10.3 | % | ||||||||
James C. Collins2 | 775,000 | 800,000 | 3.2 | % | ||||||||
Andrew N. Liveris | 1,930,800 | 1,930,800 | 0 | % | ||||||||
Charles J. Kalil | 1,050,252 | 1,050,252 | 0 | % | ||||||||
Subsequent to December 31, 2018, Mr. Doyle’s base salary was increased to $1,050,000 to move closer to the market for his future role as Chief Executive Officer of DuPont. |
As detailed
| (2) | Subsequent to December 31, 2018, Mr. Collins’ base salary was increased to $1,050,000 to move closer to the market for his future role as Chief Executive Officer of Corteva, Inc. |
Prior to the Merger, Historical Dow and Historical DuPont each maintained a program under which their respective employees earned annual short-term incentives. Subsequent to the Merger, the Compensation Committee determined, upon recommendation from management that participants would continue in the table above, the 2017 Performance Award resulted in an earned base award equal to 109% of the target award opportunity for employees. As allowed by the Dow plan, the Dow Compensation Subcommittee determined the individual component payout level for each NEOtheir historical company’s structure and be subject to the Dow plan to reflectterms of their personal contributions (shown inrespective incentive plans.
Although administered separately, the table below).
Name | Year End Base Salary ($)(a) | PA Target Percent (b) | PA Target Amount ($)(c) | Company Component (d) | Individual Committee Assessment (e) | Total PA Payment Percent (f) | Total PA Payout Amount ($) | |||||||||||||||||||||
| (a * b) | (d * e) | (c * f) | ||||||||||||||||||||||||||
Andrew N. Liveris
|
|
1,930,800
|
|
|
165
|
%
|
|
3,185,820
|
|
|
109
|
%
|
|
120
|
%
|
|
131
|
%
|
|
4,167,053
|
| |||||||
Howard I. Ungerleider
|
|
1,067,559
|
|
|
120
|
%
|
|
1,281,071
|
|
|
109
|
%
|
|
120
|
%
|
|
131
|
%
|
|
1,675,641
|
| |||||||
James R. Fitterling
|
|
1,140,112
|
|
|
125
|
%
|
|
1,425,140
|
|
|
109
|
%
|
|
120
|
%
|
|
131
|
%
|
|
1,864,083
|
| |||||||
Charles J. Kalil
|
|
1,050,252
|
|
|
105
|
%
|
|
1,102,765
|
|
|
109
|
%
|
|
110
|
%
|
|
120
|
%
|
|
1,322,215
|
| |||||||
Joe E. Harlan
|
|
1,057,194
|
|
|
120
|
%
|
|
1,268,633
|
|
|
109
|
%
|
|
100
|
%
|
|
109
|
%
|
|
1,382,810
|
| |||||||
| | ||||||||
Performance Award Operating Net Income 60% Management Operating Cash Flow 40% Individual Factor 0% - 125% Payout Range Max: 200% Target: 100% Threshold: 0%
COMPENSATION DISCUSSION & ANALYSIS (continued)
DuPont Short-Term Incentive Program
DuPont’s STIP is designed to ensure that DuPont executives maintain a strong focus on financial metrics (e.g., revenue growth and earnings growth) that have been shown to be closely linked to stockholder value creation over time. In addition, DuPont’s STIP is linked to both corporate and business unit performance. The legacy DuPont Compensation Committee has historically approved the STIP design, including measures and weightings, at the beginning of each fiscal year. The chart below represents the STIP structure approved by the legacy DuPont Compensation Committee at the beginning of 2017.
In connection with, and as a result of certain impacts of, the Merger Transaction, the legacy DuPont Compensation Committee determined that the metrics utilized in the plan as approved at the beginning of the fiscal year would either not be applicable after the merger, or would have significant impediments on their continued use after the merger. As a result, the legacy DuPont Compensation Committee determined that the fiscal yearthere would be split into apre-merger period and post-merger period. For thepre-merger period, the common set of metrics and weightings established byoverall design for all participants for 2018 under the legacy DuPont Compensation Committee at the beginning of the fiscal year remained in effect. For the post-merger period, twoannual incentive programs. Those metrics were replaced, as noted in the table below. All metrics, both pre- and post-merger, were calculated solely based upon the results of DuPont and its Business Units.
| ||||||
|
| |||||
|
| |||||
|
| |||||
The rationale for the utilization of thepre-merger measures was as follows:
The rationale for changing the measures post-merger was as follows:
Thenon-GAAP measures utilized in the 2017 STIP are defined as follows:DowDuPont.
Messrs. Breen and Ungerleider’s 2018 annual incentive were aligned solely to DowDuPont Operating EPS:Net Income.
The three Chief Operating Officers were weighted 50% to DowDuPont Operating Net Income from Continuing Operations Available for Common Stockholders excludingand 50% to Division Operating EBITDA respectively.
Finally, under the impactprovisions of significant items divided by common share from continuing operations – diluted. DuPont excluded the impact of significant items from both presentations to investorstheir change in control arrangements, Messrs. Liveris and from executive compensation performance calculations because they are not reflective of DuPont’s underlying operations for the particular period in which they are recorded, and therefore, could mask underlying operating trends.
| | ||||||||
Short Term Incentive Plan (STIP) Individual STIP Target X Corporate Performance Payout Factor 50% + Total Business Unit Performance Payout Factor 50% X Individual Factor(1) = Individual STIP Payout Max (200%) Target (100%) Threshold (60%) Below Threshold (0%)
COMPENSATION DISCUSSION & ANALYSIS (continued)
In addition to the adjustment to the measures being utilized, prior to the Merger Transaction the legacy DuPont Compensation Committee made additional changes to the STIP for 2017. Due to the likelymid-quarter closing of the Merger Transaction, coupled with the fact that certain accounting and budgeting processes are aligned only to full quarters the legacy DuPont Compensation Committee determined that the measurement of business performance for the 2017 STIP would beKalil’s annual incentives were calculated based on full quarters only. More specifically,pre-merger results would be based only uponperformance at the full quarters completedtime of retirement.
Payout factors could range as of the date of closing of the Merger Transaction, while post-merger results would be based only upon full quarters completed post-merger. Given that the Merger Transaction closed on August 31, 2017, this ultimately resulted in thepre-merger measurement period being based uponfollows; zero for below threshold performance, through June 30, 2017. Conversely, the post-merger measurement period is based upon50% for performance from October 1, 2017 through December 31, 2017. These decisions were made by the legacy DuPont Compensation Committee in order to recognize a number of accounting impacts driven by the Merger Transaction that would not reflect the ongoing operations of the business. Theat threshold, and 200% for maximum performance through June 30, 2017 includes results related to the DuPont Divested Ag Business.
As provided for in the plan, the DuPont Compensation Subcommittee, as a successor to the legacy DuPont Compensation Committee, maintained the ability to exercise discretion in determining the final payouts for 2017 under the plan. The DuPont Compensation Subcommittee discussed at length with management the impact this full-quarter approach likely had on the overall payout factor and determined, based on a number of quantitative and qualitative criteria, including management’s estimate of the likely impact from the third quarter, to exercise negative discretion. The DuPont Compensation Subcommittee elected to make two downward adjustments, the first of which was to negate the unexpected benefits of purchase accounting associated with the Merger Transaction, and the second of which smoothed the upward impact of the full quarter approach.
Each element in the calculation of the 2017 payouts for those NEOs participating in the DuPont STIP is discussed in greater detail below.
STIP Target
DuPont’s STIP targets were set as a percentage of base salary, consistent with market practice. The target STIP percentage for each individual executive is reviewed regularly against the market and has historically been approved annually by the legacy DuPont Compensation Committee (or in the case of the CEO, by the independent members of the DuPont Board). As previously noted, in conjunction with the closing of the Merger Transaction, Mr. Breen’s STIP target as a percentage of base salary increased from 160% to 165%. Per DuPont company practice, the new base salary and STIP target percentage are utilized on a full year basis, rather than a prorated one, to calculate the STIP target for the fiscal year. The actual calculation of the 2017 STIP target amount for those NEOs participating in the plan is detailed in the table below.
Name | 2017 Base Salary ($) | 2017 X Target STIP % | 2017 = Target STIP ($) | |||||||||
Edward D. Breen
|
|
1,930,800
|
|
|
165%
|
|
|
3,185,820
|
| |||
James C. Collins
| �� |
|
775,000
|
|
|
100%
|
|
|
775,000
|
| ||
STIP Payout Factor
Corporate and business unit performances are converted to a corresponding payout factorinterim points interpolated based on the conceptleverage of “leverage,” i.e., the relationship between performance for a given metric and its payout factor. Leverage for each metricplan which is 2:3.3 to 1 below target and 5:6.6 to 1 above target, meaning thattarget. As such, participants have two3.3 percentage points in payout deducted for each one percent change in performance below target, and receive five6.6 percentage points in payout for each one percent change in performance above target. This leverage is consistent with competitive practice. AllPerformance threshold was set at 85% for all metrics areand 115% for maximum.
The individual performance factors could range from 0 percent to 150 percent and overall individual awards were capped at a maximum 200% payout. The weighted average payout factor for the STIP is based on actual performance on each measure and the weighting of that performance measure.
The payout factors were equally aligned to corporate and business performance. Because Messrs. Breen and Collins worked across all businesses, their Business Unit payout factors were based on the total business performance compared to aggregate targets in the earnings and revenue measures.200 percent.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
2017 STIP Results
The following tables highlight each of the performance measures, their weightings, targets, the actual results and payout results.
(1)Pre-Merger Performance1:
Metric | Target ($ in millions, other than for EPS) | Actual ($ in millions, other than for EPS) | % of Target | Weighting | Actual Factor % | |||||||||||||||
Corporate: Operating EPS*
|
|
2.58
|
|
|
3.02
|
|
|
117%
|
|
|
50%
|
|
|
93%
|
| |||||
Business Unit Operating Earnings*
|
|
3,544
|
|
|
3,796
|
|
|
107%
|
|
|
25%
|
|
|
34%
|
| |||||
Business Unit Revenue
|
|
14,599
|
|
|
15,098
|
|
|
103%
|
|
|
25%
|
|
|
29%
|
| |||||
TOTAL
|
|
156%
|
| |||||||||||||||||
(2) Post-Merger Performance:
Metric | Target ($ in millions, other than for EPS) | Actual ($ in millions, other than for EPS) | % of Target | Weighting | Actual Factor % | |||||||||||||||
Corporate: Operating Net Income*
|
|
411
|
|
|
472
|
|
|
115%
|
|
|
50%
|
|
|
87%
|
| |||||
Business Unit Operating EBITDA*
|
|
1,037
|
|
|
1,103
|
|
|
106%
|
|
|
25%
|
|
|
33%
|
| |||||
Business Unit Revenue
|
|
5,125
|
|
|
5,258
|
|
|
103%
|
|
|
25%
|
|
|
28%
|
| |||||
TOTAL
|
|
148%
|
| |||||||||||||||||
A downward adjustment of 10% was made by the DuPont Compensation Subcommittee and applied to the post-merger factor to smooth the impact of the full-quarter measurement approach described above, yielding a final post-merger factor of 138%. When taken together with thepre-merger factor of 156% and weighted for the number of days applicable to each of thepre- and post-merger periods, the full year factor applicable to those NEOs participating in the plan is 150%.
(3) Individual Performance:
As previously noted, the Compensation Committee elected not to make any individual performance adjustments for those NEOs participating in the plan.
(4) Final STIP Payout
As illustrated in the table below, the final 2017 STIP payout for NEOs participating in the plan was determined by multiplying the individual STIP target amount by the final total payout factor of 150%:
Name | 2017 Target STIP ($) | TOTAL Payout X Factor % | 2017 = Final STIP ($) | |||||||||
Edward D. Breen
|
|
3,185,820
|
|
|
150%
|
|
|
4,778,730
|
| |||
James C. Collins
|
|
775,000
|
|
|
150%
|
|
|
1,162,500
|
| |||
The 2017 STIP awards for legacy DuPont Section 16 officers were limited to 0.25% of adjusted net income of DuPont for the CEO and 0.15% for other legacy DuPont executive officers.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Long-Term Incentive CompensationThe table below highlights the business performance range for each metric, the weightings of each metric applicable to each of our NEOs, the 2018 results relative to the business performance, and the payout percentage for each metric individually and the overall weighted payout, for each of our NEOs:
In 2017, Dow’s and DuPont’s respective LTI programs for NEOs consisted of multiple types of equity, all based on fair value on the grant date.
| Employee Group | Metric | Threshold ($mm) (50%) | Target ($mm) (100%) | Maximum ($mm) (200%) | Weight | 2018 Actual ($mm) | Metric Payout | Total Calculated Payout | Total Payout as Awarded | |||||||||||||||||||||
DowDuPont CEO | DowDuPont Operating Net Income | 8,086 | 9,513 | 10,940 | 100% | 9,564 | 104% | 104% | 104% | |||||||||||||||||||||
DowDuPont CFO | DowDuPont Operating Net Income | 8,086 | 9,513 | 10,940 | 100% | 9,564 | 104% | 104% | 82%1 | |||||||||||||||||||||
DowDuPont Materials Science Division COO
(Jim Fitterling1) | DowDuPont Operating Net Income | 8,086 | 9,513 | 10,940 | 50% | 9,564 | 104% | 101% | 82%1 | |||||||||||||||||||||
| Materials Science Division Operating EBITDA | 8,242 | 9,696 | 11,150 | 50% | 9,639 | 98% | ||||||||||||||||||||||||
DowDuPont Specialty Products
Division COO
(Marc Doyle2) | DowDuPont Operating Net Income | 8,086 | 9,513 | 10,940 | 50% | 9,564 | 104% | 109% | 109% | |||||||||||||||||||||
| Specialty Products Division Operating EBITDA | 5,228 | 6,150 | 2 | 7,073 | 50% | 6,274 | 2 | 113% | ||||||||||||||||||||||
DowDuPont Agriculture
Division COO (Jim Collins3) | DowDuPont Operating Net Income | 8,086 | 9,513 | 10,940 | 50% | 9,564 | 104% | 52% | 31%3 | |||||||||||||||||||||
| Agriculture Division Operating EBITDA | 2,714 | 3,193 | 3,672 | 50% | 2,705 | 0% | ||||||||||||||||||||||||
The following table summarizes the performance drivers, mix, and objectives for the long-term compensation as they relate to NEOs:
| (1) | Based on the recommendation of Historical Dow management, the Compensation Committee set the company component at 82 percent for all employees of DowDuPont’s Materials Science Division, including the DowDuPont Officers aligned to the Materials Science Division, due to the impact of costs on the Company’s financial results. The Compensation Committee also set the individual performance factors for Messrs. Fitterling and Ungerleider to reflect their personal contributions to the Company’s success. |
| (2) | Based on the recommendation of Historical DuPont management, the Compensation Committee exercised discretion to exclude the Hemlock Semi-conductor business from the target and actual performance for the Specialty Products Division due to non-operating performance related to customer settlements. |
| (3) | Based on the recommendation of Historical DuPont management, the Compensation Committee exercised its discretion in the final calculation of the award for Mr. Collins. The Chief Operating Officers were weighted 50% to DowDuPont Net Income and 50% to Division Operating EBITDA, while the employees in their respective divisions were weighted 30% to DowDuPont Net Income and 70% to Division Operating EBITDA. As the Operating EBITDA results for the Agriculture Division were below threshold, the greater weighting on overall DowDuPont Operating Net Income for Mr. Collins would have resulted in a higher overall payout in comparison to the Agriculture Division employees. Taking this into account, the Compensation Committee determined to set Mr. Collins’ overall payout factor at 31% of target so he received that same payout as other employees. |
| 34 | | | | |||||
|
| |||||||
| ||||||||
|
COMPENSATION DISCUSSION & ANALYSIS (continued)
A summary of the payouts under the 2018 annual incentive program to each of the DowDuPont NEOs is below:
| Name | Year End Base Salary ($) (a) | PA/STIP (b) | PA/STIP Target Amount ($) (c) | Company (d) | Individual (e) | Total (f) | Total PA/STIP Payout Amount ($) | |||||||||||||||||
| (a * b) | (d * e) | (c * f) | ||||||||||||||||||||||
Edward D. Breen | 1,930,800 | 165 | % | 3,185,820 | 104% | 100% | 104% | 3,300,510 | ||||||||||||||||
Howard I. Ungerleider | 1,110,261 | 120 | % | 1,332,313 | 82%1 | 120%1 | 98% | 1,310,996 | ||||||||||||||||
James R. Fitterling | 1,185,717 | 125 | % | 1,482,146 | 82%1 | 120%1 | 98% | 1,458,432 | ||||||||||||||||
C. Marc Doyle5 | 800,000 | 100 | % | 800,000 | 109% | 100% | 109% | 868,000 | ||||||||||||||||
James C. Collins6 | 800,000 | 100 | % | 800,000 | 31%2 | 100% | 31%2 | 248,800 | ||||||||||||||||
Andrew N. Liveris | 1,930,800 | 165 | % | 3,185,820 | 149% | 100% | 149% | 2,373,4363 | ||||||||||||||||
Charles J. Kalil | 1,050,252 | 105 | % | 1,102,765 | 119% | 100% | 119% | 984,2174 | ||||||||||||||||
| (1) |
|
| (2) |
|
| (3) | Mr. Liveris’ change in control arrangement provided that the amount of earned eligible variable pay was to be determined by using the year to date results and prorated for the number of completed months of the program. Mr. Liveris’s payment is representative of 6 months in the program. |
| (4) | Mr. Kalil’s change in control arrangement provided that the amount of earned eligible variable pay was to be determined by using the year to date results and prorated for the number of completed months of the program. Mr. Kalil’s payment is representative of 9 months in the program. |
| (5) | Subsequent to December 31, 2018, Mr. Doyle’s STIP was increased to 150% to move closer to the market for his future role as Chief Executive Officer of DuPont. |
| (6) | Subsequent to December 31, 2018, Mr. Collins’ STIP was increased to 140% to move closer to the market for his future role as Chief Executive Officer of Corteva, Inc. |
Performance Share UnitsLong-Term Incentive Compensation
Performance Share Units (“PSUs”) are a form of equity compensation whose value upon vesting is determined by attainment against specific performance goals. PSUs align executives to the Company’s financial and stock performance over a multi-year period. The following describes thepre-merger PSU programs at Dow and DuPont.
Dow – Pre-Merger Performance Shares
Prior to 2017, Dow Performance Shares were earned based on equal weighting of Operating Return on Capital (“Operating ROC”) and Relative TSR. Operating ROC was removed as a metric in the 2017 performance share program due to the potential timing of the Merger Transaction and the need to determine performance to date prior to the Merger, Transaction. The rationale for utilizing theseHistorical Dow and Historical DuPont each maintained LTI programs which utilized various equity types, includingnon-GAAPnon-qualified metrics was:
Operating Return on Capital: Measures how effectively a company has utilizedstock options, RSUs and PSUs, the money invested in its operations. Dow defined Operating ROCmix of which varied by employee level. In light of the anticipated timing of DowDuPont’s separation into three independent, publicly-traded companies, as Net Operating Profit after Tax (excluding significant items) divided by total average capital (“Operating ROC”). Net Operating Profit after Tax (excluding significant items) is a net income measurewell as the fact that excludes preferred stock dividends, net income attributable2018 was expected to noncontrolling interests, and interest expense. To achieve a target payout onbe the Operating ROC portion, Dow’s Operating ROC must equal or exceedpre-established Operating ROC goalsonly full calendar year for the same period.
The target goal represents Dow’s expected levelcombined company, the Compensation Committee determined that PSUs (other than the Synergy Grants awarded in 2017) were not an appropriate form of Operating ROC overaward, particularly given the three-year performance period. The threshold goal representsmeasurement convention utilized previously at both Historical Dow and Historical DuPont. As a result, in February 2018 the minimum level of performanceCompensation Committee determined that the 2018 LTI grants for all DowDuPont executive officers would warrant any payout. The maximum goal represents stretch performance that would warrant a maximum payout. Dow’s Operating ROC target is 10% across the industry cycle and the target for this metricbe made in the Performance Share ranges from 12% to 13% on current outstanding grants.
form ofRelative Total Shareholder Return: Reflects how Dow has performed as measured bynon-qualified stock price appreciation relative to a benchmark index. For performance shares awarded in 2015-2017, Dow utilized the companies comprising the Standard & Poor’s 500 Composite Index (the “S&P 500”) as the benchmark to determine Relative TSR as defined below.
Total shareholder return is defined as stock price appreciation plus dividends paid. For Dow and each company in the S&P 500, a beginning price using a30-trading day averaging period at the beginning of the performance period and an ending price using a30-trading day averaging period at the end of the performance period are calculated and used to create a percentile ranking to develop a relative performance metric for purposes of compensation (“Relative TSR”).
DuPont – Pre-Merger PSUs
DuPont PSUs granted in 2015 were based on equal weighting of After-Tax Operating Earnings relative to target (“Operating Earnings”) and Relative TSR. Operating Earnings was removed as a metric in the 2016 and 2017 PSU programs due to the potential timing of the Merger Transaction and the need to determine performance to date prior to the Merger Transaction. The rationale for utilizing these non-GAAP metrics was:
Operating Earnings: is a profitability metric that measures Net Income less significant Items and Non-Operating Pension/OPEBs costs. DuPont’s Operating Earnings target was 6% annual growth over the prior year, calculated on an annual basis,options.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
for the three-year Performance Period. The base period for measurement was the fiscal year preceding the Performance Period (ending 12/31/2014) and measured annually through 12/31/2017. The resulting three-year payout factor is the average of the payout percentage earned each year. The threshold performance level for any payment to be achieved was 3%, and the maximum performance level was 10%. Threshold would have resulted In a 50% payout and maximum a 200% payout, with Interim points between threshold and target, and between target and maximum, interpolated on a straight-line basis.
Relative Total Shareholder Return: Reflects how DuPont performed as measured by stock price appreciation relative to its defined peer group, as disclosed in proxy statements from 2015, 2016 and 2017, respectively.
For DuPont and each company in its defined peer group, a beginning price using a 20-trading day averaging period at the beginning of the performance period and an ending price using a 20-trading day averaging period at the end of the performance period were calculated and used to create a percentile ranking to develop a Relative TSR ranking. Threshold Relative TSR performance would be achieved at the 25th percentile (with a payout at 25% of target), target at the median, and maximum performance at the 75th percentile (with a 200% payout). Interim points between threshold and target, and between target and maximum, would be interpolated on a straight-line basis.
Impact of Merger Transaction on Outstanding Performance Share Awards
As provided in the Merger Agreement, upon the closing of the Merger Transaction all outstanding performance shares/PSUs at both Dow and DuPont were automatically converted into deferred shares/RSUs. The number of deferred shares/RSUs into which outstanding performance shares/PSUs were converted was based on the greater of target or actual performance. Based on performance against targets, outstanding awards at Dow and DuPont, respectively, were converted as noted in the tables below. Final delivery of all converted awards will follow the original vesting periods.
