UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Cabot Corporation
(Name of Registrant as Specified In Its Charter)
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Cabot Corporation
20202022 Proxy Statement
The Annual Meeting of Stockholders
of Cabot Corporation will be held:held virtually:
Thursday,March 12, 202010, 2022 at 4:00 p.m. ET
Cabot Corporation
Two Seaport Lane, Suite 1300
Boston, MA 02210-2019 USAat meetnow.global/MLNW2AY
Cabot Corporation Two Seaport Lane Suite 1400 Boston, MA 02210-2019 United States |
January 24, 202027, 2022
Dear Fellow Cabot Corporation Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders of Cabot Corporation (the “Company” or “Cabot”), which will be held virtually on Thursday, March 12, 2020,10, 2022, at 4:00 pm, Eastern Time,Time. In light of the continuing public health impact of the ongoing COVID-19 pandemic and to support the health and safety of the Company’s stockholders and attendees, the Annual Meeting will be held in a virtual meeting format via live webcast at meetnow.global/MLNW2AY, where you will be able to listen to the Corporate Headquartersmeeting live, submit questions and vote. You will need your control number included in your Notice of Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts.Internet Availability of Proxy Materials or proxy card. There will be no in-person meeting.
At the Annual Meeting, we will ask you to elect threefour members of our Board of Directors, provide your advisory approval of our executive compensation, and ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending September 30, 2020.2022. We will also discuss any other business matters properly brought before the meeting. The attached Proxy Statementproxy statement explains our voting procedures, describes the business we will conduct, and provides information about the Company that you should consider when you vote your shares.
We are using the “Notice and Access” method of providing proxy materials to you via the Internet. We are mailing to you a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the proxy materials and 20192021 Annual Report. Notice and Access provides a convenient and environmentally friendly way for you to access Cabot’s proxy materials. The Notice includes instructions on how to access our proxy statement and our 20192021 Annual Report and how to vote your shares. The Notice also contains instructions on how to receive a paper copy of the proxy materials and our 20192021 Annual Report, if you prefer.
Your vote is very important to us. Whether or not you plan to attend the Annual Meeting, in person, we encourage you to vote promptly. You may vote by mailing a completed proxy card, by phone or the Internet.
Thank you for your continued support of Cabot Corporation.
Sincerely,
SEAN D. KEOHANE
President and
Chief Executive Officer
Cabot Corporation Two Seaport Lane Suite 1400 Boston, MA 02210-2019 United States |
Notice of Annual Meeting of Stockholders
Date: | March |
Time: | 4:00 p.m., Eastern Time |
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Record Date: | You may vote if you were a stockholder of record at the close of business on January |
Voting by Proxy: | To ensure that your vote is properly recorded, please vote as soon as possible, even if you plan to attend the annual meeting. Stockholders who own shares in their own name (a record owner) have three options for submitting their vote by proxy: (1) by Internet, (2) by phone or (3) by mail. You may also vote |
If you hold your shares |
Items of Business | • | To elect |
To approve, in an advisory vote, our executive compensation;
To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2020;2022; and
To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
This notice and proxy statement are first being made available to stockholders on or about January 24, 2020.27, 2022. Our 20192021 Annual Report is available at http://www.edocumentview.com/cbt.
By order of the Board of Directors,
Jane A. Bell
Secretary
Boston, Massachusetts 02210-2019
January 24, 202027, 2022
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Board Leadership, Structure, Governance and Composition, and Risk Management | ||||
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Our Leadership | ||||
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How We | 16 | |||
How We Evaluate Our | 16 | |||
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2022 PROXY STATEMENT |
Table of Contents (continued)
Proposal 3 — Ratification of Appointment of Independent Registered Public Accounting Firm | ||||
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Cabot Corporation
Two Seaport Lane, Suite 13001400
Boston, Massachusetts 02210-2019
Proxy Statement
References to “the Company”, “Cabot”, “we”, “us”, and “our” in this proxy statement mean Cabot Corporation.
About the Annual Meeting
Who is soliciting my vote?
The Board of Directors of Cabot Corporation is soliciting your vote at the 20202022 Annual Meeting of Stockholders (“20202022 Annual Meeting” or the “meeting”).
What am I voting on?
You are voting on:
• | Proposal 1: Election of |
• | Proposal 2: Advisory approval of our executive compensation (commonly referred to as “say-on-pay”)(see page |
• | Proposal 3: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, |
Any other business properly coming before the meeting.
How does the Board recommend that I vote my shares?
The Board’s recommendation can be found with the description of each item in this proxy statement. In summary, the Board recommends that you vote:
FOR each of the threefour nominees for director;
FOR the advisory approval of our executive compensation (commonly referred to as“say-on-pay”);compensation; and
FORthe ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2020.2022.
Who is entitled to vote?
Only stockholders of record at the close of business on January 15, 202018, 2022 will be entitled to vote at the 20202022 Annual Meeting. As of that date, there were 56,676,15856,584,808 shares of our common stock outstanding. Each share of common stock is entitled to one vote. There is no cumulative voting.
What is the difference between a stockholder of record and a stockholder who holds stock “in street name”?
If you hold your shares directly in the form of stock certificates or in book-entry form with our transfer agent, Computershare, then you are a “stockholder of record.” If your shares are registered at Computershare in the name of a broker, bank, trustee, nominee or other similar holder of record, your shares are held in “street name.”
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About the Annual Meeting (continued)
Who can attend the meeting?
The 2022 Annual Meeting is open to all Cabot stockholders entitled to vote at the meeting and their legal proxies by following the instructions below under the heading “How can I attend the 2022 Annual Meeting?” You need not attend the 2022 Annual Meeting to vote.
How can I attend the 2022 Annual Meeting?
In light of the continuing public health impact of the ongoing COVID-19 pandemic and to support the health and safety of the Company’s stockholders and attendees, the 2022 Annual Meeting will be held in a virtual meeting format via live webcast. There will be no in-person meeting.
Visit meetnow.global/MLNW2AY to attend the meeting. To attend the meeting, stockholders of record as of January 18, 2022 will not need to register in advance but will need the control number included on their Notice of Internet Availability of Proxy Materials or proxy card. Stockholders whose shares are held in “street name” may attend the meeting by registering and obtaining a control number in advance using the instructions below under the heading “How do I register to attend the 2022 Annual Meeting?” The control number will be required to attend the meeting.
The meeting webcast will begin promptly at 4:00 p.m., Eastern Time. We encourage you to access the meeting prior to the start time. You should allow ample time for the check-in procedures.
We are committed to ensuring that stockholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the meeting online at meetnow.global/MLNW2AY, vote your shares electronically by clicking on the Vote icon and submit questions during the meeting by clicking on the Q&A icon. We will try to answer as many stockholder-submitted questions as time permits that comply with the meeting rules of conduct. However, we reserve the right to edit inappropriate language or to exclude questions that are not pertinent to meeting matters or that are otherwise inappropriate. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.
Do I need to register to attend the 2022 Annual Meeting?
If you were a stockholder of record on January 18, 2022, you do not need to register in advance to attend the 2022 Annual Meeting. Please follow the instructions on the Notice of Internet Availability of Proxy Materials or the proxy card that you received in order to attend.
If you hold your shares in “street name,” you must register and obtain a control number in advance to attend, vote and ask questions at the virtual meeting. To register to attend the meeting you will need to obtain a legal proxy from your bank, broker or other nominee. Follow the instructions provided to you by your bank, broker or other nominee or contact them to request a legal proxy form. Once you have received a legal proxy from them, you must submit the form of legal proxy provided by your bank, broker or other nominee reflecting the number of your shares along with your name and email address to Computershare, as described below. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on March 7, 2022. After Computershare receives your registration materials, you will receive a confirmation email from Computershare of your registration and control number.
Requests for registration may be directed to Computershare as follows:
1. | by email – send an email with your legal proxy information attached to legalproxy@computershare.com, labeled as “Legal Proxy.” |
2. | by mail – send your legal proxy information, labeled as “Legal Proxy,” to Computershare at the following address: |
Computershare
Cabot Corporation Legal Proxy
P.O. Box 43001
Providence, RI 02940-3001
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2022 PROXY STATEMENT |
About the Annual Meeting (continued)
Why did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials?
We are distributing our proxy materials to stockholders via the Internet under the “Notice and Access” approach permitted by rules of the Securities and Exchange Commission (“SEC”). This approach benefits the environment, while providing a timely and convenient method of accessing the materials and voting. On January 24, 2020,26, 2022, we will begin mailing a “Notice of Internet Availability of Proxy Materials” (the “Notice”) to stockholders. The Noticestockholders, which includes instructions on how to access our proxy statement and our 20192021 Annual Report and how to vote your shares. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive a paper copy of the proxy materials and our 20192021 Annual Report, if you prefer.
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About the Annual Meeting(continued)
How many votes must be present to hold the meeting?
Your shares are counted as present at the 20202022 Annual Meeting if you attend the meeting or if you properly return a proxy by Internet, telephone or mail. In order for us to hold our meeting, holders of a majority of our outstanding shares of common stock as of January 15, 202018, 2022 must be present in person or represented by proxy at the meeting. This majority is referred to as a quorum. Shares present virtually during the 2022 Annual Meeting will be considered shares of common stock present at the 2022 Annual Meeting. If you are a stockholder of record, your shares are counted as present at the 2022 Annual Meeting if you properly return a proxy by Internet, telephone or mail or if you attend the meeting virtually. If you hold your shares in “street name,” you must follow the instructions of your bank or broker in order to direct them how to vote the shares held in your account or obtain a legal proxy to vote online at the meeting. Proxy cards or broker voting instruction forms that reflect abstentions and brokernon-votes will be counted as shares present to determine whether a quorum exists to hold the 20202022 Annual Meeting.
What is a brokernon-vote?
Under the rules that govern brokers who have record ownership ofhold shares that they hold in “street name” for their clients who are the beneficial owners of the shares, brokers normally have discretion to vote such shares on routine matters, such as ratifications of independent registered public accounting firms, but not onnon-routine matters. Brokernon-votes generally occur when the beneficial owner of shares held by a broker does not give the broker voting instructions on anon-routine matter for which the broker lacks discretionary authority to vote the shares. We expect Proposals 1 and 2 arewill be considered non-routine matters.
Therefore, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted on proposals 1 and 2, your broker will not be able to vote your shares on these proposals. We urge you to provide instructions to your broker so that your votes may be counted on these important matters.
How are votes counted? How many votes are needed to approve each of the proposals?
For each of proposals 1, 2, and 3, you may vote “FOR”, “AGAINST”, or “ABSTAIN”.
• | Proposal 1 — Election of Directors. Pursuant to our bylaws, a nominee will be elected to the Board of Directors if the votes properly cast “for” his or her election exceed the votes properly cast “against” such nominee’s election. Brokernon-votes and abstentions will have no effect on the results of this vote. |
• | Proposal 2 —Say-on-Pay. Because proposal 2 is an advisory vote, there is no minimum vote requirement that constitutes approval of this proposal. |
• | Proposal 3 —Ratification of Independent Registered Public Accounting Firm.The affirmative vote of a majority of the votes properly cast on proposal 3 is required to ratify the appointment of Cabot’s independent registered public accounting firm. |
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About the Annual Meeting (continued)
What if there are more votes “AGAINST” a nominee for director than votes “FOR”?
Each of the nominees is an incumbent director who has tendered a conditional resignation that is effective upon (i) the failure to receive a majority of the votes cast for his or herre-election at the 20202022 Annual Meeting and (ii) the Board’s acceptance of this resignation. The Governance and Nominating Committee of the Board of Directors (the “Governance Committee”) would be responsible for initially considering the resignation and making a recommendation to the Board of Directors. The director whose resignation is under consideration is expected to abstain from participating in any decision regarding his or her resignation. The Governance Committee may consider any factors it deems relevant in deciding whether to accept a director’s resignation. If the resignation is not accepted, the director will continue to serve until his or her successor is elected and qualified.
How do I vote?
You can vote either in person atonline during the meeting or by proxy without attending the meeting. For additional information on how to attend the meeting, please refer to “How can I attend the 2022 Annual Meeting?” above. Even if you plan to attend the 20202022 Annual Meeting, we encourage you to vote your shares by proxy. If your shares are held in “street name” in a brokerage account or by a bank or other nominee and you wish to vote in person at the meeting, you must request a
2 CABOT CORPORATION
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About the Annual Meeting(continued)
legal proxy from your bank, broker or other nominee and bring that proxy to the meeting. Stockholders who own shares in their own name (aof record owner), have three options for submitting their votes by proxy:
1. | by Internet – go to www.envisionreports.com/CBT and follow the instructions on the secure site, |
2. | by phone – call the toll-free number1-800-652-VOTE and follow the instructions on your proxy card and the recorded telephone instructions, or |
3. | by mail – mark, sign and date the proxy card and return it promptly in accordance with the voting instructions on your proxy card. |
In order for your vote to be counted, you must return your completed and signed proxy card so that it is received by mail by the Company’s transfer agent by March 11, 20209, 2022, vote by Internet or by phone until the start of the meeting, or vote at the virtual meeting if you are attending.
If you hold your shares in “street name,” you must vote by telephone or overfollow the Internet by 1:00 pm, Eastern Time, on March 12, 2020.
Ifinstructions of your Cabot stock is held in a brokerage account or by a bank, broker or other nominee your abilityin order to direct them how to vote by telephonethe shares held in your account or overobtain a legal proxy to vote online at the Internet depends on your broker’s, bank’s or nominee’s voting process.meeting. Please follow the directions on your voting instruction form carefully.
How do I vote if I hold my stock through the Cabot 401(k) plan?
The Vanguard Fiduciary Trust Company is the trustee of the Cabot Common Stock Fund and the Cabot Common ESOP Fund portions of the Cabot 401(k) plan and is the record owner of all of those shares. If you hold Cabot stock through the Cabot 401(k) plan, you have the right to instruct Vanguard how to vote your shares. Vanguard will tabulate the voting instructions of each participant in the plan and will vote the shares of all participants by submitting a final proxy card representing the plan’s shares for inclusion in the tally at the 20202022 Annual Meeting.
Your vote will influence how Vanguard votes those shares for which no instructions are received from other plan participants as those shares will be voted in the same proportion as shares for which instructions are received. If you hold shares in the plan and do not vote, Vanguard will vote your shares (along with all other shares in the plan for which instructions are not provided) in the same proportion as those shares for which instructions are received from other participants in the plan.
In order for your instructions to be followed, you must provide instructions for the shares you hold through the Cabot 401(k) plan by returning your completed and signed proxy card so that it is received by the Company’s transfer agent by March 9, 20207, 2022 or by voting by telephone or over the Internet by 9:00 a.m., Eastern Time, on March 10, 2020.8, 2022.
Can I change or revoke my vote?
Yes. You can change or revoke your vote by(1) re-voting by telephone or over the Internet as instructed above (only your latest telephone or Internet vote will be counted), (2) signing and dating a new proxy card or voting instruction
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2022 PROXY STATEMENT |
About the Annual Meeting (continued)
form and submitting it as instructed above (only your latest proxy card or voting instruction form will be counted), or (3) attending the meeting and voting online, if you are a stockholder of record or hold your shares in person.“street name” and have obtained a legal proxy from your bank, broker or other nominee. If your shares are registered in your name, you may also revoke your vote by delivering timely notice to the Secretary, Cabot Corporation, Two Seaport Lane, Suite 1300,1400, Boston, Massachusetts 02210. Attending the meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request it. If you hold shares through a bank or broker, you must follow the instructions on your voting instruction form to revoke or change any prior voting instructions.
Who counts the votes?
We have hired Computershare Trust Company, N.A., our transfer agent, to count the votes represented by proxies cast by ballot, telephone and the Internet. A representative of Computershare, and either Cabot’s Secretary or Cabot’s Assistant Secretary will act as InspectorsInspector of Election.
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About the Annual Meeting(continued)
What if I return my proxy card but don’t vote for some of the matters listed?
If you return a signed proxy card without indicating your vote, your shares will be voted in line with the recommendation of the Board of Directors for each of the proposals for which you did not indicate a vote.
Can other matters be decided at the 20202022 Annual Meeting?
We are not aware of any other matters that will be considered at the 20202022 Annual Meeting. If any other matters properly arise that require a vote, the named proxies will vote in accordance with their best judgment.
Who can attend the meeting?What is “householding” and how does it affect me as a stockholder?
The 2020 Annual MeetingSome banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements. This means that only one copy of this proxy statement may have been sent to multiple stockholders in the same household. We will promptly deliver a separate copy of this proxy statement to any stockholder upon request to: Secretary, Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. Any stockholder who wants to receive a separate copy of this proxy statement, or of our proxy statements or annual reports in the future, or any stockholder who is openreceiving multiple copies and would like to all Cabot stockholders. If you need directions toreceive only one copy per household, should contact the meeting, please call Cabot’s Investor Relations Groupstockholder’s bank, broker, or other nominee record holder, or the stockholder may contact us at(617) 342-6255. When you arrive at Cabot’s Corporate Headquarters, please go to the 13th Flooraddress and signs will direct you to the meeting room. You need not attend the 2020 Annual Meeting to vote.phone number above.
Important Notice Regarding the Availability of Proxy Materials for the 20202022 Annual Meeting
This proxy statement and our 20192021 Annual Report on Form10-K are available at the following Internet address:
http://www.edocumentview.com/CBT.
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Proposal 1 — Election of Directors
Board of Directors
Our Board of Directors currently has twelve members and is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires. Three directors are proposed to be elected at the 2020 Annual Meeting. The terms of Juan Enriquez, Sean D. Keohane and William C. Kirby expire at the 2020 Annual Meeting and our Board of Directors has nominated each of them for a three-year term that will expire at the annual meeting in 2023. All of them are current directors and have been elected by stockholders at previous annual meetings.
Patrick M. Prevost, whose term of office expires at the 2020 Annual Meeting, and John F. O’Brien, whose term of office expires at the 2021 Annual Meeting, have decided to retire from the Board effective at the 2020 Annual Meeting. Upon the election of the nominated directors, and with Mr. Prevost’s and Mr. O’Brien’s retirements, Cabot’s Board of Directors will have ten members. We expect that all of the nominees will be available for election, but if any of the nominees is not available at the time of the 2020 Annual Meeting, proxies received will be voted for substitute nominees to be designated by the Board of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than three nominees.
Vote Required
A nominee will be elected to the Board of Directors if the votes properly cast “for” his election exceed the votes properly cast “against” such nominee’s election.
Recommendation
The Board of Directors recommends that you vote “FOR” the election of its three nominees.
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Proposal 1 — Election of Directors(continued)
Certain Information Regarding Directors
In addition to the information presented below regarding the specific experience, qualifications, attributes and skills that qualify the nominees and the directors whose terms of office will continue after the 2020 Annual Meeting to serve as a director of the Company, all the nominees and directors have a reputation for honesty, integrity, sound judgment and adherence to high ethical standards. Each of the nominees and directors has demonstrated the willingness and ability to make the significant commitment of time and energy to serve on our Board and its Committees, and to engage management and each other openly and constructively. Our Directors are committed to having a Board that reflects a balanced set of skills that is aligned with our strategic goals and reflects our diversity objectives.
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Proposal 1 — Election of Directors (continued)
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Proposal 1 — Election of Directors (continued)
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Proposal 1 — Election of Directors(continued)
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Board Leadership, Structure, Governance and Composition, and Risk Management
Corporate Governance Guidelines
As a leading global specialty and performance materials company, we value integrity, respect, excellence and responsibility. We are committed to living these values every day as they are an integral part of the way we conduct our business. Through our shared purpose — creating materials that improve daily life and enable a more sustainable future — we drive materials innovation, support our customers, and seek to create a more sustainable world. Our strategy articulates how we intend to deliver sustained and attractive total shareholder return, built on earnings growth and a balanced capital allocation framework. Following the successful execution of our “Advancing the Core” strategy, which was initially adopted in 2016, we refreshed our strategy and adopted our “Creating for Tomorrow” growth strategy in early fiscal 2022. This new strategy is based on investing for advantaged growth, developing innovative products and processes that enable a better future, and driving continuous improvement in all we do. Our Board is responsible for overseeing the execution of Directors has adopted Corporate Governance Guidelines that address director qualificationsour strategy, and independence,in doing so, the Board Committees, director compensation, Board performance evaluations, Boardseeks to provide leadership as the Company navigates critical issues, including the ongoing COVID-19 pandemic, as well as matters related to climate change, diversity, equity and Committee meetings, access to senior management,inclusion, a changing regulatory climate, and Chief Executive Officer (“CEO”) performance evaluationthe evolving nature of information security and succession planning, among other matters. Many of the Board’s practices and policies set out in these Guidelines are described in this discussion of Board Governance and Composition. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
cybersecurity threats. The Governance Committee is charged with reviewing the composition of the Board and refreshing itrecommending board refreshment as appropriate to ensureso that the Board as a whole reflects a range of talents, skills, diversity and expertise needed to meet the evolving needs of our Company and its businesses in this changing landscape and to oversee the execution of our strategy.
Important Factors in Assessing Director Qualifications
Director Qualifications. The Governance Committee strives to maintain an engaged, highly skilled, independent board with broad and diverse experience and judgmentviewpoints that is committed to representing the interests of our stockholders.stakeholders. Board candidates as well as nominees forre-election are evaluated in the context of the current composition of the Board of Directors and in relation to the Board’s current and anticipated requirements. We expect our directors and any candidate or nominee to have integrity and to demonstrate high ethical standards. The Committee also considers a wide range of factors when assessing director qualifications, including:
Ensuring an experienced, qualified Board with expertise in areas relevant to Cabot.The Committee seeks directors who have held significant leadership positions and can bring to the Board specific types of experience relevant to Cabot. It is the Board’s policy that the Board as a whole reflect a range of talents, skills and expertise, particularly in these areas:
Management Leadership and Strategic Planning Experience. We believe that directors who have held significant leadership positions over an extended period of time possess strong leadership qualities and demonstrate a practical understanding of organizations, processes, strategy and risk management andknow-how know how to drive change and growth. As a publicly traded company, we value experience on the boards of other publicly traded companies and other complex organizations.
Specialty Chemicals or Adjacent Industry and Operations Experience.We have soughtseek directors with leadership and operational experience in thespecialty chemicals or adjacent industries and the value chains in which we operate.
Global Experience. We value directors with global business experience because our continued success depends, in part, on growing our businesses outside the United States. Further, we have significant global manufacturing operations, outside the U.S., and, as in recent years, a majority of our revenues came from outside of the U.S. in fiscal 2019.2021.
Accounting and Finance Experience. We use a broad set of financial metrics to measure our performance, and accurate financial reporting and robust auditing are critical to our success.