Dow Performance Share Update Using 2Q17 result for Operating ROC and 08/30/17 for TSR | ||||||||||||
Grant | Metric | Min/Threshold (35%) | Target (100%) | Max (200%) | YTD Operating ROC TSR Percentile | Payout Based on Performance To-Date | ||||||
2015 – 2017 |
50% Operating ROC
|
10.0%
|
12.2%
|
13.7%
|
12.1%
|
97%
| ||||||
50% Rel. TSR
|
26th Pctl
|
51st Pctl
|
76th Pctl
|
83%
|
200%
| |||||||
Weighted Total |
149%
| |||||||||||
2016 – 2018 |
50% Operating ROC
|
10.7%
|
13.0%
|
14.6%
|
12.1%
|
74%
| ||||||
50% Rel. TSR
|
26th Pctl
|
51st Pctl
|
76th Pctl
|
67%
|
166%
| |||||||
Weighted Total |
120%
| |||||||||||
2017 – 2019 |
100% Rel. TSR
|
26th Pctl
|
51st Pctl
|
76th Pctl
|
60%
|
137%
| ||||||
Weighted Total |
137%
| |||||||||||
DuPont PSU Update | ||||||||||||
Grant | Metric | Min/Threshold (50%/25%) | Target (100%) | Max (200%) | OE metric/ TSR Percentile | Payout Based on Performance To-Date | ||||||
2015 – 2017 |
50% Oper. Earnings
|
3%
|
6%
|
10%
|
*
|
100%
| ||||||
50% Rel. TSR
|
25th Pctl
|
50th Pctl
|
75th Pctl
|
47th Pctl
|
91%
| |||||||
Weighted Total |
96%
| |||||||||||
2016 – 2018 |
100% Rel. TSR
|
25th Pctl
|
50th Pctl
|
75th Pctl
|
41st Pctl
|
74%
| ||||||
Weighted Total |
74%
| |||||||||||
2017 – 2019 |
100% Rel. TSR
|
25th Pctl
|
50th Pctl
|
75th Pctl
|
35th Pctl
|
56%
| ||||||
Weighted Total |
56%
| |||||||||||
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The table below details the annual LTI awards granted to NEOs in 2018: Mr. Breen’s grant value was increased from the previous year based on his experience and performance and to align with Mr. Liveris’s grant value. Messrs. Ungerleider, Fitterling and Kalil’s annual grant values were maintained at historical levels. In addition, Mr. Ungerleider received aone-time award in the amount of $5,000,000 in RSUs on March 12, 2018. Grant values for Messrs. Collins and Doyle were increased in line with the market for their roles.
| Named Executive Officer | Target Grant Value ($) | |||
Edward D. Breen | 12,700,000 | |||
Howard I. Ungerleider | 4,150,000 | |||
James R. Fitterling | 4,750,000 | |||
C. Marc Doyle | 3,500,000 | |||
James C. Collins | 3,500,000 | |||
Andrew N. Liveris | 12,700,000 | |||
Charles J. Kalil | 3,450,000 | |||
Treatment of Equity Awards Outstanding at the Time of the Dow and Corteva Distributions
The Company expects that DowDuPont – Post Merger Grant
In December 2017, a grantequity awards outstanding at the time of PSUs was madethe distributions will be adjusted using the following principles:
For each award recipient, the intent is to maintain the economic/intrinsic value of those awards before and after the distribution date.
The material terms of the equity awards, such as vesting conditions and treatment upon termination of employment, will generally continue unchanged.
Depending on certain factors, relating to the type, timing and holder of the equity awards, the awards may be adjusted using either the “employer method” or the “shareholder method” as more fully described, and subject to certain keyexceptions noted, below.
Employer Method
DowDuPont stock options and restricted stock units, other than those granted to employees on February 15, 2018 and awards granted to certainnon-Dow executives, in order to incentivize:
will generally be adjusted using the “employer method” as follows:
At the time of the Corteva Distribution, all DowDuPont equity awards held by individuals who are employees of Corteva at such time are expected to be converted into awards of Corteva and all equity awards held by employees who remain with DuPont are expected to remain awards of DuPont (except that awards held by certain employees with no defined future role will convert into awards covering both Corteva and DuPont), in each case, with appropriate adjustments to account for the separation and distribution of Corteva. The DuPont awards will also be adjusted to account for the Reverse Stock Split.
The parametersShareholder Method
DowDuPont (i) stock options and restricted stock units granted on February 15, 2018, (ii) outstanding performance stock unit awards and restricted stock awards and (iii) awards held bynon-employee directors of theseDowDuPont and will generally be adjusted using the “shareholder method” as follows:
At the time of the Dow Distribution, all such equity awards were converted into awards of each of Dow and DowDuPont and adjusted based on the Dow distribution ratio and the relative closing share prices of Dow and DowDuPont common stock upon the distribution.
At the time of the Corteva Distribution, the DowDuPont awards are outlined below:expected to be further converted into awards of each of DuPont and Corteva and adjusted based on the Corteva distribution ratio and the relative closing share prices of Corteva and DuPont common stock upon such distribution. The DuPont awards will also be adjusted to account for the Reverse Stock Split.
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Given that DowDuPont intends to separate into three separate entities in the near-term, the Compensation Committee developed this post-merger grant to further incentivize key executives to meet these Merger Transaction-related objectives. However, regardless of when completion of the specified performance measures occurs, no payouts will be made until, at the earliest, twenty-four months after the close of the Merger Transaction, in order to ensure continued alignment with the strategic objectives.
The table below details the awards granted to NEOs in 2017:
COMPENSATION DISCUSSION & ANALYSIS (continued)
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Benefits
Historical Dow and Historical DuPont each provideprovided benefits (including retirement benefits) to eligible employees, including the eligible NEOs, through a combination of qualified andnon-qualified plans. These plans remain in place in 2018 with eligible NEOs continuing to participate in the plans of their respective legacy entity. For details on each of the following retirement plans, see “Benefits” in the “Compensation Tables and Narratives” section on page 5848 of the Proxy Statement.
Defined-Benefit Retirement Plans (if applicable)
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COMPENSATION DISCUSSION & ANALYSIS (continued)
Perquisites
Historical Dow and Historical DuPont have historically offered perquisites that each of the respective legacy Compensation Committees believe are reasonable yet competitive in attracting and retaining the executive team.
The legacy Compensation Committees have regularly reviewed the perquisites provided to thetheir respective NEOs as part of their overall review of executive compensation. We have provided additionalThe Compensation Committee, upon the recommendation of management, maintained legacy perquisites. Additional information on perquisites can be found in footnote (d)(e) to the All Other Compensation column of the Summary Compensation Table on page 5242 of this Proxy Statement. The following outlines the limited perquisites provided to executives:
Financial and Tax Planning Support (Tax Planning for legacy Historical Dow executives only)
Company Car for the former Executive Chairman and CEO
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COMPENSATION DISCUSSION & ANALYSIS (continued)
The Compensation Committee, with the support of independent compensation consultants and Company management, develops and executes the executive compensation program. The Compensation Committee is responsible for recommending for approval by the independent Directors the compensation of the CEOformer Executive Chair and Executive Chairman,CEO, and for approving the compensation of all other NEOs and executive officers. The Compensation Committee annually reviews and evaluates the executive compensation program to ensure that the program is aligned with the Company’s compensation philosophy and withappropriately rewards performance.
The Compensation Committee reviews the following factors to determine executive compensation:
Competitive analysis: Median levels of compensation for similar jobs and job levels in the market, taking into account revenue relative to the peer group
The CEO andIn 2018 prior to Mr. Liveris’ retirement, the Executive Chairman makeand CEO made recommendations to the Compensation Committee regarding compensation for senior executives after reviewing the Company’s overall performance, each executive’s personal contributions and relevant compensation market data from the peer group for similar jobs and job levels.
Role of the Compensation Committee
The Compensation Committee is responsible for establishing DowDuPont’s executive compensation philosophy. The Compensation Committee is responsible for approving NEO compensation and has broad discretion when setting compensation types and amounts. As part of the review, Company management and the Compensation Committee also review summary total compensation scenarios for the NEOs. Additionally, the Compensation Committee annually reviews the corporate goals and objectives relevant to the compensation of the CEOExecutive Chairman and the Executive Chairman.CEO. The Compensation Committee evaluates the Executive Chairman’s and the CEO’s performance against their respective objectives and makes recommendations to the independent Directors regarding each of their compensation levels based on that evaluation. The Compensation Committee considers compensation market data from the peer group when setting compensation types and amounts for the CEO and the Executive Chairman.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
Role of Independent Board Members
The independent members of the Board of Directors are responsible for assessing the performance of the CEOExecutive Chairman and the Executive Chairman.CEO. They are also responsible for approving the compensation types and amounts for the CEOExecutive Chairman and the Executive Chairman.CEO.
Role of the Independent Compensation Consultants
The Compensation Committee has retained both Mercer and Frederic W. Cook & Co., Inc. (“FW Cook”) as independent compensation consultants on executive compensation matters includingrelative to the legacy programs maintained by each of Historical Dow and Historical DuPont. Both consultants reportreported directly to the Compensation Committee and provide noneither individual consultant provides services to DowDuPont other than those for the Compensation Committee. Until the effective date of the Merger Transaction, Mercer was retained by Historical Dow and FW Cook was retained by Historical DuPont. Post-merger but prior to the Dow Distribution, as it relates to the legacy executive compensation matters and programs, Mercer is aligned toconsults with the Historical Dow Compensation Subcommittee; FW Cook is alignedconsults with the Historical DuPont Compensation Subcommittee. Both consultants report directly to the DuPont Compensation Subcommittee.Committee for matters related to Executive Officers.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
Mercer’s and FW Cook’s responsibilities include:included:
Advising the Compensation Committee on trends and issues in executive compensation
Mercer and FW Cook have multiple safeguards and procedures in place to maintain the independence of the consultants in their executive compensation consulting practice, and the Compensation Committee has determined that the compensation consultants’ work has not raised any conflicts of interest. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer and FW Cook’s executive compensation consulting and their other administrative and consulting business units from a leadership, performance measurement and compensation perspective. In 2017,2018, Mercer and its affiliates provided approximately $2.2$1.9 million in human resources consulting services to DowDuPont unrelated to the executive and director compensation consulting services. The decision to engage Mercer to provide these other services was made by management and was reported to the Compensation Committee. In 2017,2018, Mercer’s aggregate fees for executive and director compensation consulting services were approximately $394,700.$433,000. The Compensation Committee has considered factors relevant to Mercer’s and FW Cook’s independence from management under SEC rules and has determined that both are independent from management.
DowDuPont – Post-Merger Peer Group
Prior to the Merger Transaction, Dow and DuPont maintained separate executive compensation peer groups and utilized similar selection criteria to develop their respective peer groups:
The Compensation Committee, with the support of the management team and independent compensation consultants, reviewedcreated a DowDuPont peer group that has been utilized throughout the merged period, including when making 2018 compensation decisions. The peer group was derived from the two legacy peer groups and eliminated companies with revenues less thanone-third orand more than three times that of DowDuPont.
ThenDowDuPont were eliminated. The criteria reviewed when setting the Compensation Committee selected the sixteen companies named below from Dow’s and DuPont’s collectivelegacy peer groups, that meetbecame the designated revenue range. A totalbasis of nine companies with revenue below $25 billionthe DowDuPont peer group, were excluded.as follows:
Revenues
Market Capitalization
Global presence
Research intensity or innovation and/or technology
Competitor for talent
Industries and markets served
The selected peer group was used for market comparisons, benchmarking and setting executive compensation:
3M Company | Honeywell International Inc. | PepsiCo, Inc. | ||
Archer-Daniels-Midland Company | Johnson Controls International plc | Pfizer Inc. | ||
Caterpillar Inc. | Johnson & Johnson | The Boeing Company | ||
Deere & Company | Lockheed Martin Corporation | The Coca-Cola Company | ||
General Electric Company | Merck & Co., Inc. | The Procter & Gamble Company | ||
United Technologies Corporation | ||||
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COMPENSATION DISCUSSION & ANALYSIS (continued)
The selected peer group was used for market comparisons, benchmarking and setting executive compensation:
2017 Revenues
Dow – Pre-Merger Peer Groups
Prior to the Merger Transaction, Dow competed with a wide variety of both industry andnon-industry specific companies for executive talent and investor assets. In order to ensure the executive pay program was competitive and had a strong link to stock price performance, Dow maintained two peer groups to evaluate and determine executive compensation: the TSR Peer Group and the Survey Peer Group. The TSR Peer Group was the S&P 500 and was used for relative TSR performance within the Performance Share programs. The Survey Peer Group was based on technology-based and manufacturing-based global companies and was used to maintain the competitiveness of the Company’s compensation programs.
The Compensation Committee considered relevant market pay practices as one of several factors when establishing executive compensation levels and evaluating compensation programs including base salary, annual incentives and long-term incentives. In order to maintain the competitiveness of the compensation programs, Dow compared its executive compensation programs against a Survey Peer Group of nineteen technology-based and manufacturing-based global companies (“Survey Peer Group”). These companies provided a relevant comparison based on their similarity to Dow in size and complexity taking into account factors such as revenues, market capitalization, global scope of operations and diversified product portfolios. The legacy Dow Compensation Committee believed that a mix of both industry andnon-industry peers provides a balanced and realistic perspective on the competition for the pool of potential executive talent. Market pay data for the Survey Peer Group was gathered through compensation surveys conducted by Willis Towers Watson and Mercer. Dow targeted the median of the Survey Peer Group for all compensation elements in order to attract, motivate, develop and retain top level executive talent. Annual Performance Award targets and long-term incentive grants reflected market median values while actual payouts were dependent on performance.
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1 Compare Peer Groups 2 Apply Criteria 3 Final Selection 3M Company Honeywell International Inc. PepsiCo, Inc. Archer-Daniels-Midland Company Johnson Controls International plc Pfizer Inc. Caterpillar Inc. Johnson & Johnson The Boeing Company Deere & Company Lockheed Martin Corporation The Coca-Cola Company DowDupont Inc. Merck & Co., Inc. The Procter & Gamble Company General Electric Company United Technologies Corporation 2017 Revenues $20M Median $120M
COMPENSATION DISCUSSION & ANALYSIS (continued)
The Survey Peer Group was periodically evaluated and updated to ensure the companies in the group remained relevant.
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DuPont – Pre-Merger Peer Group
Prior to the Merger Transaction, DuPont assessed compensation primarily against published compensation surveys. These surveys represented large companies with median revenue comparable to DuPont’s “market,” such as those published by Willis Towers Watson. DuPont then used peer group data as a secondary data point.
To ensure a complete and robust picture of the overall compensation environment and consistent comparisons for the CEO and other NEOs the peer group was selected and utilized as described below.
To help guide the selection process in an objective manner, the legacy DuPont Compensation Committee established the following criteria for peer group companies:
The peer group was utilized to:
Because of the smaller number of companies in the peer group, DuPont used market survey information as the primary source of competitive data, to provide a larger set of relevant data.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
The peer group reflected the diverse industries in which DuPont operated, and the multiple markets in which it competed –including markets for executive talent, customers and capital – by including large companies with a strong scientific focus and/or research intensity and a significant international presence.
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The Company requires that NEOs accumulate and hold shares of DowDuPont Common Stock with a value equal to a specified multiple of base pay.
Stock ownership guidelines include a retention ratio requirement. Under the policy, until the required ownership is reached, executives are required to retain 75% of net shares acquired upon any future vesting of stock units or exercise of stock options, after deducting shares used to pay applicable taxes and/or exercise price.
The multiples for specific executive levels are shown below. As of December 31, 2017,2018, each NEO exceeded their ownership goal.
Multiple of Salary | 2018 Target | 2018 Actual | ||||||
CEO |
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For purposes of meeting the stock ownership guidelines, direct ownership of shares and stock units held inowned via qualified andnon-qualified employee plans is included.are included in actual ownership totals. Stock options and PSUs are not included in determining whether an executive has achieved the ownership levels.
Anti-Hedging and Anti-Pledging Policies
It is against Company policy for executive officers to engage in speculative transactions in Company securities. As such, it is against Company policy for executive officers to trade in puts or calls in Company securities, or sell Company securities short. In addition, it is against Company policy for executive officers to pledge Company securities, or hold Company securities in margin accounts.
Executive Compensation Recovery (Clawback) Policy
As part of their overall Corporate Governance structures, both Historical Dow and Historical DuPont maintained Executive Compensation Recovery Policies for their executive officers. These policies allowed the respective companies to recover incentive income if an executive officer either knowingly engaged in or was grossly negligent in the event of circumstances that resulted in a financial restatement or other materialnon-compliance.
Under the DowDuPont Executive Compensation Recovery Policy, the Company may recover incentive income that was based on achievement of quantitative performance targets if an executive officer engaged in grossly negligent conduct or intentional misconduct that resulted in a financial restatement or in any increase in his or her incentive income. Incentive income includes income related to annual bonuses and long term incentives.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
Compensation and Risk Management
The Compensation Committee periodically reviews the Company’s compensation policies and practices and has determined that the incentive compensation programs do not create risks that are reasonably likely to have a material adverse effect on DowDuPont. In conducting the review in 2017, Dow and DuPont each2018, DowDuPont completed an inventory of its incentive compensation plans and policies. The evaluation covered a wide range of practices and policies including: the balanced mix between pay elements, the balanced mix between shortshort-term and long-term programs, caps on incentive payouts, governance controls in place to establish, review and approve goals, use of multiple performance measures, discretion on individual awards, use of stock ownership guidelines, provisions in severance/change in control policies, use of a compensation recovery policy, and Compensation Committee oversight of compensation programs.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
Section 162(m) of the IRCThe Internal Revenue Code generally placesimposes a $1 million limit on the amount of compensationthat a public company like DowDuPont, canmay deduct in any one year for certain executive officers subjectcompensation paid to an exemption for certain performance-based awards granted by a committeethe company’s applicable named executives. Prior to the Tax Cuts and Jobs Act of outside directors. While the Compensation Committee considers the deductibility of awards as one factor in determining executive compensation, it also looks at other factors in making its decisions and retains the flexibility2017 (the “Tax Act”) this limitation generally did not apply to award compensation that it determines to be consistent withmet the goalstax code requirements for “qualifying performance-based” compensation. Following enactment of the executiveTax Act, the Company generally expects that compensation program and in the interests of DowDuPont stockholders, even if the awards are not deductible by DowDuPont for tax purposes.
The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. As a result, executive compensationpaid to our applicable named executives in excess of $1 million will not be deductible, unless it qualifiessubject to an exception for transition relief applicablecompensation provided pursuant to certain arrangementsa binding written contract in placeeffect as of November 2, 2017.
The Compensation Committee has and will continue to consider the impact of this rule when making compensation decisions and, where possible, to award responsible but adequate executive compensation while taking advantage of Section 162(m) whenever feasible. Amounts paid under the compensation program, including base salary, Performance Awards and grants of Deferred Stock (Restricted Stock and Restricted Stock Units) may not qualify as performance-based compensation excluded from the limitation on deductibility.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
COMPENSATION TABLES AND NARRATIVES
The following table summarizes the compensation of the Executive Chairman, Chief Executive Officer, Chief Financial Officer, the three most highly compensated executive officers and a former Dow officerNEOs for the fiscal year ended December 31, 2017. Following the accounting treatment of the Merger Transaction, Dow was determined to be the accounting acquirer. As a result, the compensation for Messrs. Breen and Collins in all of the following tables includes only compensation earned as executives of DowDuPont since September 1, 2017, while the compensation for Messrs. Liveris, Ungerleider, Fitterling, Kalil and Harlan includes full year amounts earned as executives of both Dow and DowDuPont, as applicable.2018.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(a) | Option Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e) | Total ($) | Total ($)(e)(2) | Year | Salary ($) | Bonus ($) | Stock Awards ($)(a) | Option Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e)(f) | Total ($) | |||||||||||||||||||||||||||||||||||||||||
Edward D. Breen Chief Executive Officer | 2017 | 643,600 | (f) | — | 10,000,044 | 1,600,006 | 1,472,686 | — | 75,666 | 13,792,002 | 13,792,002 | 2018 | 1,930,800 | — | — | 12,700,004 | 3,300,510 | — | 743,988 | 18,675,301 | ||||||||||||||||||||||||||||||||||||||||
| 2017 | 643,600(g) | — | 10,000,044 | 1,600,006 | 1,472,686 | — | 75,666 | 13,792,002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew N. Liveris Executive Chairman, DowDuPont and Chief Executive Officer, The Dow Chemical Company | 2017 | 1,930,800 | — | 12,173,674 | 3,810,138 | 4,167,053 | — | 43,607,476 | 65,689,140 | 22,643,475 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2016 | 1,930,800 | — | 9,259,836 | 3,630,035 | 3,959,974 | 3,552,037 | 630,377 | 22,963,059 | 22,963,059 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 1,930,800 | — | 9,532,305 | 3,630,099 | 5,712,175 | 724,735 | 623,496 | 22,153,611 | 22,153,611 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Howard I. Ungerleider Chief Financial Officer | 2017 | 1,062,377 | — | 6,964,140 | 1,245,017 | 1,675,641 | — | 18,842,394 | 29,789,568 | 11,005,580 | 2018 | 1,103,144 | — | 5,000,007 | 4,150,005 | 1,310,996 | 330,919 | 99,625 | 11,994,697 | |||||||||||||||||||||||||||||||||||||||||
| 2016 | 1,031,434 | — | 2,985,154 | 1,170,008 | 1,686,536 | 1,751,240 | 99,440 | 8,723,812 | 8,723,812 | 2017 | 1,062,377 | — | 6,964,140 | 1,245,017 | 1,675,641 | — | 18,842,394 | 29,789,568 | ||||||||||||||||||||||||||||||||||||||||||
| 2015 | 1,001,392 | — | 2,914,837 | 1,110,032 | 2,165,106 | 499,678 | 86,907 | 7,777,952 | 7,777,952 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Howard I. Ungerleider Chief Financial Officer | 2016 | 1,031,434 | — | 2,985,154 | 1,170,008 | 1,686,536 | 1,751,240 | 99,440 | 8,723,812 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 1,134,578 | — | 7,533,628 | 1,425,084 | 1,864,083 | — | 20,347,917 | 32,305,290 | 12,078,682 | 2018 | 1,178,116 | — | — | 4,750,008 | 1,458,432 | 893,865 | 190,917 | 8,471,338 | ||||||||||||||||||||||||||||||||||||||||||
| 2016 | 1,090,134 | — | 3,635,031 | 1,425,033 | 1,719,854 | 2,160,423 | 64,360 | 10,094,834 | 10,094,834 | 2017 | 1,134,578 | — | 7,533,628 | 1,425,084 | 1,864,083 | — | 20,347,917 | 32,305,290 | ||||||||||||||||||||||||||||||||||||||||||
James R. Fitterling Chief Operating Officer, Materials Science Division | 2015 | 1,001,392 | — | 2,914,837 | 1,110,032 | 2,165,106 | 506,570 | 71,399 | 7,769,336 | 7,769,336 | 2016 | 1,090,134 | — | 3,635,031 | 1,425,033 | 1,719,854 | 2,160,423 | 64,360 | 10,094,834 | |||||||||||||||||||||||||||||||||||||||||
| 2017 | 1,046,820 | — | 3,314,630 | 1,035,059 | 1,322,215 | — | 26,916,804 | 33,635,528 | 6,857,078 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2016 | 1,029,659 | — | 2,564,166 | 1,005,101 | 1,282,775 | 1,084,218 | 66,505 | 7,032,424 | 7,032,424 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Charles J. Kalil Special Counsellor to the Executive Chairman and General Counsel, Materials Science Division | 2015 | 1,029,659 | — | 2,639,454 | 1,005,078 | 1,850,374 | 413,424 | 72,580 | 7,010,570 | 7,010,570 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 | 787,500 | — | — | 3,500,005 | 868,000 | 713,290 | 168,750 | 6,037,545 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 258,333 | (f) | — | 3,000,034 | — | 358,254 | 2,245,409 | 26,417 | 5,888,447 | 5,888,447 | 2018 | 795,833 | — | — | 3,500,005 | 248,800 | 263,772 | 186,327 | | 4,994,737 | | |||||||||||||||||||||||||||||||||||||||
James C. Collins Chief Operating Officer, Agriculture Division | 2017 | 258,333(g) | — | 3,000,034 | — | 358,254 | 2,245,409 | 26,417 | 5,888,447 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 1,053,739 | — | 8,414,492 | 1,020,042 | 1,382,810 | — | 12,467,046 | 24,338,129 | 23,691,445 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Joe E. Harlan(g) Former Chief Commercial Officer, The Dow Chemical Company | 2016 | 1,031,434 | — | 2,678,873 | 1,050,105 | 1,475,719 | 161,878 | 319,839 | 6,717,847 | 6,717,847 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 1,001,392 | — | 2,914,837 | 1,110,032 | 1,968,278 | 118,174 | 116,612 | 7,229,324 | 7,229,324 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 | 970,590 | — | — | 12,700,004 | 2,373,436 | — | 37,632,092 | 53,676,122 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew N. Liveris Former Executive Chairman | 2017 | 1,930,800 | — | 12,173,674 | 3,810,138 | 4,167,053 | — | 43,607,476 | 65,689,140 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2016 | 1,930,800 | — | 9,259,836 | 3,630,035 | 3,959,974 | 3,552,037 | 630,377 | 22,963,059 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 2017 2016 | 787,689 1,046,820 1,029,659 | — — — | — 3,314,630 2,564,166 | 3,450,007 1,035,059 1,005,101 | 984,217 1,322,215 1,282,775 | — — | 10,328,220 26,916,804 66,505 | | 15,550,134 33,635,528 7,032,424 | | ||||||||||||||||||||||||||||||||||||||||||||||||||
Totals in the above table might not equal the summation of the columns due to rounding amounts to the nearest dollar.
| (a) | Amounts represent the aggregate grant date fair value of awards in the year of grant in accordance with the same standard applied for financial accounting purposes, Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. |
| (b) | DowDuPont’s valuation for financial accounting purposes uses the widely accepted Black-Scholes option valuation model. Options awarded |
| (c) | Individual results forNon-Equity Incentive Plan Compensation are detailed in the “Annual Incentive Compensation” section of the CD&A and reflect income paid in |
| (d) | ||||||||
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COMPENSATION DISCUSSION & ANALYSIS (continued)
| The Change in Pension Value for |
| (e) | All Other Compensation includes perquisites and other personal |
Name | Perquisites and Other Personal Benefits ($) (1) | Contributions to Defined Contribution Plans ($) | Certain Merger Related Items ($) (2) | |||||||||
Edward D. Breen
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Andrew N. Liveris
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Howard I. Ungerleider
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James R. Fitterling
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Charles J. Kalil
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James C. Collins
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Joe E. Harlan
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COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table details these amounts:
| Name | Perquisites and Other Personal Benefits ($)(1) | Contributions to Defined Contribution Plans ($) | ||||||||
Edward D. Breen | 140,130 | 603,858 | ||||||||
Howard I. Ungerleider | 40,316 | 59,309 | ||||||||
James R. Fitterling | 130,019 | 60,898 | ||||||||
C. Marc Doyle | – | 168,750 | ||||||||
James C. Collins | 10,077 | 176,250 | ||||||||
Andrew N. Liveris | 37,537,990 | 94,102 | ||||||||
Charles J. Kalil | 10,270,646 | 57,574 | ||||||||
| (1) | The following other compensation items exceeded $10,000 in value: |
i. Mr. Breen: Personal use of company aircraft ($139,435) as required by Company policy for security and immediate availability purposes
ii. Mr. Ungerleider: Financial and tax planning ($32,027)
iii. Mr. Fitterling: Personal use of company aircraft ($57,848) as required by Company policy for security and immediate availability purposes, financial and tax planning ($34,203), tax reimbursement ($21,403), and home security ($15,558)
iv. Mr. Collins: Financial planning ($10,077)
v. Mr. Liveris: Personal use of Company aircraft ($522,087) as required by Company policy for security and immediate availability purposes, financial and tax planning ($138,161), Company provided automobile ($19,056), Severance ($15,298,694), LTI Acceleration ($21,555,276)
vi. Mr. Kalil: Financial and tax planning ($31,508), Severance ($4,306,033), LTI Acceleration ($5,919,106)
Perquisites and other personal benefits include: personal use of |
| (f) | Amounts shown for 2017 All Other Compensation for Messrs. Ungerleider, Fitterling, Liveris and |
Upon close of the Merger Transaction, participants could elect to (i) receive alump-sum payment or (ii) direct Historical Dow to purchase an annuity on their behalf using theafter-tax proceeds of the lump sum (the “ESRP Choice Annuity”). The ESRP Choice Annuity option was designed and offered to allow participants to select an annuity option identical to what they would have received in the absence of a change in control and accelerated lump sum payment. The ESRP Choice Annuity was not intended to confer any additional benefit beyond the original annuity option. Structuring requirements resulted in a distribution and tax reimbursement in order to provide this equivalent option consistent with the intended ESRP design. |
The distributions triggered by the Merger Transaction are separate and distinct from |
i. Mr. Ungerleider: ESRP ($14,995,603), ESRP Choice Annuity program tax reimbursement ($2,646,883), and EDP ($1,141,503)
ii. Mr. Fitterling: ESRP ($17,752,711), and EDP ($2,473,897)
iii. Mr. Liveris: ESRP ($41,742,161), and EDP ($1,303,504)
iv. Mr. Kalil: ESRP ($20,623,387), ESRP Choice Annuity program tax reimbursement ($5,670,927), and EDP ($484,136)
| (g) |
| Amounts shown for |
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. This table includes both equity andnon-equity awards.
GRANTS OF PLAN-BASED AWARDS FOR 2017
| GRANTS OF PLAN-BASED AWARDS FOR 2018 | GRANTS OF PLAN-BASED AWARDS FOR 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Date of Action by the Compensation Committee |
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(a) | All Other Stock Awards: Number Shares of Stock or Units (#)(b) | All Other Option Awards: Number of Securities Underlying Options (#)(c) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(d) | Grant Date | Date of Action by the Compensation Committee | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(a) | All Other Stock Awards: Number of Shares of Stock or Units (#)(b) | All Other Option Awards: Number of Securities Underlying Options (#)(c) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(d) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
Threshold | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Edward D. Breen | 8/31/2017 | (e) | 0 | 1,064,701 | 2,129,402 | 2/15/2018 | 2/15/2018 | 0 | 3,185,820 | 6,371,640 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/6/2017 | 10/12/2017 | 107,672 | 70.24 | 1,600,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
|
| 11/26/2017
|
|
| 0
|
|
| 140,529
|
|
| 281,058
|
|
| 10,000,044
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew N. Liveris | 2/8/2017 | 2/8/2017 | 0 | 3,185,820 | 6,371,640 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 0 | 93,400 | 186,800 | 7,713,308 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 51,890 | 3,175,149 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Edward D. Breen | 2/15/2018 | 2/15/2018 | 821,475 | 71.85 | 12,700,004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2/10/2017
|
|
| 2/8/2017
|
|
| 263,860
|
|
| 61.19
|
|
| 3,810,138
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Howard I. Ungerleider | 2/8/2017 | 2/8/2017 | 0 | 1,281,071 | 2,562,142 | 2/15/2018 | 2/15/2018 | 0 | 1,332,313 | 2,664,626 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 0 | 30,520 | 61,040 | 5,520,486 | 2/15/2018 | 2/15/2018 | 268,435 | 71.85 | 4,150,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 16,960 | 1,037,782 | 3/12/2018 | 3/12/2018 | 70,087 | 5,000,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 86,220 | 61.19 | 1,245,017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
|
| 11/26/2017
|
|
| 0
|
|
| 42,159
|
|
| 84,318
|
|
| 3,000,034
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| James R. Fitterling | 2/15/2018 | 2/15/2018 | 0 | 1,482,146 | 2,964,292 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/8/2017 | 2/8/2017 | 0 | 1,425,140 | 2,850,280 | 2/15/2018 | 2/15/2018 | 307,245 | 71.85 | 4,750,008 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 0 | 34,940 | 69,880 | 5,885,505 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C. Marc Doyle | 2/15/2018 | 2/15/2018 | 0 | 800,000 | 1,600,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/15/2018 | 2/15/2018 | 226,391 | 71.85 | 3,500,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 19,410 | 1,187,698 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| James C. Collins | 2/15/2018 | 2/15/2018 | 0 | 800,000 | 1,600,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/15/2018 | 2/15/2018 | 226,391 | 71.85 | 3,500,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 98,690 | 61.19 | 1,425,084 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Andrew N. Liveris | 2/15/2018 | 2/15/2018 | 0 | 3,185,820(e) | 6,371,640 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 821,475 | 71.85 | 12,700,004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
|
| 11/26/2017
|
|
| 0
|
|
| 42,159
|
|
| 84,318
|
|
| 3,000,034
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles J. Kalil | 2/8/2017 | 2/8/2017 | 0 | 1,102,765 | 2,205,529 | 2/15/2018 | 2/15/2018 | 0 | 1,102,765(e) | 2,205,529 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 0 | 25,380 | 50,760 | 2,095,972 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 14,100 | 862,779 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2/10/2017
|
|
| 2/8/2017
|
|
| 71,680
|
|
| 61.19
|
|
| 1,035,059
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James C. Collins | 8/31/2017 | (e) | 0 | 259,005 | 518,010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
|
| 11/26/2017
|
|
| 0
|
|
| 42,159
|
|
| 84,318
|
|
| 3,000,034
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joe E. Harlan | 2/8/2017 | 2/8/2017 | 0 | 1,268,633 | 2,537,266 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 0 | 25,010 | 50,020 | 2,065,416 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/10/2017 | 2/8/2017 | 13,900 | 850,541 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2/10/2017
|
|
| 2/8/2017
|
|
| 70,640
|
|
| 61.19
|
|
| 1,020,042
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Charles J. Kalil | 2/15/2018 | 2/15/2018 | 223,157 | 71.85 | 3,450,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (a) | Performance Share awards were not granted in 2018 as described in the “Long-Term Incentive Compensation” section of the CD&A. |
| (b) | Restricted Stock Unit awards as described in the “Long-Term Incentive |
| Stock Option awards as described in the “Long-Term Incentive |
| (d) | Amounts represent the aggregate grant date fair value of awards in the year of grant in accordance with the same standard applied for financial accounting purposes consistent with the values shown in the Summary Compensation Table. |
| (e) | Amounts representnon-pro-rata values; actual awards werepro-rated as described in the |
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table lists outstanding equity grants for each NEO as of December 31, 2017.2018. The table includes outstanding equity grants from past years as well as the current year.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(a) | Number of Securities Underlying Unexercised Options (#) Unexercisable(a) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(b)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c)(d) | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisablea) | Number of Securities Underlying Unexercised Options (#) Unexercisable(a) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(b)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c)(d) | ||||||||||||||||||||||||||||||||||||
Edward D. Breen |
| 05/13/2015
|
| 2,662 | 189,563 | 05/13/2015 | 2,726 | 145,785 | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 06/05/2015
|
| 408 | 29,053 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/06/2015
|
| 341,867 | 170,933 | 51.57 | 11/05/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/03/2016
|
| 151,435 | 10,785,182 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/02/2017
|
| — | 341,867 | 59.42 | 02/01/2027 | 114,245 | 8,136,547 | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/06/2017
|
| — | 107,672 | 70.24 | 11/05/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
| 140,529 | 10,008,475 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Andrew N. Liveris |
| 02/15/2008
|
| 163,999 | — | 38.62 | 02/18/2018 | |||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/13/2009
|
| 909,100 | — | 9.53 | 02/13/2019 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/12/2010
|
| 551,800 | — | 27.79 | 02/12/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/11/2011
|
| 412,380 | — | 38.38 | 02/11/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/10/2012
|
| 516,000 | — | 34.00 | 02/10/2022 | 06/05/2015 | 418 | 22,343 | |||||||||||||||||||||||||||||||||||||||||||||
|
| 02/15/2013
|
| 761,660 | — | 32.16 | 02/15/2023 | 11/06/2015 | 512,800 | 51.57 | 11/05/2022 | ||||||||||||||||||||||||||||||||||||||||||||
|
| 02/14/2014
|
| 315,930 | — | 46.71 | 02/14/2024 | 02/02/2017 | 113,956 | 227,911 | 59.42 | 02/01/2027 | 117,006 | 6,257,465 | |||||||||||||||||||||||||||||||||||||||||
|
| 02/13/2015
|
| 208,446 | 104,224 | 49.44 | 02/13/2025 | 225,299 | 16,045,795 | 11/06/2017 | 35,891 | 71,781 | 70.24 | 11/05/2027 | |||||||||||||||||||||||||||||||||||||||||
|
| 02/12/2016
|
| 110,503 | 221,007 | 46.01 | 02/12/2026 | 207,770 | 14,797,379 | 11/26/2017 | 140,529 | 7,515,491 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/10/2017
|
| — | 263,860 | 61.19 | 02/10/2027 | 179,848 | 12,808,775 | 02/15/2018 | — | 821,475 | 71.85 | 02/14/2028 | |||||||||||||||||||||||||||||||||||||||||
Howard I. Ungerleider |
| 02/15/2008
|
| 30,750 | — | 38.62 | 02/18/2018 | 02/13/2009 | 2,788 | — | 9.53 | 02/13/2019 | ||||||||||||||||||||||||||||||||||||||||||
|
| 02/13/2009
|
| 11,288 | — | 9.53 | 02/13/2019 | 02/12/2010 | 22,400 | — | 27.79 | 02/12/2020 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/12/2010
|
| 22,400 | — | 27.79 | 02/12/2020 | 02/11/2011 | 18,600 | — | 38.38 | 02/11/2021 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/11/2011
|
| 18,600 | — | 38.38 | 02/11/2021 | 02/10/2012 | 82,420 | — | 34.00 | 02/10/2022 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/10/2012
|
| 82,420 | — | 34.00 | 02/10/2022 | 02/15/2013 | 210,880 | — | 32.16 | 02/15/2023 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/15/2013
|
| 210,880 | — | 32.16 | 02/15/2023 | 02/14/2014 | 96,220 | — | 46.71 | 02/14/2024 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/14/2014
|
| 96,220 | — | 46.71 | 02/14/2024 | 02/13/2015 | 95,610 | — | 49.44 | 02/13/2025 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/13/2015
|
| 63,738 | 31,872 | 49.44 | 02/13/2025 | 68,893 | 4,906,559 | 02/12/2016 | 71,232 | 35,618 | 46.01 | 02/12/2026 | 66,980 | 3,582,090 | |||||||||||||||||||||||||||||||||||||||
|
| 02/12/2016
|
| 35,616 | 71,234 | 46.01 | 02/12/2026 | 66,980 | 4,770,316 | 02/10/2017 | 28,739 | 57,481 | 61.19 | 02/10/2027 | 58,772 | 3,143,127 | |||||||||||||||||||||||||||||||||||||||
|
| 02/10/2017
|
| — | 86,220 | 61.19 | 02/10/2027 | 58,772 | 4,185,742 | 11/26/2017 | 42,159 | 2,254,663 | |||||||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
| 42,159 | 3,002,564 | 02/15/2018 | — | 268,435 | 71.85 | 02/15/2028 | |||||||||||||||||||||||||||||||||||||||||||||
| 03/12/2018 | 70,087 | 3,748,253 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
James R. Fitterling |
| 02/11/2011
|
| 118,090 | — | 38.38 | 02/11/2021 | 02/11/2011 | 118,090 | — | 38.38 | 02/11/2021 | ||||||||||||||||||||||||||||||||||||||||||
|
| 02/15/2013
|
| 188,710 | — | 32.16 | 02/15/2023 | 02/15/2013 | 178,210 | — | 32.16 | 02/15/2023 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/14/2014
|
| 96,220 | — | 46.71 | 02/14/2024 | 02/14/2014 | 96,220 | — | 46.71 | 02/14/2024 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/13/2015
|
| 63,738 | 31,872 | 49.44 | 02/13/2025 | 68,893 | 4,906,559 | 02/13/2015 | 95,610 | — | 49.44 | 02/13/2025 | |||||||||||||||||||||||||||||||||||||||||
|
| 02/12/2016
|
| 43,379 | 86,761 | 46.01 | 02/12/2026 | 81,562 | 5,808,846 | 02/12/2016 | 86,758 | 43,382 | 46.01 | 02/12/2026 | 81,562 | 4,361,936 | |||||||||||||||||||||||||||||||||||||||
|
| 02/10/2017
|
| — | 98,690 | 61.19 | 02/10/2027 | 67,278 | 4,791,539 | 02/10/2017 | 32,896 | 65,794 | 61.19 | 02/10/2027 | 67,278 | 3,598,027 | |||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
| 42,159 | 3,002,564 | 11/26/2017 | 42,159 | 2,254,663 | |||||||||||||||||||||||||||||||||||||||||||||||
| 02/15/2018 | — | 307,245 | 71.85 | 02/15/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| C. Marc Doyle | 02/05/2014 | 4,052 | 46.54 | 02/04/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/04/2015 | 22,936 | 55.44 | 02/03/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 07/29/2015 | 75,019 | 4,012,014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/03/2016 | 38,270 | 19,134 | 45.84 | 02/02/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/02/2017 | 20,533 | 41,065 | 59.42 | 02/01/2027 | 21,084 | 1,127,565 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 11/26/2017 | 42,159 | 2,254,663 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/15/2018 | — | 226,391 | 71.85 | 02/14/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| James C. Collins | 02/04/2015 | 16,245 | 55.44 | 02/03/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 07/29/2015 | 75,019 | 4,012,014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/03/2016 | 22,612 | 25,512 | 45.84 | 02/02/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/02/2017 | 25,666 | 51,332 | 59.42 | 02/01/2027 | 25,207 | 1,348,053 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 11/26/2017 | 42,159 | 2,254,663 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/15/2018 | — | 226,391 | 71.85 | 02/14/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Andrew N. Liveris | 02/13/2009 | 160,694 | — | 9.53 | 02/13/2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 02/12/2010 | 551,800 | — | 27.79 | 02/12/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/11/2011 | 412,380 | — | 38.38 | 02/11/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/10/2012 | 516,000 | — | 34.00 | 02/10/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/15/2013 | 761,660 | — | 32.16 | 02/15/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/14/2014 | 315,930 | — | 46.71 | 02/14/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/13/2015 | 312,670 | — | 49.44 | 02/13/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/12/2016 | 221,006 | 110,504 | 46.01 | 02/12/2026 | 207,770 | 11,111,540 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 02/10/2017 | 104,224 | 159,636 | 61.19 | 02/10/2027 | 179,848 | 9,618,271 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 02/15//2018 | — | 821,475 | 71.85 | 02/15/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(a) | Number of Securities Underlying Unexercised Options (#) Unexercisable(a) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(b)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c)(d) | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisablea) | Number of Securities Underlying Unexercised Options (#) Unexercisable(a) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(b) | Market Value of Shares or Units of Stock That Have Not Vested ($)(b)(c) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(d) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c)(d) | ||||||||||||||||||||||||||||||||||||
Charles J. Kalil |
| 03/01/2000
|
| 108 | 5,560 | 03/01/2000 | 108 | 5,560 | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/23/2001
|
| 55 | 3,147 | 02/23/2001 | 55 | 2,941 | |||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/10/2012
|
| 49,044 | — | 34.00 | 02/10/2022 | 02/14/2014 | 87,470 | — | 46.71 | 02/14/2024 | |||||||||||||||||||||||||||||||||||||||||||
|
| 02/15/2013
|
| 201,290 | — | 32.16 | 02/15/2023 | 02/13/2015 | 86,570 | 49.44 | 02/13/2025 | ||||||||||||||||||||||||||||||||||||||||||||
|
| 02/14/2014
|
| 87,470 | — | 46.71 | 02/14/2024 | 02/12/2016 | 61,192 | 30,598 | 46.01 | 02/12/2026 | 57,534 | 3,076,918 | |||||||||||||||||||||||||||||||||||||||||
|
| 02/13/2015
|
| 57,712 | 28,858 | 49.44 | 02/13/2025 | 62,385 | 4,443,060 | 02/10/2017 | 28,858 | 42,822 | 61.19 | 02/10/2027 | 48,871 | 2,613,621 | |||||||||||||||||||||||||||||||||||||||
|
| 02/12/2016
|
| 30,596 | 61,194 | 46.01 | 02/12/2026 | 57,534 | 4,097,571 | 02/15/2018 | — | 223,157 | 71.85 | 02/15/2028 | |||||||||||||||||||||||||||||||||||||||||
|
| 02/10/2017
|
| — | 71,680 | 61.19 | 02/10/2027 | 48,871 | 3,480,593 | ||||||||||||||||||||||||||||||||||||||||||||||
James C. Collins |
| 02/04/2015
|
| — | 16,245 | 55.44 | 02/03/2022 | 2,736 | 194,885 | |||||||||||||||||||||||||||||||||||||||||||||
|
| 07/29/2015
|
| 73,249 | 5,216,799 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/03/2016
|
| — | 51,024 | 45.84 | 02/02/2026 | 26,101 | 1,858,887 | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/02/2017
|
| — | 76,998 | 59.42 | 02/01/2027 | 24,612 | 1,752,866 | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/26/2017
|
| 42,159 | 3,002,564 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Joe E. Harlan |
| 02/14/2014
|
| 91,850 | — | 46.71 | 02/14/2024 | |||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/13/2015
|
| 63,738 | 31,872 | 49.44 | 02/13/2025 | 68,893 | 4,906,559 | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/12/2016
|
| 31,966 | 63,934 | 46.01 | 02/12/2026 | 60,108 | 4,280,892 | ||||||||||||||||||||||||||||||||||||||||||||||
|
| 02/10/2017
|
| — | 70,640 | 61.19 | 02/10/2027 | 48,164 | 3,430,240 | ||||||||||||||||||||||||||||||||||||||||||||||
| (a) | Stock Option award grants vest in three equal installments on the first, second and third anniversaries of the grant date shown in the table. |
Restricted Stock Units issued by Historical Dow, including those shares associated with the conversion of PSUs upon the closing of the Merger Transaction, vest and are delivered three years after the grant date. RSUs issued by Historical DuPont (with grant |
| (c) | Market values based on the |
| (d) | Performance Shares granted |
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Option Exercises and Stock Vested
The following table summarizes the value received from stock option exercises and stock grants vested during 2017.2018.
OPTION EXERCISES AND STOCK VESTED FOR 20172018
| Option Awards | Stock Awards | |||||||||||||||
Name
|
Number of Shares Acquired on Exercise (#)
|
Value Realized on Exercise ($)
|
Number of Shares Acquired on Vesting (#)(a)
|
Value Realized on Vesting ($)
| ||||||||||||
Edward D. Breen
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
| ||||
Andrew N. Liveris
|
|
915,371
|
|
|
23,294,750
|
|
|
231,479
|
|
|
14,203,529
|
| ||||
Howard I. Ungerleider
|
|
23,510
|
|
|
394,380
|
|
|
70,509
|
|
|
4,326,426
|
| ||||
James R. Fitterling
|
|
177,000
|
|
|
5,617,385
|
|
|
70,509
|
|
|
4,326,426
|
| ||||
Charles J. Kalil
|
|
70,000
|
|
|
1,174,250
|
|
|
64,090
|
|
|
3,932,555
|
| ||||
James C. Collins(b)
|
|
—
|
|
|
—
|
|
|
18,951
|
|
|
5,960,077
|
| ||||
Joe E. Harlan
|
|
473,910
|
|
|
15,211,887
|
|
|
67,293
|
|
|
4,129,092
|
| ||||
| Option Awards | Stock Awards | |||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(a) | Value Realized on Vesting ($) | ||||||||||||||||
Edward D. Breen | — | — | 155,094 | 8,277,355 | ||||||||||||||||
Howard I. Ungerleider | 39,250 | 1,490,198 | 68,893 | 4,917,839 | ||||||||||||||||
James R. Fitterling | 10,500 | 372,120 | 68,893 | 4,917,839 | ||||||||||||||||
C. Marc Doyle | — | — | 22,249 | 1,211,416 | ||||||||||||||||
James C. Collins | 2,900 | 66,642 | 29,468 | 1,623,572 | ||||||||||||||||
Andrew N. Liveris | 912,405 | 48,124,921 | 225,299 | 16,082,679 | ||||||||||||||||
Charles J. Kalil | 250,334 | 9,220,084 | 62,385 | 4,453,276 | ||||||||||||||||
| (a) | Reflects delivery of shares from |
In August 2015, the SEC adopted a rule underAs required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of 2010 requiring annual disclosureRegulationS-K, we are providing the following information about the relationship of the ratio of the median annual total compensation for all employees other than the CEO to the annual total compensation of our employees (other than our CEO) and the CEO. The rule (Item 402(u)annual total compensation of RegulationS-K) requires disclosure of this information starting with the first fiscal year beginning on or after January 1, 2017.our CEO, Edward D. Breen. For 2018:
To determine the median
The annual total compensation for all employees other than the CEO, a median employee was $75,018, and
The annual total compensation of the CEO, as reported in the Summary Compensation Table was $18,675,301.