Technology and Market Experience. As aan innovative science and technology company, and an innovator, we value directors with an understanding of technology, and material science and the value chains in which we participate. We seek to grow organically by developing new products and formulations and identifying new applications and high-growth markets for our existing products. Under our “Advancing the Core” strategy,materials. We believe this is critical as we continue to intensify our focus on application innovation and formulated solutions.solutions as part of our “Creating for Tomorrow” strategy.
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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
Enhancing the Board’s diversity of background.As a global company, we consider diversity is an essential element of our culture. At the Board level and throughout our company we value the benefits we receivereceived from different perspectives and strive for a talented and diverse workforce and a diverse Board that is representative of our global business, customers, employees and stockholders. In evaluating the suitability of individual Board nominees, the Governance
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Board Composition (continued)
Committee takes into accountconsiders many factors, including general understanding of the disciplines relevant to the success of a publicly traded company with global manufacturing operations in today’s business environment, professional experience, background, education, skill, age, race, gender and national origin. Although the Board does not have a formal written policy that solely addresses diversity, ourOur Corporate Governance Guidelines prioritizeinclude diversity of origin, gender, background, experience and thought as important director selection criteria.criteria and, as a result, we do not have a separate formal written policy that solely addresses diversity. The Governance Committee reviews its effectiveness in balancing these considerations when assessing the composition of the Board.
Individual Attributes.The Board believes that to function effectively, all directors should demonstrate sound judgment, compassion, and a willingness and ability to work with other members of the Board openly and constructively andconstructively. In addition, they should have the ability to communicate clearly and persuasively, and to dedicate thewhile dedicating sufficient time sufficient to ensure the diligent performance of their duties on our behalf.
Complying with the Board’s independence guidelines.When selecting and recruiting candidates, the Board looks at other positions the candidate has held or holds, including other board memberships, as well as the candidate’s other relationships, to determine whether any material relationship with Cabot exists that could impair the candidate’s independence.
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Candidate Recommendations.Board Leadership, Structure, Governance and Composition, and Risk Management We identify candidates for election to(continued)
As highlighted in the graphics below, we believe the Board of Directors through the business networksas a whole possesses a balanced mix of the directorstalents, skills, diversity, expertise, tenure and management and from recommendations made by third-party search firms uponindependence needed to meet the requestevolving needs of the Governance Committee. Over the past year, the Governance Committee retained a search firmCompany and its businesses and to help identify potential candidates. We evaluate candidates recommended by our stockholders in the same manner and on the same basis as candidates recommended by our directors, management or third-party search firms. Ms. Yan was initially identified as a candidate for election to the Board by a third-party search firm, and upon the recommendation of the Governance Committee, the Board elected Ms. Yan a director effective May 2019. In considering Ms. Yan’s candidacy, the Board considered Ms. Yan’s years of experience in global manufacturing and engineering as well as her significant experience in international business, particularly in Asia.
Board Refreshment.A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that our Board has the right skills and tenures to best oversee management and the execution of our strategy and“Creating for Tomorrow” strategy. The numbers of directors counted as possessing a qualification or expertise indicates a specific area of focus or expertise that the associated risks. Taking into account the upcoming retirements of Messrs. Prevost and O’Brien, 40% of our directors have joineddirector brings to the Board and does not mean that directors not counted do not possess such qualifications or expertise. More details on each director’s qualifications, skills and expertise are included in the last three years. Our Board does not have a mandatory retirement policy. With respect to director tenure,biographies on the Board is of the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. The Board will continue to proactively manage its composition andmake-up to ensure it has the appropriate mix of tenures and the requisite skills to address the Company’s current and future needs.
How we Assess Director Independence
The Board’s Guidelines.It is the Board’s policy that at least the majority of the Board’s members must be independent under our Corporate Governance Guidelines. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. All our directors are “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO, and Mr. Prevost, our former President and CEO. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with Cabot. The Board’s guidelines for director independence are consistent with the independence requirements in the New York Stock Exchange’s listing standards. In addition to applying these guidelines, the Board evaluates all relevant facts and circumstances in making an independence determination. In assessing director independence, the Board considers all known relationships, transactions and arrangements among directors, their family members, and Cabot. The Board concluded that none of thenon-management directors who served as directors during the 2019 fiscal year, other than Mr. Prevost, had a material relationship with Cabot.following pages.
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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
Our Board’s Role in Risk Oversight and in Overseeing our Progression on Environmental, Social and Governance (“ESG”) Matters and Activities
Our Board oversees our enterprise-wide program of risk management. Cabot management is primarily responsible for day-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment includes a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance and managerial risks that may affect the Company. From this assessment, the most significant risks in terms of their likelihood and severity are identified and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full Board or the relevant Committee of the Board our major risk exposures, their potential operational or financial impact on Cabot, and the steps we take to manage them. The Company has a robust risk management program, the strength of which, we believe, is not dependent on the Board’s leadership structure.
Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure and country-specific risks. This includes business continuity risks, including climate-related risks, if identified as having a material impact on our business, strategy or operations. Each Committee also has responsibility for risk oversight within their areas of responsibility and expertise.
Our Board Committee structure provides for risk oversight as follows:
• | Audit Committee — focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm, our CFO, our Controller, our Treasurer, our Director of Internal Audit, our Chief Digital Information Officer and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processes and cybersecurity program, and management annually reviews our information security and cybersecurity program with the full Board. |
• | SHE&S Committee — assists the Board in fulfilling its oversight responsibility by reviewing the effectiveness of our safety, health, environment and sustainability (“SHE&S”) programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes. The Committee also focuses on issues around climate change, technological innovation, and the evolving regulatory landscape that affect our manufacturing operations. |
• | Compensation Committee — considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistent with our business strategy. The Committee regularly reviews gender-based pay equity and, beginning in fiscal 2021, pay equity among our employees in the United States based on racial/ethnic diversity. |
• | Governance Committee — considers governance and Board and CEO succession risks and evaluates director skills and qualifications. |
More information describing our Board Committees, their responsibilities, and specific areas of risk oversight is below under the heading “How Our Board Operates”.
As reflected in our “Creating for Tomorrow” strategy, we are committed to operating responsibly, reducing our environmental impact and developing innovative performance materials that address the sustainability challenges of our customers, communities and the world. We therefore work to incorporate environmental sustainability, employee safety and well-being, diversity and inclusion and other values into our decision-making in a manner that we believe will both mitigate risk and drive long-term value.
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2022 PROXY STATEMENT |
Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
In fiscal 2020, we adopted our 2025 Sustainability Goals to further articulate our commitment to ESG matters and facilitate the integration of this commitment into the operation of our business. These goals address 11 topics that we have identified as important to Cabot and are categorized under the following three pillars: Caring for our People and Communities, Acting Responsibly for the Planet, and Building a Better Future Together. Our work to achieve each of these goals is resourced by teams across our Company and each goal is sponsored by a member of our Management Executive Committee. With respect to Board oversight of ESG matters in general, rather than concentrating oversight of all ESG initiatives into any one Committee, the Board takes the approach that certain matters are most appropriately overseen by the Board as a whole and, for other topics, the most appropriate Committee should maintain oversight. The graphic below provides an overview of Board and SHE&S Committee oversight with respect to each of our three pillars.
Caring for our People and Communities | Acting Responsibly for the Planet | Building a Better Future Together | ||||||||
Our entire Board reviews talent management and management succession planning, as well as the Company’s diversity and inclusion objectives and achievements. The SHE&S Committee oversees our goals related to community engagement and occupational health and safety. | The SHE&S Committee focuses on issues around climate change and the evolving regulatory landscape, and oversees our goals related to emissions, energy, wastes and spills, water, and environmental compliance. | The entire Board has oversight of Cabot’s goals that address product sustainability, suppliers’ sustain ability, and economic value gen erated and distributed. |
To further advance our sustainability agenda, during 2021, we committed to align our climate-related disclosures with the recommendations of the Task Force for Climate-related Financial Disclosure (“TCFD”), and we engaged a third party to help us evaluate our climate risks and opportunities following the TCFD guidelines. Based on the work we have done to date, we recently disclosed our preliminary analysis in a climate scenario risks and opportunities matrix developed in accordance with the TCFD guidance. In addition, at the beginning of fiscal 2022, we announced our ambition to align our sustainability agenda with the Paris Climate Agreement to achieve net zero carbon emissions globally by 2050. We believe our activities related to these matters will be most appropriately overseen by the Board as a whole, and that our SHE&S Committee should allocate significant time annually for discussion of these matters.
Information on our sustainability goals, our Climate Scenario Risks and Opportunities Matrix, and the various ESG-related awards we have received is available on our website at www.cabotcorp.com/sustainability, which information is not part of, or incorporated by reference into, this proxy statement.
Assessment of Risk in Incentive Compensation Program
Our Compensation Discussion and Analysis (“CD&A”) describes our compensation policies, programs and practices for our named executive officers. The corporate goal-setting, assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate short- and long-term incentive programs.
Participants in our long-term incentive program receive awards consisting of time-based restricted stock units and performance-based restricted stock units and, in the case of members of the Management Executive Committee and a limited number of other participants, stock options. In addition to our corporate short- and long-term incentive programs, we maintain a cash incentive plan for certain functional and business roles and our manufacturing facilities offer an annual cash incentive plan.
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2022 PROXY STATEMENT |
Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
The Compensation Committee directed management, working with the Committee’s independent consultant, Meridian Compensation Partners, to provide an evaluation of the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment was presented to and reviewed by the Compensation Committee. Among the program features evaluated were the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with features intended to mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelines for members of the Management Executive Committee; a company compensation recoupment policy; and significant controls for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designed to mitigate risk, including the oversight provided by the Compensation Committee, which reviews and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
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2022 PROXY STATEMENT |
Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
Our Leadership Structure —Non-Executive Chair of the Board; Executive Sessions
Sue H. Rataj has served asNon-Executive Chair of the Board of Directors since March 9, 2018.
Although our Corporate Governance Guidelines do not require that our Chair and Chief Executive Officer positions be separate, our Board believes that this leadership structure is appropriate at this time because it allows our Chief Executive Officer to focus on the strategic and operational aspects of our business, while allowing theNon-Executive Chair of the Board to provide independent leadership for the Board. Our Board recognizes that future circumstances may lead it to change the leadership structure depending on Cabot’s needs at the time and, as such, believes that it is important to retain flexibility. In the future, if the Chief Executive Officer also serves as Chair of the Board, our Corporate Governance Guidelines require that an independent director be appointed annually as lead director to set the agenda for and lead the executive sessions of thenon-management directors at Board meetings and to undertake such other responsibilities as the independent directors designate.
Key Responsibilities.OurNon-Executive Chair of the Board focuses on the Board’s processes and ensuring it is prioritizing the right matters. Specifically, the Chair has the following responsibilities, and may perform other functions at the Board’s request:
presiding over meetings of our Board and stockholders, including executive sessions of thenon-management directors;
serving as anex-officio member of each Board committee of which he or she is not a member and, upon invitation, attending those committee meetings where possible;
establishing an agenda for each Board meeting in collaboration with our CEO and meeting with our CEO following each meeting to discuss any open issues andfollow-up items;
facilitating and coordinating communication among thenon-management directors and our CEO and an open flow of information between management and our Board;
leading our Board’s annual performance review in collaboration with the Governance Committee, leading our Board’s annual performance review;Committee;
meeting with eachnon-management director at least annually;
providing assistance to our CEO by attending selected internal business management meetings and meeting with our CEO as necessary;
coordinating the periodic review of management’s strategic plan;
in collaboration with the Compensation Committee, leading our Board’s review of the succession plans for our CEO;CEO in collaboration with the Governance Committee; and
working with management on effective stockholder communication and engagement.
Our Board of Directors has six scheduled Board meetings to review and discuss Cabot’s performance and prospects, as well as the issues we face, with calls and communications between meetings as appropriate. The Board interacts directly with senior management during its meetings. The Board typically dedicates onemultiple-day multiple day meeting a year to a discussion of longer-term strategic issues the Company faces.issues. During this meeting,fiscal 2021 two areas of particular focus, for which the Board allocates significant time forinvited outside experts to participate in a broad Board discussion, were (i) included greenhouse gas and climate matters and how the chemical industry as a whole is addressing these challenges, and (ii) the evolving nature of talent management and management succession planning, as well as the Company’s diversity and inclusion objectives and achievements.cybersecurity risks. During fiscal 2019,2021, the Board met sixseven times and acted by written consent once.
A significant portion of the Board’s oversight responsibility is carried out through its four operating committees.
Committee Composition.All of the members of our Audit Committee, Governance and Nominating Committee, Safety, Health, Environment and Sustainability Committee and Compensation Committee satisfy the NYSE’s definition of an independent director.
Committee Operations. Each Committee meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and can retain outside advisors. Each Committee’s meeting materials are available for review by all directors.
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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
Committee Responsibilities. The primary responsibilities of each Committee are listed below. For more detail about the responsibilities and functions of each Committee, see the Committee charters on our website (www.cabotcorp.com) under the heading “Company — About Cabot — Governance — Resources.”
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Board Composition (continued)
Audit Committee
Members
Michael M. Morrow, Chair | Frank A. Wilson | |||
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811 meetings and one action by written consent in fiscal 20192021
Financial Acumen.Mr. Morrow, Mr. Del Grosso and Mr. Wilson are “audit committee financial experts” under SEC rules and each of these directors as well as Mr. Enriquez areis “financially literate” under NYSE rules.
Primary Responsibilities
The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of Cabot’s financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function, and (v) our risk assessment and risk management processes.processes, including with respect to information technology and cybersecurity risk. The Audit Committee, among other functions:
Has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm.
Monitors the qualifications, independence and performance of our independent registered public accounting firm and approves professional services provided by the independent registered public accounting firm.
Reviews with our independent registered public accounting firm the scope and results of the audit engagement.
Reviews the activities and recommendations of our independent registered public accounting firm.
Discusses Cabot’s annual audited financial statements, quarterly financial statements and earnings releases with management and Cabot’s independent registered public accounting firm, includingas well as our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Reviews Cabot’s accounting policies, risk assessment and risk management processes, control systems, legal matters and compliance activities.
During fiscal 2019,2021, the Committee’s other priorities included treasury matters, including cash and debt management,management; internal controls practices,practices; accounting matters, including those related to the potential accounting implications of a possible divestiture of the Company’s Purification Solutions business, and the reserve established for potential respirator liabilities; and tax mattersmatters. The Committee also discussed the Company’s comprehensive cyber-security risk management programs, data and cyber-security risk.system testing procedures and cyber incident response plan.
Compensation Committee
Members
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William C. Kirby |
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4 meetings and 2 actions1 action by written consent in fiscal 20192021
Primary Responsibilities
The primary responsibilities of the Compensation Committee are to:
Approve the corporate goals and objectives relevant to the compensation of our CEO, evaluate the CEO’s performance in light of those goals and objectives and, either as a Committee or together with the other independent directors (as directed by the Board), determine and approve the CEO’s salarycompensation based on this evaluation.
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Board Leadership, Structure, Governance and incentive compensation.Composition, and Risk Management (continued)
Establish policies applicable to the compensation, severance or other remuneration of Cabot’s Management Executive Committee, review and approve performance measures and goals under incentive compensation plans applicable to such employees, and approve their salaries, annual short-term and long-term incentive awards, any severance payments and any other remuneration.
Review and approve the aggregate amount of bonuses to be paid to participants in Cabot’s annual corporate short-term incentive program.
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Board Composition(continued)
Administer Cabot’s incentive compensation plans for members of the Company’s Management Executive Committee, equity-based plans and supplemental benefits arrangements, which includes approving the aggregate number of shares of stock granted under Cabot’s long-term incentive program.
AppointMonitor the membersactivities of the Company’s Benefits and Investment Committees and monitor their activities.Committee.
Review on a periodic basis reports prepared by management of gender pay equity at the Company.Company on the basis of elements of diversity.
Review disclosure describing the Company’s human capital resources.
Important items for fiscal 20192021 included assessing the effectiveness of our executive compensation programs and establishing appropriate performance measures and goals under our incentive compensation plans for fiscal 2022. The Committee received regular updates on trends and regulatory developments affecting executive compensation, and assessed the compensation arrangements for the newly appointed membersmarket competitiveness of the Company’s Management Executive Committee.our executives’ compensation.
Governance and Nominating Committee
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
| Matthias L. Wolfgruber |
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43 meetings in fiscal 20192021
Primary Responsibilities
The Governance Committee is charged primarily with:
Developing and recommending to the Board corporate governance policies and procedures.
Identifying individuals qualified to become directors of Cabot.
Recommending director candidates to the Board to fill vacancies and to stand for election at the annual meeting of stockholders.
Recommending Committee assignments.
Leading the annual review of the Board’s performance.
Recommending compensation and benefit policies for Cabot’s directors.
Reviewing and making determinations regarding interested transactions under Cabot’s Related Person Transaction Policy and Procedures.
Assisting the Board in CEO succession planning, including succession planning in the event of unforeseeable events.
During fiscal 2019,2021, the Governance Committee focusedcontinued its focus on Board composition matters to ensure the Board as a whole has the skills, talents, diversity and refreshment and reviewedexpertise needed to meet Cabot’s evolving needs. With respect to our director compensation program, the Committee last formally assessed the competitiveness of this program in 2018, having deferred the assessment it would have performed in November 2020 in light of the impact of the COVID-19 pandemic on the Company. The Committee undertook this assessment in November 2021 and made modest changes to our director compensation program.program to ensure it remains competitive and appropriate to attract experienced and qualified candidates to our Board. These changes were effective January 1, 2022.
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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
Safety, Health, Environment & Sustainability (“SHE&S”) Committee
Members
Cynthia A. Arnold |
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34 meetings in fiscal 20192021
Primary Responsibilities
The SHE&S Committee reviews aspects of Cabot’s safety, health, environmental and sustainability performance, process safety, security, product stewardship,toxicology and registrations, community engagement and governmental affairs. In particular, the Committee reviews the following:
Cabot’s environmental reserve and risk management processes.and remediation programs.
Environmental and safety audit programs, risk assessments, performance metrics risk and opportunity assessments.performance against such metrics.
Management processes related to our safety, health, environment and sustainability programs.
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Board Composition(continued)
During fiscal 2019, the2021, particular areas of Committee focused onfocus included the Company’s corporate sustainability priorities; the Company’s TCFD scenario analysis; the development of a carbon black lifecycle analysis; the Company’s process safety improvement plans, chemical risksmanagement programs; natural disaster risk management and hazard assessments program, sustainability programpreparedness, particularly relating to flooding and reporting, product safetyhurricanes in North America; developments in greenhouse gas regulations around the world, including global carbon pricing and toxicology matters,in other environmental regulatory changes in the geographies where we operate, particularly in China; the Company’s planned and anticipated significant environmental-related capital expenditures, and the Company’s environmental remediation activities.activities, as well as the Company’s response to the COVID-19 pandemic with respect to employee health and safety.
Executive Committee
Members
Sue H. Rataj, Chair | Michael M. Morrow | |||
Sean D. Keohane |
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Did not meet or actNo meetings in fiscal 20192021
Primary Responsibilities
The Executive Committee reviews and, where appropriate, approves corporate action with respect to the conduct of our business between Board of Directors’ meetings. Actions taken by the Executive Committee are reported to the Board at its next meeting.
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that address director qualifications (which include the Board’s policy on Board overboarding) and independence, Board Committees, director compensation, Board performance evaluations, Board and Committee meetings, access to senior management, and Chief Executive Officer (“CEO”) performance evaluation and succession planning, among other matters. Many of the Board’s practices and policies set out in these Guidelines are described throughout this discussion of Board Leadership, Structure, Governance and Composition and Risk Management. The Corporate Governance Guidelines are posted on our website (www.cabotcorp.com) under the heading “Company — About Cabot – Governance – Resources.”
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Board Leadership, Structure, Governance and Composition, and Risk Management (continued)
How We Assess Director Independence
The Board’s Guidelines.Under our Corporate Governance Guidelines, it is the Board’s policy that at least the majority of the Board’s members must be independent. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. All of our current directors are “independent” under the Board’s director independence standards, other than Mr. Keohane, our President and CEO. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with Cabot. The Board’s guidelines for director independence are consistent with the independence requirements in the New York Stock Exchange’s listing standards. In addition to applying these guidelines, the Board evaluates all relevant facts and circumstances in making an independence determination. In assessing director independence, the Board considers all known relationships, transactions and arrangements among directors, their family members, and Cabot. The Board concluded that none of the non-management directors who served as directors during the 2021 fiscal year had a material relationship with Cabot.
How We Evaluate the Board’s EffectivenessOur Board and Assess Director Recommendations
Each year, the Governance Committee leads our Board’s annual evaluation process. The process focuses on the effectiveness of the Board as a whole, prioritizing issues, and identifying specific issuesmatters for future discussion. In 2019,For 2021, our General Counsel conducted individual interviews withsolicited feedback from each director. The conversations were guided bydirector based on a series of questions provided to the directors in advance covering Board and Committee membership, operations and responsibilities, as well as open-ended questions so that each director had leeway to discussprovide feedback on the issues he or she believed to be the most pertinent. In addition, our Non-Executive Chair conducted one-on-one discussions with each director, during which she also sought feedback on individual director performance from other directors. The key themes, observations and suggestions with respect to the Board’s performance as a whole were summarized and discussed first with the Governance Committee and later with the full Board. Based on these discussions, opportunities to further enhance the Board’s effectiveness have been and are being implemented. In addition,
Board Refreshment. A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that our Board has the right skills and tenures to best oversee management and the execution of our strategy and the associated risks. Approximately Non-Executiveone-third Chair conductedof our directors have joined the Board within the last three years. Our Board does not have a mandatory retirement policy because the Board is of the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. The Board will continue to proactively manage its composition and one-on-onemake-up discussions with each directorto ensure it has the appropriate mix of tenures and also solicited feedbackthe requisite skills to address the Company’s current and future needs.
Candidate Recommendations. We identify candidates for election to the Board of Directors through the business networks of the directors and management and from recommendations made by third-party search firms upon the request of the Governance Committee. We evaluate candidates recommended by our stockholders in the same manner and on individual director performance.the same basis as candidates recommended by our directors, management or third-party search firms.
Our Board’s Role in Risk OversightProcedures for Stockholders to Recommend Director Nominees
Our Board overseesThe Governance Committee has a policy with respect to the submission of recommendations by stockholders of candidates for director nominees, which is available on our enterprise-wide program of risk management. Cabot management is primarily responsible forday-to-day risk management practices and, together with other personnel, regularly engages in an enterprise-wide risk assessment. This assessment is updated onwebsite at www.cabotcorp.com under the heading “Company— About Cabot—Governance—Resources”. A stockholder wishing to recommend a continual basis and includescandidate must submit the recommendation by a comprehensive review of a broad range of risks, including financial, operational, business, legal, regulatory, reputational, governance and managerial risks which may potentially affectdate no later than the Company. From this assessment,120th calendar day before the most significant risks in terms of their likelihood and severity are identified, and plans to manage and mitigate these risks are developed. Cabot management regularly reports to either the full Board or the relevant Committeefirst anniversary of the Board our major risk exposures, their potential operational or financial impact ondate that Cabot andreleased its proxy statement to stockholders in connection with the steps we takeprevious year’s annual meeting. Recommendations should be submitted to manage them.