Based upon the calculation of compensation for both the CEO and the median employee, we estimate the ratio of CEO pay to median employee pay for 2018 was 249:1.
The pay ratio presented above is a reasonable estimate. Because SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, the pay ratio may not be comparable to the pay ratio reported by other companies.
In accordance with Instruction 2 to Item 402(u) of RegulationS-K, because there has been no change in our employee population or employee compensation arrangements in the past fiscal year that we reasonably believe would significantly impact our pay ratio disclosure, we elected to utilize the same median employee that we had identified in 2017 to calculate our 2018 CEO pay ratio. We identified our median employee in 2017 from the population of all employees worldwide as of October 31, 2017. As is permitted under SEC rules, the Company utilized2017 utilizing base pay and annual incentive at target – rather than Summary Compensation Table compensation – to determine the median employee.compensation. The Company calculated annual base pay based on a reasonable estimate of hours worked during 2017 for hourly workers, and upon salary levels for the remaining employees. The Company used a valid statistical sampling methodology to identify employees who the Company expected to be paid within a .05% range of the median. The Company selected an employee from that group as the median employee for purposes of preparing the ratio of CEO pay to median employee pay. The Company then calculated the compensation for the median employee based upon the same components of compensation used to determine the CEO’s pay for purposes of Summary Compensation Table disclosure. For 2017, the annual total compensation for the median employee was $78,835, and the annual total compensation of the CEO as reported in the Summary Compensation Table was $13,792,002. Based upon the calculation of compensation for both the CEO and the median employee, the ratio of CEO pay to median employee pay is 175:1.
However, as previously noted, the compensation of the CEO disclosed in the Summary Compensation Table is reflective of only that compensation earned as CEO of DowDuPont, and does not reflect the value of all compensation earned by the CEO during 2017. If the compensation in the Summary Compensation Table were to include the value of all such compensation earned during 2017, the ratio of CEO pay to median employee pay would have been 387:1.
The pay ratio presented above is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, the pay ratio may not be comparable to the pay ratio reported by other companies.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table lists the pension program participation and actuarial present value of each NEOs defined benefit pension as of December 31, 2017.2018.
PENSION BENEFITS AS OF DECEMBER 31, 20172018
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit | Payments During Last Fiscal Year(b) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit | Payments During Last Fiscal Year ($) | |||||||||||||||||||||||
Edward D. Breen | DuPont Pension Plan
| — | — | — | Historical DuPont Pension Plan | — | — | — | |||||||||||||||||||||||
| DuPont Pension Restoration Plan | — | — | — | ||||||||||||||||||||||||||||
Andrew N. Liveris(d) | Dow Employees’ Pension Plan
| 22.1 | 2,024,134 | — | |||||||||||||||||||||||||||
| Dow Executives’ Supplemental Retirement Plan | 42.0 | — | 41,742,161 | Historical DuPont Pension Restoration Plan | — | — | — | ||||||||||||||||||||||||
Howard I. Ungerleider | Dow Employees’ Pension Plan
| 27.5 | 1,026,057 | — | Historical Dow Employees’ Pension Plan | 28.5 | 995,236 | — | |||||||||||||||||||||||
| Dow Executives’ Supplemental Retirement Plan | 27.5 | 139,771 | 11,913,302 | Historical Dow Executives’ Supplemental Retirement Plan | 28.5 | 501,511 | — | ||||||||||||||||||||||||
James R. Fitterling | Dow Employees’ Pension Plan
| 34.0 | 1,712,671 | — | Historical Dow Employees’ Pension Plan | 35.0 | 1,660,385 | — | |||||||||||||||||||||||
| Dow Executives’ Supplemental Retirement Plan | 34.0 | 335,811 | 17,752,711 | Historical Dow Executives’ Supplemental Retirement Plan | 35.0 | 1,281,962 | — | ||||||||||||||||||||||||
Charles J. Kalil | Dow Employees’ Pension Plan
| 37.9 | 2,019,636 | — | |||||||||||||||||||||||||||
C. Marc Doyle | Historical DuPont Pension Plan | 23.2 | 652,659 | — | |||||||||||||||||||||||||||
| Dow Executives’ Supplemental Retirement Plan | 37.9 | 886,637 | 14,019,580 | Historical DuPont Pension Restoration Plan | 23.2 | 3,189,098 | — | ||||||||||||||||||||||||
James C. Collins | DuPont Pension Plan
| 32.7 | 1,476,396 | — | Historical DuPont Pension Plan | 33.7 | 1,420,143 | — | |||||||||||||||||||||||
| DuPont Pension Restoration Plan | 32.7 | 6,056,314 | — | Historical DuPont Pension Restoration Plan | 33.7 | 6,375,720 | — | ||||||||||||||||||||||||
Joe E. Harlan | Dow Employees’ Pension Plan
| 6.4 | 95,077 | — | |||||||||||||||||||||||||||
Andrew N. Liveris(c) | Historical Dow Employees’ Pension Plan | 22.7 | 1,906,729 | 49,188 | |||||||||||||||||||||||||||
| Dow Executives’ Supplemental Retirement Plan | 6.4 | 38,763 | 646,684 | Historical Dow Executives’ Supplemental Retirement Plan | 42.6 | — | — | ||||||||||||||||||||||||
Charles J. Kalil | Historical Dow Employees’ Pension Plan | 38.7 | 1,990,508 | 30,532 | |||||||||||||||||||||||||||
| Historical Dow Executives’ Supplemental Retirement Plan | 38.7 | 255,770 | 599,540 | ||||||||||||||||||||||||||||
| (a) | Unless otherwise noted, all present values reflect accrued age 65 benefits. The form of payment, discount rate |
| (b) |
| Mr. Breen is not eligible to, and does not, participate in either of Historical DuPont’s Pension or Pension Restoration Plans. |
Mr. Liveris also accumulated funds in the Australian Superannuation Fund (“Australian Fund”) prior to his permanent transfer to the United States. The value of Mr. Liveris’ Company contributions in the Australian Fund at |
Defined-Benefit Retirement Plans
GivenIn 2018, the anticipated limited duration of the combined Company, DowDuPont has no employees. TheCompany’s executive officers of DowDuPont continuecontinued to be employees of, and participants in the benefit programs of Historical Dow and Historical DuPont, respectively.
The Dow Employees’ Pension Plan
For employees hired prior to January 1, 2008:2008, Historical Dow provides the Dow Employees’ Pension Plan (“DEPP”) for its U.S. employees and for employees of some of its wholly owned U.S. subsidiaries. Upon retirement, employees receive an annual pension under the DEPP formula subject to statutory limitations. The benefit is paid in the form of a monthly annuity and is calculated based on the sum of the employee’s yearly basic and supplemental accruals up to a maximum of 425% for basic accruals and 120% for supplemental accruals.
Basic accruals equal the employee’s highest consecutive three-year average compensation (“HC3A”) multiplied by a percentage ranging from 4% to 18% based on the age of the employee in the years earned.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The sum of the basic and supplemental accruals is divided by a conversion factor to calculate an immediate monthly benefit. If the employee terminates employment before age 65 and defers payment of the benefit, the account balance calculated under this formula will be credited with interest. Messrs. Liveris, Ungerleider, Fitterling, and Kalil participate in DEPP.
For employees hired on or after January 1, 2008: The Personal Pension Account (“PPA”) grows annually based on Pay Credits and Interest Credits. At the end of each year, 5% of an employee’s base salary and actual variable pay is credited to the account (“Pay Credit”). Additionally, the PPA is credited with an annual Interest Credit equal to the Interest Credit Rate multiplied by the PPA balance as of December 31 of the previous year. The Interest Credit Rate is determined annually by Dow, and is based on the closing rate on thesix-month U.S. Treasury bill on the last business day of September immediately preceding the Plan Year plus 1.5%.
| 48 | | |||||||
When a vested employee leaves Dow, the PPA can be taken as an immediate annuity, as a deferred annuity or as a lump sum. Vesting is three years. Mr. Harlan participates in the PPA.
COMPENSATION DISCUSSION & ANALYSIS (continued)
The DuPont Pension Plan
Historical DuPont provides the DuPont Pension Plan, atax-qualified defined benefit pension plan that covers a majority of U.S. employees, except those hired or rehired after December 31, 2006. The DuPont Pension Plan currently provides employees with a lifetime retirement income based on years of service and the employees’ final average pay near retirement. In November 2016, Historical DuPont announced changes to the U.S. pension plans. Historical DuPont will freezefroze the pay and service amounts used to calculate pension benefits for active employees who participate in the U.S. pension plans on November 30, 2018 (the “Effective“Benefit Freeze Date”). Therefore, as of the Benefit Freeze Date, employees participating in the U.S. pension plans no longer accrue additional benefits for future service and eligible compensation received.
The normal form of benefit for married individuals is a 50% qualified joint and survivor annuity. The normal form of benefit for unmarried individuals is a single life annuity, which is actuarially equivalent to the normal form for married individuals. Normal retirement age under the DuPont Pension Plan is generally age 65, and benefits are vested after five years of service. Under the provisions of the DuPont Pension Plan, employees are eligible for unreduced pensions when they meet one of the following conditions:
Age 65 or older with at least five years of service
An employee who is not eligible for retirement with an unreduced pension is eligible for retirement with a reduced pension if he is at least age 50 with at least 15 years of service. His pension is reduced by the greater of 5% for every year that his age plus service is less than 85 or 5% for every year that his age is less than 58. In no event will the reduction exceed 50%. As of December 31, 2017,2018, Mr. Collins is eligible for a reduced pension. Mr. Breen was hired after December 31, 2006, and is not eligible to participate in the DuPont’s Pension or Pension Restoration Plans.
The primary pension formula that applies to the NEOs provides a monthly retirement benefit equal to:
Average monthly compensation is based on the employee’s three highest-paid years or, if greater, the 36 consecutive highest-paid months. Compensation for a given month includes regular compensation plusone-twelfth of an individual’s STIPannual incentive award for the relevant year. Other bonuses are not included in the calculation of average monthly compensation. Compensation for service after the EffectiveBenefit Freeze Date is disregarded in determining the average monthly compensation.
| | ||||||||
1.5% of Average Monthly Compensation Years of Service through 12/31/07 50% of Monthly Primary Social Security benefit is determined at Benefit YearsFreeze Date.
For the purpose of Service through 12/31/07 Total Yearsretirement eligibility, employee’s age and service post Benefit Freeze Date until termination of Service throughemployment will be counted in determining the Effective Date 0.5% of Average Monthly Compensation Years of Service from 1/1/2008 through the Effective Date 16.67% of Monthly Primary Social Security Benefit Years of Service from 1/1/2008 through the Effective Date Total Years of Service through the Effective Date
COMPENSATION DISCUSSION & ANALYSIS (continued)
The Dow Executives’ Supplemental Retirement Plan
Because the IRC limits the benefits otherwise provided by the DEPP, the Historical Dow Board of Directors adopted the Executives’ Supplemental Retirement Plan (“ESRP”(the “ESRP”) to provide employees who participate in DEPP withnon-qualified benefits calculated under the same formulas described above. Some parts of the supplemental benefit may be taken in the form of a lump sum depending upon date of hire and plan participation. All Dow NEOs participate in the ESRP.
Upon close of the Merger Transaction, the change of control triggered a distribution ofnon-qualified benefits to certain participants under the ESRP. Participants could elect to receive alump-sum payment or direct Dow to purchase an annuity on their behalf using theafter-tax proceeds of the lump sum (the “ESRP Choice Annuity”). The ESRP Choice Annuity option was designed and offered to allow participants to select an annuity option identical to what they would have received in the absence of a change in control and accelerated lump sum payment. The ESRP Choice Annuity was not intended to confer any additional benefit beyond the original annuity option. Structuring requirements resulted in a distribution and tax reimbursement in order to provide this equitable option. Detailed information regarding the obligation to make distributions due to change in control provisions under the terms of thesenon-qualified plans was provided in the joint proxy statement/prospectus, included in the registration statement on FormS-4 filed by DowDuPont with the SEC on March 1, 2016 (FileNo. 333-209869), as last amended on June 7, 2016, and declared effective by the SEC on June 9, 2016 (the “Registration Statement”). In addition to the Registration Statement, such change in control distributions were also described on the Form8K-12B filed by DowDuPont with the SEC on September 1, 2017, as well as the Company’s latest annual and quarterly reports on Forms10-K and10-Q. Post-merger, active employees continue to accrue thesenon-qualified benefits. The ESRP distributions triggered by the Merger Transaction are separate and distinct from the change in control and severance arrangements described on page 64 of the Proxy Statement.
| | 49 | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
In addition, Mr. Kalil elected to have a portion of his ESRP benefit secured by enrolling in the Key Employee Insurance Program (“KEIP”) in 1997. KEIP is a life insurance program that secured benefits otherwise available under ESRP, which was offered to certain employees as an alternative to the ESRP. Historical Dow has not offered KEIP to employees since 1999 and has no plans to reinstate this program for new participants.
The DuPont Pension Restoration Plan
If benefits provided under the DuPont Pension Plan exceed the applicable IRC compensation or benefit limits, the excess benefit is paid under the DuPont Pension Restoration Plan, an unfundednon-qualified plan. Effective January 1, 2007, the form of benefit under the DuPont Pension Restoration Plan for participants not already in pay status is a lump sum. The mortality tables and interest rates used to determine lump sum payments are the Applicable Mortality Table and the Applicable Interest Rate prescribed by the Secretary of the Treasury in IRC Section 417(e)(3).
Historical DuPont does not grant any extra years of credited service for pension benefit purposes. Key actuarial assumptions for the present value of accumulated benefit calculation can be found in Note 1718 (“Long-Term EmployeePension Plans and Other Post Employment Benefits”) to the Consolidated Financial Statements in Historical DuPont’s Annual Report on Form10-K for the year ended December 31, 2017.2018. All other assumptions are consistent with those used in the Long-Term EmployeePension Plans and Other Post Employment Benefits Note, except that the present value of accumulated benefit uses a retirement age at which the NEO may retire with an unreduced benefit under the DuPont Pension Plan. The valuation method used for determining the present value of the accumulated benefit is the traditional unit credit cost method.
Mr. Breen was hired after December 31, 2006, and is not eligible to participate in the DuPont Pension Restoration Plan.
Dow Employees’ Savings Plan
Historical Dow provides all U.S. salaried employees the opportunity to participate in a 401(k) plan (The Dow Chemical Company Employees’ Savings Plan). In 2017,2018, for salaried employees who contributed 2% of annual salary, Historical Dow provided a matching contribution of 100% of the employee’s contribution. For salaried employees who contributed up to an additional 4%, Historical Dow provided a 50% match. All NEOs participate in the 401(k) plan on the same terms as other eligible employees.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
DuPont Retirement Savings Plan
Historical DuPont provides all U.S. full-service employees the opportunity to participate in a 401(k) plan, the DuPont Retirement Savings Plan (“RSP”). Historical DuPont contributes 100% of the first 6% of the employee’s contribution election and also contributes 3% of each employee’s eligible compensation regardless of the employee’s contribution. All NEOs participate in the 401(k) plan on the same terms as other eligible employees.
Non-Qualified Deferred Compensation
The following table provides information on compensation the NEOs have elected to defer as described in the narrative that follows.
| 50 | | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
NON-QUALIFIED DEFERRED COMPENSATION FOR 20172018
Name | Executive Contributions in Last Fiscal Year ($)(a) | Company Contributions in Last Fiscal Year ($)(b) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($)(c) | Aggregate Balance at Last Fiscal Year-End ($)(d) | |||||||||||||||
Edward D. Breen(e) | 38,616 | 56,847 | 5,337 | — | 100,800 | |||||||||||||||
Andrew N. Liveris | 115,848 | 65,066 | 423,696 | 1,303,504 | 1,012,890 | |||||||||||||||
Howard I. Ungerleider | 53,118 | 29,936 | 171,045 | 1,141,502 | 18,340 | |||||||||||||||
James R. Fitterling | 56,728 | 32,229 | 598,006 | 2,473,897 | 1,607,825 | |||||||||||||||
Charles J. Kalil | 52,341 | 29,867 | 79,222 | 484,135 | 1,208,654 | |||||||||||||||
James C. Collins(e) | 15,500 | 23,250 | 2,417 | — | 41,167 | |||||||||||||||
Joe E. Harlan | 63,224 | — | 16,468 | — | 646,062 | |||||||||||||||
| Name | Executive Contributions in Last Fiscal Year ($)(a) | Company Contributions in Last Fiscal Year ($)(b) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($) | ||||||||||||||||||||
Edward D. Breen | 386,072 | 579,108 | (131,201 | ) | — | 1,703,648 | |||||||||||||||||||
Howard I. Ungerleider(c) | 55,157 | 30,430 | (10,543 | ) | — | 93,384 | |||||||||||||||||||
James R. Fitterling(c) | 58,905 | 32,019 | (124,313 | ) | — | 1,574,437 | |||||||||||||||||||
C. Marc Doyle | 96,000 | 144,000 | (64,204 | ) | — | 557,944 | |||||||||||||||||||
James C. Collins | 101,000 | 151,500 | 28,612 | — | 1,207,155 | ||||||||||||||||||||
Andrew N. Liveris(c) | 58,235 | 65,223 | (165,743 | ) | — | 970,605 | |||||||||||||||||||
Charles J. Kalil(c) | 39,384 | 28,695 | (3,199 | ) | — | 1,273,535 | |||||||||||||||||||
| (a) | Executive contributions are included in salary for |
| (b) | Company contributions are included in All Other Compensation for |
| (c) |
| Includes Company and executive contributions with respect to Mr. Liveris of |
Dow Elective Deferral Plan
Because the IRC limits contributions to The Dow Chemical Company Employees’ Savings Plan, the Board of Directors adopted the Elective Deferral Plan (the “EDP”) in order to further assist employees in saving for retirement. The EDP allows participants to voluntarily defer the receipt of base salary (maximum deferral of 75%) and Performance Award (maximum deferral of 100%).
Each participant enrolled in the EDP receives a matching contribution using the same formula authorized for salaried participants under the 401(k) plan for employer matching contributions. The current formula provides for a matching contribution on the first 6% of base salary deferred. For purposes of calculating the match under the EDP, Historical Dow will assume each participant is contributing the maximum allowable amount to the 401(k) plan and receiving a match thereon. The assumed match from the 401(k) plan will be offset from the matching contribution calculated under the EDP. The NEOs’ balances consist primarily of voluntary deferrals (and related earnings), not contributions made by Historical Dow.
Investment choices include a fund with an interest rate equal to the sum of the60-month rolling average often-year U.S. Treasury Note yield plus the current five-year Historical Dow credit spread, as well as theline-up of funds available under The Dow Chemical Company Employees’ Savings Plan.
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COMPENSATION DISCUSSION & ANALYSIS (continued)
The EDP allows for distributions to commence on January 31 after separation or after a specific future year that can be later or earlier than the separation date. Distributions may be paid either in a lump sum or in equal monthly, quarterly or annual installments up to fifteen years based on the employee’s initial election as to the time and form of payment. If installments were elected, the unpaid balance will continue to accumulate gains and losses based on the employee’s investment selections. If payout upon change in control was elected, then when a change in control is triggered the employees are paid those balances per the terms of the plan document; as was the case with the Merger Transaction. Detailed information regarding the obligation to make distributions due to change in control provisions under the terms of thesenon-qualified plans was provided in the joint proxy statement/prospectus, included in the registration statement on FormS-4 filed by DowDuPont with the SEC on March 1, 2016 (FileNo. 333-209869), as last amended on June 7, 2016, and declared effective by the SEC on June 9, 2016 (the “Registration Statement”). In addition to the Registration Statement, such change in control distributions were also described on the Form8K-12B filed by DowDuPont with the SEC on September 1, 2017, as well as the Company’s latest annual and quarterly reports on Forms10-K and10-Q. The EDP distributions triggered by the Merger Transaction are separate and distinct from the change in control and severance arrangements described on page 64 of the Proxy Statement.document.
DuPontNon-Qualified Deferred Compensation Programs
Historical DuPont offersnon-qualified deferred compensation programs under which eligible participants may voluntarily elect to defer some portion of base salary, STIP, or LTI awards until a future date. Deferrals are credited to an account and earnings are calculated thereon in accordance with the applicable investment option or interest rate. With the exception of the Retirement Savings Restoration Plan (“RSRP”), there are no company contributions or matches. The RSRP was adopted to restore company contributions that would be lost due to IRC limits on compensation that can be contributed under Historical DuPont’stax-qualified savings plan.
| | 51 | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following provides an overview of the various deferral options as of December 31, 2017.2018.
RSRP:RSRP:
Under the RSRP, an NEO can elect to defer his/her eligible compensation (generally, base salary plus STIP) that exceeds the regulatory limits ($270,000275,000 in 2017)2018) in increments of 1% up to 6%. Historical DuPont matches participant contributions on adollar-for-dollar basis up to 6% of eligible pay. Historical DuPont also makes an additional contribution of 3% of eligible compensation. Participant investment options under the RSRP mirror the options available under thetax-qualified retirement savings plan. Distributions may be made in the form of a lump sum or annual installments after separation from service.
Management Deferred Compensation Plan (“MDCP”):
Under the MDCP, an NEO can elect to defer the receipt of up to 60% of his/her base salary and/or STIP award. Historical DuPont does not match deferrals under the MDCP. Participants may select from among seven core investment options under the MDCP for amounts deferred, including DowDuPont Common Stock units with dividend equivalents credited as additional stock units. In general, distributions may be made in the form of a lump sum at a specified future date if prior to separation from service, or a lump sum or annual installments after separation from service.
In addition, under the MDCP, an NEO can elect to defer the receipt of 100% of his/her LTI awards (RSUs and/or PSUs). Historical DuPont does not match LTI deferrals under the MDCP. LTI deferrals under the MDCP are in the form of DowDuPont Common Stock units with dividend equivalents credited as additional stock units.
Except for Mr. Ungerleider,Doyle, all of the NEOs are currently retirement eligible and entitled to benefits similar to most other salaried employees upon separation from the Company. All of the NEOs are also entitled to additional benefits in the case of an involuntary termination without cause or a change in control event. The summary below shows the impact of various types of separation events on the different compensation elements the NEOs receive.
Base Salary, Annual Incentive and Other Benefits – Retirement, Death, or Disability
Base Salary: Paid through date of separation on the normal schedule.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Outstanding LTI Awards
The treatment of LTI awards upon the different forms of separation are driven by Historical Dow and Historical DuPont’s respective plan documents.