Our Board has ultimate responsibility for risk oversight and oversees our corporate strategy, business development, capital structure, market exposure and country specific risks. Each Committee also has responsibility for risk oversight. The Audit Committee focuses on financial risk, including internal controls and legal and compliance risks and receives regular reports from our independent registered public accounting firm, our CFO, our Controller, our Director of Internal Audit and our General Counsel. The Audit Committee also oversees the Company’s enterprise risk management processesSecretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. The notice to the Secretary should include all information about the candidate that Cabot would be required to disclose in a proxy statement in accordance with Securities and cybersecurity program. The SHE&S Committee assistsExchange Act rules or as required by the Company’s by-laws, consent of the candidate to serve on the Board in fulfilling its oversight responsibility by reviewingof Directors, if nominated and elected, and agreement of the effectiveness of our safety, health, environmentcandidate to complete, upon request, questionnaires customary for Cabot directors and sustainability programs and initiatives and overseeing matters related to stewardship and sustainability of our products and manufacturing processes. The Compensation Committee considers human resources risks and evaluates and sets compensation programs that encourage decision-making predicated upon a level of risk consistentcomply with our business strategy. The Compensation Committee also oversees senior management succession planning and development. Finally, the Governance Committee considersapplicable Company policies.
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Board Composition(continued)
governance and Proposal 1 — Election of Directors
Board succession risks, and evaluates director skills and qualifications to ensure each Committee has directors with the requisite skills to oversee the applicable risks that are the focus of that Committee. The Company has a robust risk management program, the strength of which is not dependent on the Board’s leadership structure.Directors
Our Compensation DiscussionBoard of Directors currently has ten members and Analysis (“CD&A”) describes our compensation policies, programs and practicesis divided into three classes serving staggered three-year terms. Directors for our named executive officers. Our corporate goal-setting, assessment and compensation decision-making processes described in our CD&A apply to all participants in our corporate short- and long-term incentive programs.
Participants in our long-term incentive program receive awards consistingeach class are elected at the annual meeting of time-based restricted stock units and performance-based restricted stock units, and,stockholders held in the caseyear in which the term for their class expires. Four directors are proposed to be elected at the 2022 Annual Meeting. The terms of membersMichael M. Morrow, Sue H. Rataj, Frank A. Wilson, and Matthias L. Wolfgruber expire at the 2022 Annual Meeting and our Board of Directors has nominated each of them for a three-year term that will expire at the Management Executive Committeeannual meeting in 2025. All of them are current directors and a limited number of other participants, stock options. Beyond our corporate short- and long-term incentive programs, a substantial number of our facilities offer anhave been elected by stockholders at previous annual cash incentive plan.meetings.
The Compensation Committee directed management, working with the Committee’s independent consultant, Meridian Compensation Partners, to provide an evaluation on the design of all of our incentive plans to assess whether any portion of our incentive compensation programs encourages excessive risk taking. That assessment is presented to and reviewed by the Compensation Committee. Among the program features evaluated are the types of compensation offered, performance metrics, the alignment between performance goals, payout curves and the Company’s business strategy, and the overall mix of incentive awards. The Company’s compensation programs are designed with featuresWe expect that mitigate risk without diminishing the incentive nature of the compensation. Specific features of the programs to mitigate risk include, as applicable, the following: caps limiting the amount that can be paid under the corporate short- and long-term incentive programs and all of the local cash incentive programs; a balanced mix of annual and longer-term incentive opportunities; a mix of cash and equity incentives; multiple performance metrics; management processes to oversee risk associated with each of our incentive programs; stock ownership guidelinesnominees will be available for memberselection, but if any of the Management Executive Committee; a company compensation recoupment policy; and significant controlsnominees are not available at the time of the 2022 Annual Meeting, proxies received will be voted for important business decisions. In our CD&A we describe in more detail the features of our executive compensation programs that are designedsubstitute nominees to mitigate risk, including the oversight providedbe designated by the Compensation Committee, which reviewsBoard of Directors or, if no substitute nominees are identified by the Board, proxies will be voted for a lesser number of nominees. In no event will the proxies be voted for more than four nominees.
Vote Required
A nominee will be elected to the Board of Directors if the votes properly cast “for” his or her election exceed the votes properly cast “against” such nominee’s election. Abstentions and approves the design, goals and payouts under our corporate short- and long-term incentive programs and each executive officer’s compensation. Based on our assessment, we believe our compensation policies, programs and practices do not create risks that are reasonably likely tobroker non-votes will have a material adverseno effect on the Company.results of this vote.
Recommendation
The Board of Directors recommends that you vote “FOR” the election of its four nominees.
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Proposal 1 — Election of Directors (continued)
Certain Information Regarding Directors
Michael M. Morrow (Nominee for Election) | Director Since: 2017 Committee Memberships: Audit (Chair), Compensation, Governance Term of Office Expires: 2022 Age: 66 Independent Business Experience: • Partner, PricewaterhouseCoopers, a public accounting firm, 1986 until retirement in June 2016, as audit partner and in various leadership and governance roles, including Lead Director of PwC’s U.S. Board of Partners • Consultant, PwC, June 2016 to June 2017 Other Boards and Positions: • Chair, Financial Accounting Standards Advisory Committee (FASAC), an advisory body to the Financial Accounting Standards Board (FASB) (beginning January 2020, and Member from January 2019 to present) • Member, Board of Visitors, Wake Forest University School of Business (2011 to 2017) • Member, Business Advisory Council, University of Rhode Island School of Business (2010 to 2015) Mr. Morrow has substantial expertise in accounting, finance and financial reporting matters, and significant leadership, business and corporate governance experience. | |||
Sue H. Rataj Non-Executive Chair of the Board (Nominee for Election) | Director Since: 2011 Committee Memberships: Executive (Chair), Governance (Chair) Term of Office Expires: 2022 Age: 65 Independent Business Experience: • Chief Executive, Petrochemicals for BP, a global energy company, April 2008 until retirement in April 2011 • Senior management positions with BP, including Group Vice President, Refining and Marketing, July 2007 to April 2008 Other Public Company Boards: • Director, Agilent Technologies, Inc., a global leader providing instruments, software and consumables to laboratories in the life sciences, diagnostics and applied chemical markets (2015 to present) • Supervisory Board Member, Bayer AG, a life science enterprise developing and manufacturing products in the pharmaceuticals, consumer health, animal health and crop science segments (2012 to 2017) Ms. Rataj has substantial management leadership and strategic planning experience, significant expertise in operations, safety, health and environmental matters, risk management, accounting and finance matters, particularly in the context of a chemicals company, as well as corporate governance experience. |
18 CABOT CORPORATION
2022 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
Frank A. Wilson (Nominee for Election) | Director Since: 2018 Committee Memberships: Audit Term of Office Expires: 2022 Age: 63 Independent Business Experience: • Senior Vice President and Chief Financial Officer, PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company, May 2009 until retirement in May 2018 • Finance, business development and investor relations leadership positions, Danaher Corporation, a life sciences and industrial conglomerate, 1997 to May 2009 Other Public Company Boards: • Director, Alkermes, a fully integrated, global biopharmaceutical company (September 2019 to present) • Director, Novanta, Inc., a technology partner to medical and advanced industrial OEMs (May 2021 to present) • Director, Sparton Corporation, a provider of design, development and manufacturing services for electromechanical devices (2015 to March 2018) Other Boards and Positions: • Senior Advisor, Astor Place Holdings, the private investment arm of Select Equity Group, L.P. (2018 to present) Mr. Wilson has significant financial expertise and skills in strategic planning, investor relations and business development within international public companies. | |||
Matthias L. Wolfgruber (Nominee for Election) | Director Since: 2014 Committee Memberships: Compensation (Chair), Governance Term of Office Expires: 2022 Age: 68 Independent Business Experience: • Chief Executive Officer, Altana AG, a global specialty chemicals company, 2007 until retirement in January 2016 • President and Chief Executive Officer, Altana Chemie AG, member of the management board of Altana AG, 2002 to 2007 • Management positions at Wacker-Chemie in the U.S. and Europe, 1985 to 2002 Other Public Company Boards: • Chairman, Lanxess AG, a leading global manufacturer of specialty chemicals and intermediates (May 2018 to present, and Supervisory Board Member from 2015 to 2018) Other Boards and Positions: • Chairman, Altana AG (May 2020 to present, and Supervisory Board Member from 2016 to 2020) • Supervisory Board, Grillo-Werke AG, a manufacturer and supplier of zinc alloy products and chemicals (2014 to March 2021) • Chairman, Ardex Group, a global supplier of high-performance specialty building materials (2015 to March 2021) Dr. Wolfgruber has extensive leadership experience managing specialty chemicals businesses with global operations, with particular expertise in manufacturing, strategic investments and acquisitions. |
CABOT CORPORATION 19
2022 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
Juan Enriquez | Director Since: 2005 Committee Memberships: SHE&S (Chair), Governance Term of Office Expires: 2023 Age: 62 Independent Business Experience: • Chairman and Chief Executive Officer, Biotechonomy Ventures, a life sciences research and investment firm, since 2003 • Managing Director, Excel Venture Management, a life sciences investment company, since March 2008 • Director, Life Science Project at Harvard Business School, 2001 to 2003 Other Boards and Positions: • Director, various start-up companies • Trustee, Boston Museum of Science • Trustee, American Academy of Arts and Sciences • Trustee, GBH • Trustee, QuestBridge Mr. Enriquez has significant expertise in technology, start-up companies and international business, and leadership experience from his broad experience in technology ventures. | |||
Sean D. Keohane | Director Since: 2016 Committee Memberships: Executive Term of Office Expires: 2023 Age: 54 Business Experience: • President, Chief Executive Officer and Director, Cabot Corporation, since March 2016 • Executive Vice President, President, Reinforcement Materials, November 2014 to March 2016; Senior Vice President, President, Performance Chemicals, March 2012 to November 2014; General Manager, Performance Chemicals, May 2008 to March 2012; Vice President in March 2005; joined Cabot Corporation August 2002 • General management positions, Pratt & Whitney, a division of United Technologies, prior to 2002 Other Public Company Boards: • Director, The Chemours Company, a global provider of performance chemicals (2018 to present) Other Boards and Positions: • Director, American Chemistry Council, a trade association representing the business of chemistry at the global, national and state levels (2016 to present) Mr. Keohane has a deep understanding of Cabot’s businesses, strong knowledge of the chemicals industry and significant experience in management, strategic planning, manufacturing, international business and marketing. |
20 CABOT CORPORATION
2022 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
William C. Kirby | Director Since: 2012 Committee Memberships: Compensation Term of Office Expires: 2023 Age: 70 Independent Business Experience: • Spangler Family Professor of Business Administration, Harvard Business School; T.M. Chang Professor of China Studies, Harvard University, since July 2008 • Harvard University Distinguished Service Professor and Chairman of the Harvard China Fund, since July 2006 • Harvard faculty member since 1992, served as Chair of Harvard’s History Department, Director of the Harvard University Asia Center, Dean of the Faculty of Arts and Sciences and Director of the Fairbank Center for Chinese Studies Other Public Company Boards: • Director, The Taiwan Fund, Inc., a diversified closed-ended management investment company (2013 to present) • Director, The China Fund, Inc., a non-diversified closed-ended management investment company (2007 to 2019) Other Boards and Positions: • Director, Harvard University Press • Director, Harvard Magazine • Director, The American Council of Learned Societies, a federation of scholarly organizations whose mission is to promote the circulation of humanistic knowledge throughout society (2018 to present) • Director, JAMM Active Limited, a global producer of innovative performance fabrics for athletic use (2016 to January 2021) Mr. Kirby has extensive business knowledge and particular expertise regarding the business, economic and political environment in China. |
CABOT CORPORATION 21
2022 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
Cynthia A. Arnold | Director Since: 2018 Committee Memberships: SHE&S Term of Office Expires: 2024 Age: 63 Independent Business Experience: • Chief Technology Officer, The Valspar Corporation, a global paints and coatings company, January 2011 until retirement in July 2017 • Chief Technology Officer, Sun Chemical Corporation, a producer of inks, coatings and supplies, pigments, polymers, liquid compounds, solid compounds and application materials, 2004 to 2010 • Vice President of Coatings, Adhesives and Specialty Chemicals Technology, Eastman • Management and technology leadership positions, General Electric Company, a high technology industrial leader, 1994 to 2003 Other Public Company Boards: • Director, Fluence, a global provider of energy storage products and services and digital applications for renewables and storage (October 2021 to present) • Member, Supervisory Board, Avantium N.V., a technology company in renewable chemistry (September 2020 to present) Other Boards and Positions: • Director, Milliken & Company, a global diversified industrial company for specialty chemicals, performance materials and textiles (April 2019 to present) • Director, Citrine Informatics, an AI/machine learning software provider for chemical and material companies (2019 to present) • Member, Advisory Board, University of Minnesota Dept of Chemical Engineering and Materials Science Dr. Arnold has a depth of global experience in the specialty chemicals industry, particularly in technology and innovation, with an understanding of the value chains and markets in which Cabot participates. | |||
Douglas G. Del Grosso | Director Since: 2020 Committee Memberships: Audit Term of Office Expires: 2024 Age: 60 Independent Business Experience: • President, Chief Executive Officer and Director, Adient, plc, a global manufacturer of automotive seating, since October 2018 • President and Chief Executive Officer, Chassix, Holdings, Inc., a supplier of chassis, brake and powertrain components, from 2016 to 2018 • President and Chief Executive Officer, Henniges Automotive, a provider of sealing systems, anti-vibration components and encapsulated glass systems, from 2012 to 2015 • Vice President and General Manager, TRW Automotive, a supplier of automotive systems, modules and components, from 2007 to 2012 • President and Chief Operating Officer, Lear Corporation, a manufacturer of automotive seating and electrical distribution systems, from 2005 to 2007 Other Boards and Positions: • Director, National Association of Manufacturers, a trade association representing manufacturers in the United States (2020 to present) Mr. Del Grosso has significant leadership and global operational experience within the automotive sector and valuable experience in management, strategic planning, manufacturing, risk management and international business and marketing. |
22 CABOT CORPORATION
2022 PROXY STATEMENT |
Proposal 1 — Election of Directors (continued)
Christine Y. Yan | Director Since: 2019 Committee Memberships: SHE&S Term of Office Expires: 2024 Age: 56 Independent Business Experience: • Stanley Black & Decker, a global leader in power tools, hand tools and storage solutions, engineered fastening systems and security services: • President, Asia, from 2014 to 2018 • President, Stanley Storage and Workspace Systems, from 2013 to 2014 • President Americas, Stanley Engineered Fastening, from 2008 to 2013 • President Global Automotive, Stanley Engineered Fastening, from 2006 to 2008 Other Public Company Boards: • Director, Modine Manufacturing Company, a thermal management company (2014 to present) • Director, onsemi, a provider of intelligent power and sensing technologies (2018 to present) • Director, Ansell Limited, a provider of protective industrial and medical gloves (2019 to present) Ms. Yan has extensive background in automotive, industrial and consumer markets with years of experience in global manufacturing and engineering and significant experience with international business, particularly in Asia. |
CABOT CORPORATION 23
2022 PROXY STATEMENT
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Other Governance Policies and Practices
Transactions with Related Persons
Policy and Procedures for the Review of Related Person Transactions
Our Board has adopted a written policy for the review and approval or ratification of transactions involving related persons. “Related persons” consist of any person who is or was (since the beginning of the fiscal year) a director, nominee for director or executive officer of Cabot, any greater than 5% stockholder of Cabot and the immediate family members of any of those persons. The Governance Committee is responsible for applying the policy with the assistance of our General Counsel.
Transactions covered by the policy consist of any transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements, or relationships in which (1) the aggregate amount involved will or may be expected to exceed $100,000$120,000 with respect to any fiscal year, (2) Cabot is a participant and (3) any related person has or will have a direct or indirect interest, other than solely as a result of being a director or a less than 10% beneficial owner of another entity (an “interested transaction”). Under the policy, the following interested transactions have a standingpre-approval from the Governance Committee, even if the aggregate amount is greater than $100,000:$120,000:
• | Certain sales of stock by executive officers to Cabot. (1) Sales of Cabot stock by an executive officer (including the CEO) to Cabot pursuant to the terms of our long-term incentive program or (2) other sales by executive officers (excluding the CEO) provided that the sale has been approved by our CEO, the per share purchase price is the fair market value of our common stock on the date of sale, the proceeds from the sale to the executive officer do not exceed $500,000, and the sale does not take place during a quarterly blackout period. |
• | Certain transactions with other companies. Any transaction between Cabot and another company if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total |
• | Employment of executive officers; director compensation. Any employment by Cabot of an executive officer if the related compensation is required to be reported in our proxy statement or if the compensation was approved by our Compensation Committee. Any compensation paid to a director if the compensation is required to be reported in our proxy statement. |
• | Other transactions. Competitively bid or regulated public utility services transactions; transactions involving trustee-type services; and transactions where the related person’s interest arises solely from the ownership of our common stock and all common stockholders received the same benefit on a pro rata basis. |
Each interested transaction by a related person that does not have standingpre-approval under the policy should be reported to our General Counsel for presentation to the Governance Committee for approval before its consummation or for ratification, if necessary, after its consummation. The Chair of the Governance Committee has the authority topre-approve or ratify (as applicable) any interested transaction with a related person in which the aggregate amount involved is expected to be less than $500,000. In determining whether to approve or ratify an interested transaction, the Governance Committee and the Chair may take into account such factors as they deem appropriate, which may include whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Transactions with Related Persons
Since the beginning of fiscal 2019,2021, Cabot and its subsidiaries had no transactions, nor are there any currently proposed transactions, in which Cabot or its subsidiaries was or is to be a participant and the amount involved exceeds $120,000 and any related person (as defined above) had or will have a direct or indirect material interest reportable under SEC rules.
1824 CABOT CORPORATION
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Other Governance Policies and Practices(continued)
The Company welcomes stockholder engagement. Our directors are available to answer questions from stockholders at the 20202022 Annual Meeting. In addition, management of the Company conducts stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. We provide regular updates regarding the Company’s performance and strategic actions to the investor community, and we participate in numerous investor conferences,one-on-one meetings, earnings calls, investor days, and educational investor and analyst conversations. Consistent with this practice, in December 2021 we hosted an investor day, during which Mr. Keohane, our CEO, and other members of our executive team provided an in-depth review of our updated growth strategy and financial targets. We also communicate with stockholders and other stakeholders through various media, including our annual report, proxy statement and other filings with the SEC, news releases and our website. We believe ongoing stockholder engagement allows us to respond effectively to stockholder concerns.
Procedures for Stockholders to Recommend Director Nominees
The Governance Committee has a policy with respect to the submission of recommendations by stockholders of candidates for director nominees, which is available on our website. A stockholder wishing to recommend a candidate must submit the recommendation by a date not later than the 120th calendar day before the first anniversary of the date that Cabot released its proxy statement to stockholders in connection with the previous year’s annual meeting. Recommendations should be submitted to the Company’s Secretary in writing at Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, Massachusetts 02210. The notice to the Secretary should include all information about the candidate that Cabot would be required to disclose in a proxy statement in accordance with Securities and Exchange Act rules or as required by the Company’sby-laws, consent of the candidate to serve on the Board of Directors, if nominated and elected, and agreement of the candidate to complete, upon request, questionnaires customary for Cabot directors and to comply with applicable Company policies.
Director Attendance at Meetings
During fiscal 2019,2021, each director attended at least 75% of the aggregate of the total Board meetings and the total meetings held by all of the Committees on which he or she served during the periods that he or she served. Because of travel restrictions that were being implemented at the time of our 2021 Annual Meeting to reduce the spread of COVID-19, the Annual Meeting was held in a virtual meeting format by live webcast and each of our Directors attended and were available to respond to questions.
Code of Business Ethics and Training
We have adopted a code of ethics that applies to all of our employees and directors, including the Chief Executive Officer, the Chief Financial Officer, the Controller and other senior financial officers. In fiscal 2019,2021, each of our directors completed our Code of Business Ethicson-line compliance training program that we require our employees to complete. In addition, in fiscal 2021, as part of our risk oversight of our information technology systems and risk mitigation efforts, employee training on cybersecurity risks was required of all Cabot employees who have access to our information technology resources. The Code of Business Ethics is posted on our website (www.cabotcorp.com) under the caption “Company — About—About Cabot — Code of Business Ethics.”
Stockholders or other interested parties wishing to communicate with the Board, thenon-management directors or any individual director may contact theNon-Executive Chair of the Board by calling1-800-853-7602; or by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Board of Directors, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277..
Anyone who has a complaint or concern regarding our accounting, internal accounting controls or auditing matters may communicate that concern to the Chair of the Audit Committee by calling1-800-853-7602; or by sending an email through our website using the link that is located under the caption “Company — About Cabot — Governance — Contact the Board of Directors”; or by writing to Cabot Corporation Audit Committee, c/o Alertline Anonymous, P.O. Box 3767, 13950 Ballantyne Corporate Place, Suite 300, Charlotte, North Carolina 28277.. All such communications to the Board of Directors or the Audit Committee will also be sent to Cabot’s Office of Compliance.
CABOT CORPORATION 1925
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Annual compensation for ournon-employee directors is comprised of cash compensation and a grant of Cabot common stock. The Governance Committee is responsible for reviewing the form and amount of compensation paid to ournon-employee directors and recommends changes to our Board of Directors as appropriate. In November 2018,2021, the Governance Committee, with the assistance of Mercer LLC,Meridian, a national executive compensation firm, evaluated the reasonablenesscompetitiveness of ourthe Company’s director compensation and the appropriate mix of cash and equity compensation. This assessmentprogram, which included a review of director compensation data prepared for the Governance Committee by Mercer usingfrom the same peer group of companies our Compensation Committee uses for assessing the reasonableness of our executive compensation decisions. Based on this evaluation and upon the recommendation of the Governance Committee, our Board of Directors approved, effective January 1, 2019, the following2022, numerous changes in our director compensation:
increased the annual equity compensation component of this program from a value of $110,000 to a value of $120,000
increased the annual cash retainer from $75,000 to $90,000
eliminated the separate $16,000 annual cash retainer for serving on the Audit Committee and the separate $7,000 annual cash retainer for serving on the Compensation, Governance or SHE&S Committee
reduced the annual retainer paid to the Chair of the Audit Committee from $25,000 to $20,000
increased the annual retainer paid to the Chair of the Compensation Committee from $10,000 to $15,000
retained the $10,000 cash retainer paid to the Chairs of the Governance and SHE&S Committees
eliminated the separate cash retainer paid to the Chair of the Governance Committee when the Chair of that Committee is also serving as Non-Executive Chair of the Board
retained the $110,000 annual cash retainer paid to our Non-Executive Chair of the Board.
non-employee director compensation program as described below. Directors who are Cabot employees do not receive compensation for their services as directors.
Cash Compensation
Effective January 1, 2019, the annualIn calendar year 2021, cash compensation for ournon-employee directors consistsconsisted of the following components:
retainer of $90,000
$20,000 for serving as Chair of the Audit Committee
$15,000 for serving as Chair of the Compensation Committee
$10,000 for serving as Chair of the SHE&S Committee
$10,000 for serving as Chair of the Governance Committee, except whenwhich was waived by the Chair of the Governance Committee is also serving as Non-Executive Chair of the Board of Directors, in which case this retainer is waived
$110,000 for serving as Non-Executive Chair of the Board of Directors
Effective January 1, 2022, annual cash compensation for our non-employee directors consists of the following components:
retainer of $95,000
$20,000 for serving as Chair of the Audit Committee
$15,000 for serving as Chair of the Compensation Committee
$15,000 for serving as Chair of the SHE&S Committee
$15,000 for serving as Chair of the Governance & Nominating Committee
$120,000 for serving as Non-Executive Chair of the Board of Directors
Cash compensation is paid quarterly and, when changes occur in Board or Committee membership during a quarter, the compensation ispro-rated.
Stock Compensation
Under the Cabot Corporation 2015 Directors’ Stock Compensation Plan (the “Directors’ Stock Plan”), eachnon-employee director is eligible to receive each calendar year shares of Cabot common stock as part of his or her compensation for services to be performed in that year. For calendar year 2019,2021, eachnon-employee director whose term of office continued after the 20192021 Annual Meeting of Stockholders received an award of shares having a grant date value as close as possible to $120,000 (2,613(2,489 shares). John K. McGillicuddy,Mark S. Wrighton, who retired atafter the 20192021 Annual Meeting, received apro-rated grant of 653622 shares. The closing price of our common stock on January 10, 2019,7, 2021, the date such shares were granted, was $45.92. Upon her election to the Board effective May 13, 2019, Ms. Yan received a grant of 1,818 shares as compensation for her services as a$48.21. For calendar year 2022, each non-employee director received an award of shares having a grant date value as close as possible to be performed in calendar 2019. The closing price of our common stock on May 13, 2019 was $44.01.$135,000 (2,254 shares).
As of January 10, 2020,18, 2022, there were 239,675194,291 shares available for issuance under the Directors’ Stock Plan.
20 CABOT CORPORATION
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Director Compensation(continued)
We believe that it is desirable for directors to have an equity interest in Cabot and we encourage all directors to own a reasonable amount of Cabot stock to align director and stockholder interests and to enhance a director’s long-term perspective. Accordingly, our Corporate Governance Guidelines requirenon-employee directors to have an equity ownership in Cabot of at least 10,000 shares.in an amount equal to five times the annual cash retainer paid for service as a director. It is expected that this ownership level will generally be achieved within a five-year period beginning when a director is first elected to
26 CABOT CORPORATION
2022 PROXY STATEMENT |
Director Compensation (continued)
the Board. For purposes of determining a director’s compliance with this ownership requirement, any deferred shares held by a director are considered owned by the director. In addition, eachnon-employee director is required to retain the shares granted in any given year for a period of at least three years from the date of issuance or until the director’s earlier retirement.
Reimbursement of Certain Expenses; Charitable Giving
Our Corporate Governance Guidelines state that Cabot will not provide retirement or other benefits or perquisites tonon-employee directors. Directors, however, are reimbursed for reasonable travel andout-of-pocket expenses incurred in connection with attending Board and Committee meetings and other Cabot business-related events and are covered by Cabot’s travel accident insurance policy for such travel. In connection with the retirement of Mr. McGillicuddyWrighton from the Board of Directors atafter the 20192021 Annual Meeting and in recognition for his many years of service, wethe Cabot Corporation Foundation made an aggregatea $25,000 contribution on his behalf of $25,000 to charitiesa charity he selected.
Deferred Compensation
Under the Cabot CorporationNon-Employee Directors’ Deferral Plan (the “Deferred Compensation Plan”), directors can elect to defer receipt of any cash compensation payable in a calendar year for a period of at least three years or until they cease to be members of the Board of Directors. In any year, these deferred amounts are, at the director’s choice, either (i) credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable year or (ii) treated as invested in Cabot phantom stock units, based on the market price of shares of Cabot common stock at the time of deferral (with dividends paid on shares credited and treated as if reinvested in Cabot phantom stock units). Mr.Messrs. Del Grosso and Enriquez and Dr. Wolfgruber elected to defer receipt of their calendar year 2019years 2020 and 2021 cash compensation, as applicable, and treat the deferred amounts as invested in Cabot phantom stock units. Messrs.Mr. Kirby and Prevost elected to defer receipt of theirhis calendar year 2019years 2020 and 2021 cash compensation and have it credited with interest at a rate equal to the Moody’s Corporate Bond Rate. The Moody’s Corporate Bond Rate used to calculate interest during calendar year 20192021 was 4.64%2.79%.
Under the Deferred Compensation Plan, directors also may defer receipt of the shares of common stock issuable to them under the Directors’ Stock Plan. For each share of stock deferred, a director is credited with one Cabot phantom stock unit to a notional account created in the director’s name. Dividends that would otherwise be payable on the deferred shares accrue in the account and are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the year. The rate used to calculate interest during calendar year 20192021 was 4.64%2.79%. At the end of the deferral period, the deferred shares of Cabot common stock are issued to the director, along with the accrued cash dividends and interest earned, either in one issuance or in installments over a period of up to ten years, as selected by the director. Messrs. Del Grosso, Enriquez, Kirby, McGillicuddy, Morrow, Prevost and Wilson, Ms. Yan, and Dr. Wolfgruber elected to defer their calendar year 20192021 stock awards.
CABOT CORPORATION 2127
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Director Compensation(continued)
The following table sets forth the compensation earned by ournon-employee directors in fiscal 2019:2021:
Name
| Fees Earned or Paid in Cash ($)(1)
| Stock Awards ($)(2)
| Change in Pension Value and Earnings($)(3)
| All Other ($)(4)
| Total($)
| Fees Earned or Paid in Cash ($)(1)
| Stock Awards ($)(2)
| Change in Pension Value and Earnings($)(3)
| All Other ($)(4)
| Total($)
| |||||||||||||||||||||||||||||||||
Cynthia A. Arnold
|
88,000
|
|
119,989
|
| — |
|
—
|
|
|
207,989
|
| 90,000 |
| 119,995 |
|
| — |
|
| — |
|
| 209,995 | ||||||||||||||||||||
Douglas G. Del Grosso | 90,000 |
| 119,995 |
|
| 57 |
|
| — |
|
| 210,052 |
| ||||||||||||||||||||||||||||||
Juan Enriquez
|
90,250
|
|
119,989
|
|
|
1,805
|
|
|
—
|
|
|
212,044
|
| 100,000 |
| 119,995 |
|
| 4,089 |
|
| — |
|
| 224,084 |
| |||||||||||||||||
William C. Kirby
|
88,000
|
|
119,989
|
|
|
9,218
|
|
|
—
|
|
|
217,207
|
| 90,000 |
| 119,995 |
|
| 26,880 |
|
| — |
|
| 236,875 |
| |||||||||||||||||
John K. McGillicuddy
|
49,250
|
|
29,986
|
|
|
1,022
|
|
|
25,000
|
|
|
105,258
|
| ||||||||||||||||||||||||||||||
Michael M. Morrow
|
109,250
|
|
119,989
|
|
|
36
|
|
|
—
|
|
|
229,275
|
| 110,000 |
| 119,995 |
|
| 322 |
|
| — |
|
| 230,317 |
| |||||||||||||||||
John F. O’Brien
|
103,500
|
|
119,989
|
|
|
—
|
|
|
—
|
|
|
223,489
|
| ||||||||||||||||||||||||||||||
Patrick M. Prevost
|
88,000
|
|
119,989
|
|
|
3,208
|
|
|
—
|
|
|
211,197
|
| ||||||||||||||||||||||||||||||
Sue H. Rataj
|
200,500
|
|
119,989
|
|
|
—
|
|
|
—
|
|
|
320,489
|
| 200,000 |
| 119,995 |
|
| — |
|
| — |
|
| 319,995 | ||||||||||||||||||
Frank A. Wilson
|
90,250
|
|
119,989
|
|
|
9
|
|
|
—
|
|
|
210,248
|
| 90,000 |
| 119,995 |
|
| 205 |
|
| — |
|
| 210,200 |
| |||||||||||||||||
Matthias L. Wolfgruber
|
99,750
|
|
119,989
|
|
|
219
|
|
|
—
|
|
|
219,958
|
| 105,000 |
| 119,995 |
|
| 875 |
|
| — |
|
| 225,870 |
| |||||||||||||||||
Mark S. Wrighton
|
88,000
|
|
119,986
|
|
|
7,518
|
|
|
—
|
|
|
215,507
|
| 45,000 |
| 29,987 |
|
| 6,587 |
|
| 25,000 |
|
| 106,574 |
| |||||||||||||||||
Christine Y. Yan
|
34,620
|
|
80,010
|
|
|
2
|
|
|
—
|
|
|
114,632
|
| 90,000 |
| 119,995 |
|
| 136 |
|
| — |
|
| 210,131 |
|
1. | Cash compensation earned reflects changes in Board and Committee service that occurred during the fiscal |
2. | Reflects the grant date fair value of shares of Cabot common stock granted to eachnon-employee director computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the number of shares granted to the director by the closing price of our common stock on the date of grant, which, for all directors |
3. | Represents above-market interest (the portion exceeding 120% of the applicable long-term rate) on compensation deferred under the Deferred Compensation |
4. | Consists of a charitable contribution made |
2228 CABOT CORPORATION
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Beneficial Stock Ownership of Directors, Executive
Officers and Persons Owning More Than Five
Percent of Common Stock
The following table shows the amount of Cabot common stock beneficially owned as of January 15, 202018, 2022 (unless otherwise indicated) by each person known by Cabot to beneficially own more than 5% of our outstanding common stock, by each director of Cabot, by each of our named executive officers and by all directors, nominees for director and executive officers of Cabot as a group. Unless otherwise indicated, each person has sole investment and voting power over the securities listed in the table.
Name
| Total Number of Shares(1) | Percent of Class(2) | ||||||
Holders of More than Five Percent of Common Stock | ||||||||
BlackRock, Inc. | 5,839,996 | (3) | 9.70 | % | ||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
The Vanguard Group | 5,103,090 | (4) | 8.50 | % | ||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355 | ||||||||
Wellington Management Group LLP | 2,938,778 | (5) | 5.16 | % | ||||
Wellington Group Holdings LLP | ||||||||
Wellington Investment Advisors Holdings LLP | ||||||||
c/o Wellington Management Company LLP | ||||||||
280 Congress Street | ||||||||
Boston, MA 02210 | ||||||||
Directors and Executive Officers | ||||||||
Cynthia A. Arnold | 6,902 | * | ||||||
Brian A. Berube | 99,831 | (6) | * | |||||
John R. Doubman | 54,859 | (7) | * | |||||
Juan Enriquez | 34,468 | (8) | * | |||||
Karen A. Kalita | 6,336 | (9) | * | |||||
Hobart C. Kalkstein | 95,677 | (10) | * | |||||
Sean D. Keohane | 365,593 | (11) | * | |||||
William C. Kirby | 16,782 | (12) | * | |||||
Erica McLaughlin | 31,250 | (13) | * | |||||
Michael M. Morrow | 9,584 | (14) | * | |||||
John F. O’Brien | 53,992 | * | ||||||
Patrick M. Prevost | 220,219 | (15) | * | |||||
Sue H. Rataj | 18,828 | * |
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Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock(continued)
Name
| Total Number of Shares(1) | Percent of Class(2) |
Total Number
|
Percent of Class(2)
| ||||||||||||
Holders of More than Five Percent of Common Stock | ||||||||||||||||
BlackRock, Inc. | 6,244,761 | (3) | 11.0 | % | ||||||||||||
55 East 52nd Street | ||||||||||||||||
New York, NY 10055 | ||||||||||||||||
The Vanguard Group | 5,768,169 | (4) | 10.2 | % | ||||||||||||
100 Vanguard Blvd. | ||||||||||||||||
Malvern, PA 19355 | ||||||||||||||||
Directors and Executive Officers | ||||||||||||||||
Cynthia A. Arnold | 11,645 | (5) | * | |||||||||||||
Douglas G. Del Grosso | 7,104 | (6) | * | |||||||||||||
Juan Enriquez | 37,463 | (7) | * | |||||||||||||
Karen A. Kalita | 26,255 | (8) | * | |||||||||||||
Hobart C. Kalkstein | 139,073 | (9) | * | |||||||||||||
Sean D. Keohane | 689,596 | (10) | 1.2 | % | ||||||||||||
William C. Kirby | 21,525 | (11) | * | |||||||||||||
Erica McLaughlin | 90,227 | (12) | * | |||||||||||||
Michael M. Morrow | 14,327 | (13) | * | |||||||||||||
Sue H. Rataj | 23,571 | * | ||||||||||||||
Frank A. Wilson | 5,834 | (16) | * | 10,577 | (14) | * | ||||||||||
Matthias L. Wolfgruber | 13,123 | (17) | * | 17,866 | (15) | * | ||||||||||
Mark S. Wrighton | 47,068 | (18) | * | |||||||||||||
Christine Y. Yan | 4,453 | (19) | * | 9,196 | (16) | * | ||||||||||
Directors and executive officers as a group (18 persons) | 1,192,950 | (20) | 2.08 | % | ||||||||||||
Jeff Zhu | 171,342 | (17) | * | |||||||||||||
Directors and executive officers as a group (14 persons) | 1,269,767 | (18) | 2.2 | % |
* | Less than one percent. |
1. | For Cabot’s executive officers, the number includes shares of Cabot common stock held for their benefit by the trustee of Cabot’s 401(k) Plan. The shares of common stock allocated to the accounts of Cabot’s executive officers in the 401(k) Plan constitute less than 1% of our common stock. |
2. | The calculation of percentage of ownership of each listed beneficial owner is based on |
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Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More Than Five Percent of Common Stock (continued)
3. | Based on an amendment to a Schedule |
4. | Based on an amendment to a Schedule |
5. |
|
6. |
|
7. | Includes |
|
Includes |
Includes |
10. | Includes 541,756 shares of common stock that Mr. Keohane has the right to acquire within 60 days of January 18, 2022 upon the exercise of stock options and 12,950 shares of Cabot common stock held by the trustee for Cabot’s 401(k) Plan for his benefit. |
11. |
|
Mr. Kirby has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
Includes |
Includes |
|
Mr. Wilson has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
Dr. Wolfgruber has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
|
Ms. Yan has deferred receipt of these shares under applicable Cabot deferred compensation plans. |
Includes 118,953 shares of common stock that Mr. Zhu has the right to acquire within 60 days of January 18, 2022 upon the exercise of stock options. |
18. | Shares of our common stock shown as being beneficially owned by directors and executive officers as a group includes |
2430 CABOT CORPORATION
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The Compensation Committee of the Board of Directors (referred to as the “Compensation Committee” or the “Committee”) has reviewed the Compensation Discussion and Analysis (“CD&A”) section included in this Proxy Statement. The Compensation Committee has also reviewed and discussed the CD&A with the members of management who are involved in the compensation process.
Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated by reference into our Annual Report on Form10-K for the fiscal year ended September 30, 2019.2021.
John F. O’Brien,Matthias L. Wolfgruber, Chair
William C. Kirby
Mark S. WrightonMichael M. Morrow
Compensation Discussion and Analysis
As context for our named executive officers’ fiscal 20192021 compensation, below we summarize Cabot’s fiscal 20192021 performance and provide a brief overview of the decisions made with respect to executive compensation in fiscal 20192021 and our executive compensation programs for that fiscal year. We then describe our compensation philosophy and objectives, our compensation setting process and other compensation and governance related policies, and the compensation awarded, earned and paid for fiscal 2019.2021. For fiscal 2019,2021 our named executive officers and their current positions are:
Sean D. Keohane, President and Chief Executive Officer;
Erica McLaughlin, Senior Vice President and Chief Financial Officer;
Karen A. Kalita, Senior Vice President and General Counsel;
Hobart C. Kalkstein, Senior Vice President and President, Reinforcement Materials Segment, and President, Americas Region; and
|
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Jeff Zhu, Senior Vice President and President, Performance Additives business, and President, Asia Pacific Region.
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Executive Summary
Our Performance in Fiscal 20192021
OurDuring fiscal 2021, we continued to execute on our “Advancing the Core” strategy, is designedwhich we initially introduced in fiscal 2016. Under this strategy we seek to extend our leadership in performance materials by (i) investing for growth in our core businesses, (ii) driving application innovation with our customers, and (iii) generating strong cash flows through efficiency and optimization. The aim of this strategy is to deliver sustained and attractive total shareholder return (“TSR”), built on earnings growth and a balanced capital allocation framework.framework comprised of growth investments and cash return to shareholders. This strategy is intended to ensure that we invest sufficiently in our core businesses to capture opportunities and drive long-term earnings growth while also providing our shareholders with a meaningful cash return. Early in our fiscal 2022, we refreshed our Advancing the Core strategy in recognition of our successful execution of that strategy and adopted our “Creating for Tomorrow” growth strategy based on investing for advantaged growth, developing innovative products and processes that enable a better future, and driving continuous improvement in all we do.
DuringOverall, we had a very successful fiscal 2019, we delivered solid results despite challenging end markets. With respect to our2021 in terms of both financial performance we:and the progress we made in advancing our strategic objectives and sustainability goals. Our business recovered from the challenges we experienced in fiscal 2020 as a result of the COVID-19 pandemic, which severely and negatively impacted demand from our key tire and automotive customers, and, during fiscal 2021, we experienced strong volume demand and we were able to elevate our earnings to a higher level of profitability.
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Executive Compensation (continued)
Specifically, in fiscal 2021, we
generated diluted earnings per share (“EPS”) of $2.63$4.34 and record adjusted EPSEPS* of $3.91*,$5.02; generated income before income taxes and equity in earnings of affiliated companies of $406 million and record total segment EBIT* of $550 million, with record EBIT in our Reinforcement Materials segment of $329 million and strong EBIT in our Performance Chemicals segment of $211 million;
generated cash flow from operating activities of $257 million and record discretionary free cash flow (“DFCF”)* of $353 million, which we believe was solidallowed us to increase our quarterly cash dividend by 6% beginning in lightour first quarter of weakening macroeconomic and key sector indicators we experienced during theour fiscal year including, most notably, a decline in industrial activity in China2022; and declines globally in automotive production;
CABOT CORPORATION 25
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Executive Compensation(continued)
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maintained a strong balance sheet and liquidity position, by improvingending the year with a cash balance of $168 million and with liquidity of approximately $1.3 billion. We also reduced our net debt to EBITDA ratio from 2.5 times at the end of fiscal 2020 to 1.6 times at the end of fiscal 2021, while maintaining an investment grade credit rating.
We believe these results are outstanding. The macro-environment in fiscal 2021 required resilience and agility in the face of global supply chain disruptions, including the impact to our businesses from the semiconductor chip shortage on automotive production, the continuing evolution of necessary COVID-19 pandemic safety protocols and adjustments to our ways of working, capital days performance and through the issuance of10-year bonds, whichsharply rising input costs. In addition, we believe improves our financialnavigated numerous unplanned plant outages. Our commercial and operational flexibility.
While fiscal 2019 market fundamentalsdiscipline drove these very strong results as we worked closely with our customers to manage the challenges noted above and were weaker thansuccessful in our pricing efforts to ensure our margins remained robust and that we anticipated, we remained focusedcould invest to support our customers’ long-term supply requirements.
We also made progress on our long-term strategya number of strategic initiatives and capital allocation framework and executed important initiativesgrowth investments, including those intended to extend our leadership positions and to drive sustained growth of our earnings and discretionary free cash flow. During the year, we:
completedwe made significant progress in establishing commercial arrangements with a number of key battery manufacturers in our battery materials growth vector, and achieved a doubling of revenue in this product line as compared to fiscal 2020;
within our Performance Additives business, we made progress in the divestitureconversion to specialty carbons of our Specialty Fluids business,plant in Xuzhou, China, which will provide manufacturing capacity across our broad range of specialty carbon applications and make available additional capacity to support our battery materials growth vector, and also initiated negotiations with Tokai Carbon for the majorityacquisition of its carbon black facility in Tianjin, China, which capacity, upon consummation of the proceeds from whichpurchase agreement we usedsigned in the first quarter of fiscal 2022, we intend to repurchase shares aboveconvert to produce specialty carbons, including products for our stated capital allocation framework;battery materials growth vector;
managedwithin our investmentsInkjet business, we achieved multiple OEM qualifications that position us well to strengthen our core manufacturing asset footprint;capitalize on the expected shift in packaging from analog to digital printing as inkjet presses penetrate this market;
executed the successfulstart-up of a new fumed silica plant in China;
commenced work to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons;
improved the performance of the Purification Solutions segment through strong execution of the transformation plan we implemented early in the year intended to focus the segment’s portfolio, optimize its assets, and streamline its organizational structure; and
returned $253 million of cash towithin our shareholders, consisting of $173 million through share repurchases and $80 million in dividend payments.
We also continued to make progress driving application innovation in new markets. For example, with respect to our energy materialsSpecialty Compounds product line, we have achievedcontinued with the execution of a project to build a specialty compounds production line in Cilegon, Indonesia, which will allow us to meet customer technical qualification with most of the top global battery manufacturers and launched a suite of conductive carbon additives that will form the basedemand for long-term growth. We believe our continued efforts to broaden our range of conductive carbon additives and build formulation capability will differentiate our product offeringsblack masterbatch in this important high-growth application. Additionally, we continued to fund importanthigh growth investments in Cabot Elastomer Composites and achieved critical customer qualification milestones that are expected to lead to long-term growth of this transformative material in tires.region;
To improve our efficiency and optimize our operations, we implemented a number of cost reduction initiatives across the Company during the year. These included organizational structural changes and asset decisions that reduced headcount, and achieved, inclusive of savings derived from the Purification Solutions transformation plan, an approximately $30 million reduction in our costs.