Historical Dow’s Treatment of LTI – excluding Change in Control
The following LTI treatment applies if the executive meets the age 55 and 10 years of service requirementrequirement:
Stock Options: Vesting and expiration periods remain unchanged except that grants made in the same year as termination vestpro-rata for the portion of the year worked.
| 52 | | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Voluntary Separation
If the executive separates before meeting the age and service requirements of a particular grant, such grant is forfeited.
Involuntary Termination with Cause
Outstanding grants are forfeited and incentive income (including LTI) may be recovered by the companyCompany as described in the Executive Compensation Recovery Policy.
Disability, Death or Involuntary Termination without Cause
Executives not meeting the age and years of service requirements referenced above will receive the following for outstanding LTI grants:
Stock Options: Vesting and expiration periods are shortened to the earlier of the existing expiration date or one year.
In addition to the benefits described above for any retirement-eligible officers, all NEOs aligned to Historical Dow’s benefit plans will otherwise receive the following benefits if involuntarily terminated without cause.
Alump-sum severance payment of two weeks per year of service (up to a maximum of 18 months) under the U.S. Severance Plan, plus six months base salary under the Executive Severance Supplement. The U.S. Severance Plan covers most salaried employees in the United States.
Historical DuPont’s Treatment of LTI – excluding Change in Control
The following LTI treatment applies if the executive meets the age 55 and 10 years of service requirementrequirement:
Options continue vesting in accordance with the three-year vesting schedule.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Voluntary Separation or Termination for Cause
Historical DuPont’s various plans and programs provide for forfeiture of all unvested stock options, RSUs and PSUs when associated with voluntary separation or termination for cause.
Death
Options are fully vested and exercisable and expire two years following death or at the end of the original term, whichever is shorter.
Involuntary Termination without Cause
Vested options may be exercised during theone-year period following termination. During theone-year period, options continue to become exercisable in accordance with the three-year vesting schedule, as if the employee had not separated from service.
| | 53 | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
RSUs that are awarded as part of the annual award to eligible employees are automatically vested and paid out. Special or one time awards are forfeited upon a termination for lack of work. Upon disability, special or one time RSU awards are automatically vested and paid out.
Potential Payments upon Termination or Change in Control
Historical Dow and Historical DuPont respectively had change in control severance arrangements with certain NEOs or programs in place to ensure continuity of management in a potential change in control environment. These are legacy arrangements from each of Historical Dow and Historical DuPont, and are structured to protect the interests of stockholders by including a “double-trigger” mechanism that results in a severance payout only when:
A change of control is consummated, and
Equity awards granted pursuant to each of Historical Dow’s and Historical DuPont’s equity plans that were outstanding as of the date of the Merger Transaction have a double trigger change in control provision whereby the awards will become fully vested upon the holder’s involuntary termination of employment without cause within 24 months following a change in control.
The following arrangements are separate and distinct from the ESRP and EDP distributions triggered by the Merger Transaction as further described on pages 60 and 61 of the Proxy Statement.
HistoricalDow – Pre-Merger Arrangements
Pursuant to agreementschange in control arrangements entered into in 2007, Messrs. Liveris and Kalil will receivereceived the following benefits if separated within two years of a change in control event as referenced in the CD&A. An executive must be involuntarily terminated within two years of a change in control or resign for good reason following a change in control in order to receive benefits (“double trigger”).at retirement.
A severance payment equal to two times the executive’s annual base salary and target Performance Award (2.99 times for Mr. Liveris).
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
HistoricalDuPont – Pre-Merger Arrangements
To ensure that executives remain focused on company business during a period of uncertainty, in 2013, Historical DuPont adopted the Senior Executive Severance Plan. Messrs. Breen, Collins and CollinsDoyle are participants in the plan. For any benefits to be earned under the plan, a change in control must occur and the executive’s employment must be terminated within two years following the change in control, either by the Company without cause or the executive for good reason (a “double trigger”). Benefits provided under the plan include:
Lump sum cash payment equal to two times (three times for the CEO) the sum of the executive’s base salary and target annual bonus.
Covered executives are also entitled to reimbursement of any expenses incurred in enforcing their rights under the plan and, effective in December 2015, if any payments or benefits payable to the executive (whether under the plan or otherwise) are subject to the excise tax imposed under Section 4999 of the Code, an additional reimbursement payment will be made such that, on a netafter-tax basis, the executive would be in the same position as if no such excise tax had been imposed. The CompanyHistorical DuPont determined, particularly in light of the merger of equals with
| 54 | | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Historical Dow and Intended Business Separations, that such a reimbursement payment is appropriate for participants in the Senior Executive Severance Plan: (i) to provide reasonable assurance that the participants, especially those with a short tenure or a newly enhanced role at the Company,Historical DuPont, realize the benefit the CompanyHistorical DuPont intended to provide under the plan and (ii) during this time of uncertainty, to incentivize those executives to remain objective, avoid conflicts of interest and stay focused on executing the merger and Intended Business Separations to maximize stockholder value.
The plan requires a release of claims as a condition to the payment of benefits and includes twelve-monthtwelve-monthnon-competitionnon-competition andnon-solicitation provisions (eighteen months for the CEO) and additionalnon-disparagement and confidentiality provisions.
| | ||||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
The following table summarizes the value of the incremental benefits to be received due to an Involuntary Termination without cause or a change in control event as of December 31, 2017.2018.
INVOLUNTARY TERMINATION OR CHANGE IN CONTROL VALUES
Name | Type of Benefit | Involuntary Without Cause ($)(a) | Change-in- Control ($)(b) | Type of Benefit | Involuntary Without Cause ($)(a) | Change-in- Control ($)(b) | ||||||||||||
Edward D. Breen | Severance
| 18,535,680
| 18,535,680
| Severance | 18,535,680 | 18,535,680 | ||||||||||||
LTI Acceleration(c)
| n/a
| 26,420,112
| LTI Acceleration(c) | n/a | 6,257,465 | |||||||||||||
Increase in Present Value of Pension
| n/a
| n/a
| ||||||||||||||||
Health & Welfare Benefits
| 38,915
| 38,915
| ||||||||||||||||
Outplacement & Financial Planning
| 9,900
| 9,900
| ||||||||||||||||
Tax Reimbursement
| —
| 22,258,116
| ||||||||||||||||
Andrew N. Liveris | Severance
| 3,861,600
| 15,298,694
| |||||||||||||||
LTI Acceleration
| n/a
| 54,140,050
| Increase in Present Value of Pension | n/a | n/a | |||||||||||||
Increase in Present Value of Pension
| n/a
| 475,666
| Health & Welfare Benefits | 41,607 | 41,607 | |||||||||||||
Health & Welfare Benefits
| 19,035
| 19,035
| Outplacement & Financial Planning | 9,900 | 9,900 | |||||||||||||
Outplacement & Financial Planning
| 30,000
| 50,000
| Tax Reimbursement | — | 16,370,507 | |||||||||||||
Howard I. Ungerleider | Severance
| 1,662,929
| 1,662,929
| Severance | 1,772,148 | 1,772,148 | ||||||||||||
LTI Acceleration
| n/a
| 17,217,385
| LTI Acceleration | — | 12,994,200 | |||||||||||||
Increase in Present Value of Pension
| n/a
| 15,816
| Increase in Present Value of Pension | — | 80,765 | |||||||||||||
Health & Welfare Benefits
| n/a
| n/a
| Health & Welfare Benefits | 6,705 | 6,705 | |||||||||||||
Outplacement & Financial Planning
| 30,000
| 30,000
| Outplacement & Financial Planning | 30,000 | 30,000 | |||||||||||||
James R. Fitterling | Severance
| 2,060,972
| 2,060,972
| Severance | 2,189,017 | 2,189,017 | ||||||||||||
LTI Acceleration
| n/a
| 19,378,222
| LTI Acceleration | — | 10,538,690 | |||||||||||||
Increase in Present Value of Pension
| n/a
| 20,665
| Increase in Present Value of Pension | — | 110,444 | |||||||||||||
Health & Welfare Benefits
| 18,207
| 18,207
| Health & Welfare Benefits | 27,495 | 27,495 | |||||||||||||
Outplacement & Financial Planning
| 30,000
| 30,000
| Outplacement & Financial Planning | 30,000 | 30,000 | |||||||||||||
Charles J. Kalil | Severance
| 2,056,070
| 4,306,033
| |||||||||||||||
C. Marc Doyle | Severance | 1,887,500 | 4,000,000 | |||||||||||||||
LTI Acceleration | 5,139,578 | 5,285,763 | ||||||||||||||||
LTI Acceleration
| n/a
| 14,911,402
| Increase in Present Value of Pension | n/a | n/a | |||||||||||||
Increase in Present Value of Pension
| n/a
| —
| Health & Welfare Benefits | 17,243 | 37,845 | |||||||||||||
Health & Welfare Benefits
| 6,345
| 6,345
| Outplacement & Financial Planning | 704 | 4,500 | |||||||||||||
Outplacement & Financial Planning
| 30,000
| 50,000
| Tax Reimbursement | — | 3,740,428 | |||||||||||||
James C. Collins | Severance
| 1,639,000
| 3,875,000
| Severance | 1,962,500 | 4,000,000 | ||||||||||||
LTI Acceleration
| n/a
| 11,483,349
| LTI Acceleration | n/a | 5,554,979 | |||||||||||||
Increase in Present Value of Pension
| Increase in Present Value of Pension | n/a | n/a | |||||||||||||||
Health & Welfare Benefits
| 10,368
| 10,368
| Health & Welfare Benefits | 3,324 | 10,008 | |||||||||||||
Outplacement & Financial Planning
| 10,204
| 23,500
| Outplacement & Financial Planning | 10,204 | 23,500 | |||||||||||||
Tax Reimbursement
| —
| 5,053,976
| Tax Reimbursement | — | 3,654,077 | |||||||||||||
Joe E. Harlan(d) | Severance
| 1,219,839
| n/a
| |||||||||||||||
Andrew N. Liveris(d) | Severance | — | 15,298,694 | |||||||||||||||
LTI Acceleration
| n/a
| 15,632,159
| LTI Acceleration | — | 21,555,276 | |||||||||||||
Increase in Present Value of Pension
| n/a
| n/a
| Increase in Present Value of Pension | — | — | |||||||||||||
Health & Welfare Benefits
| n/a
| n/a
| Health & Welfare Benefits | — | 13,329 | |||||||||||||
Outplacement & Financial Planning
| 30,000
| n/a
| Outplacement & Financial Planning | — | 50,000 | |||||||||||||
Charles J. Kalil(d) | Severance | — | 4,306,033 | |||||||||||||||
LTI Acceleration | — | 5,919,106 | ||||||||||||||||
Increase in Present Value of Pension | — | — | ||||||||||||||||
Health & Welfare Benefits | — | 13,329 | ||||||||||||||||
Outplacement & Financial Planning | — | 50,000 | ||||||||||||||||
| (a) | While as of December 31, |
| (b) | An executive must meet the double trigger requirement of being involuntarily terminated within two years of a change in control in order to receive benefits. In addition, the LTI acceleration value in this table includes Performance Shares at target. |
| (c) | Excludes LTI awards granted to Mr. Breen in his capacity as anon-employee director prior to his being named CEO of Historical DuPont. |
| (d) |
|
| | 55 | |||||||
COMPENSATION DISCUSSION & ANALYSIS (continued)
Compensation Committee Interlocks and Insider Participation
During 2017,2018, the members of the Company’s Compensation Committee were Lamberto Andreotti, Lois D. Juliber(Co-Chair), Raymond J. Milchovich, and Dennis H. Reilley(Co-Chair)., and Ruth G. Shaw. None of the members of the Compensation Committee were at any time during 20172018 an officer or employee of the Company. None of the executive officers serves as a member of the board of directors or a compensation committee of any entity that has one or more executive officers serving as a member of the Board or compensation committee.
The Compensation Committee of the Board reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with Company management. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in the Company’s Annual Report on Form10-K for the year ended December 31, 20172018 (“20172018 Annual Report”), as incorporated by reference from this Proxy Statement.
The Compensation Committee operates pursuant to a charter that is available atwww.dow-dupont.com/investors/corporate-governance.
This report is submitted by the Compensation Committee.
Lamberto Andreotti
Lois D. Juliber(Co-Chair)
Raymond J. Milchovich
Dennis H. Reilley(Co-Chair) (Chair)
| 56 | | |||||||
AGENDA ITEM 2: ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION
As required by Section 14A of the Exchange Act, the Company is asking stockholders to approve an advisory resolution on the Company’s executive compensation as reported in this Proxy Statement. As described in the Compensation Discussion and Analysis section of this Proxy Statement, executive compensation programs are designed to attract and retain talent through the alignment of pay and financial interests of the executives with stockholder value creation, particularly as DowDuPont seeks to realize Merger Transaction synergies and complete the spin into three separate public companies.
As described in the Compensation Discussion and Analysis section, the People and Compensation Committee believes the executive compensation programs create incentives for strong operational performance and for the long-term benefit of the Company.
Beginning in 2011, a “say on pay” advisory vote to approve executive compensation has been required for all U.S. public companies under Section 14A of the Exchange Act. Therefore, in accordance with the Exchange Act, and as a matter of good corporate governance, the Company is asking stockholders to approve the followingnon-binding advisory resolution at the 20182019 Annual Meeting of Stockholders:
RESOLVED, that the stockholders of DowDuPont Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company’s 20182019 Annual Meeting of Stockholders.
This advisory resolution isnon-binding on the Board. Althoughnon-binding, the Board and the People and Compensation Committee will review and carefully consider the voting results when evaluating the executive compensation programs.
Unless the Board modifies its policy on the frequency of holding “say on pay” advisory votes, theThe next “say on pay” advisory vote will occur at the Company’s 20192020 Annual Meeting of Stockholders.
The Board of Directors unanimously recommends a vote FOR the approval of the Advisory Resolution to Approve Executive Compensation.
✓ | AGENDA ITEM 2: ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION The Board of Directors recommends that you vote FOR this resolution. |
| | ||||||||
AGENDA ITEM 3: ADVISORY RESOLUTION ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION
Section 14A of the Exchange Act provides stockholders the opportunity to indicate how frequently the Company should hold future advisory votes to approve the compensation of the named executive officers. Stockholders may indicate whether they would prefer to have future advisory votes to approve executive compensation every one year, every two years, every three years or abstain from voting.
After careful consideration, the Board recommends that future advisory votes to approve compensation of the named executive officers be held annually. The Board believes that holding a vote every year is the most appropriate option because (i) it would enable the stockholders to provide us with input regarding the compensation of the named executive officers on a timely basis; and (ii) it is consistent with the Company’s practice of engaging with stockholders, and obtaining their input, on corporate governance matters and executive compensation philosophy, policies and practices. Stockholders are not voting to approve or disapprove the Board’s recommendation. Rather, stockholders may indicate their preference on the frequency of Advisory Compensation Votes by voting for one of the following options:
For the reasons discussed above, the Company is asking stockholders to vote to hold an advisory vote to approve executive compensation every one year.
The Board unanimously recommends a vote to hold future advisory votes to approve executive compensation “EVERY ONE YEAR”.
This advisory resolution isnon-binding on the Board. Althoughnon-binding, the Board and the Compensation Committee will review and carefully consider the voting results when establishing its policy on the frequency of holding future advisory votes to approve executive compensation.
|
|
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AGENDA ITEM 4:3: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
RESOLVED, that the appointment of Deloitte & TouchePricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for 2018,2019, made by the Audit Committee with the concurrence of the Board, is hereby ratified.
Appointment of PricewaterhouseCoopers LLP as the Independent Registered Public Accounting Firm
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm. The Company Bylaws provide thatIn connection with the selection ofIntended Business Separation, the Audit Committee appointed PricewaterhouseCoopers LLP, on December 13, 2018, as the independent registered public accounting firm must be presented for stockholder ratification or rejection at each Annual Meeting.the fiscal year ending December 31, 2019. The Audit Committee has appointed, and the Board has concurred subject to your ratification, Deloitte & Touchewith the appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for 2018.2019, subject to stockholder ratification.
As part of the Merger Transaction, Historical Dow was determined to be the accounting acquirer and, as a result, Deloitte & Touche LLP, servedHistorical Dow’s auditor, was appointed to serve as Dow’sthe independent registered public accounting firm for the audits of the Company’s consolidated financial statements appearing in the Company’s annual reports on Form10-K for the years ending December 31, 2018 and December 31, 2017.
In connection with the Dow Distribution, Deloitte & Touche LLP has offices at or near mostwas retained as the independent auditor of Dow and effectively did not stand forre-election as the independent registered public accounting firm of the locations where DowDuPont operates in the United States and other countries. Company for 2019.
The members of the Audit Committee and the Board believe that the continued retentionaudit report of Deloitte & Touche LLP is inon the best interestsconsolidated financial statements of the Company appearing in the Company’s annual report on Form10-K for the fiscal years ended December 31, 2018 and its investors.December 31, 2017, did not contain any adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company’s fiscal years ended December 31, 2018 and December 31, 2017, there were no disagreements between the Company and Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure (within the meaning of Item 304(a)(1)(iv) of Regulation S-K) and there were no reportable events (as defined by Item 304(a)(1)(v) of Regulation S-K).
PricewaterhouseCoopers LLP participated in a portion of the audit of the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2018 and December 31, 2017 as registered public accounting firm for the audit of Historical DuPont. During the fiscal years ended December 31, 2018 and December 31, 2017, other than in the normal course of the audit, the Company did not consult with PricewaterhouseCoopers LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.
Audit Committee Process
Before making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates for the independent registered public accounting firm. For Deloitte & TouchePricewaterhouseCoopers LLP, this has included a review of its performance in prior years, its independence and processes for maintaining independence, the results of the most recent internal quality control review or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well as its reputation for integrity and competence in the fields of accounting and auditing. The Audit Committee is responsible for the audit fee negotiations with Deloitte & TouchePricewaterhouseCoopers LLP and the Audit Committee is directly involved in the selection of the lead engagement partner in conjunction with the mandated rotation of this position. Additional information may be found in the Audit Committee Report on page 7261 of the Proxy Statement and in the Audit Committee charterCharter available on the Company’s website atwww.dow-dupont.com/investors/corporate-governance.
The Audit Committee has expressed its satisfaction with Deloitte & Touche LLP. In October 2017, Deloitte & Touche LLP advised the Audit Committee that, like all other major accounting firms, it has been named as a defendant in a number of civil lawsuits, most of which are premised on allegations that financial statements issued by clients and reported on by the firm were incorrect. Deloitte & Touche LLP has further advised the Audit Committee that based on the firm’s historical experience and understanding of the circumstances giving rise to such lawsuits, the firm does not believe that they will have a significant impact on the firm’s ability to serve as the independent registered public accounting firm for the Company. The Audit Committee has concluded that the ability of Deloitte & Touche LLP to perform services for the Company is not adversely affected by such litigation.
| 58 | | |||||||
AGENDA ITEM 3: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
Representatives of Deloitte & TouchePricewaterhouseCoopers LLP will attend the 20182019 Meeting and may make a statement if they wish. They will be available to answer stockholder questions at the 20182019 Meeting. Representatives of Deloitte & Touche LLP are not expected to attend the 2019 Meeting.
In the event that the selection of Deloitte & TouchePricewaterhouseCoopers LLP is not ratified by stockholders, the Audit Committee will take that into account in connection with any future decisions as to the selection of a firm to serve as the Company’s auditors, although by law the Audit Committee has final authority over the determination of whether to retain Deloitte & TouchePricewaterhouseCoopers LLP or another firm at any time.
Audit CommitteePre-Approval Policy
To assure that the audit andnon-audit services performed by the independent registered public accounting firm do not impair its independence in appearance or in fact, the Audit Committee has established policies and procedures requiring itspre-approval of all such services and associated fees.
The independent registered public accounting firm submits a report annually regarding the audit, audit-related, tax and other services it expects to render in the following year and the associated, forecasted fees to the Audit Committee for its approval. Audit services include the audit of the Company’s Consolidated Financial Statements, separate audits of its subsidiaries, services associated with regulatory filings and attestation services regarding the effectiveness of the Company’s internal controls over financial reporting. Audit-related services are assurance services that are reasonably related to the audit of the Company’s Consolidated Financial Statements or services traditionally provided by the independent registered public accounting firm. Audit-related services include employee benefit plan audits; audits ofcarve-out financial statements related to divestitures; due diligence services regarding potential acquisitions or dispositions, includingtax-related due diligence; internal control reviews and recommendations on internal control requirements, excluding those that are part of the financial statement audit; and agreed-upon or expanded audit procedures related to regulatory requirements. Tax services include selected tax compliance services, advice and recommendation with respect to issues such as tax audits and appeals, restructurings, mergers and acquisitions, and assistance regarding appropriate handling of items on the returns, required disclosures, elections and filing positions available to the Company. Other services includenon-financial attestation, assessment and advisory services. The Audit Committee may delegate to one or more members, the authority to grant specificpre-approvals under this policy provided that anypre-approvals so made shall be reported to the full Audit Committee at its next meeting.
If a service has not been included in the annualpre-approval process, it must be specificallypre-approved by the Audit Committee. In situations where the cost of services is likely to exceed the approved fees, excluding the impact of currency, specificpre-approval is required. Requests for specificpre-approvals will be considered by the full Audit Committee. If that is not practical, then the Chair may grant specificpre-approvals when the estimated cost for the service or the increase in fees for a previouslypre-approved service does not exceed $500,000. Any suchpre-approvals are reported to the full Audit Committee at its next meeting.
The Board unanimously recommends that stockholders vote FOR the resolution to ratify the selection of Deloitte & TouchePricewaterhouseCoopers LLP as the independent registered public accounting firm for DowDuPont for 2018.2019.
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AGENDA ITEM 4:3: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
Independent Registered Public Accounting Firm Fees
For the years ended December 31, 20172018 and 2016,2017, professional services were performed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates. The Audit Committeepre-approved all services rendered by and associated fees paid to Deloitte & Touche LLP for the years ended December 31, 2018 and 2017. Total fees for the years ended December 31, 20172018 and 2016,2017, for the independent registered public accounting firm were:
Type of Fees $ in thousands | DowDuPont 2017(e) | Dow 2017(f) | Dow 2016 | ||||||||||||
Audit Fees(a)
|
|
$3,520
|
|
|
$25,792
|
|
|
$24,686
|
| ||||||
Audit-Related Fees(b)
|
|
105
|
|
|
8,062
|
|
|
12,012
|
| ||||||
Tax Fees(c)
|
|
29
|
|
|
1,729
|
|
|
4,237
|
| ||||||
All Other Fees(d)
|
|
5,631
|
|
|
0
|
|
|
0
|
| ||||||
TOTAL
|
|
$9,285
|
|
|
$35,583
|
|
|
$40,935
|
| ||||||
Type of Fees | ||||||||||||
DowDuPont
| DowDuPont 2017
| Historical
| ||||||||||
| $ in thousands | ||||||||||||
Audit Fees (a) | $ 29,614 | $ 3,520 | $ 25,792 | |||||||||
Audited Related Fees (b) | 7,773 | 105 | 8,062 | |||||||||
Tax Fees (c) | 644 | 29 | 1,729 | |||||||||
All Other Fees (d) | 4,433 | 5,631 | 0 | |||||||||
|
|
|
|
|
| |||||||
TOTAL | $42,464 | $ 9,285 | $ 35,583 | |||||||||
| * | Includes audit, audit related and tax fees billed to Historical Dow. |
| (a) | The aggregate fees billed for the integrated audit of |
| (b) | The aggregate fees billed primarily for audits ofcarve-out financial statements, assessment of controls relating to outsourced services, audits and reviews supporting divestiture activities, and agreed-upon procedures engagements. |
| (c) | The aggregate fees billed primarily for preparation of expatriate employees’ tax returns and related compliance services. |
| (d) | The aggregate fees billed are for consulting work completed at Historical DuPont. |
| (e) | Represents fees from September 1, 2017 through December 31, 2017. |
| (f) | Represents fees from January 1, 2017 through December 31, 2017. |
✓
|
AGENDA ITEM The Board of Directors recommends that you vote FOR this resolution.
|
| 60 | | |||||||
The Audit Committee operates pursuant to a charter that is available atwww.dow-dupont.com/investors/corporate-governance. All references to Committee in this report refer to the Audit Committee.