In addition, during fiscal 2019 we advanced our sustainability agenda. Notably, all of our operating manufacturing sites in China have achieved certification under the Responsible Care® 14001 standard, the global standard for safety & health, environmental and security management systems established by the American Chemistry Council’s Responsible Care program, by auditors from the international registrar, BSI. In addition, we received a Gold rating from EcoVadis, an independent sustainability monitoring organization, for our Sustainability Report, which is the fourth consecutive year that we have received a Gold rating, and in 2019 we were named among the 100 Best Corporate Citizens by Corporate Responsibility Magazine for the second consecutive year. Further, we continued to make progress toward creating a more inclusive and diverse organization. Mr. Keohane signed the CEO Action for Diversity and Inclusion™ during the year, and we made further progress in increasing gender diversity representation on our Management Executive Committee. Currently, three of the ten members of our Management Executive Committee are women.
Executive Transitions
In June 2019, Mr. Berube, the Company’s former Senior Vice President and General Counsel, voluntarily resigned from Cabot. Ms. Kalita assumed responsibility as the Company’s chief legal officer, and was appointed Senior Vice President and General Counsel at that time. In addition, Mr. Doubman stepped down from his position as Senior Vice President and President, Performance Additives business, effective October 2, 2019, and his responsibilities were transitioned to other senior leaders within Cabot. Mr. Doubman’s employment with Cabot terminated effective November 15, 2019. The compensation decisions made in connection with these changes are described later in this CD&A.
* | Adjusted EPS, Total Segment EBIT, and |
** | Share repurchases were suspended during fiscal 2021 to preserve cash flow in light of the COVID-19 pandemic. |
2632 CABOT CORPORATION
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Executive Compensation(continued)
we continued to evaluate strategic options for our Purification Solutions business and in the first quarter of fiscal 2022 entered into an agreement to divest this business that we expect to close in the second quarter of our fiscal year 2022;
• | we completed a major air emissions control project at our carbon black manufacturing facility located in Louisiana that will result in improved air quality through the substantial elimination of NOx and SO2 emissions and ensure that we can support our customers’ supply needs over the long-term; |
we continued to enhance our operating platform, building on our commercial and operational excellence initiatives and the establishment of our global business services organization, with a stronger digital platform that enables greater automation of processes and provides us with enhanced data analytics;
we maintained our strong record of performance in employee safety, with a Total Recordable Incident Rate for fiscal 2021 of 0.34, keeping us in the upper tier of chemical and industrial companies;
• | we committed to align our disclosures with the recommendations of the Task Force for Climate-related Financial Disclosure (“TCFD”), and we engaged a third party to help us evaluate climate risks and opportunities following the TCFD guidelines. We also received a Platinum rating from EcoVadis, an independent sustainability monitoring organization, for our Sustainability Report, and in December 2021 we were named one of America’s Most Responsible Companies 2022 by Newsweek magazine for the third consecutive year; and |
we returned $80 million in cash to our shareholders through dividends.
Highlights of our Fiscal Year 20192021 Named Executive Officer Compensation Decisions and the Impact of Company Performance on Compensation.
We believe fiscal 20192021 compensation appropriately aligned our named executive officers’ paycompensation with our corporate performance, with a significant portion of the compensation paid to our named executive officers based on our performance againstpre-established corporate financial goals. Specifically, 65% of the total direct compensation opportunity for our CEO (base salary, target STIshort-term incentive (“STI”) award and LTIlong-term incentive (“LTI”) awards (with PSUs valued at target)) for our CEO was performance-based and not guaranteed, and, on average, the percentage of total direct compensation opportunities for our other named executive officers that was performance-based was 53%56%. The charts below show the total direct compensation opportunities provided to our named executive officers for fiscal 2019,2021, as well as the mix between short- and long-term compensation, andnoting the elements that constitute performance-based compensation.
Base Salary.All of our named executive officers received a base salary increase for calendar 20192021 during our annual salary review process that took place in November 2018, with the exception2020. The Compensation Committee approved 3.5% merit-based salary increases for each of our named executive officers for 2021, and market-based adjustments for Mses. McLaughlin and Kalita and Mr. Doubman, who received a 10% increase in his base salary effective October 1, 2018, at the time of his promotion to President, Performance Additives business.Kalkstein, as described further below. The increases in the base salaries of our named executive officers other than Mr. Doubman made during the annual review process ranged from 3%3.5% (for the merit-based increases) to 15%15.9% (taking into account the market-based adjustments) and were made in recognition of the officers’ strong individual performance and leadership, and, in the case of Ms. McLaughlin, Ms. Kalita, and Mr. Kalkstein, to bring their base salaries closer to the market
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2022 PROXY STATEMENT |
Executive Compensation (continued)
median of the benchmark compensation data used by the Committee, as further described below. In addition, Ms. Kalita received a 29% increase in her base salary effective at the time of her promotion in June 2019, after a review of benchmark compensation data and in recognition of the associated expanded job responsibilities she assumed. With these increases, we believe the base salaries of our named executive officers for fiscal 20192021 were aligned and consistent with our compensation philosophy, which considers individual performance and leadership, scope of responsibilities, the number of years the executive has held the position, and benchmark compensation data to arrive at a market competitive base level of compensation appropriate for the individual. (See pages 39-4245-48 for further details).
Considerations Applied in Setting Targets for STI and LTI Incentive Awards for 2021. Our philosophy in setting goals for each of the financial metrics that will determine payouts under our STI and LTI awards is to set challenging but achievable target goals that, in addition to promoting well-rounded Company and management performance:
drive achievement of our strategy to improve our profitability and achieve adjusted EPS compound annual growth rate over time of 7-10%, and manage our cash flow; and
will be realized as a result of strong execution and Company performance.
When setting financial targets, typically we begin with our performance in the just completed fiscal year and set growth targets from that base that align with the execution of our strategy. We describe how we develop Company performance metrics in detail below, under the heading “Developing Company Performance Metrics”. Setting financial targets for our 2021 STI and LTI incentive awards, which the Committee finalized in November 2020, was particularly challenging given the uncertain environment caused by the COVID-19 pandemic at the time when the Committee was setting targets. For Cabot, demand contracted sharply in fiscal year 2020 across our key end-markets and, while we began to see demand recover in the last fiscal quarter of 2020, there remained significant uncertainty around the trajectory of the COVID-19 pandemic and its projected impact on global economic growth. The Committee established adjusted EBIT and adjusted EPS targets based on a range of factors well beyond our performance in fiscal 2020, including projections for key macro-economic indicators and forecasted expectations for Cabot’s key end-markets. Additionally, the Committee considered management’s internal operating plans and specific managerial actions intended to out-perform market conditions in establishing the appropriateness of fiscal year 2021 targets. As a result, the adjusted EBIT and adjusted EPS targets for fiscal 2021 included materially more aggressive annual growth expectations from our fiscal 2020 performance than would have been the case had we applied our traditional target setting approach. This approach also resulted in threshold levels of adjusted EBIT and adjusted EPS for fiscal 2021 being set above our actual performance in fiscal 2020. In setting NWC and DFCF targets, our goals in 2021 were to maintain and continue to build on the structural and process improvements we had made in 2020, and in setting adjusted RONA targets, we set targets that reflected an expected gradual recovery and expansion over the three-year period from the lower levels achieved during fiscal 2020 as a result of the environment caused by the COVID-19 pandemic. We believe the financial targets established for our 2021 STI and LTI awards reflected appropriate growth expectations and, in keeping with our philosophy, were challenging and required strong management execution and Company performance to achieve.
As described below, payouts under the STI awards on the basis of corporate performance and the percentage of PSU awards earned for the fiscal 2021 performance period of the outstanding LTI awards reflect the exceptional execution and performance of our management team, as well as the strong volume demand we experienced during fiscal 2021 as our business recovered from the declines we experienced in fiscal 2020 as a result of the COVID-19 pandemic.
STI Awards and Payouts. The Company achieved performance belowabove the targetmaximum level of the adjusted earnings before interest and taxes (“EBIT”) goal and withinEBIT metric, above the target range and below the maximum of the NWC days metric, and above the maximum level of the net working capital (“NWC”) days goalDFCF metric established by the Committee under our short-term incentive (“STI”)STI program, for fiscal 2019, resulting in a payout of the portion of the award that is based on our financial performance of 74.1%at 188% of target. The balance of the amounts paid inwith respect ofto STI awards to members of our Management Executive Committee, including our named executive officers, reflected their individual performance and demonstrated leadership, and ranged from 75%110% to 110%130% of target. The total STI awards made to the members of our Management Executive Committee, including our named executive officers, ranged from 74%165% to 85%171% of the named executive officer’s target award. (Seepages 39-4245-48 for further details about awards and payouts made to our named executive officers).
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Executive Compensation(continued)
LTI Awards and Payouts. Our long-term incentive (“LTI”)LTI program is 70% performance-based and 30% time-based, consisting of a combination of performance-based restricted stock units (“PSUs”)PSUs (35%), stock options (35%) and time-based restricted stock units (“TSUs”)TSUs (30%) (with percentages measured based on the awards’ grant date values, assuming target level achievement of applicable performance goals in the case of PSUs). The grant date value of the
34 CABOT CORPORATION
2022 PROXY STATEMENT |
Executive Compensation (continued)
awards granted in fiscal 20192021 to each named executive officer was based on an assessment of the named executive officer’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation, and internal equity (the relationship of pay among the executive officers in the context of their responsibilities) considerations. In addition, as described below, Ms. Kalita received a supplemental LTI award in connection with her promotion to the role of Senior Vice President and General Counsel.retention considerations. (See pages 39-4245-48 for further details.)
AsFurther, as described below,on page 43, each PSU award is allocated evenly into three tranches, with each tranche having a separate fiscal year performance period and the entire award having a cumulative three-year overall vesting period. All performance goals for each performance period are established at the time of grant to cover the full three-year performance period. Our financial performance in each fiscal year determines the percentage of the target award earned for that fiscal year performance period in three outstanding PSU awards. The percentage of the target awards earned for fiscal 20192021 performance with respect to outstanding PSUs is set forth below. For each performance metric, adjusted EPS and adjusted return on net assets (“RONA”),RONA, achieving the target level of performance results in 100% of the portion of the award that relates to that metric being earned. We believe that the PSUs earned based on our fiscal 20192021 financial results properly aligned our LTI compensation with our solidoutstanding fiscal 20192021 financial performance, consistent with the role of these awards in advancing ourpay-for-performance philosophy.
LTI Award
|
FY’21 Performance Metrics and Achievement
|
| ||||
|
|
| ||||
Fiscal | Adjusted EPS |
| ||||
Fiscal | Adjusted EPS | 169.0% | ||||
Fiscal 2021 Grant (covering fiscal 2021-2024), |
| 200.0% |
28CABOT CORPORATION 35
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Executive Compensation(continued)
Characteristics of our Executive Compensation Programs
Our executive compensation programs include a number of practices intended to align the interests of management and our shareholders.
What We Do | What We Don’t Do | |
✓ Link pay to performance; significant portion of executive pay is not guaranteed
✓ Tie performance-based awards to achievement of
✓ Use our STI awards to recognize individual performance and leadership and achievement of corporate goals ✓ Review actual compensation paid to or realized by our Management Executive Committee as compared to the value of compensation awarded
✓ Balance the mix of pay components, including cash, stock options, and restricted stock units (both performance- and time-based)
✓ Cap incentive awards under our STI and LTI programs
✓
✓ Maintain stock ownership guidelines
✓ Subject STI and LTI program compensation to our recoupment policy
✓ Provide modest perquisites consisting primarily of financial planning and an executive physical examination | ✘ Enter into employment contracts with our CEO and other named executive officers (other than Mr. Zhu, who is based in China)
✘ Provide for excise taxgross-ups in the event of a change in control
✘ Reprice underwater stock options without shareholder approval
✘ Permit hedging or short sales of company stock by executive officers or directors
✘ Provide single-trigger change in control vesting in our equity awards |
Consideration of Results of Shareholder Advisory Votes on Executive Compensation
At our 20192021 Annual Meeting, we conducted an advisory(non-binding) shareholder vote on executive compensation, as required by the Dodd-Frank Act. Approximately 94%95.17% of the shares voted approved the executive compensation discussed and disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and other related tabular and narrative disclosures contained in our 20192021 proxy statement. In considering the results of this most recent favorable advisory vote on executive compensation, among other things, the Compensation Committee determined that the Company’s executive compensation programs have been effective in implementing the Company’s stated compensation philosophy and objectives, and directly aligning compensation paid or earned with Company performance. Therefore, the Committee did not make any changes toin the structure of these programs during fiscal 2019.or in response to this vote.
The Compensation Committee recognizes that executive pay practices and corporate governance principles continue to evolve. Accordingly, it will continue to monitor executive compensation practices and make adjustments as necessary to ensure that our executive compensation programs continue to support our corporate goals and objectives, appropriately incentivize management and reflect good corporate governance principles.
The Compensation Committee pays close attention to the advice of its compensation advisors and provides access for our shareholders who would like to communicate on executive compensation directly with the Compensation Committee or the Board. You may contact the Board of Directors through our website at “Company — About Cabot — Governance — Contact the Board of Directors”.
Compensation Philosophy, Objectives and Process
Continuing to position Cabot for future success requires the talent to support our business and Advancing the Core strategy. Our executive compensation programs are designed to provide a competitive and internally equitable compensation and benefits
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Executive Compensation (continued)
package that rewards individual and Company performance and reflects job complexity and the strategic value of the individual’s position while also promoting long-term retention and motivation. We seek to accomplish these goals in a way that is aligned with the long-term interests of our shareholders.
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Executive Compensation(continued)
To achieve these goals, our executive compensation programs followadhere to these principles:
Offer a total compensation opportunity and a benefits package that are competitive in our industry;
Reward executives based on our business performance by closely aligning a meaningfulmajority portion of their compensation with the performance of the Company on both a short- and long-term basis;
Set challenging but achievable performance goals that support the Company’s short- and long-term financial goals;
Motivate individual performance by rewarding the specific performance and achievements of individual executives and their demonstrated leadership; and
Align the interests of our executives and our shareholders through performance-based compensation, equity grants and stock ownership guidelines.
Our Compensation Setting Process
The Compensation Committee
As discussed under “Board Leadership, Structure, Governance and Composition, and Risk Management — How ourOur Board Operates — Compensation Committee”, on page 14,13, the Compensation Committee is responsible for all compensation decisions related to members of the Company’s Management Executive Committee, which includes all our named executive officers.
The annual compensation planning process for the preceding fiscal year concludes at the Committee’s meeting in November, when the Committee evaluates the Company’s performance against the corporate performance goals set for the just-concluded fiscal year and also evaluates each executive officer’s individual performance and, on this basis, determines the amounts payable or earned, as applicable, in respect of the fiscal year under our STI and LTI programs. Each November, the Compensation Committee also (i) determines any adjustments to base salaries, with any adjustment typically effective the following January, (ii) sets corporate performance metrics applicable to our STI and LTI programs for the current fiscal year, (iii) grants LTI awards, and (iv) establishes performance goals and maximum payment levels under our STI and LTI programs for awards granted in the current fiscal year, in each case, for each named executive officer.
A description of the Compensation Committee’s roles and responsibilities is set forth in its written charter adopted by the Board of Directors, which can be found atwww.cabotcorp.com under “Company — About Cabot — Governance — Resources.”
Role of the Compensation Consultant
The Compensation Committee has retained Meridian Compensation Partners (“Meridian”) as its independent compensation consultant for purposes of advising on executive compensation matters since March 2018. During fiscal 2019,2021, Meridian provided the Committee with advice on a broad range of executive compensation matters, including the following:
Apprising the Committee of compensation-related trends and developments in the marketplace;marketplace, including developments relating to the COVID-19 pandemic;
Informing the Committee of regulatory developments relating to executive compensation practices;
Reviewing and assessing the composition of the group of peer companies used for compensation benchmarking purposes;
Providing the Committee with an assessment of the market competitiveness of our executive compensation programs;
Assessing the relationship between executive compensation actually paid and corporate performance;
Identifying potential changes to our executive compensation programs to maintain market competitiveness and consistency with business strategies, good governance practices and alignment with shareholder interests;
Providing the Committee with an assessment of the proposed compensation arrangements for newly appointed members of the Company’s Management Executive Committee; and
Reviewing the disclosure of our executive compensation programs in thethis proxy statement.
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Executive Compensation (continued)
Meridian attended all regularly scheduled meetings of the Compensation Committee during fiscal 2019.2021.
The Compensation Committee has assessed the independence of Meridian pursuant to SEC rules and concluded that no conflict of interest exists that prevents Meridian from independently advising the Compensation Committee.
Role of the Chief Executive Officer and Other Officers
Each year, our CEO and our Chief Human Resources Officer (“CHRO”), working with internal resources as well as Meridian, review the design of our executive compensation programs and recommend modifications to existing, and/or the adoption of new, plans and programs to the Compensation Committee. In addition, our CEO recommends to the
30 CABOT CORPORATION
|
Executive Compensation(continued)
Committee the performance metrics and goals to be used to determine future payouts under our STI and LTI programs, and each named executive officer’s individual performance goals (other than the CEO’s) are jointly developed by the executive and the CEO.
Before the Compensation Committee makes compensation decisions regarding the compensation of our named executive officers, the CEO provides his assessment of each named executive officer’s performance, other than his own, taking into consideration factors such factors as the officer’s achievement of individual goals, leadership accomplishments, contribution to Cabot’s performance and the achievement of Company goals, and areas of strength and areas for development. He then makes specific award recommendations.recommendations for these officers. In preparing compensation recommendations for the Committee, our CEO, our CHRO and other members of management involved in the process review compensation and survey data compiled by the Committee’s independent compensation consultant for similarly-situated executives at our peer group of companies and other external competitive market data provided by such consultant, as described below. Our CEO attends Compensation Committee meetings but is not present for, and does not participate in, any discussions concerning his own compensation. All decisions relating to the compensation of our named executive officers are made solely by the Committee and are reported to the full Board of Directors.
Use of Benchmarking Comparison Data
The companies we have included in our compensation peer group consist of companies in the diversified chemicals or specialty chemicals industries with similar products and services and with revenues and a market capitalization generally betweenone-third and three times the Company’s revenue and market capitalization. The Compensation Committee reviews executive compensation data for executives with comparable positions at these peer group companies to gauge the reasonableness of its executive compensation decisions and the competitiveness of our executive compensation programs. The Compensation Committee believes maintaining market-competitive executive compensation programs allows us to successfully attract and retain experienced executive talentexecutives who are critical to our long-term success.
The Compensation Committee annually reviews the companies included in our compensation peer group and may add or eliminate companies as it determines to be appropriate. For purposes of fiscal 20192021 compensation matters our compensation peer group consisted of the following 20 companies:
• Albemarle Corporation • Ashland Global Holdings, Inc. • Axalta Coating Systems • Celanese Corporation • The Chemours Company • FMC Corporation • Ferro Corporation • H.B. Fuller Company • Huntsman Corporation • Innospec Inc. | • Kraton Corporation | • Minerals Technologies • NewMarket Corporation • Element Solutions, Inc. (formerly Platform Specialty Products Corporation) • Avient Corporation (formerly PolyOne • RPM International Inc. • Stepan Company • Trinseo S.A. • Tronox Limited • W.R. Grace & Co. | ||
In preparation for the fiscal 20202022 executive compensation review season and the decisions that the Compensation Committee has made and will make with respect to fiscal 20202022 compensation, the Compensation Committee reviewed,
38 CABOT CORPORATION
2022 PROXY STATEMENT |
Executive Compensation (continued)
with Meridian, the peer group companies listed above and determined that it was appropriate to add Olin Corporation and Orion Engineered Carbons S.A. to the peer group. With these additions, the Committee confirmed the continued appropriateness of the peer group for benchmarking the Company’s executive compensation programs. As a result, the Compensation Committee did not make any changes in our compensation peer group for fiscal 2020 compensation decisions.
The Compensation Committee and management also consider executive compensation survey data. The survey data used is based on information reported in the Willis Towers Watson Executive Compensation survey. For positions where compensation peer group and survey data are available, the peer group and survey data are averaged to provide a market composite perspective for compensation.
At least annuallyEach year, the Compensation Committee reviews tally sheets that detail all elements of each named executive officer’s compensation and benefits for the current and prior fiscal years, as well as a projection of his or her compensation for the upcoming fiscal year. These are provided to the Committee as a means to review the total compensation and benefits package for each named executive officer and the impact of any compensation decisions on such compensation
CABOT CORPORATION 31
|
Executive Compensation(continued)
and benefits levels. The Compensation Committee made no changes to our current executive compensation programs or any individual named executive officer’s proposed compensation for fiscal 2019 based on the information set forth in the tally sheets.
Factors Considered in Determining Amounts of Compensation
The Compensation Committee considers the following factors in determining each named executive officer’s total annual and long-term compensation opportunities:
the officer’s role, level of responsibility, performance, demonstrated leadership, and experience;
the number of years the officer has held thehis or her position;
the current target total compensation for each officer;
employee retention and internal equity considerations; and
external competitiveness.
The Compensation Committee has adopted a targeting strategy for executive compensation decisions that defines competitiveness as a “range around the market 50thpercentile” for all elements of total direct compensation (base salary, target STI awards and LTI awards (with PSUs valued at target)). For members of the Management Executive Committee who are promoted from within Cabot, or whose total direct compensation is not competitive at the time of their promotion under our targeting strategy, our philosophy and intention has been to bring such executive’s total direct compensation to within the median competitive range of the benchmark compensation data used by the Committee over a three-year period from the time of their promotion, subject to actual performance in the role. The Committee believes that the use of a range provides the Committee with the framework to target the market median of the benchmarking data used by the Committee, as described under “Use of Benchmarking Comparison Data” above, but to vary compensation opportunities as it deems appropriate based on individual and Company circumstances.
Developing Company Performance Metrics
The performance metrics we use for our STI and LTI programs are intended to support our short- and long-term business plans and strategies. In fiscal 2019,2021, we used fourfive financial metrics to promote well-rounded Company and management performance, as described below.
For our STI awards we used adjustedthree financial metrics to closely align the incentive metrics under our STI awards with each of the elements of our “Advancing the Core” strategy. Adjusted EBIT aswas the principal financial performance metric because it reflects an important near-term goal of improving our operating profitability and is a key driver of TSR. To increase the focus on efficiently managing our working capital, and to measure our short-term financial health, we also used a net working capital (“NWC”) days metric, and to incentivize cash flow management we used discretionary free cash flow (“DFCF”) as the third financial metric. Adjusted EBIT had a weighting of 60%, and NWC days metric in our STI awards.and DFCF each had a weighting of 20%. In addition, for awards made for fiscal 2021, we removed the minimum adjusted EBIT achievement level (or gate) for overall plan payout to emphasize the importance of achievement of each of the three financial metrics.