The Audit Committee of the Board is comprised entirely of independent Directors who meet the independence, experience and other qualification requirements of the New York Stock Exchange (“NYSE”) and the Company. The Board has determined that all of the Committee members James A. Bell,are financially literate and that Robert A. Brown James M. Ringler and Patrick J. Ward are financially literate and are audit committee financial experts as defined by the applicable standards.
From January 1, 2017 through the Merger Transaction closing on August 31, 2017, DowThe Audit Committee held six Committee meetings. From September 1, 2017 through December 31, 2017, DowDuPont held three Committee meetings. Five11 meetings during 2018. Four meetings were regularly scheduled meetings (three as Dow, two as DowDuPont) that included separate executive sessions of the Committee with the lead client service partner of the independent registered public accounting firm, the internal auditor, the general counsel, management and among the Committee members themselves. FourSeven meetings were conference calls related to the Company’s earnings announcements and periodic filings (two as Dow, two as DowDuPont).filings. Numerous other informal meetings and communications among theco-chairs, various Committee members, the independent registered public accounting firm, the internal auditor and/or members of the Company’s management also occurred.
On behalf of the Board, the Committee oversees the Company’s financial reporting process and its internal control over financial reporting, areas for which management has the primary responsibility. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally accepted in the United States and for issuing its report on the Company’s internal control over financial reporting.
In this context, the Committee has reviewed and discussed with management and the independent registered public accounting firm the audited financial statements and the quarterly unaudited financial statements, matters relating to the Company’s internal control over financial reporting and the processes that support certifications of the financial statements by the Company’s Chief Executive Officer and Chief Financial Officer.
Among other items, the Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the standards of the Public Company Accounting Oversight Board. The Committee has received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and discussed with them their independence from the Company and its management. In addition, the Committee has received written materials addressing Deloitte & Touche LLP‘sthe independent registered public accounting firm’s internal quality control procedures and other matters as required by the NYSE listing standards.
Further, the Committeepre-approves and reviews audit, audit-related and permittednon-audit services provided by the independent registered public accounting firm to the Company and the related fees for such services.services pursuant to thePre-Approval Policy. The Committee haspre-approved all services provided and fees charged by the independent registered public accounting firm to the Company, and has concluded that such services are compatible with the auditors’ independence. The Committee’s charter allows delegation of the authority topre-approve audit, audit-related and permittednon-audit services by the independent registered public accounting firm to a subcommittee consisting of one or more Committee members, provided that such subcommittee decisions be presented to the full Committee at its next scheduled meeting.
Relying on the reviews and discussions referred to above, the Committee recommended to the Board, and the Board approved, that the audited financial statements and management’s report on internal control over financial reporting be included in the Company’s Annual Report on Form10-K for the year ended December 31, 2017,2018, for filing with the U.S. Securities and Exchange Commission. The Committee has also selected Deloitte & TouchePricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the Company and its subsidiaries for 2018.2019. The Board has concurred with that selection and has presented the matter to the stockholders of the Company for ratification.
This report is submitted by the Audit Committee.
James A. Bell(Co-Chair)
Robert A. Brown
JamesAlexander M. RinglerCutler
Patrick J. Ward(Co-Chair) (Chair)
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AGENDA ITEM 5:4: STOCKHOLDER PROPOSAL —
ELIMINATION OF SUPERMAJORITY VOTING THRESHOLDSRIGHT TO ACT BY WRITTEN CONSENT
A stockholder has stated that its representative intends to present the following proposal at the Annual2019 Meeting. The Company will promptly provide the name and address of the stockholder and the number of shares owned upon request directed to the Office of the Corporate Secretary. The Company is not responsible for the contents of the proposal. If properly presented at the Annual2019 Meeting,the Board unanimously recommends a vote AGAINST this proposal.
Proposal 5 – Simple Majority Vote4 — Right to Act by Written Consent
RESOLVED,Resolved, Shareholders request that our board take each stepof directors undertake such steps as may be necessary soto permit written consent by shareholders entitled to cast the minimum number of votes that each voting requirement in our charterwould be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and bylaws that calls for a greater than simple majority votevoting. This written consent is to be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws. Itlaw and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any valid topic for written consent.
Hundreds of major companies enable shareholder action by written consent. Taking action by written consent in place of a meeting is a means shareholders can use to raise important that our company take each step necessary to adopt this proposal topic completely.
Shareowners are willing to pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements have been found to be one of 6 entrenching mechanisms that are negatively related to company performance according to “What Matters in Corporate Governance” by Lucien Bebchuk, Alma Cohen and Allen Ferrell ofmatters outside the Harvard Law School. Supermajority requirements are used to block initiatives supported by most shareowners but opposed by a status quo management.normal annual meeting cycle.
This proposal topic won from 74% to 88%majority shareholder support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, McGraw-Hill13 major companies in a single year. This included 67%-support at both Allstate and Macy’s. The proponentsSprint. Hundreds of these proposals included Ray T. Cheveddenmajor companies enable shareholder action by written consent. This proposal topic would have received a vote still higher than 67% at Allstate and William Steiner.Sprint if most shareholders at Allstate and Sprint had access to independent proxy voting advice.
CurrentlyOur higher 25%-threshold for shareholders to call a 1%-minority can frustratespecial meeting (which may be unreachable due to time constraints and detailed technical requirements) is one more reason that we should have the willright to act by written consent.
When considering a shareholder proposal such as this is good to remember we gave 71%-support to a 2018 shareholder proposal for abolishing a shareholder need to obtain a 67%-vote to improve certain provisions of our 66%-shareholder majority. In other words a 1%-minority could have the power to prevent shareholders from improving management accoutability. Currently the role of DowDuPont shareholders is diminished because management can declare as worthless and useless a 66%-vote of shareholders on certain issues.
Please vote to improve management accountability:
Simple Majority Vote – Proposal 5
Company’s Statement and Recommendation
The Board recommends a vote AGAINST this proposal.corporate governance.
The Board believes thatability to elect a director by written consent would give our current directors a greater incentive to manage the supermajority provisionsfollowing problems more effectively and prevent a reoccurrence:
Purported lawsuits over drinking water contamination with PFOA in the Company’s Bylaws are necessaryOhio, West Virginia and appropriate given the current factsNew York. September 2018
Putative Class Action Lawsuit over alleged drinking water contamination, Cape Fear River.
September 2018
Pesticide Chlorpyrifos allegedly puts children’s brains and circumstances. A simple majoritypregnant women at risk.
August 2018
Four employees died of the stockholders have the powerasphyxiation after release of toxic gas at La Porte, Texas facility — $3 Million settlement.
July 2018
SEC investigation over failure to amend, alter, change, adopt and repeal the Bylaws at any annual or special meeting subjectdisclose perks paid to certain limited exceptions. An affirmative vote of at least 66 2/3% of the holders of all shares of capital stock of DowDuPont entitled to vote on such matters (a “Supermajority Vote”) are required to amend, alter, change adopt or repeal Article IX (Governance Provisions), Section 5.6 (detailing selection and role of the Executive Chairman), Section 5.7 (detailing the selection and role of CEO) and Section 8.1 (provisions requiring the methodAndrew Liveris, former CEO.
July 2018
$3 Million in perks provided for amendment) of the Bylaws. When the merger between Dow and DuPont was proposed, both companies were concerned about ensuring a balance in governance as a way to maintain equality in the combined company. Accordingly, this requirement was included in the draft bylaws included in the joint proxy statement/prospectus issued by Dow and DuPont on Andrew Liveris, former CEO.
July 2018
Lawsuits concerning Agent Orange.
June 10, 2016, and in the Bylaws adopted by the Board at the time of the closing of the Merger Transaction on August 31, 2017.2018
DowDuPont is pursuing the intended separation of its Agriculture Division, Materials Science Division and Specialty Products Division into three independent, publicly traded companies. Article IX of the Bylaws sets forth the governance provisions, including board composition, the function, composition and capabilities of the Advisory Committees which have been established to generally oversee the business and affairs of each division in preparation for the intended business separations. A more$2.4 Billion impairment charges reported.
February 2018
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AGENDA ITEM 5:4: STOCKHOLDER PROPOSAL — ELIMINATION OF SUPERMAJORITY VOTING THRESHOLDSRIGHT TO ACT BY WRITTEN CONSENT (continued)
detailed descriptionThe expectation is that, once this proposal is adopted, shareholders would not need to make use of this right of written consent because its mere existence will act as a guardrail to help ensure that our company is well supervised by the Board of Directors and management. Our Directors and management will want to avoid shareholder action by written consent and will thus be more alert in avoiding poor performance.
Please vote yes:
Right to Act by Written Consent — Proposal 4
Company’s Statement and Recommendation
The Board recommends a vote AGAINST this proposal.
Under the Company’s Certificate of Incorporation, any action required or permitted to be taken by the stockholders of the Advisory Committees and the composition thereof canCompany must be found beginning on page 4effected at a duly called annual or special meeting of the Proxy Statement. Under Article IX of the Bylaws, the ability of the Board, Executive Chairman and CEO, to carry out the steps to separate the three separate divisions is critical to the successstockholders of the Company and justifies inputmay not be effected by any consent in writing by such stockholders. The Company’s Bylaws currently provide that special meetings of stockholders may be called by the Secretary at the request in writing of the holders of record of at least 25% of the outstanding stock of the Company entitled to vote. The Board believes that this current mechanism for stockholders to raise matters for consideration by the Company is appropriate for the Company in light of its size and diverse stockholder base. In addition, the Company’s existing corporate governance practices ensure Board accountability and encourage stockholders to express their views to the Board.
The processes in place for stockholder meetings are designed to ensure that matters are presented and voted on in a fair, transparent and orderly manner. Prior to any annual or special meeting of stockholders, the Company is required to provide sufficient advance notice of the meeting and the matters to be voted upon along with fulsome disclosure about the proposed action. Such advance notice provides stockholders the opportunity to consider, discuss and deliberate on matters prior to voting based on accurate and complete information that has been circulated to the entire stockholder base. In contrast, adoption of the written consent proposal would permit a small group of stockholders (including short-term speculators) with no fiduciary duties to other stockholders to initiate action with no prior notice either to the other stockholders or to the Company, thus preventing all stockholders from more thanhaving an opportunity to deliberate in an open and transparent manner, and to consider arguments for and against any action, including the Company’s position. The Company believes that stockholder meetings provide an important forum for stockholders to present, discuss and vote on proposals on an informed basis. The ability for stockholders to act by written consent is simply not appropriate for the Company given its size, diverse stockholder base and the potential for abuse by groups of self-interested stockholders.
In addition to stockholders’ right to call a simplespecial meeting with a 25% threshold as described above, the following existing corporate governance practices ensure Board accountability and encourage stockholders to express their views:
The Company has adopted a proxy access Bylaw provision that permits eligible stockholders to nominate and include in the Company’s proxy materials director nominees, as discussed on page 9 of this Proxy Statement under the heading “Director Candidate Nominations through Proxy Access”;
All board members are elected annually by a majority of stockholders. Asthe votes cast by stockholders and directors not elected by a majority of the votes cast are subject to the Company’s resignation policy;
Annual stockholder“say-on-pay” vote gives stockholders the opportunity to express their views on executive compensation;
The Company’s Certificate of Incorporation and Bylaws do not include supermajority stockholder voting requirements;
Stockholders may communicate directly with the Board and each member thereof by writing to such this balancedparties in care of the Office of the Corporate Secretary, as further discussed on page 8 of the Proxy Statement under the heading “Communications with the Board and carefully considered approach is reasonableDirectors”; and necessary
Extensive stockholder engagement efforts as further discussed on page 8 of the Proxy Statement under the heading “Stockholder Engagement.”
Such corporate governance practices have been designed to ensure effective oversightBoard accountability and stockholder engagement and are appropriate for the Company in light of the intended business separations.
its size and large stockholder base. The Board strongly believes that extraordinary transactions and fundamental changes to corporate governance should have the broad supportadoption of DowDuPont’s stockholders rather than a simple majority. The Board also believes that the existing vote requirements protect stockholders against the potentially self-interested actions of short-term investors. Without requiring a Supermajority Vote in these key, limited circumstances, it would be possible for a group of short-term stockholders to approve a change in DowDuPont’s fundamental strategy thatthis proposal is not in the Company’s best interest as it drives towards the intended business separations.interests of our stockholders.
☒ |
AGENDA ITEM The Board of Directors recommends that you vote AGAINST this proposal.
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AGENDA ITEM 6:5: STOCKHOLDER PROPOSAL — PREPARATION OF AN EXECUTIVE COMPENSATION REPORT
A stockholder has stated that its representative intends to present the following proposal at the Annual2019 Meeting. The Company will promptly provide the name and address of the stockholder and the number of shares owned upon request directed to the Office of the Corporate Secretary. The Company is not responsible for the contents of the proposal. If properly presented at the Annual2019 Meeting,the Board unanimously recommends a vote AGAINST this proposal.
Resolved: That the shareholders of DowDupont, assembled in annual meeting in person and by proxy, hereby recommend the following nonbinding proposal: that the Board of Directors prepare a report, to be made available to shareholders four months after the 20182019 Annual Meeting, that shall review the compensation packages provided to senior executives of the Company and address the following.
1. Comparison of compensation packages for senior executives with that provided to the lowest paid Company employees.
2. Whether there should be a ceiling on compensation provided to senior executives to prevent the possibility of excessive compensation.
3. Whether compensation of senior executives should be adjusted in a situation where there is a stated need for employees to be laid off from work.
Shareholders’ Statement
DowDupont Board of Directors Corporate Governance Guidelines and its Amended Bylaws provide for the Board of Directors to determine the compensation of the members of the Board as they deem appropriate –- in effect, they determine their own compensation!
The amount of theirAccording to the DowDupont 2018 proxy statement, annual compensation for directors who served the pastfull year is not known as of the writing of this proposal. However, as guidance, the Dow and the Dupont 2017 proxy statements reflect annual compensation rangingranged from a minimum of $265,000$285,000 to over $350,000.
Given this extraordinarily generous compensation provided to the members of the Board, is it any surprise that these same members have approved extraordinarily generous compensation ranging from $7 to $23 million for senior executives who are also members of the Board?executives? Can we just view this back and forth between the Board and these senior executives as simply that of “one hand washing the other”?
Not surprisingly, virtually nothing is said either in the 2017 Dow or the DupontDowDupont proxy statement or in any of the DowDupont SEC filings, regarding how itsnon-executive employees are compensated. This failure is to be expected given that, over the past several years, employees have received the most minimal of wage increases. In fact, at the Richmond factory, with over 1,000 employees, there was no increase at all last year. Nothing.
This proposal seeks to have the Board address these issues of compensation, issues involving not just the compensation of executives, but also how executives are compensated in relation to how its othernon-executive employees are compensated.
If you AGREE with this proposal, please mark your proxy FOR this resolution.
Company’s Statement and Recommendation
The Board recommends a vote AGAINST this proposal.
The Board shares the underlying objective for the Company’s compensation policy and programs are designed to be linked to business and individual performance and shareholder value. The Company’s compensation programs for all employees reflect competitive positioning, internal equity, and the value the individual brings to the position. The Board believes that the objective of this proposal is addressed through the engaged oversight and work of the People and Compensation Committee as described in greater detail in the Compensation Discussion and Analysis (“CD&A”) beginning on page 3026 of the Proxy Statement.
| 64 | | |||||||
AGENDA ITEM 6:5: STOCKHOLDER PROPOSAL — PREPARATION OF AN EXECUTIVE COMPENSATION REPORT (continued)
Compensation of the executive officers of DowDuPont, including that of the NEOs, is governed by the People and Compensation Committee (or, in the case of both the Executive ChairmanChair and the CEO, by the Board). In addition, the executive compensation programs of Dow and DuPont in which the NEOs participate are also under the purview of the Dow Compensation Subcommittee and DuPont Compensation Subcommittee, respectively. The Board and the People and Compensation Committee and the respective Subcommittees are assisted in performance of their oversight duties by both independent compensation consultants and management.
At this time, the People and Compensation Committee is focused on ensuring the DowDuPont management team delivers value to stockholders through:
Enhanced EBITDA and cash flow generationgeneration;
Delivering committedrun-rate cost synergies of approximately $3.3$3.6 billion (against the original target of $3 billion) and at least $1 billion in growth synergies
Completing the Intended Business Separations.
To that end, the People and Compensation Committee’s executive compensation program is designed to align with these goals. More information about executive compensation can be found in the CD&A beginning on page 3026 of the Proxy Statement
The U.S. Securities and Exchange Commission has adopted extensive rules that provide for expanded disclosure of compensation-related information and additional transparency, including the new CEO pay ratio disclosure requirement. In complying with these rules, the Company has fully disclosed the relevant details of its executive compensation practices in the CD&A so that stockholders may evaluate those practices. The Board’s executive compensation practices are the result of the comprehensive process outlined in the CD&A above. That process requires the People and Compensation Committee to make many interrelated decisions and consider numerous competing interests. The People and Compensation Committee illustrates its pay for performance approach to executive compensation beginning on page 3829 of the CD&A. Additionally, this year the Company has disclosed information regarding the ratio of CEO pay to median employee pay on page 5747 of the CD&A.
Finally, stockholders have the right to vote, on an advisory basis, on the executive compensation disclosed in this Proxy Statement. Last year, stockholders who voted approved the compensation of the NEOs of the respective legacy companies. Dow and DuPont have historic, strong cultures of corporate governance. FourteenDowDuPont. Six of the sixteenseven Board members and all Standing Committee members are independent under the Corporate Governance Guidelines and applicable regulatory and listing standards.
For the foregoing reasons, the Board believes that the report requested by the proposal is not necessary.
☒ |
AGENDA ITEM The Board of Directors recommends that you vote AGAINST this proposal.
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| | 65 | |||||||
AGENDA ITEM 7:6: STOCKHOLDER PROPOSAL — PREPARATION OF A REPORT ON SUSTAINABILITY METRICS IN PERFORMANCE-BASED PAYCLIMATE CHANGE INDUCED FLOODING AND PUBLIC HEALTH
A stockholder has stated that its representative intends to present the following proposal at the Annual2019 Meeting. The Company will promptly provide the name and address of the stockholder and the number of shares owned upon request directed to the Office of the Corporate Secretary. The Company is not responsible for the contents of the proposal. If properly presented at the Annual2019 Meeting,the Board unanimously recommends a vote AGAINST this proposal.
WHEREAS: Numerous studies suggestRESOLVED: Shareholders request that companies that integrate environmental, social,DowDuPont, with board oversight, publish a report on climate change-induced flooding and governance (ESG) factors into business strategy reduce reputational, legal,public health, omitting proprietary information and regulatoryprepared at reasonable cost. The report should assess the public health risks of petrochemical operations and improve long-term performance.
A large, diverse group of companies has integrated sustainability metrics into executive pay incentive plans, among them Unilever, Walmart,investments in areas increasingly prone to climate change-induced storms, flooding, and Mead Johnson. Guidance issued by the United Nations Principles for Responsible Investment (2012) stated that including ESG factors in executive incentive schemes can help protect long-term shareholder value.
As a result of the DowDuPont merger, there are new opportunities from the perspective of long-term value creation to consider establishing a more transparent and consistent relationship between sustainability, company reputation and executive bonuses.
The company is certainly trying to improve its reputation, despite a lasting shadow cast by the 1984 Bhopal chemical disaster, the marketing of napalm in the Vietnam War,sea level rise and the continued production and marketingadequacy of controversial pesticides such as chlorpyrifos.
In the Harvard Business Review, Dow Chemical CEO Andrew Liveris asserted that this is “no longer the company that gave you napalm during the Vietnam War.” He discussed howmeasures the company is tryingemploying to transform itself through environmental initiatives and a commitment to sustainability, for instance, substituting more environmentally friendly materials for petrochemicals:prevent public health impacts from resultant chemical releases.
And our new goals have us delivering two billion dollars of new value through 2025 by managing inputs for less outputs, by managing ourselves on emissions and on waste so we impact the environment less. These sorts of metrics, which we now track for ourselves, we can articulate to the investment community.
The denominator goals actually became the simplest to talkWHEREAS: Investors are concerned about to investors and to the financial, community, which is look, there’s ahealth, environmental, regulatory, and reputational risks associated with operating andbuilding-out new chemical plants and related infrastructure in Gulf Coast locations that are increasingly prone to catastrophic storms and flooding associated with climate change. Civil society groups have mobilized to oppose the expansion of petrochemical facilities in their communities due to concerns regarding direct impacts to their health and livelihoods. Such opposition threatens to jeopardize DowDuPont’s social license to operate there’s a regulatory environment that comes through either federal or state or even local authorities,in the region.
Petrochemical facilities like ethane crackers and those regulatory environmentspolyethylene processing plants produce dangerous pollutants including benzene (a known carcinogen), Volatile Organic Compounds, and sulfur dioxide. These operations can become inundated and pose severe chemical release risks during extreme weather events. Flooding from Hurricane Harvey in 2017 resulted in DowDuPont plant shut downs and the release of unpermitted, unsafe levels of pollutants. Nearby Houston residents reported respiratory and skin problems following Dow’s releases during Hurricane Harvey.
Growing storms and the costs they bring our company are born from inputs that are garnered from everywhere,predicted to increase in frequency and we needintensity as global warming escalates. Flood-related damage is projected to be onehighest in Texas, where many of thoseDowDuPont’s petrochemical plants are concentrated. Houston alone has seen three500-year floods in the span of three years, and Hurricane Harvey reduced DowDuPont’s 2017 third quarter earnings by 250 million dollars. Sea level rise poses particularly significant risks to DowDuPont’s current and planned activities in Louisiana, where land loss from rising seas is a serious, growing issue.
Historically, DowDuPont has paid out millions in settlements with the Environmental Protection Agency and Department of Justice for violation of various clean air and water laws. As floods and storms intensify, they may bring additional unplanned chemical releases. Investors are concerned that provide that input.DowDuPont has not demonstrated how it will prevent such unsafe chemical releases and associated financial damages.
Although some executives withinIn spite of these growing risks, DowDuPont has dramatically accelerated its petrochemical activity in the Gulf Coast. The Company’s plans to invest heavily in further expansion in flood-prone areas of Texas and Louisiana increase risks to its physical assets and associated health harms to local communities from leaks, spills, and damages exacerbated by increasingly severe storms and flooding. While the company has disclosed that risks from storms may have performance awardsimpact its business, and that include elements of sustainability,it is undertaking engineering and sets performance goals foremergency planning and “continues to study” storm preparedness, available disclosures do not provide investors sufficient information to understand whether DowDuPont is effectively managing the CEOmaterial public health and Chairman, there is as yet no clearly articulated company policy that applies sustainability metrics to senior executive bonuses across the board.
RESOLVED: Shareholders request the Board Compensation Committee prepare a report to shareholders, at reasonable expensefinancial risks presented by climate-induced storm impacts and excluding proprietary information, assessing the feasibility of integrating the company’s sustainability metrics consistently to performance based pay incentives for senior executive staff under the Company’s compensation incentive plans. For the purposes of this proposal, “sustainability” is defined as how environmental and social considerations, and related financial, performance and reputation metrics, are integrated into long-term corporate strategy.
Supporting statement:
Examples of potential metrics to integrate to senior executive compensation could include: reductions in the total volume of persistentbio-accumulative toxic substances sold by the company annually, number of new products introduced, objective metrics of company reputation among community stakeholders, effective resolution of legacy issues, and metrics regarding the company’s reputation for reducing its environmental and social impact.sea level rise.
| 66 | | |||||||
AGENDA ITEM 7:6: STOCKHOLDER PROPOSAL — PREPARATION OF A REPORT ON SUSTAINABILITY METRICS IN PERFORMANCE-BASED PAYCLIMATE CHANGE INDUCED FLOODING AND PUBLIC HEALTH (continued)
Company’s Statement and Recommendation
The Board recommends a vote AGAINST this proposal.
The BoardDowDuPont agrees that the interestssafety of stockholdersits operations is critical to its employees, community and the Company. Safety, health and environmental stewardship are best served by companies that operate their businesses in a sustainable manner while focusing on long-term value creation. Since the 1980s, both Dow and DuPont have demonstrated industry leadership in sustainability. That commitment resulted in DowDuPont being named to the 2017 Dow Jones Sustainability World Index, recognizing DowDuPont’s continuing sustainability performance to beexplicitly called out in the top 10%core values for each DowDuPont division, and the Company is committed to continuously improving its practices in these areas. DowDuPont has always taken seriously the risk of potential physical damage to company facilities and its manufacturing processes and the industry.
Both Dowattendant health and DuPont have displayedsafety risks, and has taken a proven, decades-long track recordnumber of consistently integrating industry-leading sustainability, environmental,proactive measures to manage and social metrics into company strategyminimize risk, such as maintaining and using those metrics to drive company performance.implementing comprehensive disaster management plans that include consideration of design and siting of buildings, process safety management, community preparedness, and site emergency response.
In 2015, Dow launched its third set of industry-leading, aspirational 2025 Sustainability Goals, which link sustainability metrics directlyconnection with our stated intent to company strategy in every business unit, function and geography. Dow’s emphasis on integrating sustainability metrics into the everyday plans of the company has been key to its economic, environmental, and social metric successes over the past two decades.
In 2015, DuPont continued its sustainability leadership effort by announcing a set of 2020 Sustainability Goals that integrate sustainability with its innovation process, further improve its operational footprint and continue its efforts to enhance global food security.
More information about the Company’s commitments to sustainability and achievements are described in the “Sustainability Initiatives” section beginning on page 12 of the Proxy Statement. More information about Dow’s and DuPont’s legacy sustainability programs, goals, and reports can be found online atwww.dow-dupont.com/about-dow-dupont/sustainability.
Additionally, DowDuPont intends to createform three strong independent, industry leading companies in Agriculture, Materials Science, Agriculture and Specialty Products, DowDuPont separated its Materials Science business through aspin-off on April 1, 2019, of all the outstanding common stock of Dow to stockholders of DowDuPont. In preparation for thespin-off, DowDuPont realigned the assets and eachobligations associated with its Materials Science business to subsidiaries of these new intended companies willDow, including ownership of Historical DuPont’s largest petrochemical operations.
Prior to this realignment, DowDuPont owned and operated eleven facilities in the Gulf Coast region that make, use, or store petrochemicals. After this realignment, DowDuPont owns only three Gulf Coast petrochemical facilities—two are aligned to Specialty Products Division and one is aligned to the Agriculture Division. The petrochemical facility aligned to the Agriculture Division is one building on a larger Historical Dow site that is operated and maintained by Dow following the Dow Distribution. None of our current or planned operations include ethane crackers.
Furthermore, all Gulf Coast petrochemical manufacturing facilities currently operated or maintained by DowDuPont have independent sustainability strategies appropriatesite-specific response plans for hurricane monitoring, preparedness efforts, and site recovery after the storm. DowDuPont maintains a natural disaster response team that intervenes when it is forecasted that multiple sites may be impacted by a hurricane at Category 1 or above. The team leverages Company resources to their unique marketshelp impacted locations prepare for and business models.
Finally,respond to hurricane impacts. This support may include humanitarian aid, equipment, security, or more, depending on the incentive compensation program is structured around financialstorm and operational performance measures that the Compensation Committee believes are most important in driving the responsible, long-term growthneeds of the business. Achievement of these performance measures is enhanced by accomplishingsite.
Considering the Company’s sustainability goals, which include world-leading operations performance, providing customersexisting efforts to address and mitigate the risks associated with products that help solve sustainability challenges,climate change-induced storms and helping develop societal blueprints to accomplishflooding as described above, the United Nations Sustainable Development Goals. Given that sustainability performance is inherent inpreparation of such a report would not be the best use of the Company’s approach, making sustainability an explicit performance measure is not necessary.time or resources.
☒
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AGENDA ITEM The Board of Directors recommends that you vote AGAINST this proposal.
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AGENDA ITEM 8:7: STOCKHOLDER PROPOSAL — PREPARATION OF A REPORT ON INVESTMENT IN INDIAPLASTIC POLLUTION
A stockholder has stated that its representative intends to present the following proposal at the Annual2019 Meeting. The Company will promptly provide the name and address of the stockholder and the number of shares owned upon request directed to the Office of the Corporate Secretary. The Company is not responsible for the contents of the proposal. If properly presented at the Annual2019 Meeting,the Board unanimously recommends a vote AGAINST this proposal.
Whereas plastic pollution is a global environmental crisis. DowDupont is one of the world’s largest plastics and resins manufacturers and plastic pellets are increasingly found on beaches and in waterways due to spills at facilities or during transport.
On December 2, 1984, a Union Carbide plantEight million tons of plastics leaks into oceans annually. Plastics degrade in Bhopal, India, released a gas cloud killing approximately 7,000 people within dayswater to small particles that animals mistake for food; plastic pollution impacts 260 species, causing fatalities from ingestion, entanglement, suffocation, and at least 15,000drowning. Plastic does an estimated $13 billion in damage to marine ecosystems annually. If no action is taken, oceans are expected to contain more plastic than fish by 2050. Plastics also absorb toxics such as dioxins from water and transfer them to the marine food web and potentially to human diets, increasing the risk of adverse effects to wildlife and humans.
Nearly 200 nations pledged to eliminate plastic pollution in the years following. Records show that the plant stored bulk quantities ofultra-hazardous methyl isocyanate but US parent company UCC did not equip the plant with some crucial safety features. In 1988, an Indian court upheld the liability of UCC to pay damages. Criminal charges were also brought against UCC for culpable homicide not amounting to murder.
Of 573,588 official victims, thousands were left with chronic illnesses. Recent research finds ongoing morbidity and mortality at ten times normal rates and also damage to survivors’ DNA, increasing the likelihood of suffering extending through future generations. Studies have found organic contaminants and heavy metals in soilworld’s oceans at the former plant siteUnited Nations Environment Assembly in Nairobi last December. UN Undersecretary-General Erik Solheim called the issue “an ocean Armageddon.” The U.S. Microbead-Free Waters Act of 2015 banned one form of microplastic pollution—microbeads used in cosmetic products.
Most plastic products originate from plastic pellets, also known aspre-production pellets, or nurdles, manufactured in polymer production plants. Due to spills and poor handling procedures, billions of plastic pellets are swept into waterways during production or transport annually, adding to harmful levels of plastic pollution in local groundwater.the environment.
Bhopal exemplifiesPlastic pellets are estimated to be the second largest direct source of microplastic pollution to the ocean by weight; up to 53 billion pellets may be spilled annually in the United Kingdom alone. A recent study concluded that up to 36 million plastic pellets may be spilled from one major industry production complex in Sweden.
DowDupont and its subsidiaries reported 120 material spills in 2016 and 2017, but company information lacks specificity as to which involved pellets, whether spills occurred on land or waterways, and the extent to which spilled pellets were recovered. In 2017, joint ventureSCG-Dow disclosed four high-severity spills that may have released up to 11,000 pounds of plastic powder or granules. Dow is listed as a failuremember of nationalOperation Clean Sweep, an industry program to prevent spills, but this initiative provides no public reporting.
Given the severe biodiversity and international laweconomic impacts of plastic pollution described above, there is an urgent need to ensure corporate liabilityincrease and improve reporting, as well as discussing accountability for human and environmental harms. Responding to widespread public criticism, India reopened a civil claimpellet spill remediation in 2010, seeking additional compensation of over $1 billion. This year an Indian criminal court emailed Dow a ‘notice to appear’ in proceedings within which UCC is named an ‘absconder’. The Indian Law Ministry previously concluded that, “irrespective of the manner in which UCC has merged or has been acquired... if there is any legal liability, it would have to be borne by Dow...”more detail.
Dow Chemical CEO Andrew Liveris told McKinsey: “You’ve got to be agile, go to growth areas, and then stick with them.” India’s economy grows between7-9% annually, with its chemical sector predicted to reach $403 billion by 2025, but Dow’s growth in India is being challenged. Bhopal-related issues were cited in the cancellation of a proposed joint venture with GACL, causing Dow losses and missed revenues totalling $300 million between 2008 and 2016.
DowDuPont’s growth in India can be reasonably expected to face serious, continuing obstacles while legal and moral liability for Bhopal remains unresolved. According to Motley Fool, “Dow’s refusal to take responsibility for Bhopal has hit the company’s bottom line.... and even limited its ability to invest overseas.”
Resolved,BE IT RESOLVED shareholdersShareholders request that the Board of Directors prepare aof DowDuPont issue an annual report to shareholders, by October 2018, at reasonable cost and excluding confidentialomitting proprietary information, on plastic pollution. The report should disclose trends in the amount of pellets, powder or legally privileged information, providing objective, quantitative metricsgranules released to the environment by the company annually, and analysis regarding howconcisely assess the public’s associationeffectiveness of the company withcompany’s policies and actions to reduce the Bhopal tragedy may be relevant to plans for investment in India until 2025.volume of the company’s plastic materials contaminating the environment.
Supporting Statement
Suchstatement: Proponent recommends that the report should, as a minimum, discuss any standing court orders or legal developments that create a risk to direct investment in India. The proponents believe that metrics should also include at a minimum, for Dow Chemicaldiscussion of pellet loss prevention, cleanup and DuPont, for at least the last five years:containment.
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AGENDA ITEM 7: STOCKHOLDER PROPOSAL — PREPARATION OF A REPORT ON PLASTIC POLLUTION (continued)
Company’s Statement and Recommendation
The Board recommends a vote AGAINST this proposal.
DowDuPont was formed with the intent to separate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses. The separation of materials science business was completed on April 1, 2019 when DowDuPont stockholders received a pro rata dividend of all of the outstanding shares of common stock of Dow. The Specialty Plastics & Packaging segment aligned with the materials science business and is now part of Dow. The DowDuPont Board recommends that you vote against this proposal asksas the business is no longer part of the Company.
Please see the additional information below about Dow’s position on plastics waste including pellet loss:
Improving waste management systems is critical to solving the plastic waste issue in the near term, as we transition to a longer-term broad based circular economy model for plastics. In a circular economy, waste from one product can be used as an input for an entirely different product or industry (e.g., used plastic water bottles recycled into fabric for clothing) and systems are designed to avoid the creation of waste by maximizing the utility of materials throughout their lifecycle. This model will require wide-scale collaboration with governments, NGOs and private enterprise to invest in waste management infrastructure and enabling technology for increased recycling of plastics. Dow has been a leading voice on the need for scalable,end-of-life solutions for plastic waste for many years and has actively collaborated with NGOs, brand owners, governments, and customers on the development of research and demonstration projects to show how circular economy based principles applied to plastics can help keep waste out of our environment.
Operation Clean Sweep Blue: Dow is a pledged partner in Operation Clean Sweep (OCS), an international product stewardship program developed to prevent resin pellet, flake and powder loss, and help keep pellets, flakes and powder out of the marine environment. Dow is committed to ensuring zero pellet loss and is working to embed zero pellet loss principles in manufacturing and logistics projects through OCS Blue qualification at all Dow sites by the end of 2019. OCS Blue commitments include:
| ○ | Delivering an annual briefing on OCS to all relevant resin handling employees; |
| ○ | Educating new employees on the OCS program as part of onboarding; |
| ○ | Reviewing facility housekeeping procedures, using OCS checklists and tools; |
| ○ | Educating shipping contractors to help them understand the importance of OCS; and |
| ○ | Annually sharing with PLASTICS information on best management practices. |
Drive cross-value chain collaboration: Dow is helping lead a cross-industry and value chain effort to end plastic waste in the environment through the Global Alliance to End Plastic Waste.
Invest in people and companies working toward solutions: In October 2018, Dow announced that it became a founding investor in Circulate Capital’s $100 million effort to incubate and finance companies and infrastructure that prevent waste in oceans.
Engage with government: Dow is a member of the World Economic Forum’s Global Plastic Action Partnership designed to bring businesses, civil society, national and local governments, community groups and world-class experts together to collaborate on solving plastic pollution.
Clean-up existing waste: Dow’s recent #PullingOurWeight campaign, which began in fall 2018, included more than 5,600 Dow employees, families and friends participating in 55clean-ups globally, removing more than 52,500 pounds of trash and litter from beaches and waterways.
Innovate for recyclability: Product innovation is another key part of Dow’s efforts to end plastics waste in the environment. Dow’s RecycleReady technology enables manufacturers to develop packaging that can qualify for the Sustainable Packaging Coalition’s “How2Recycle” label.
Work closely with leading NGOs: Dow announced in October 2018 that it is donating an additional $1 million to Ocean Conservancy over the next two years to support waste collection and recycling solutions in Southeast Asian countries.
Invest in recycling and waste management solutions: Another step Dow is taking to issue a report assessing the financial, reputationalcomplement its circular economy activities is to drive development of new commercial recycling business models and operational impact the legacy Bhopal issue may have on Dow’s business in India and worldwide. It is importantgrowth strategies to note that Dow never owned or operatedmonetize plastics waste recycling streams globally.
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AGENDA ITEM 8:7: STOCKHOLDER PROPOSAL — PREPARATION OF A REPORT ON INVESTMENT IN INDIAPLASTIC POLLUTION (continued)
Dow has a legacy of innovation, leadership and action in sustainability. Sustainability is an inherent part of Dow’s long-term value proposition, and it guides the plant, which today is under the control of the Madhya Pradesh state government. Dow acquired the shares of Union Carbide Corporation (“UCC”) more than 16 years after the tragedy. We do not believe the Bhopal tragedy or related legal proceedings have had, or will have a significantdecisions made to drive responsible behaviors, bottom-line financial operational or reputational impact on Dow’s business in India or worldwide. Such a report is unnecessarybenefits and would consume valuable Company resources with no benefitbenefits to stockholders.
The 1984 gas leak in Bhopal, India, was one of the most tragic incidents in the history of the chemical industry.
By the time Dow acquired UCC’s stock in 2001, UCC had sold its interest in Union Carbide India Limited (“UCIL”), the entity which operated the plant at Bhopal. Most importantly, UCC and UCIL settled all liability claims related to the gas release under a legally-binding settlement with the Union of India approved by the Supreme Court of India in 1989, some 12 years before UCC’s transaction with Dow. The Court has reviewed the adequacy of the agreement and upheld the validity of the agreement in 1991 and again in 2007. In the settlement, UCC preserved its defense that it is not responsible for the gas release. No court has ever ruled on UCC’s liability for the gas release.
As to the matter of remediation of the site, responsibility for theclean-up of the Bhopal site lies with the Madhya Pradesh State government. In 1998, the Madhya Pradesh State Government, which owned and had been leasing the property to Union Carbide India Limited (UCIL), took over the facility and assumed all accountability for the site, including the completion of any additional remediation. Furthermore, rulings in 2005 and 2012 by both the High Court at Jabalpur and Supreme Court of India have confirmed that the responsibility of remediation lies with the State Government of Madhya Pradesh.
Further, in June 2013, in a case addressing the corporate liability of UCC for acts of UCIL, the U.S. Court of Appeals for the Second Circuit ruled that UCC is not liable for any environmental remediation or related site environmental consequences at the Bhopal plant site in India. The Court stated, “[M]any others living near the Bhopal [India] plant may well have suffered terrible and lasting injuries from a wholly preventable disaster for which someone is responsible. After nine years of contentious litigation and discovery, however, all that the evidence in this case demonstrates is that UCC is not that entity.”
Dow’s presence in India began in 1957 with the Polychem Limited joint venture. More than 50 years later, Dow’s affiliated companies continue to thrive with over 900 employees in India and a strong presence. Dow Chemical International Private Limited (“Dow India”) has two established Centers of Excellence in the areas of Engineering (Chennai) and Business Process Services and Expertise (Mumbai), three manufacturing sites, customer application centers and a variety of commercial offices. Providing market-leading products and solutions in industries as diverse as paints & coatings, water, pharmaceuticals, automotive, alternative energies, construction and agriculture, Dow is committed to consistent growth in India through its expertise as a science and technology leader, its experience as a leading chemical company, and its engagement with the communities in which itDow operates. As a responsibleDow remains committed to the highest standards of corporate citizen, Dow India provides free artificial limbsresponsibility, transparency and technology development for the ‘Jaipur Foot’ initiative; continues to build homes through the ‘Habitat for Humanity’ project, trains and supports rural women entrepreneurs with the Mann Deshi Foundation and equips teachers to deliver environment education in their classes. More information on Dow’s business in India can be found at www.in.dow.com.accountability.
The Bhopal tragedy has not impacted Dow’sDowDuPont Board recommends that you vote against this proposal as the business in India or worldwide. In fact, Dow’s affiliated companies continue to experience double-digit growth in India. Our Board believes that the resources required to issue a report assessing the financial, reputational, and operational impactis no longer part of the Bhopal issue would be unnecessary and wouldCompany; the proposal is not provide stockholders with any additional value.applicable to DowDuPont.
☒
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AGENDA ITEM The Board of Directors recommends that you vote AGAINST this proposal.
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AGENDA ITEM 9: STOCKHOLDER PROPOSAL — MODIFICATION OF THRESHOLD FOR CALLING SPECIAL STOCKHOLDER MEETINGS
A stockholder has stated that its representative intends to present the following proposal at the Annual Meeting. The Company will promptly provide the name and address of the stockholder and the number of shares owned upon request directed to the Office of the Corporate Secretary. The Company is not responsible for the contents of the proposal. If properly presented at the Annual Meeting,the Board unanimously recommends a vote AGAINST this proposal.
RESOLVED: Shareowners request that the Board of DowDuPont Inc. (“Company”) take the steps necessary to amend Company bylaws and appropriate governing documents to give holders of 10% of outstanding common stock the power to call a special shareowners meeting. To the fullest extent permitted by law, such bylaw text in regard to calling a special meeting shall not contain exceptions or excluding conditions that apply only to shareowners but not to management or the Board.
SUPPORTING STATEMENT
Under DowDuPont’s certificate of incorporation, a special shareholder meeting can only be called by 25% of shareowners. This impossibly high threshold – which could require $39.4 billion in stock – is unreasonable and out of line with Company peers.
This Proposal would grant 10% of shareowners the ability to convene a meeting to consider important matters. The Proposal does not alter the Board’s power to call special meetings; rather, it grants shareowners the reasonable right to call for consideration of important matters that may arise – and have arisen – between normally-scheduled annual meetings.
It appears that management has mishandled a variety of issues in ways that have increased both cost and liability for shareowners – sometimes significantly.
When Dow Chemical acquired Union Carbide in 2001, it acquired significant legal, financial, and reputational liabilities that stemmed from the 1984 Bhopal gas disaster, and other pollution of the lands and water of communities around the former Union Carbide Bhopal plant.
For over twenty-five years Union Carbide has been declared an “absconder” from Indian criminal proceedings – making itself subject to an Asset Attachment Order designed to compel a court appearance. Parent company Dow acquired this escalating legal risk from the same case, having just this year received formal notice to appear from the same Indian court. Dow now confronts the prospect of becoming subject to a national Asset Attachment Order.
Following intense public pressure, India filed a Supreme Court petition to reopen civil litigation that seeks compensation of over $1 billion. A number of parties have filed briefs in the case to request a Mareva Order – which would freeze assets of the Company. This is the equivalent to having a senior-level claim or lien on the Company, which would allow seizure of DowDuPont assets worldwide.
India’s economy has grown between7-9% annually and its chemical sector is expected to reach $403 billion by 2025. This emerging legal threat to the Company’s Indian assets may block or diminish participation in this growth, a risk that would significantly deprive shareowners.
However, despite having a legal duty to do so, DowDuPont has failed to disclose these risks in public filings or statements to shareowners. It has instead issued inadequate or misleading reports – a possible dereliction of Directors’ fiduciary duty.
For these reasons, shareowners need a reasonable 10% threshold to call a special meeting.
THEREFORE: Please vote FOR this common-sense governance enhancement that offers shareowners a critical right which DowDuPont’s 25% threshold places out of reach.
Company’s Statement and Recommendation
The Board recommends a vote AGAINST this proposal.
The Company’s Bylaws currently provide that special meetings of stockholders may be called either by the Board or by the Secretary at the request in writing of the holder of record of at least 25% of the outstanding stock of the Company entitled to
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AGENDA ITEM 9: STOCKHOLDER PROPOSAL — MODIFICATION OF THRESHOLD FOR CALLING SPECIAL STOCKHOLDER MEETINGS (continued)
vote. The Board believes that the current threshold for calling a special stockholders’ meeting is appropriate for the Company and that the lower threshold called for by the proponents’one-size-fits-all approach would be detrimental to the Company’s stockholders as a whole.
Special meetings are an important protection for all stockholders, and should be used appropriately to represent the interest of many rather than to benefit few. At 10%, two stockholders could call a special meeting. Lowering the threshold on the right to call special meetings would enable a small number of stockholders to call a special meeting on a subject which may be of little or no interest to most stockholders, and preparing for the special meeting would consume valuable Company resources that would be better spent elsewhere. The costs of decreasing the special meeting threshold outweigh its benefits.
More importantly, perhaps, the rationale for special stockholder meetings is not supported by lowering the threshold from 25% to 10%. Special stockholder meetings should be reserved for those matters of such importance that they cannot, and should not, wait until the next Annual Meeting of Stockholders. Matters of such utmost importance and urgency would necessarily be supported by 25% of stockholders. Lowering the threshold would not advance the purpose of special meetings, and if used improperly, would be costly, time-consuming, and disruptive to the Company.
The Board, which has a long combined history of successful corporate governance through its legacy boards, may, in furtherance of its fiduciary obligations, call special meetings of the stockholders, which is an added measure of confidence for stockholders that special meetings, when in the best interests of stockholders as a whole, will be convened.
The Board also believes that stockholders already have an extremely effective means of communicating with the Board on all issues. As discussed on page 9 of the Proxy Statement under the heading “Communications with the Board and Directors,” stockholders and other interested parties may communicate directly with the Board, the Executive Chairman, theCo-Lead Independent Directors or other outside Director by writing to such parties in care of the Office of the Corporate Secretary.
The Board believes that the current Bylaws strike the proper balance between the interest of stockholders to call special meetings to address critical issues on an expedited basis and the potential for additional cost and disruption that is associated with such meetings.
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Future Stockholder Proposals
If you satisfy the requirements of the rules and regulations of the SEC and wish to submit a proposal to be considered for inclusion in the Company’s proxy materials for the 20192020 Annual Meeting of Stockholders of DowDuPont Inc. (“20192020 Meeting”), pursuant toRule14a-8, please send it to the Office of the Corporate Secretary. Under SEC Exchange Act Rule14a-8, these proposals must be received no later than the close of business on November 16, 2018.December 31, 2019.