For our PSU awards, we used adjusted EPS as the principal financial performance metric because it reflects an important longer-term financial goal of improving ourafter-tax profitability. Because our business is capital intensive, we believebelieved it was also appropriate to include a return metric under our LTI program and, as a result, used adjusted RONA,return on net assets (“RONA”), which measures how effectively and efficiently we use our operating assets to generate earnings. For
CABOT CORPORATION 39
2022 PROXY STATEMENT |
Executive Compensation (continued)
awards made for fiscal 2021, we modified the weighting of these two financial metrics. For PSUs granted before November 2020, adjusted EPS and adjusted RONA had an 80% and 20% weighting, respectively. For awards granted in November 2020 (during fiscal 2021), adjusted EPS and adjusted RONA have a 65% and 35% weighting, respectively. Placing a more significant emphasis on the adjusted RONA performance metric is intended to further incentivize the importance of capital efficiency and the effective and efficient use of our operating assets to generate earnings.
Our philosophy in setting goals for each of the metrics is to establish goals that will drive the achievement of our short- and long-term objectives under our Advancing the Corecorporate strategy. Accordingly, in setting our adjusted EBIT and adjusted EPS goals, we typically begin with our performance in the just completed fiscal year and set a growth target from that base. In setting adjusted EPS targets, we set targets over the three-year term of the PSU awards that would result in payouts based on the achievement of our strategic goal of achieving a 7%-10% CAGR over time. We set NWC days goals we consider the prior fiscal year’s performance to establish goals that are intended to incentivize a reduction in our net working capital days and continued improvement in our NWC management. Finally, in settingmanagement, set DFCF goals to incentivize cash flow management, and set adjusted RONA goals we seek to drive earnings growth at return levels greater than our weighted average cost of capital. Setting financial targets for our 2021 STI and LTI incentive awards was particularly challenging given the uncertain environment caused by the COVID-19 pandemic in fiscal year 2020 and when the Committee was setting targets. The additional factors the Committee took into consideration in setting these targets for fiscal 2021 are described above in the Executive Summary under the heading “Considerations Applied in Setting Targets for STI and LTI Incentive Awards for 2021”.
Overall, we intend to set challenging, but realizable,achievable, target goals including those that are realizablewill only be realized as a result of strong execution and performance. We recognize that from time to time we may need to change the metrics we use under our compensation plans to reflect new priorities and business circumstances. We expect to continue to reassess our performance metrics and goal setting process annually.
Our Performance-based Compensation Philosophy
Our executive compensation programs are designed to provide more than 50% of each named executive officer’s total direct compensation opportunity in the form of performance-based compensation (STI awards, stock options and PSUs). For fiscal 2019, 65% of the total direct compensation opportunity for our CEO was performance-based and not guaranteed. The performance-based portion of the total direct compensation opportunities for our other named executive officers (other than our CEO) for fiscal 2019 on average, was 53%.
32 CABOT CORPORATION
|
Executive Compensation(continued)
How Did our Fiscal 20192021 STI Program Operate?
We provide annual STI awards to drive the achievement of key short-term business results and to recognize individuals based on their contributions to those results and Cabot’s overall performance. Each named executive officer has an annual target incentive opportunity under our STI program, which is expressed as a percentage of his or her base salary. Ms. Kalita’s target incentive opportunity was increased from 28% of her base salary, to 55% of her base salary at the time of her promotion to the role of Senior Vice President and General Counsel. This increase was intended to bring her total direct compensation closer to the market median of the benchmark compensation data used by the Committee and in recognition of the expanded job responsibilities she assumed as a result of her promotion. Prior to her promotion, Ms. Kalita participated in our fiscal 2019 STI program on the same basis as non-executive employees, which is weighted 50/50 as between pre-established corporate financial goals and individual goals and achievements. Ms. Kalita’s fiscal 2019 STI payout was based on her blended base salary and target bonus opportunities for fiscal 2019 and a blended weighting between corporate financial goals and individual goals and achievements.summarized below:
Name | FY21 STI Target | FY21 STI Target Amount | ||||||
Sean D. Keohane |
| 120 | % | $ | 1,242,000 | |||
Erica McLaughlin |
| 75 | % | $ | 397,424 | |||
Karen A. Kalita |
| 65 | % | $ | 277,657 | |||
Hobart C. Kalkstein |
| 70 | % | $ | 354,349 | |||
Jeff Zhu |
| 70 | % | $ | 354,228 |
The actual amounts payable in respect ofunder the STI awardsprogram range from 0% to 200% of the target award opportunity, with 70% of each award based on the achievement ofpre-established corporate financial goals and the remaining 30% of each award based on individual performance and achievements. We used two financial metrics to measure corporate performance for determining payouts under our STI program for fiscal 2019: adjusted EBIT, which had an 80% weighting, and NWC days, which had a 20% weighting. The Committee established threshold, target, and maximum performance level goals for each financial metric, and formetric: adjusted EBIT, also a stretch performance level goal,NWC days, and DFCF with payout for performance between performance levels determined on a straight-line basis. For NWC days and DFCF, the target level waslevels utilized a narrow “dead band” of days and a cash flow range, respectively, so that small variations around demonstrated performance levels on these metrics would not be rewarded or penalized. If the threshold adjusted EBIT goal was not achieved, no payouts in respect of corporate performance underUnder our STI program, would be made. If threshold levels of performance are achieved, the Committee retains the discretion, after determining the amount that would otherwise be payable under an award for a performance period, to adjust the amount ofactual payment, if any, to be made under such award. Consistent with prior years, the awards earned under our STI program based on our level of achievement of other corporate goals in the areas of safety, environmental performance, customers, innovation and people or such other factors as it determines appropriate, butCommittee did not exercise such discretion with respect to fiscal 20192021 awards.
40 CABOT CORPORATION
2022 PROXY STATEMENT |
Executive Compensation (continued)
At the beginning of each fiscal year, thenon-Executive Chair, with input from the other independent directors, develops the individual performance goals for our CEO, which are then approved by the Committee. Each of our other executive officers develops with the CEO his or her individual performance goals for the year. In assessing each executive officer’s individual performance, the Committee considers the officer’s personal achievements, including his or her achievements against establishedthese pre-established individual performance goals, as well as individual contributions to the management team and to the Company, and leadership and management of the executive officer’s business, region or function, as applicable. The Committee does not assign specific numerical weightings or ratings to the individual performance goals and the performance of each officer is evaluated as a whole. Furthermore, there are no formal threshold levels of achievement applicable to the individual performance component of our STI program. Ultimately, the determination of the payout of the portion of the STI awards based on individual performance is based on the judgment of the Committee (with respect to our CEO) and our CEO and the Committee (with respect to our CEO’s direct reports), in each case, after reviewing all relevant factors, with the final determination made by the Committee.
CABOT CORPORATION 33
|
Executive Compensation(continued)
We believe that the fiscal 2019 STI payouts properly aligned annual incentive compensation with the Company’s fiscal 2019 financial performance, consistent with the STI program’s role in our overall compensation program. The adjusted EBIT, and NWC days and DFCF targets for the fiscal 20192021 STI awards and our actual fiscal 20192021 performance were as follows:
Fiscal 20192021 STI Program Targets and Results
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal 2019
|
Percent
| Threshold Level (50% payout) | Target Level (100% payout) | Maximum Level (200% payout) | Fiscal 2021 Results | Performance Modifier | |||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBIT (80%)
|
|
$369 million
|
|
|
$440 million
|
|
|
$461 million
|
|
|
$503 million
|
|
|
$394 million
|
|
|
67.6
|
%
| |||||||||||||||||||||||||||||||||||||
Adjusted EBIT (60%)(in millions) | $ | 254 | $317 | $ | 407 | $ | 492 | 200.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||
NWC Days (20%)
|
|
85
|
|
|
80-78
|
|
|
—
|
|
|
73
|
|
|
80
|
|
|
100.0
|
%
| 77 | 72-70 | 60 | 66 | 140.0 | % | |||||||||||||||||||||||||||||||
DFCF (20%)(in millions) | $ | 128 | $ | 187-$227 | $ | 286 | $ | 353 | 200.0 | % | |||||||||||||||||||||||||||||||||||||||||||||
Weighted average payout
|
|
74.1
|
%
|
|
|
|
| 188.0 | % |
The portion of the STI award that was earned by each named executive officer based on individual performance reflected his or her individual performance and leadership in fiscal 20192021 (ranging from 75%115% to 110%130% of target), with the total STI awards earned ranging from 74%166% to 85%171% of the named executive officer’s overall target award. Detailed information about each named executive officer’s fiscal 20192021 STI payout is set forth in the discussion below under the heading “Fiscal 20192021 Compensation Decisions”.
How Did our Fiscal 20192021 LTI Program Operate?
We provide our named executive officers with LTI awards to promote retention, to incentivize sustainable growth and long-term value creation, and to further align the interests of our executives with those of our shareholders by tying the executives’ realized compensation to stock price changes during the performance and/or vesting periods.periods, and to promote retention. The
CABOT CORPORATION 41
2022 PROXY STATEMENT |
Executive Compensation (continued)
grant date value of LTI awards granted to each named executive officer for a given year is based on an assessment of the individual’s position, role and responsibilities within the Company, the overall competitiveness of his or her total direct compensation opportunity, and internal equity considerations. The Committee also considers compensation peer group and other market data for a general understanding of competitive equity compensation practices and considers the impact of the grants on equity incentive plan usage and share dilution, as well as the Company’s compensation expense and employee retention concerns.
70% of the target value of our executives’ LTI awards is performance-based, consisting of a combination of PSUs and stock options, which only provide value when theour share price increases above the share price on the date of grant. When making LTI awards for fiscal 2019,2021, the Compensation Committee first determined the total grant date value of the awards to be granted to each executive, and then delivered that value in three components: PSUs representing 35%, stock options representing 35%, and TSUs representing 30%, respectively, of the total grant date value of the award, assuming target level achievement of applicable performance goals for PSUs. The terms of each type of LTI award are described in further detail below, whichbelow. These terms are generally applicable to LTI awards granted in fiscal 20192021 and in previous fiscal years.
PSUs reward performance and the execution of our goal to deliver year-over-year and long-term growth in earnings and to increase the operating profit we generate relative to the capital we invest in our businesses. Stock options are performance-based because no value is created unless the value of our common stock appreciates after grant and they encourage employee retention through the use of a time-based vesting schedule. TSUs encourage employee retention by providing some level of value to executives who remain employed for three years. PSUs, stock options and TSUs also support an ownership culture and thereby encourage our executives to take actions that are best for Cabot’sCabot��s long-term success. Importantly, although each of these equity awards provides a competitive economic value on the date of grant, their ultimate value to an executive will depend upon the degree to which we achieve objectively measurable performance metrics and/or the market value of our common stock after the end of the relevant vesting period. That value will be largely dependent upon our performance and the performance of our stock.
34 CABOT CORPORATION
|
Executive Compensation(continued)
PSUs
To reinforce the long-term nature of the PSU awards and to reward performance and the execution of our long-term growth goals, at the time of grant, the performance metrics and goals for each of the threeone-year performance periods of the award are established. Specifically, each award of PSUs is allocated evenly into three tranches, with each tranche having aone-year performance period and the entire award having a three-year vesting period. When the award vests at the end of the applicable three-year period, the number of shares of stock issuable, if any, will depend on the degree of achievement of corporate performance goals for each year within the overall three-year performance period. Based on the degree to which we achieve the performance goals, an executive may earn between 0% to 200% of the number of PSUs allocated to each tranche of his or her award.
42 CABOT CORPORATION
2022 PROXY STATEMENT |
Executive Compensation (continued)
To drive long-term performance, threshold, target, stretch and maximum goals are established for the corporate performance metrics for each tranche in the three-year performance period at or before the time of grant of the PSUs. In November 2018,2020, at the time it approved the grant of PSU awards, the Committee established the specific performance metrics and goals for the fiscal 2019,2021, fiscal 20202022 and fiscal 20212023 performance periods of these awards based on the Company’s prior fiscal year performance and management’s expectations for incrementalour strategic goal of achieving a 7-10% earnings per share compound annual growth and performancerate over that three-year periodtime and taking into account our Advancingan expected gradual recovery and expansion over the Core strategy. three-year period from the COVID-19 pandemic-related performance levels experienced in fiscal 2020. (The additional factors the Committee took into consideration in setting these targets for fiscal 2021 in light of the uncertainty surrounding the COVID-19 pandemic are described above in the Executive Summary under the heading “Considerations Applied in Setting Targets for STI and LTI Incentive Awards for 2021”).
Setting metrics and goals in this way serves to both reinforce the long-term nature of these awards and to incentivize our leaders to achieve incrementally more challenging goals for each fiscal year included in the award. Our actual performance against those goals determines the number of shares that will be issuableissued in respect of the PSUs when the awards vest, with the number of shares issuableissued for performance between performance levels interpolated on a straight-line basis. The financial metrics used to measure corporate performance are adjusted EPS, with an 80% weighting, and adjusted RONA, with a 20% weighting.
CABOT CORPORATION 35
|
Executive Compensation(continued)
To reinforce the capital allocation goal of returning a substantial portion of free cash flow to shareholders under our Advancing the Core strategy, for PSUs granted in or after November 2016, dividend equivalent payments are made in cash in respect of PSUs that are earned based on the achievement of applicable performance metrics, but that have not vested based on time, when and if dividends are declared and paid on the Company’s common stock. The objective of providing such dividend equivalent payments is to help focus our executives on, and to reward them for, managing the business so as to produce cash that is capable of being distributed to shareholders in the form of a dividend. Dividend equivalents also mirror the income generation associated with stock ownership.
CABOT CORPORATION 43
2022 PROXY STATEMENT |
Executive Compensation (continued)
Stock options
Stock options are granted with an exercise price equal to 100% of the closing price of Cabot’s common stock on the date of grant. They generally vest, subject to continued employment, over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant) and have aten-year term.
TSUs
TSUs generally vest, subject to continued employment, in their entirety at the end of three years. When the TSUs vest, they are settled in shares of Cabot common stock. During the vesting period, dividend equivalents are paid in cash on each TSU when and if dividends are declared and paid on the Company’s common stock.
Practices Regarding the Grant of Equity Awards
Annual equity grants are made at the Compensation Committee’s regularly scheduled meeting in November to align the timing of grants with our fiscal year, most importantly for PSUs, which are earned based on a fiscal year performance period. The November meeting usually occurs approximately one week following our release of earnings for our fourth fiscal quarter. The exercise price of stock options is the closing price of Cabot stock on the NYSE on the date the options are granted. From time to time, equity awards outside of the annual grant program are made for recruiting or retention purposes or in connection with promotions or to recognize specific achievements or performance. In fiscal 2019, we granted Ms. Kalita an LTI award in connection with her promotion to SVP and General Counsel, as described in further detail below. We do not have a program, plan, or practice to time“off-cycle” awards in coordination with the release of materialnon-public information.
PSUs Earned under Outstanding PSU Awards on the Basis of Fiscal 2021 Performance
36The following tables show the performance metrics and goals and the relative weighting of each metric that the Committee set for the fiscal 2021 performance period of PSUs granted in fiscal 2019, 2020, and 2021, our degree of attainment of these goals and the percentage of the awards earned, measured against the target award. Because the performance metrics and goals for the fiscal 2021 performance period of these awards were established at different times based on when they were granted, they each reflect the long-term goals and target-setting philosophy in place when they were awarded.
Performance Goals (set in November 2018) and Results for
Performance Year 3 of the PSUs that Vested in November 2021
Threshold Level (50% payout) | Target Level (100% payout) | Stretch Level (150% payout) | Maximum Level (200% payout) | Fiscal 2021 Results | Percent Earned | |||||||||||||||||||||||||
Adjusted EPS (80%) | $ | 4.30 | $ | 4.94 | $ | 5.66 | $ | 6.32 | $ | 5.02 | 105.6% | |||||||||||||||||||
Adjusted RONA (20%) | 12.10 | % | 14.40 | % | 16.00 | % | 17.90 | % | 17.70 | % | 194.7% | |||||||||||||||||||
Composite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 123.4% |
Performance Goals (set in November 2019) and Results for
Performance Year 2 of the PSUs that Vest in November 2022
Threshold Level (50% payout) | Target Level (100% payout) | Stretch Level (150% payout) | Maximum Level (200% payout) | Fiscal 2021 Results | Percent Earned | |||||||||||||||||||||||||
Adjusted EPS (80%) | $ | 3.69 | $ | 4.48 | $ | 4.90 | $ | 5.43 | $ | 5.02 | 161.3% | |||||||||||||||||||
Adjusted RONA (20%) | 11.00 | % | 13.00 | % | 14.00 | % | 15.00 | % | 17.70 | % | 200.0% | |||||||||||||||||||
Composite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 169.0% |
44 CABOT CORPORATION
|
Executive Compensation(continued)
Performance Goals (set in November 2020) and Results for
Performance Year 1 of the PSUs that Vest in November 2023
Threshold Level (50% payout) | Target Level (100% payout) | Stretch Level (150% payout) | Maximum Level (200% payout) | Fiscal 2021 Results | Percent Earned | |||||||||||||||||||||||||
Adjusted EPS (65%) | $ | 2.18 | $ | 2.96 | $ | 3.34 | $ | 3.74 | $ | 5.02 | 200.0% | |||||||||||||||||||
Adjusted RONA (35%) | 8.50 | % | 10.50 | % | 13.00 | % | 14.00 | % | 17.70 | % | 200.0% | |||||||||||||||||||
Composite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 200.0% |
PSUs Earned under PSU Award that Vested in 20192021
The chart below shows the composite 2017 PSU achievement under the fiscal 2019 PSU awards granted in November 20162018 that vested in November 2019.2021. The performance periods of these awards were our 2017, 2018,2019, 2020, and 20192021 fiscal years. As described above, the Committee established the performance metrics and goals for each of these performance periods based on the Company’s expectations for the Company’s earnings growth and performance over that three-year period at the time of grant. We believe setting metrics in this way reinforces the long-term nature of these awards and incentivizes our leaders to achieve incrementally more challenging goals for each year in the award. The adjusted EPS and adjusted RONA targets set in November 2016 for each of the performance periods of the fiscal 2017 awards were higher than our actual adjusted EPS and adjusted RONA performance in fiscal 2016. In addition, in setting the performance goals for the 2017 PSU awards, we simplified the award structure by establishing a fixed range between the threshold and maximum goals. Overall, the composite PSU achievement under these awards was 153% of the target awards.
Results for PSUs granted in Fiscal 2017 that Vested 2019
Performance Year
| Adjusted EPS
| Adjusted
| % Achieved
| Adjusted RONA
| Adjusted
| % Achieved
| Overall
| ||||||||||||||||||||||||||||
2017 (Y1) |
| $3.30 |
|
| $3.43 | * |
| 151.4% |
|
| 12.0% |
|
| 12.9% |
|
| 159.6% |
|
| 153% |
| ||||||||||||||
2018 (Y2) |
| $3.46 |
|
| $4.03 | * |
| 170.6% |
|
| 12.2% |
|
| 14.3% |
|
| 183.3% |
|
| 173% |
| ||||||||||||||
2019 (Y3) |
| $3.63 |
|
| $3.91 |
|
| 137.8% |
|
| 12.4% |
|
| 12.7% |
|
| 115.0% |
|
| 133% |
| ||||||||||||||
Composite |
| 153% |
|
|
CABOT CORPORATION 37
|
Executive Compensation(continued)
PSUs Earned under Outstanding PSU Awards on the Basis of Fiscal 2019 Performance
The following tables show the performance metrics and goals and the relative weighting of each metric that the Committee set for the fiscal 2019 performance period of PSUs granted in fiscal 2017, 2018, and 2019, our degree of attainment of these goals and the percentage of the awards earned, measured against the target award. As the performance metrics and goals for the fiscal 2019 performance period of these awards were established at different times based on when they were granted, they each reflect the long-term goals and target-setting philosophy in place when they were awarded.
Performance Goals (set in November 2016) and Results for
Performance Year 3 of the PSUs that Vested in November 2019
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| |||||||||||||||||||||||||
Adjusted EPS (80%)
|
|
$2.70
|
|
|
$3.63
|
|
|
$4.00
|
|
|
$4.50
|
|
|
$3.91
|
|
137.8%
| ||||||||||||||
Adjusted RONA (20%)
|
|
9.00
|
%
|
|
12.4
|
%
|
|
13.40
|
%
|
|
15.00
|
%
|
|
12.7
|
%
|
115.0%
| ||||||||||||||
Composite
|
133.2%
|
Performance Goals (set in November 2017) and Results for
Performance Year 2 of the PSUs that Vest in November 2020
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| |||||||||||||||||||||||||
Adjusted EPS (80%)
|
|
$2.70
|
|
|
$3.71
|
|
|
$4.00
|
|
|
$4.50
|
|
|
$3.91
|
|
134.5%
| ||||||||||||||
Adjusted RONA (20%)
|
|
9.00
|
%
|
|
12.10
|
%
|
|
13.0
|
%
|
|
15.00
|
%
|
|
12.7
|
%
|
133.3%
| ||||||||||||||
Composite
|
134.3%
|
Performance Goals (set in November 2018) and Results for
Performance Year 1 of the PSUs that Vest in November 2021
Threshold
|
Target
|
Stretch
|
Maximum
|
Fiscal
|
Percent
| |||||||||||||||||||||||||
Adjusted EPS (80%)
|
|
$3.43
|
|
|
$4.31
|
|
|
$4.51
|
|
|
$5.04
|
|
|
$3.91
|
|
77.3%
| ||||||||||||||
Adjusted RONA (20%)
|
|
11.5
|
%
|
|
14.40
|
%
|
|
15.1
|
%
|
|
16.8
|
%
|
|
12.7
|
%
|
70.7%
| ||||||||||||||
Composite
|
76.0%
|
38 CABOT CORPORATION
|
Executive Compensation(continued)
Performance Year | Adjusted EPS Target (100% Payout) | Adjusted EPS Actual | % Achieved | Adjusted RONA Target (100% Payout) | Adjusted RONA Actual | % Achieved | Overall Achievement | ||||||||||||||||||||||||||||
2019 (Y1) | $ | 4.31 | $ | 3.91 | 77.3 | % | 14.4 | % | 12.7 | % | 70.7 | % | 76.0 | % | |||||||||||||||||||||
2020 (Y2) | $ | 4.61 | $ | 2.08 | 0.0 | % | 14.4 | % | 7.6 | % | 0.0 | % | 0.0 | % | |||||||||||||||||||||
2021 (Y3) | $ | 4.94 | $ | 5.02 | 105.6 | % | 14.4 | % | 17.7 | % | 194.7 | % | 123.4 | % | |||||||||||||||||||||
Composite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 66.5 | % |
Fiscal 20192021 Compensation Decisions
The compensation decisions the Committee made with respect to our named executive officers for fiscal 20192021 are described below.
In considering each officer’s individual performance in fiscal 20192021 and determining his or her STI award payout for fiscal 20192021 and making the other compensation decisions discussed above, the Committee specifically considered the following:
Sean D. Keohane, President and CEO.