Future Annual Meeting Business
Under the Company’s Bylaws, if you wish to raise items of proper business directly at an annual meeting, including Director nominations outside of the proxy access process, other than stockholder proposals presented underRule 14a-8 for inclusion in the Company’s proxy materials, you must give advance written notification to the Office of the Corporate Secretary. For the 20192020 Meeting, written notice must be received by the Office of the Corporate Secretary between the close of business on November 16, 2018,December 31, 2019, and the close of business on December 16, 2018.January 30, 2020. However, as provided in the Bylaws, different deadlines apply if the 20192020 Meeting is called for a date that is not within 30 days before or after the anniversary of the 20182019 Meeting; in that event, written notice must be received by the Office of the Corporate Secretary no earlier than the close of business on the 120th day prior to the 20192020 Meeting and no later than the close of business on the later of the 90th day prior to the 20192020 Meeting or the 10th day following the date on which public disclosure of the date of such meeting is first made by the Company. Such notices must comply with the procedural and content requirements of the Bylaws. If notice of a matter is not received within the applicable deadlines or does not comply with the Bylaws, the chairmanchair of the annual meeting may refuse to introduce such matter. If a stockholder does not meet these deadlines or, does not satisfy the requirements of Rule14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the annual meeting. The full text of the Bylaws is available atwww.dow-dupont.com/investors/corporate-governance.
Future Director Nominees through Proxy Access
Under the Company’s Bylaws, if you wish to nominate a director through proxy access, you must give advance written notification to the Office of the Corporate Secretary. For the 20192020 Meeting, written notice must be received by the Office of the Corporate Secretary between the close of business on October 17, 2018,December 1, 2019, and the close of business on November 16, 2018.December 31, 2019. Such notices must comply with the procedural and content requirements of the Bylaws. The full text of the Bylaws is available atwww.dow-dupont.com/investors/corporate-governance.
Multiple Stockholders with the Same Address
In accordance with a notice sent previouslyThe SEC’s “householding” rules permit us to stockholders with the same surname who share a single address,deliver only one notice or set of proxy materials will be sent to stockholders who share an address unless contrary instructions were received from any stockholder at that address.otherwise requested. This practice known as “householding,” is designed to reduce printing and postage costs. If you did not respond that you did not want to participate in householding, you were deemed to have consented to the practice. If you are a registered stockholder and share an address with another stockholder and have received only one notice or one set of proxy materials, you may revoke your consentrequest a separate copy of these materials, and future materials, at any timeno cost to you by sending your namewriting to the Office of the Corporate Secretary. Alternatively, if you are currently receiving multiple copies of the notice or the proxy materials at the same address and your holder identification numberwish to receive a single copy in the future, you may contact the Office of the Corporate Secretary. If you hold your stock with a bank or broker, you may revoke your consent to householding at any time by contacting Broadridge Financial Solutions Inc., 51 Mercedes Way, Edgewood, NY 11717, or by calling1-866-540-7095. If you are a registered stockholder receiving multiple copies at the same address or if you have a number of accounts at a single brokerage firm, you may submit a request to receive a single copy in the future by contacting the Office of the Corporate Secretary. If you hold your stock with a bank or broker, contact Broadridge Financial Solutions Inc. at the address and telephone number provided above. The Company will promptly deliver to a stockholder who received one copy of proxy materials as the result of householding, a copy of the materials upon the stockholder’s written or oral request to the Office of the Corporate Secretary.
Electronic Delivery of Proxy Materials
Stockholders may request proxy materials be delivered to them electronically in 20192020 by visiting https://enroll.icsdelivery.com/dwdp. This results in faster delivery of the documents and significant savings to the Company by reducing printing and mailing costs.
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ADDITIONAL INFORMATION (continued)
Copies of Proxy Materials and Annual Report
The Notice and Proxy Statement and Annual Report are posted on DowDuPont’s websiteat www.dow-dupont.com/investors and at www.proxyvote.com.
Copies of Corporate Governance Documents
The Certificate of Incorporation, Bylaws, Corporate Governance Guidelines, Director Code of Conduct, Code of Financial Ethics, board committee charters and other governance documents are posted on DowDuPont’s website atwww.dow-dupont.com/investors/corporate-governance. Stockholders may receive printed copies of each of these documents without charge by contacting the Office of the Corporate Secretary, 974 Centre Road, Wilmington, DE 19805.
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Significant Items Impacting Results(1)
In millions, except per share amounts (Unaudited) | Pretax Impact(2) | Net Income(3) | EPS – Diluted(4) | |||||||||||||||||||||
TWELVE MONTHS ENDED DECEMBER 31 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Reported pro forma results
|
$
|
2,310
|
|
$
|
6,083
|
|
$
|
2,753
|
|
$
|
5,347
|
|
$
|
1.17
|
|
$
|
2.37
|
| ||||||
– Significant Items:
| ||||||||||||||||||||||||
Asbestos-related charge
|
|
—
|
|
|
(1,113
|
)
|
|
—
|
|
|
(701
|
)
|
|
—
|
|
|
(0.31
|
)
| ||||||
Charge for the termination of a terminal use agreement
|
|
—
|
|
|
(117
|
)
|
|
—
|
|
|
(74
|
)
|
|
—
|
|
|
(0.03
|
)
| ||||||
Customer claims adjustment/recovery
|
|
—
|
|
|
53
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
0.02
|
| ||||||
Environmental charges
|
|
—
|
|
|
(295
|
)
|
|
—
|
|
|
(205
|
)
|
|
—
|
|
|
(0.09
|
)
| ||||||
Gains on sales of businesses/entities
|
|
1,031
|
|
|
375
|
|
|
645
|
|
|
220
|
|
|
0.28
|
|
|
0.09
|
| ||||||
Impact of Dow Corning ownership restructure
|
|
—
|
|
|
2,106
|
|
|
—
|
|
|
2,350
|
|
|
—
|
|
|
1.05
|
| ||||||
Integration and separation costs
|
|
(1,499
|
)
|
|
(476
|
)
|
|
(1,028
|
)
|
|
(367
|
)
|
|
(0.44
|
)
|
|
(0.16
|
)
| ||||||
Merger-related inventorystep-up amortization
|
|
(1,483
|
)
|
|
—
|
|
|
(1,231
|
)
|
|
—
|
|
|
(0.53
|
)
|
|
—
|
| ||||||
Litigation related charges, awards and adjustments
|
|
(332
|
)
|
|
(1,208
|
)
|
|
(215
|
)
|
|
(761
|
)
|
|
(0.08
|
)
|
|
(0.34
|
)
| ||||||
Restructuring, goodwill impairment and asset related charges – net
|
|
(3,594
|
)
|
|
(1,176
|
)
|
|
(3,161
|
)
|
|
(782
|
)
|
|
(1.34
|
)
|
|
(0.35
|
)
| ||||||
Settlement and curtailment items
|
|
(892
|
)
|
|
382
|
|
|
(594
|
)
|
|
254
|
|
|
(0.25
|
)
|
|
0.11
|
| ||||||
Transaction costs and productivity actions
|
|
(58
|
)
|
|
(195
|
)
|
|
(37
|
)
|
|
(159
|
)
|
|
(0.02
|
)
|
|
(0.08
|
)
| ||||||
Income tax items
|
|
—
|
|
|
—
|
|
|
1,151
|
|
|
(13
|
)
|
|
0.48
|
|
|
—
|
| ||||||
Total significant items
|
$
|
(6,827
|
)
|
$
|
(1,664
|
)
|
$
|
(4,470
|
)
|
$
|
(204
|
)
|
$
|
(1.90
|
)
|
$
|
(0.09
|
)
| ||||||
- DuPont amortization of intangibles
|
|
(1,119
|
)
|
|
(1,080
|
)
|
|
(766
|
)
|
|
(730
|
)
|
|
(0.33
|
)
|
|
(0.33
|
)
| ||||||
= Pro forma adjusted results(Non-GAAP)
|
$
|
10,256
|
|
$
|
8,827
|
|
$
|
7,989
|
|
$
|
6,281
|
|
$
|
3.40
|
|
$
|
2.79
|
| ||||||
Pro forma adjusted measures of income arenon-GAAP measures. The Company’s management believes these measures provide useful information to investors by offering an additional way of viewing DowDuPont’s results that helps investors identify the underlying earnings of the Company as compared to prior and future periods and its peers. Although amortization of DuPont’s intangible assets is excluded from thesenon-GAAP measures, management believes it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in amortization of additional intangible assets. Pro forma adjusted measures are financial measures not recognized in accordance with U.S. GAAP and should not be viewed as an alternative to U.S. GAAP financial measures of performance.
| Significant Items Impacting Results(1) | ||||||||||||||||
| In millions, except per share amounts (unaudited) | Net Income(2) | EPS-Diluted(3) | ||||||||||||||
| TWELVE MONTHS ENDED DECEMBER 31 | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| As Reported | Pro Forma | As Reported | Pro Forma | |||||||||||||
Reported Results: | $ | 3,849 | $ | 2,753 | $ | 1.65 | $ | 1.17 | ||||||||
-Significant Items: | ||||||||||||||||
Net gain (loss) on divestitures and change in joint venture ownership | (23) | 645 | (0.01) | 0.28 | ||||||||||||
Integration and separation costs | (2,156) | (1,028) | (0.93) | (0.44) | ||||||||||||
Merger-related inventorystep-up amortization | (1,359) | (1,231) | (0.58) | (0.53) | ||||||||||||
Litigation related charges, awards and adjustments | - | (215) | - | (0.08) | ||||||||||||
Restructuring, goodwill impairment and asset related charges - net | (878) | (3,161) | (0.38) | (1.34) | ||||||||||||
Settlement and curtailment items | - | (594) | - | (0.25) | ||||||||||||
Loss on early extinguishment of debt | (104) | - | (0.04) | - | ||||||||||||
Transaction costs and productivity actions | - | (37) | - | (0.02) | ||||||||||||
Income tax items | (180) | 1,151 | (0.08) | 0.48 | ||||||||||||
Total impact of significant items | $ | (4,700) | $ | (4,470) | $ | (2.02) | $ | (1.90) | ||||||||
- DuPont amortization of intangibles | (1,015) | (766) | (0.44) | (0.33) | ||||||||||||
Adjusted Results(Non-GAAP) | $ | 9,564 | $ | 7,989 | $ | 4.11 | $ | 3.40 | ||||||||
Adjusted measures of income and pro forma adjusted measures of income arenon-GAAP measures. The Company’s management believes these measures provide useful information to investors by offering an additional way of viewing DowDuPont’s results that helps investors identify the underlying earnings of the Company as compared to prior and future periods and its peers. Although amortization of DuPont’s intangible assets is excluded from thesenon-GAAP measures, management believes it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in amortization of additional intangible assets. Pro forma adjusted measures are financial measures not recognized in accordance with U.S. GAAP and should not be viewed as an alternative to U.S. GAAP financial measures of performance. |
| |||||||||||||||
(1) See Note 24 to the Consolidated Financial Statements contained in the Company’s 2018 Annual Report on Form10-K for additional information related to significant items impacting results. |
| |||||||||||||||
(2) “Net income available for DowDuPont Inc. common stockholders”/Pro forma “Net income available for DowDuPont Inc. common stockholders.” The income tax effect on significant items is calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlyingnon-GAAP adjustment. |
| |||||||||||||||
(3) “Earnings per common share from continuing operations – diluted”/Pro forma “Earnings per common share from continuing operations – diluted.” |
| |||||||||||||||
| | A-1 | |||||||
APPENDIX (continued)
Common Shares – Diluted
The following tables present U.S. GAAP and Operating share counts for the twelve-month periods ended December 31, 2017, and December 31, 2016.
U.S. GAAP Share Count
In millions (Unaudited) | ||||||||||||||||||||
TWELVE MONTHS ENDED DECEMBER 31 | 2017 | 2016 | 2018 | 2017 | 2017 | |||||||||||||||
Weighted average common shares – basic(5, 6)
|
|
1,579.8
|
|
|
1,108.1
|
| ||||||||||||||
| As Reported | Pro Forma(6) | |||||||||||||||||||
Weighted average common shares – basic(5) | 2,301.0 | 1,579.8 | 2,323.9 | |||||||||||||||||
Plus dilutive effect of equity compensation plans(5)
|
|
18.3
|
|
|
15.1
|
| 14.5 | 18.3 | 22.2 | |||||||||||
Weighted average common shares – diluted
|
|
1,598.1
|
|
|
1,123.2
|
| 2,315.5 | 1,598.1 | 2,346.1 | |||||||||||
| (5) | As a result of the Merger Transaction, share amounts for the year ended December 31, 2017, reflect a weighted averaging effect of Historical Dow shares outstanding prior to August 31, 2017, and DowDuPont shares outstanding on or after August 31, 2017. |
| (6) |
Pro Forma Common Shares Outstanding
In millions (Unaudited) | ||||||||
TWELVE MONTHS ENDED DECEMBER 31 | 2017 | 2016 | ||||||
Dow common shares outstanding – basic(7)
|
|
808.1
|
|
|
1,108.1
|
| ||
DuPont common shares outstanding – basic(8)
|
|
744.1
|
|
|
1,113.2
|
| ||
DowDuPont common shares outstanding – basic(9)
|
|
771.7
|
|
|
—
|
| ||
Total DowDuPont common shares outstanding – basic
|
|
2,323.9
|
|
|
2,221.3
|
| ||
Dilutive impact of Dow equity-based awards(7)
|
|
12.2
|
|
|
15.1
|
| ||
Dilutive impact of DuPont equity-based awards(10)
|
|
3.9
|
|
|
5.7
|
| ||
Dilutive impact of DowDuPont equity-based awards(9)
|
|
6.1
|
|
|
—
|
| ||
Total DowDuPont common shares outstanding – diluted
|
|
2,346.1
|
|
|
2,242.1
|
| ||
| The pro forma share amount in the twelve-month period ended December 31, 2017, reflects a weighted averaging effect of Historical Dow shares outstanding prior to August 31, |
| The share information also includes DowDuPont share |
| | ||||||||
APPENDIX (continued)
Reconciliation of Pro Forma Earnings Per Common Share from Continuing Operations –Diluted to Pro Forma Adjusted Earnings Per Common Share from Continuing Operations
– Diluted(11)(7)
Dollars per share (Unaudited) | ||||||||
TWELVE MONTHS ENDED DECEMBER 31 | 2017 | 2016 | ||||||
Pro forma earnings per common share from continuing operations – diluted
|
$
|
1.17
|
|
$
|
2.37
|
| ||
– Impact of pro forma significant items,after-tax(12)
|
|
(1.90
|
)
|
|
(0.09
|
)
| ||
– Impact of pro forma amortization of DuPont’s intangible assets,after-tax
|
|
(0.33
|
)
|
|
(0.33
|
)
| ||
Pro forma adjusted earnings per common share from continuing operations – diluted(Non-GAAP)(11, 13)
|
$
|
3.40
|
|
$
|
2.79
|
| ||
| In millions (Unaudited) | ||||
| TWELVE MONTHS ENDED DECEMBER 31 | 2018 | 2017 | ||
| As Reported | Pro Forma | |||
Earnings per common share from continuing operations - diluted | $1.65 | $1.17 | ||
- Impact of pro forma significant items,after-tax(8) | (2.02) | (1.90) | ||
- Impact of pro forma amortization of DuPont’s intangible assets,after-tax | (0.44) | (0.33) | ||
Adjusted earnings per share from continuing operations – diluted(Non-GAAP) (7, 9) | $4.11 | $3.40 |
|
Refer to the Significant Items Impacting Results section in this Appendix for additional information on the impact of significant items. |
For the twelve-month periods ended December 31, |
The Company uses Pro Forma Operating EBITDA as its measure of profit/loss for segment reporting. The Company defines Pro Forma Operating EBITDA as pro forma earnings (i.e., pro forma “Income (loss) from continuing operations before income taxes”) before interest, depreciation, amortization and foreign exchange gains (losses), excluding the impact of adjusted significant items.
Reconciliation of “Pro forma income from continuing operations, net of tax” to “Pro forma Operating EBITDA”
In millions (Unaudited) | ||||||||
TWELVE MONTHS ENDED DECEMBER 31 | 2017 | 2016 | ||||||
Pro forma income from continuing operations, net of tax
|
$
|
2,912
|
|
$
|
5,795
|
| ||
+ Provision (Credit) from income taxes on continuing operations
|
|
(602
|
)
|
|
288
|
| ||
Pro forma income from continuing operations before income taxes
|
$
|
2,310
|
|
$
|
6,083
|
| ||
+ Depreciation and amortization
|
|
5,546
|
|
|
5,236
|
| ||
- Interest income(14)
|
|
230
|
|
|
209
|
| ||
+ Interest expense and amortization of debt discount
|
|
1,256
|
|
|
1,108
|
| ||
- Foreign exchange gains (losses), net(14)
|
|
(457
|
)
|
|
(232
|
)
| ||
Pro forma EBITDA
|
$
|
9,339
|
|
$
|
12,450
|
| ||
- Adjusted Significant Items(15)
|
|
(6,827
|
)
|
|
(1,664
|
)
| ||
Pro forma Operating EBITDA
|
$
|
16,166
|
|
$
|
14,114
|
| ||
| | ||||||||
Pro forma Operating EBITDA Margins Calculation
In millions (Unaudited) | ||||||||
TWELVE MONTHS ENDED DECEMBER 31 | 2017 | 2016 | ||||||
Pro forma Net Sales
|
$
|
79,535
|
|
$
|
70,894
|
| ||
Pro forma Operating EBITDA
|
$
|
16,166
|
|
$
|
14,114
|
| ||
Pro forma Operating EBITDA Margin
|
|
20.3%
|
|
|
19.9%
|
| ||
Reconciliation of “Income from continuing operations, net of tax” to “Operating EBITDA”
|
| |||||||
TWELVE MONTHS ENDED DECEMBER 31
| 2018
| 2017
| ||||||
| As Reported | Pro Forma | |||||||
Income from continuing operations, net of tax | $ | 4,004 | $ | 2,912 | ||||
+Provision (Credit) from income taxes on continuing operations | 1,489 | (602) | ||||||
Income from continuing operations before income taxes | $ | 5,493 | $ | 2,310 | ||||
+ Depreciation and Amortization | 5,918 | 5,546 | ||||||
- Interest income(10) | 210 | 230 | ||||||
+ Interest expense and Amortization of debt discount | 1,504 | 1,256 | ||||||
- Foreign exchange gains (losses), net(10) | (184) | (457) | ||||||
EBITDA | $ | 12,889 | $ | 9,339 | ||||
-Adjusted Significant Items(11) | (5,404) | (6,827) | ||||||
Operating EBITDA
| $
| 18,293
|
| $
| 16,166
|
| ||
(10) Included in “Sundry income (expense) – net.” |
| |||||||
(11) Adjusted significant items, excluding the impact ofone-time transaction costs directly attributable to the Merger Transaction and reflected in the pro forma adjustments.
|
| |||||||
Operating EBITDA Margins Calculation
| ||||||||
| In millions (Unaudited) | ||||||||
| TWELVE MONTHS ENDED DECEMBER 31 | 2018 | 2017 | ||||||
| As Reported | Pro Forma | |||||||
Net Sales | $ | 85,977 | $ | 79,535 | ||||
Operating EBITDA | $ | 18,293 | $ | 16,166 | ||||
Operating EBITDA Margin | 21.3% | 20.3% | ||||||
| | A-3 | |||||||
DowDuPont Inc.
2018 Annual Meeting of Stockholders
Wednesday, April 25, 2018 at 12:00 P.M. Central Time
The Ritz-Carlton Hotel
160 E Pearson St, Chicago, IL 60611
Corporate Headquarters Global Dow Center 2211 H.H.Dow Way Midland, MI 48674DOWDUPONT INC. ATTN: OFFICE OF THE CORPORATE SECRETARY 974 Centre Road Wilmington,CENTRE ROAD WILMINGTON, DE 19805 USA www.Dow-dupont.com
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on the cut-off date (see reverse side). Have your proxy card in hand when you access the website and follow the instructions to cast your vote. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on the cut-off date (see reverse side). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Votes must be received by the cut-off date (see reverse side). PROOF OF STOCK OWNERSHIP IS REQUIRED TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS. SEE REVERSE SIDE. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E78671-P25067-Z75005 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY DOWDUPONT INC. The Board of Directors recommends that you vote FOR all director nominees in Agenda Item 1, and FOR Agenda Items 2 and 3. 1. Election of Directors For Against Abstain Nominees: 1a. Edward D. Breen For Against Abstain 1b. Ruby R. Chandy 2. Advisory Resolution to Approve Executive Compensation 1c. Franklin K. Clyburn, Jr. 3. Rati?cation of the Appointment of the Independent Registered Public Accounting Firm 1d. Terrence R. Curtin The Board of Directors recommends that you vote AGAINST the 1e. Alexander M. Cutler following Stockholder Proposals: 1f. C. Marc Doyle 4. Right to Act by Written Consent 1g. Eleuthère I. du Pont 5. Preparation of an Executive Compensation Report 1h. Rajiv L. Gupta 6. Public Preparation Health of a Report on Climate Change Induced Flooding and 1i. Luther C. Kissam 7. Preparation of a Report on Plastic Pollution 1j. Frederick M. Lowery other NOTE: matters The undersigned as may properly authorizes come before the proxies the meeting to vote or in any their adjournment discretion on thereof. such 1k. Raymond J. Milchovich 1l. Steven M. Sterin Please sign exactly as name appears hereon. Joint owners should each sign personally. When signing as attorney, executor, administrator or other ?duciary, please give full title as such. All holders must sign. If a corporation, sign the full corporate name by authorized of?cer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be held AprilJune 25, 2018:
2019: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
YOUR VOTE IS IMPORTANT. PLEASE VOTE THE SHARES AS SOON AS POSSIBLE.
Bring this top portion and valid government issuedgovernment-issued photo identificationidenti?cation with you to attend the
Annual Meeting of Stockholders.
Please check the proxy materials for additional requirements for meeting attendance.
IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,
q? DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q? E78672-P25067-Z75005 DOWDUPONT INC. Annual Meeting of Stockholders June 25, 2019, 8:00 AM Eastern Time 974 Centre Road Chestnut Run Plaza, Building 730 Wilmington, DE 19805 This Proxy is Solicited on Behalf the Board of Directors. The undersigned hereby appoints A. M. Cutler and E. D. Breen or any of them, each with power of substitution, as proxies for the undersigned to vote all shares of Common Stock of said Company which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held on June 25, 2019, and any adjournment or postponement thereof, as hereinafter speci?ed and, in their discretion, upon such other matters as may properly come before the Meeting. The undersigned hereby revokes all proxies previously given. Such proxies are directed to vote as speci?ed on the reverse side, or if no speci?cation is made, FOR all director nominees in Agenda Item 1, FOR Agenda Items 2 and 3, and AGAINST Stockholder Proposals 4-7, and to vote in accordance with their discretion on such other matters as may properly come before the Meeting and at any adjournment or postponement of the Meeting. To vote in accordance with the DowDuPont Board of Directors’ recommendations, just sign and date on the reverse side; no voting boxes need to be checked. NOTICE TO PARTICIPANTS IN EMPLOYEES’ SAVINGS PLANS If you are a participant in certain employee savings plans, a trustee for the relevant employee savings plan may vote, as directed by the plan ?duciary or by an independent ?duciary selected by the plan ?duciary, all shares held in the plan for which no voting instructions are received. Other shares owned by you will be voted only if you sign and return a proxy card, vote by Internet or telephone, or attend the meeting and vote by ballot. The cut-off date for shares held in employee savings plans is June 20, 2019. The cut-off date for all other shares is June 24, 2019. Continued and to be signed on reverse side
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