Fiscal 20192021 Performance Summary
The Committee believes that Mr. Keohane performed extraordinarily well in fiscal 2019.2021. The Committee specifically recognized Mr. Keohane’s continued leadership of Cabot and his strong execution as the Company recovered from COVID-19 driven declines in fiscal 2020 to deliver exceptional financial performance in fiscal 2021, while successfully navigating through a dynamic environment and external challenges related to rising input costs, global supply chain disruptions, and the persistence of the COVID-19 pandemic and its impact on Cabot’s employees and business operations. Specifically, the Committee also recognized Mr. Keohane’s role in:
our solidthe Company’s outstanding financial results despiteperformance during the weakeningfiscal year, resulting in record adjusted EPS* of macroeconomic$5.02 and record total segment EBIT* of $550 million, and the Company’s strong cash flow generation during the year that resulted in record DFCF* of $353 million;
* | Non-GAAP financial measure. See Appendix A. |
CABOT CORPORATION 45
2022 PROXY STATEMENT |
Executive Compensation (continued)
the continued progress of Cabot’s sustainability efforts, including making meaningful progress toward the Company’s 2025 Sustainability Goals, committing to align Cabot’s disclosures with the recommendations of the Task Force for Climate-related Financial Disclosure, and Cabot serving as an inaugural sponsor of the Future of STEM Scholars Initiative (FOSSI);
the strong performance of key sector indicators we experienced throughoutstrategic growth initiatives, particularly Battery Materials, where the year;Company doubled revenues in fiscal 2021 as compared to fiscal 2020 and generated strong profitability;
our executionadvancement of important strategic initiatives, including the divestiture of our Specialty Fluids business and the improved performancenegotiation of the acquisition of Tokai Carbon’s carbon black facility in Tianjin, China, which we intend to convert to produce specialty carbons, including products for our battery materials growth vector, upon completion; digitalization of core back-office capabilities within the Company and continued evaluation of strategic options for our Purification Solutions segment followingbusiness, which culminated in entry into an agreement in the implementationfirst quarter of fiscal 2022 to divest the transformation plan;business; and
the investments we made to strengthen our manufacturing asset footprint, reflected most notably in the successfulstart-upcompletion of a major air emissions control project at our additional fumed silica capacitycarbon black manufacturing facility in ChinaLouisiana, the further execution of a project to build a specialty compounds production line in Cilegon, Indonesia, and the commencement ofcontinued work to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons, which we expect to be completed in 2021;2022.
implementing cost reduction initiatives across the Company that we view as important to our long-term sustainable growth, including organizational structural changes and asset decisions that reduced headcount;
our progress integrating sustainability throughout Cabot and in developing a more inclusive and diverse organization;
the strengthening of our investor outreach that resulted in, among other things, an increase in analyst coverage of the Company;
our efforts to build strong and sustainable customer and partner relationships; and
|
Compensation Decisions for Fiscal 20192021
Base Salary | Base Salary Increase | STI Target Amount | Actual STI Payout(1) | FY21 LTI Grant Amount(2) | FY21 LTI Grant(2) | ||||||||||||||||||||||||
$1,035,000 | 3.5% | $ | 1,242,000 | $ | 2,118,852 | $ | 4,750,000 | 40,578 PSUs 34,781 TSUs 171,568 Options |
Base Salary — Mr. Keohane’s annual base salary for calendar 2019 was $1,000,000, an increase of approximately 5% compared to his 2018 annual base salary.
STI Award —Mr. Keohane’s target STI award for fiscal 2019 was $1,200,000 (120% of his annual base salary) and his actual STI award payout for fiscal 2019 was$964,272, 80% of target, based on achievement of 74.1% of target in respect of corporate performance and 95% of target in respect of individual performance.
LTI Award — Mr. Keohane was granted an LTI award with a grant date value of $4,500,000, consisting of 31,500 PSUs, 27,000 TSUs and 137,674 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals.
(1) | The STI payout was based on the achievement of 188.0% of target against corporate performance and 130% of target against individual performance, resulting in a payout of 171% of target. |
(2) | The number and grant date value of PSUs assumes target level of achievement of applicable performance goals. |
Erica McLaughlin, SVP and CFO.
Fiscal 20192021 Performance Summary
Among Ms. McLaughlin’s key achievements that the Committee considered were the following:
her integralstrong leadership of the company’s strategic agenda, which this year resulted in the negotiation of the acquisition of Tokai Carbon’s carbon black facility in Tianjin, China, which upon completion we intend to convert to produce specialty carbons and battery materials products, which will provide additional capacity for our high growth battery materials vector;
similarly, her leadership of the strategic process to divest our Purification Solutions business, a non-core Cabot business;
her role in managingleading the Company’s operating cash flow,management activities, which resulted in our generating $363a record $353 million of DFCF* and cash flow from operations including a $25of $257 million, decrease in net working capital, and enabledallowing us to increase our quarterly cash dividend by 6%; beginning in the first quarter of fiscal 2022;
her role inensuring the execution of our capital allocation strategy, which included returning $253 million to our shareholders through share repurchases and dividends;
her commitment to disciplined financial policies and the maintenance ofCompany maintained a strong balance sheet and liquidity position,position. The Company ended fiscal 2021 with liquidity of approximately $1.3 billion and a debt/EBITDA ratio of 1.6X, while maintaining an investment grade credit rating. Additionally, the Company put in place a new $1 billion ESG-linked revolving credit facility; and
her involvement in the Company’s business transformation efforts, including with the issuancedigitalization of10-year bonds to support our Advancing the Core strategy; back-office capabilities.
* | Non-GAAP financial measure. See Appendix A. |
46CABOT CORPORATION 39
|
Executive Compensation(continued)
her strong leadership of our M&A and other strategic activities, including the divestiture of our Specialty Fluids business and oversight of our transformation plan for our Purification Solutions segment; and
her role leading our investor communications program, including successful outreach efforts that resulted in an increase in analyst coverage of the Company.
Compensation Decisions for Fiscal 20192021
Base Salary | Base Salary Increase | STI Target Amount | Actual STI Payout(1) | FY21 LTI Grant Amount(2) | FY21 LTI Grant(2) | ||||||||||||||||||||
$529,899 | 9.7% | $ | 397,424 | $ | 678,006 | $ | 1,000,000 | | 8,542 PSUs 7,322 TSUs 36,119 Options |
Base Salary — Ms. McLaughlin’s annual base salary for calendar 2019 was $460,000, an increase of approximately 15% compared to her 2018 base salary.
STI Award —Ms. McLaughlin’s target STI award for fiscal 2019 was $322,000 (70% of her annual base salary) and her actual STI award payout for fiscal 2019 was$263,576, 82% of target, based on achievement of 74.1% of target in respect of corporate performance and 100% of target in respect of individual performance.
LTI Award — Ms. McLaughlin was granted an LTI award with a grant date value of $775,000, consisting of 5,425 PSUs, 4,650 TSUs and 23,710 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals.
(1) | The STI payout was based on the achievement of 188.0% of target against corporate performance and 130% of target against individual performance, resulting in a payout of 171% of target. |
(2) | The number and grant date value of PSUs assumes target level of achievement of applicable performance goals. |
Karen A. Kalita, SVP and General Counsel (since June 3, 2019), previously Chief Counsel, Reinforcement Materials Segment and Purification Solutions Segment and Assistant Corporate SecretaryCounsel.
Fiscal 20192021 Performance Summary
Prior to her appointment as SVP and General Counsel,Among Ms. Kalita served as Chief Counsel for our Reinforcement Materials and Purification Solutions segments, Assistant Corporate Secretary and a member of the Company’s Office of Compliance. Ms. Kalita remains a member of the Office of Compliance. Among herKalita’s key achievements that the Committee considered in her prior and current roles were the following:
her role in helping the Company manage through legal and other regulatory considerations related to the ongoing COVID-19 pandemic;
her position as Chief Counsel for our Reinforcement Materials and our Purification Solutions segments, role in leading the Company in addressing new regulatory disclosure requirements;
her guidance to the Board on governance matters;
her strong legal guidance and support overseeing the negotiation of key commercial, M&A and other strategic activities involving those segments;activities;
her strong leadershiprole within the Company’s Office of Compliance and to the Company on ethics and compliance matters, and her roleleadership in managing our regulatory compliance programs;
the smooth transition of leadership when she assumed responsibility as the Company’s chief legal officer;
her assistance to the Board on governance matters;
her role in overseeing the negotiation of key commercial agreements and providing risk management counsel; and
her effective oversight of complex litigation and environmental matters toward positive outcomes for the Company. .
Compensation Decisions for Fiscal 20192021
Base Salary — Ms. Kalita received an annual base salary increase of 3% during the annual salary review in November 2018, resulting in an annual salary for calendar 2019 of $259,284. Her annual base salary was increased by 29% to $335,000, effective June 3, 2019, in connection with her promotion to SVP and General Counsel.
STI Award — Ms. Kalita’s target STI award for fiscal 2019 was $109,813 (based on her blended annual base salary and target opportunities in 2019). Her actual STI award payout for fiscal 2019 was$90,263, 82% of target, based on achievement of 74.1% of target in respect of corporate performance and 95% of target in respect of individual performance (with the blended weighting of such components described under “How Did our Fiscal 2019 STI Program Operate” above).
LTI Award — Ms. Kalita was granted an LTI award with a grant date value of $325,000, including an LTI award with a $250,000 grant date value granted in connection with her promotion to SVP and General Counsel, consisting of 2,738 PSUs in the aggregate, 2,733 TSUs in the aggregate and 11,437 stock options in the aggregate, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals.
Base Salary | Base Salary Increase | STI Target Amount | Actual STI Payout(1) | FY21 LTI Grant Amount(2) | FY21 LTI Grant(2) | ||||||||||||||||||||
$427,165 | 15.9% | $ | 277,657 | $ | 461,189 | $ | 625,000 | | 5,339 PSUs 4,576 TSUs 22,574 Options |
40 CABOT CORPORATION
(1) |
The STI payout was based on the achievement of 188.0% of target against corporate performance and 115% of target against individual performance, resulting in a payout of 166% of target. |
Executive Compensation(continued)
(2) | The number and grant date value of PSUs assumes target level of achievement of applicable performance goals. |
Hobart C. Kalkstein, SVP and President, Reinforcement Materials Segment, and President, Americas Region.
Fiscal 20192021 Performance Summary
Among Mr. Kalkstein’s key achievements that the Committee considered were the following:
his role in delivering record EBIT performance for the strong business results of our Reinforcement Materials Segment, despite a challenging competitive environment in China and weak automotive fundamentals globally;segment;
his role negotiating the 2021 tire contracts, particularly in effectively managing the new International Marine Organization regulations and their impact on our feedstock costs;face of uncertainty after the steep erosion in demand the Company experienced in fiscal 2020;
his leadership in strengthening strategic customer relationships within the Reinforcement Materials Segment and the successful negotiation of supply agreements with certain of our major tire customers;championing commercial excellence in his organization;
• | his leadership in our completion of a major air emissions control project at our carbon black manufacturing facility in Louisiana that will result in improved air quality through the reduction of NOX and SO2 emissions and will enable us to support our customer’s supply needs over the long-term; |
his role incontribution to the developmentCompany’s sustainability efforts, specifically the effective communication of our expansion project at our facility in Cilegon, Indonesia;
his role in advancing the Cabot Elastomer Composites businessCabot’s sustainability program and the achievement of key customer qualification milestones;goals to Cabot’s customers; and
CABOT CORPORATION 47
2022 PROXY STATEMENT |
Executive Compensation (continued)
his role in leading our Americas Region.Region, particularly as the region manages through the continued challenges resulting from the COVID-19 pandemic.
Compensation Decisions for Fiscal 20192021
Base Salary — Mr. Kalkstein’s annual base salary for calendar 2019 was $464,200, an increase of 10% compared to his 2018 annual base salary.
STI Award — Mr. Kalkstein’s target STI award for fiscal 2019 was $278,520 (60% of his annual base salary). His actual STI award payout for fiscal 2019 was $236,341, 85% of target, based on achievement of 74.1% of target in respect of corporate performance and 110% of target in respect of individual performance.
LTI Award —Mr. Kalkstein was granted an LTI award with a grant date value of $800,000, consisting of 5,600 PSUs, 4,800 TSUs and 24,475 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals.
Brian A. Berube, former SVP and General Counsel (until June 3, 2019).
Compensation Decisions for Fiscal 2019
Base Salary | Base Salary Increase | STI Target Amount | Actual STI Payout(1) | FY21 LTI Grant Amount(2) | FY21 LTI Grant(2) | ||||||||||||||||||||
$506,213 | 5.4% | $ | 354,349 | $ | 599,204 | $ | 900,000 | | 7,688 PSUs 6,590 TSUs 32,507 Options |
(1) | The STI payout was based on the achievement of 188.0% of target against corporate performance and 125% of target against individual performance, resulting in a payout of 169% of target. |
(2) | The number and grant date value of PSUs assumes target level of achievement of applicable performance goals. |
Base Salary — Mr. Berube’s annual base salary for calendar 2019 was $461,440, an increase of 3% compared to his 2018 annual base salary.
STI Award — Mr. Berube voluntarily resigned from Cabot during fiscal 2019 and, accordingly, he did not receive an STI award payout for fiscal 2019.
LTI Award —Mr. Berube was granted an LTI award with a grant date value of $750,000, which he forfeited upon his resignation from the Company.
At the time of Mr. Berube’s resignation, the Company extended the exercise period for Mr. Berube’s vested stock options to the earlier of (i) October 14, 2020 and (ii) the original expiration date of the stock options in light of his many contributions during his long and successful career at Cabot.
John R. Doubman, formerJeff Zhu, SVP and President, Performance Additives business, (until October 2, 2019).and President, Asia Pacific Region.
Fiscal 20192021 Performance Summary
Among Mr. Doubman’sZhu’s key achievements that the Committee considered were the following:
his role in delivering strong EBIT performance for the successfulstart-up of our additional fumed silica capacity in ChinaPerformance Additives business and in continuingsuccessfully navigating macro-environment challenges related to advance our capacity expansion project with DowDuPont, which secures access to long-term feedstockglobal supply chain disruptions, impacts from the semiconductor chip shortage on automotive production, and will allow us to meet growing demand for our high-performance fumed silica;rising input costs;
his roleleadership in enabling the Companyperformance of our battery materials growth vector, which achieved a number of commercial successes during the fiscal year resulting in a doubling of revenue for this product line as compared to upgrade the carbon black plant we purchased in China in 2018 for the production of specialty carbons, which we expect to be completed in 2021; andfiscal 2020;
his leadership of the business’s application developmentgrowth investments and strategic activities, particularly in energy materials and the successful program qualifications it has obtained with mostour negotiation of the major globalacquisition of Tokai Carbon’s carbon black facility in Tianjin, China and our conversion of our plant in Xuzhou, China to support our specialty carbon applications and battery manufacturers.materials growth vector; and
his role in leading our Asia Pacific Region.
Compensation Decisions for Fiscal 2021
Base Salary | Base Salary Increase | STI Target Amount | Actual STI Payout(1) | FY21 LTI Grant(2) Amount | FY21 LTI Grant(2) | ||||||||||||||||||||
$506,040 | 3.5% | $ | 354,228 | $ | 599,000 | $ | 900,000 | | 7,688 PSUs 6,590 TSUs 32,507 Options |
(1) | The STI payout was based on the achievement of 188.0% of target against corporate performance and 125% of target against individual performance, resulting in a payout of 169% of target |
(2) | The number and grant date value of PSUs assumes target level of achievement of applicable performance goals. |
48CABOT CORPORATION 41
|
Executive Compensation(continued)
In determining2022 Compensation Decisions
All of our named executive officers, with the exception of Mr. Doubman’s STI award,Keohane, whose base salary was determined to be competitive by the Committee also consideredbased on a review of benchmark compensation data and the resultsCommittee’s targeting strategy for executive compensation, received a base salary increase for calendar 2022 during our annual salary review process that took place in November 2021. The Compensation Committee approved merit-based salary increases for each of our named executive officers (other than Mr. Keohane) for 2022, and a market-based adjustment for Ms. Kalita in the Performance Additives business, whichpercentages set forth in the table below. In connection with this review, no adjustments were made to our named executive officers’ target STI incentive opportunity for 2022. With these increases in base salaries, we believe the current target total direct compensation of our named executive officers is within a competitive range around the market median of the benchmark compensation data used by the Committee. The table below management expectations.
Compensation Decisionssets forth the base salary and target STI incentive opportunity for Fiscal 20192022 for each of our named executive officers.
Base Salary — Mr. Doubman’s annual base salary for calendar 2019 was $395,000, which reflects the 10% increase he received in his annual base salary effective as of October 1, 2018 at the time of his promotion.
STI Award —Mr. Doubman’s target STI award for fiscal 2019 was $237,000 (60% of his annual base salary) and his actual STI award payout for fiscal 2019 was$176,224, 74% of target, based on achievement of 74.1% of target in respect of corporate performance and 75% of target in respect of individual performance.
LTI Award — Mr. Doubman was granted an LTI award with a grant date value of $600,000, consisting of 4,200 PSUs, 3,600 TSUs and 18,356 stock options, with the number and grant date value of PSUs assuming target level of achievement of applicable performance goals. Of this award, 5,506 stock options vested in November 2019 in accordance with the terms of the award and Mr. Doubman forfeited the balance of the LTI award upon the termination of his employment on November 15, 2019.
Effective October 2, 2019, Mr. Doubman stepped down from his position as SVP and President, Performance Additives business of the Company. Mr. Doubman’s employment with the Company terminated effective November 15, 2019. Under the terms of his transition and separation agreement with Cabot, commencing on his termination of employment, the Company will pay to Mr. Doubman a total of $592,500, payable over an18-month period. In addition, the Company extended the exercise period for Mr. Doubman’s vested stock options to the earlier of (i) November 15, 2021 and (ii) the original expiration date of the stock options. The Company also agreed to pay a portion of Mr. Doubman’s COBRA premiums for up to 18 months following the termination of his employment, to provide financial planning benefits on the same basis as if he had remained employed for a period of eighteen months following termination in an amount not to exceed $30,000, and to provide Mr. Doubman with outplacement services in an amount not to exceed $40,000. In exchange for the payments and benefits provided in the transition and separation agreement, the Company received a release of claims from Mr. Doubman, and Mr. Doubman agreed to covenants as tonon-competition andnon-solicitation for a period of twelve months following the termination of his employment. When considering the level of separation payments and benefits to be provided to Mr. Doubman, the Committee considered the length and level of his service with the Company, his significant contributions to the Company and the Company’s achievements under his leadership, as well as the advice provided by Meridian.
Name | 2022 Base Salary Merit Increase | 2022 Base Salary Market Adjustment | 2022 Base Salary | FY22 STI Target as % of Base Salary | ||||||||||||||||
Sean D. Keohane | 0 | % |
|
|
| $ | 1,035,000 | 120% | ||||||||||||
Erica McLaughlin | 3.5 | % |
|
|
| $ | 548,446 | 75% | ||||||||||||
Karen A. Kalita | 4.5 | % | 3.5 | % | $ | 462,011 | 65% | |||||||||||||
Hobart C. Kalkstein | 3.0 | % |
|
|
| $ | 521,399 | 70% | ||||||||||||
Jeff Zhu | 3.0 | % |
|
|
| $ | 521,222 | 70% |
Risk Assessment
We monitor the risks associated with our executive compensation programs and policies on anon-going basis. In May 2019,2021, management presented the Committee with the results of a study it conducted of our compensation programs to assess the potential risks arising from these programs. We believe the following policies and practices reflect sound risk management practices within our compensation programs and mitigate excessive risk-taking that could harm our value or reward poor judgment by our executives and other employees:
Use of short-balanced mix of annual and long-term performance periods in our LTI program andlonger-term incentive opportunities;
Employ multiple levels of tiered performance (threshold, target, stretch and maximum) in both our STI and LTI programs;
Targeting pay within a reasonable range of market median;
Use of maximum payout caps in both the STI and LTI programs;
Use of different financial performance metrics across the STI and LTI programs;programs covering multiple dimensions of performance (income statement, balance sheet, share price, etc.);
Ability of the Committee to use discretion to modify STI awards;
Annual Committee review and approval of the STI and LTI program design, performance metrics and goals and earned payouts;
Mix of equity awards and multi-year vesting used in the LTI program;
Availability of a Company recoupment policy; and
Use of share ownership guidelines.
Based on these mitigating factors, the Committee agreed with the study’s findings that our compensation programs do not encourage inappropriate or unacceptable risk to the Company, and that any risks are within our ability to effectively monitor and manage and are not reasonably likely to have a material adverse effect on the Company.
42 CABOT CORPORATION
|
Executive Compensation(continued)
Share Ownership Guidelines
To further align the interests of our executives and our shareholders, in November 2008, we adopted share ownership guidelines for members of our Management Executive Committee. Under ourthese guidelines, we expect our CEO to own equity in the Company in an amount equal to five times his or her annual base salary, and each other officer who reports
CABOT CORPORATION 49
2022 PROXY STATEMENT |
Executive Compensation (continued)
directly to the CEO to own equity in an amount equal to three times his or her annual base salary. Each executive has five years from the date he or she becomes subject to the share ownership guidelines to meet his or her target. The Committee reviews compliance with these guidelines annually. At the time of this filing, all of the members of the Management Executive Committee who have been subject to these guidelines for five years or longer had satisfied such share ownership guidelines.
Recoupment of Compensation
The Company adopted a recoupment (clawback) policy in 2012. The policy applies to performance-based compensation, such as STI and LTI compensation, paid to participants in our LTI program (which includes our named executive officers), and covers awards made for fiscal 2013 and thereafter. Under the policy, if the Company is required to restate its financial statements due to materialnon-compliance with financial reporting requirements under applicable securities laws, and the amount of performance-based compensation awarded or paid would have been lower had the achievement of applicable financial performance been calculated based on the restated financial results, the amount of the excess compensation awarded or paid during the three-year period preceding the date on which the Company is required to prepare the restatement is subject to recoupment, in the discretion of the Compensation Committee. In addition, if a participant knowingly engaged in misconduct that is a material factor in the Company’s obligation to restate its financial statements, the Company will have the right to seek recoupment of the proceeds from the sale of shares issued upon the exercise of stock options or upon the vesting of restricted stock units (including TSUs and PSUs) occurring during the twelve-month period following the filing with the SEC of the financial statements required to be restated, in an amount deemed appropriate by the Compensation Committee under the circumstances.
Other Information
Retirement and Other Benefit Programs
OurExcept for Mr. Zhu, our named executive officers participate in the full range of benefit programs and are covered by the same retirement plans on the same terms as are generally provided to our full-time U.S. salaried employees, are eligible to participate in and/or receive benefits under our Deferred Compensation Plan and our Death Benefit Protection Plan, and participate in our Senior Management Severance Protection Plan. These plans are described in the footnotes and text that accompany the compensation tables that follow this CD&A.
Mr. Zhu is a participant in our Senior Management Severance Protection Plan, but as a China-based employee, does not participate in the other retirement and benefit programs described above. Instead, Mr. Zhu participates in the China Supplemental Pension Plan, which is provided to full-time Cabot employees in China, and participates in the insurance and other benefit programs consistent with other employees who are on an international assignment. These benefits, and their costs to Cabot, are described in the footnotes and text that accompany the compensation tables that follow this CD&A.
Health and Welfare Plans
The health and welfare plans offered to our named executive officers are the same as those offered to all other employees working in the same country. Mr. Zhu is also covered by the health and welfare plans and life and disability benefits offered to our employees who are on an international assignment.
Perquisites
We provide our named executive officers a modest level of perquisites, consisting principally of financial planning and tax assistance services and an executive physical examination. We provide these benefits to help our executives maintain their health and manage their finances, in each case, so that they are able to focus their attention on Cabot’s business. Mr. Zhu receives certain benefits as a result of his international assignment as described further below.
Employment Arrangements
OurWith the exception of Mr. Zhu, our named executive officers serve without employment agreements. The compensation of our named executive officers is set by the Compensation Committee as described above.
50CABOT CORPORATION 43
|
Executive Compensation(continued)
Under the terms of Mr. Zhu’s relocation and employment, described in his February 2012 offer letter, he receives additional benefits, many of which are offered to employees who are on an international assignment. These benefits consist of tax equalization, housing (including utilities), a car and driver, annual home leave, and a travel allowance. The tax equalization benefit is intended to ensure that Mr. Zhu’s tax obligations are equal to the taxes he would have paid on his earnings had he remained a resident in Singapore, with the Company paying all other Chinese taxes associated with the income Mr. Zhu earns while based in China. In addition, under the terms of Mr. Zhu’s offer letter with the Company, if Mr. Zhu’s employment is terminated at Cabot’s initiation while based in China, for any reason other than dismissal due to a violation of law or applicable company policy, Cabot will pay the costs to repatriate Mr. Zhu and his family back to Singapore. Mr. Zhu’s base salary and short-term incentive and equity awards are determined in U.S. Dollars and then converted to local China RMB at the time of payment.
Hedging Policy
The Company’s insider trading policy prohibits executives, directors, their family members who share the same address or are financially dependent upon them, and entities owned or controlled by any such persons, from, among other things, engaging in any “short sales”, including short sales “against the box”, or purchases, sales, or other arrangements involving, puts, calls or other derivative securities on the Company’s common stock, and issuing any standing or limit orders for the sale of the Company’s common stock that remain outstanding for more than five days, other than in connection with a Rule 10b5-1 trading plan adopted in compliance with the policy. No categories of hedging transactions are specifically permitted and, other than the transactions described above, no other categories of hedging transactions are specifically disallowed.
Tax and Accounting Information
We consider the tax and accounting rules associated with various forms of compensation when designing our compensation programs. However, to maintain flexibility to compensate our executive officers in a manner designed to promote short- and long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible or have the most favorable accounting treatment to the Company and has paid, and will continue to pay, compensation that is not deductible.
44CABOT CORPORATION 51
|
Executive Compensation(continued)
The following table and footnotes describe the compensation for our named executive officers for the three most recently completed fiscal years (or such shorter period as described in the footnotes below). Each component of our executive compensation program is described under the heading “Compensation Discussion and Analysis,” which begins on page 25.31.
Name and Principal Position
| Year
| Salary
| Stock
| Option
| Non-Equity
| Change in Value and
| All Other
| Total ($)
| ||||||||||||||||||||||||
Sean D. Keohane President and CEO |
|
2019
|
|
|
987,500
|
|
|
2,925,000
|
|
|
1,574,578
|
|
|
964,272
|
|
|
15,469
|
|
|
212,560
|
|
|
6,679,379
|
| ||||||||
| 2018
|
|
| 937,500
|
|
| 2,599,951
|
|
| 1,399,898
|
|
| 1,567,500
|
|
| —
|
|
| 270,593
|
|
| 6,775,442
|
| |||||||||
2017 | 887,500 | 2,079,911 | 1,119,647 | 1,252,000 | — | 232,734 | 5,571,792 | |||||||||||||||||||||||||
Erica McLaughlin(1) Senior Vice President and CFO |
|
2019
|
|
|
445,000
|
|
|
503,750
|
|
|
271,171
|
|
|
263,576
|
|
|
—
|
|
|
84,775
|
|
|
1,568,272
|
| ||||||||
2018 | 323,779 | 403,659 | 179,277 | 273,839 | — | 57,770 | 1,238,324 | |||||||||||||||||||||||||
Karen A. Kalita(1) Senior Vice President and General Counsel |
|
2019 |
|
|
281,756 |
|
|
237,454 |
|
|
87,516 |
|
|
90,263 |
|
|
819 |
|
|
39,818 |
|
|
737,626 |
| ||||||||
Hobart C. Kalkstein Senior Vice President, President, Reinforcement Materials Segment, and President, Americas Region |
|
2019
|
|
|
453,650
|
|
|
520,000
|
|
|
279,921
|
|
|
236,341
|
|
|
2,629
|
|
|
88,466
|
|
|
1,581,007
|
| ||||||||
| 2018
|
|
| 416,000
|
|
| 487,464
|
|
| 262,474
|
|
| 440,568
|
|
| 2,675
|
|
| 102,224
|
|
| 1,711,405
|
| |||||||||
| 2017
|
|
| 392,250
|
|
| 438,699
|
|
| 236,170
|
|
| 350,000
|
|
| 3,604
|
|
| 85,875
|
|
| 1,506,598
|
| |||||||||
Brian A. Berube(2) Former Senior Vice President and General Counsel |
|
2019
|
|
|
320,596
|
|
|
487,500
|
|
|
422,805
|
|
|
—
|
|
|
24,020
|
|
|
44,794
|
|
|
1,299,715
|
| ||||||||
| 2018
|
|
| 444,750
|
|
| 487,464
|
|
| 262,474
|
|
| 427,392
|
|
| 7,650
|
|
| 103,059
|
|
| 1,732,789
|
| |||||||||
2017 | 427,500 | 487,444 | 262,410 | 367,000 | 11,639 | 95,101 | 1,651,094 | |||||||||||||||||||||||||
John R. Doubman(1)(2) Former Senior Vice President and President, Performance Additives |
|
2019 |
|
|
395,000 |
|
|
390,000 |
|
|
323,158 |
|
|
176,224 |
|
|
1,102 |
|
|
57,429 |
|
|
1,342,913 |
|
Name and Principal Position | Year | Salary ($)(3) | Stock Awards ($)(4) | Option Awards ($)(5) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | ||||||||||||||||||||||||||||||||
Sean D. Keohane(1) President and CEO | 2021 | 1,026,250 | 3,087,459 | 1,662,151 | 2,118,852 | 12,074 | 335,701 | 8,242,487 | ||||||||||||||||||||||||||||||||
2020 | 750,000 | 2,924,943 | 1,574,400 | 432,000 | — | 136,180 | 5,817,523 | |||||||||||||||||||||||||||||||||
2019 | 987,500 | 2,925,000 | 1,574,578 | 964,272 | 15,469 | 212,560 | 6,679,379 | |||||||||||||||||||||||||||||||||
Erica McLaughlin Senior Vice President and CFO | 2021 | 518,174 | 649,948 | 349,921 | 678,006 | — | 136,088 | 2,332,137 | ||||||||||||||||||||||||||||||||
2020 | 477,250 | 536,205 | 288,636 | 121,716 | — | 76,332 | 1,500,139 | |||||||||||||||||||||||||||||||||
2019 | 445,000 | 503,750 | 271,171 | 263,576 | — | 84,775 | 1,568,272 | |||||||||||||||||||||||||||||||||
Karen A. Kalita Senior Vice President and General Counsel | 2021 | 412,499 | 406,218 | 218,697 | 461,189 | 1,780 | 97,086 | 1,597,469 | ||||||||||||||||||||||||||||||||
2020 | 360,125 | 389,935 | 209,912 | 66,883 | 1,309 | 57,523 | 1,085,687 | |||||||||||||||||||||||||||||||||
2019 | 281,756 | 237,454 | 87,516 | 90,263 | 819 | 39,818 | 737,626 | |||||||||||||||||||||||||||||||||
Hobart C. Kalkstein Senior Vice President, President, Reinforcement Materials Segment, and President, Americas Region | 2021 | 499,772 | 584,969 | 314,928 | 599,204 | 7,138 | 111,440 | 2,117,451 | ||||||||||||||||||||||||||||||||
2020 | 476,385 | 519,981 | 279,893 | 95,129 | 4,552 | 59,647 | 1,435,587 | |||||||||||||||||||||||||||||||||
2019 | 453,650 | 520,000 | 279,921 | 236,341 | 2,629 | 88,466 | 1,581,007 | |||||||||||||||||||||||||||||||||
Jeff Zhu(1)(2) Senior Vice President, President, Performance Additives business, and President, Asia Pacific Region | 2021 | 501,762 | 584,969 | 314,928 | 599,000 | — | 958,427 | 2,959,086 | ||||||||||||||||||||||||||||||||
2020 | 483,107 | 519,981 | 279,893 | 96,808 | — | 775,562 | 2,155,351 | |||||||||||||||||||||||||||||||||
1. | Mr. Keohane’s fiscal year 2020 annual base salary was $1,000,000. In recognition of the impact of the coronavirus pandemic on the Company’s business and operations during fiscal year 2020, at his request, Mr. Keohane’s salary was temporarily suspended from April 1 through June 30, 2020. |
Under the terms of Mr. Zhu’s employment arrangements, his base salary, short-term incentive award, and equity-based compensation are determined in U.S. Dollars and then converted to China RMB at time of payment, or settlement, as applicable. For purposes of the disclosure in this proxy statement, certain amounts that were paid and recorded in China RMB have been converted to U.S. Dollars using the average monthly exchange rate during the 12-month period ended September 30, 2021 of U.S.D 6.49925 to one China RMB and, with respect to his fiscal year 2020 compensation, using the average monthly exchange rate during the 12-month period ending September 30, 2020 of U.S.D. 7.00695 to one China RMB.
2. | For |
|
3. | We review base salaries annually in November and any changes are generally effective on January 1 of the following calendar year. The amounts reported in this column reflect salary earned during each fiscal year. |
4. | The amounts reported in this column reflect the aggregate grant date fair value of TSUs and PSUs granted in the applicable fiscal year to each named executive officer, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value per unit of the TSUs and PSUs is equal to the closing price of Cabot common stock on the date of grant, with the grant date fair value of the PSUs calculated based on the probable outcome of applicable performance conditions, which |
52CABOT CORPORATION 45
|
Executive Compensation(continued)
5. | The amounts reported in this column reflect the aggregate grant date fair value of stock option awards granted in the applicable fiscal year to each named executive officer, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, determined using the Black-Scholes option-pricing model. The assumptions used to calculate the grant date fair value of option awards under the Black-Scholes model are set forth in Note |
|
|
6. | The amounts reported in this column consist of: |
a. |
|
b. | Above-market interest (the portion exceeding 120% of the applicable federal long-term rate) credited to deferrals under Cabot’s |
7. | The table below identifies the amounts shown for fiscal |
Company Contributions to 401(k) ($)(a) | Company Contributions to Supplemental 401(k) Plan ($)(a) | Company Contributions to China Supplemental Plan ($)(a) | Company Contributions to Deferred Compensation Plan ($)(a) | Financial Planning and Tax Assistance ($)(b) | Additional Benefits and Tax Equalization ($)(c ) | Other ($)(d) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Contributions to 401(k) Plan ($)(a) | Company Contributions to Supplemental 401(k) Plan ($)(a) | Company Contributions to Deferred Compensation Plan ($)(a) | Financial Planning and Tax Assistance ($)(b) | Other ($)(c) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean D. Keohane |
|
28,000 |
|
|
167,158 |
|
|
— |
|
|
14,771 |
|
|
2,631 |
|
|
212,560 |
| 29,000 | 179,514 | — | 105,943 | 15,130 | — | 6,114 | 335,701 | ||||||||||||||||||||||||||||||||||||||
Erica McLaughlin |
|
28,546 |
|
|
41,471 |
|
|
— |
|
|
13,652 |
|
|
1,106 |
|
|
84,775 |
| 29,000 | 90,546 | — | — | 15,130 | — | 1,412 | 136,088 | ||||||||||||||||||||||||||||||||||||||
Karen A. Kalita |
|
29,023 |
|
|
9,181 |
|
|
— |
|
|
1,385 |
|
|
229 |
|
|
39,818 |
| 28,602 | 52,215 | — | — | 15,130 | — | 1,139 | 97,086 | ||||||||||||||||||||||||||||||||||||||
Hobart C. Kalkstein |
|
28,000 |
|
|
33,983 |
|
|
7,000 |
|
|
14,974 |
|
|
4,509 |
|
|
88,466 |
| 29,000 | 65,091 | — | 8,000 | 8,000 | — | 1,349 | 111,440 | ||||||||||||||||||||||||||||||||||||||
Brian A. Berube |
|
22,154 |
|
|
10,338 |
|
|
— |
|
|
11,389 |
|
|
913 |
|
|
44,794 |
| ||||||||||||||||||||||||||||||||||||||||||||||
John R. Doubman |
|
28,000 |
|
|
11,487 |
|
|
— |
|
|
14,962 |
|
|
2,980 |
|
|
57,429 |
| ||||||||||||||||||||||||||||||||||||||||||||||
Jeff Zhu | — | — | 27,775 | — | 9,658 | 821,666 | 99,328 | 958,427 |
a. | The 401(k) Plan, the Supplemental 401(k) Plan, |
b. | Consists of amounts paid or reimbursed by Cabot for financial planning and tax assistance services during fiscal |
c. | Mr. Zhu receives additional benefits, many of which are provided to employees on an international assignment, that amounted to $821,666 for fiscal 2021. These benefits included the payment by Cabot of expenses related to his assignment to China, consisting of $168,388 for rent and utilities for housing in China, $2,516 for home leaves during the year, and $25,535 for a travel allowance. Mr. Zhu will also receive an estimated $625,227 in tax equalization benefits with respect to fiscal 2021. The tax equalization benefit is intended to ensure that Mr. Zhu’s tax obligations are equal to the taxes he would have paid on his earnings had he remained a resident in Singapore, with the Company paying all other Chinese taxes associated with the income Mr. Zhu earns while based in China. Certain of these amounts were paid in China RMB and have been converted to U.S. dollars as described above. |
d. | Consists of the amount paid by Cabot for an annual physical exam |
The table does not include any amounts related to the use of tickets for sporting and cultural events by the named executive officers because no incremental costs |
46CABOT CORPORATION 53
|
Executive Compensation(continued)
Grant of Plan-Based Awards Table
The following table reports plan-based awards granted to the named executive officers during fiscal 2019.2021. The material terms of our STI and LTI awards are described in “Compensation Discussion and Analysis — Our Performance-based Compensation Philosophy” beginning on page 32.40.
Name | Grant Date |
Estimated Future Payouts UnderNon-Equity Incentive |
Estimated Future Payouts Under Equity Incentive | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of Stock and Option Awards ($)(5) | Grant Date |
Estimated Future Payouts Under Non-Equity Incentive |
Estimated Future Payouts Under Equity Incentive | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh)(4) | Grant Date Fair Value of Stock and Option Awards ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean D. Keohane | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 27,000 |
|
| — |
|
| — |
|
| 1,350,000 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 34,781 |
|
| — |
|
| — |
|
| 1,424,978 |
| ||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 15,750 |
|
| 31,500 |
|
| 63,000 |
|
| — |
|
| — |
|
| — |
|
| 1,575,000 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| 20,289 |
|
| 40,578 |
|
| 81,156 |
|
| — |
|
| — |
|
| — |
|
| 1,662,481 |
| ||||||||||||||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 137,674 |
|
| 50.00 |
|
| 1,574,578 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 171,568 |
|
| 40.97 |
|
| 1,662,151 |
| ||||||||||||||||||||||
Short-Term Incentive Compensation (“STI”) |
| — |
|
| 420,000 |
|
| 1,200,000 |
|
| 2,400,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
STI |
| — |
|
| 434,700 |
|
| 1,242,000 |
|
| 2,484,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Erica McLaughlin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,650 |
|
| — |
|
| — |
|
| 232,500 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7,322 |
|
| — |
|
| — |
|
| 299,982 |
| ||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,713 |
|
| 5,425 |
|
| 10,850 |
|
| — |
|
| — |
|
| — |
|
| 271,250 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| 4,271 |
|
| 8,542 |
|
| 17,084 |
|
| — |
|
| — |
|
| — |
|
| 349,966 |
| ||||||||||||||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 23,710 |
|
| 50.00 |
|
| 271,171 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 36,119 |
|
| 40.97 |
|
| 349,921 |
| ||||||||||||||||||||||
STI |
| — |
|
| 112,700 |
|
| 322,000 |
|
| 644,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 139,099 |
|
| 397,424 |
|
| 794,849 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||
Karen A. Kalita | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 900 |
|
| — |
|
| — |
|
| 45,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 300 |
|
| 600 |
|
| 1,200 |
|
| — |
|
| — |
|
| — |
|
| 30,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 1,833 |
|
| 74,988 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,576 |
|
| — |
|
| — |
|
| 187,479 |
| |||||||||||||||||||||||||||||||||||||
PSU |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 1,069 |
|
| 2,138 |
|
| 4,276 |
|
| 87,466 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| 2,670 |
|
| 5,339 |
|
| 10,678 |
|
| — |
|
| — |
|
| — |
|
| 218,739 |
| |||||||||||||||||||||||||||||||
Options |
| 6/3/2019 |
|
| — |
|
| — |
|
| — |
|
| 11,437 |
|
| 40.91 |
|
| 87,516 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| 22,574 |
|
| 40.97 |
|
| 218,697 |
| ||||||||||||||||||||||||||||||||||||||||||||||
STI |
| — |
|
| 33,603 |
|
| 109,813 |
|
| 219,626 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 97,180 |
|
| 277,657 |
|
| 555,315 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||
Hobart C. Kalkstein | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,800 |
|
| — |
|
| — |
|
| 240,000 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 6,590 |
|
| — |
|
| — |
|
| 269,992 |
| ||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,800 |
|
| 5,600 |
|
| 11,200 |
|
| — |
|
| — |
|
| — |
|
| 280,000 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| 3,844 |
|
| 7,688 |
|
| 15,376 |
|
| — |
|
| — |
|
| — |
|
| 314,977 |
| ||||||||||||||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 24,475 |
|
| 50.00 |
|
| 279,921 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 32,507 |
|
| 40.97 |
|
| 314,928 |
| ||||||||||||||||||||||
STI |
| — |
|
| 97,482 |
|
| 278,520 |
|
| 557,040 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 124,022 |
|
| 354,349 |
|
| 708,699 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||
Brian A. Berube | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jeff Zhu | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,500 |
|
| — |
|
| — |
|
| 225,000 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 6,590 |
|
| — |
|
| — |
|
| 269,992 |
| ||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,625 |
|
| 5,250 |
|
| 10,500 |
|
| — |
|
| — |
|
| — |
|
| 262,500 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| 3,844 |
|
| 7,688 |
|
| 15,376 |
|
| — |
|
| — |
|
| — |
|
| 314,977 |
| ||||||||||||||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 22,945 |
|
| 50.00 |
|
| 422,805 |
|
| 11/13/2020 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 32,507 |
|
| 40.97 |
|
| 314,928 |
| ||||||||||||||||||||||
STI |
| — |
|
| 96,902 |
|
| 276,864 |
|
| 553,728 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 123,980 |
|
| 354,228 |
|
| 708,457 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||
John R. Doubman | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,600 |
|
| — |
|
| — |
|
| 180,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| 2,100 |
|
| 4,200 |
|
| 8,400 |
|
| — |
|
| — |
|
| — |
|
| 210,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options |
| 11/9/2018 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 18,356 |
|
| 50.00 |
|
| 323,158 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
STI |
| — |
|
| 82,950 |
|
| 237,000 |
|
| 474,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
1. | The amounts in these columns represent bonus opportunities under our STI program and assume that performance goals for adjusted EBIT, |
CABOT CORPORATION 47
|
Executive Compensation(continued)
2. | The amounts in these columns represent PSU awards. |
54 CABOT CORPORATION
2022 PROXY STATEMENT |
Executive Compensation (continued)
3. | The amounts in this column represent TSU awards. |
4. | All stock options were granted with an exercise price equal to the closing price of our common stock on the date of grant and generally vest, subject to continued employment, over a three-year period (30% on each of the first and second anniversaries of the date of grant and 40% on the third anniversary of the date of grant). |
5. a. | Reflects the grant date fair value of TSUs, PSUs and option awards, calculated in accordance with FASB ASC Topic 718 as described in more detail in footnotes 4 and 5 to the Summary Compensation Table above. |
|
|
|
The grant date fair value per unit for TSUs and PSUs is equal to the closing price of Cabot common stock on the date of grant ($ |
48CABOT CORPORATION 55
|
Executive Compensation(continued)
Outstanding Equity Awards at FiscalYear-End Table
The following table shows information regarding outstanding equity awards held by our named executive officers as of September 30, 2019.2021.
The following narrative describes benefits provided under Cabot’s Deferred Compensation Plan, 401(k) Plan, and Supplemental 401(k) Plan and China Supplemental Pension Plan.
Deferred Compensation Plan
Our Deferred Compensation Plan is a nonqualifiednon-qualified plan that permits certain employees in the U.S. to voluntarily defer in any year up to 50% of their base salary and up to 100% of any short-term incentive and sales incentive bonus awarded.
58 CABOT CORPORATION
2022 PROXY STATEMENT |
Executive Compensation (continued)
Under this plan, participants receive a credit equal to 10% of the amount they defer, which is intended to account for the fact that any compensation that is deferred is not eligible compensation for purposes of Company contributions under the 401(k) Plan or the Supplemental 401(k) Plan. All of our U.S.-based named executive officers are eligible to participate in the Deferred Compensation Plan, but onlyPlan. Mr. Keohane and Mr. Kalkstein made contributions to the plan for fiscal 2019.2021.
All deferred amounts are credited with interest at a rate equal to the Moody’s Corporate Bond Rate for the month of November prior to the beginning of the applicable calendar year. Amounts that are deferred in a particular year are credited to a participant’s account as if they were invested in the account on the first day of the applicable calendar year and notional interest is applied as if the participant had earned the deferred amount on the first day of the calendar year. Earnings are compounded daily. The Moody’s rate used to calculate interest payable for calendar year 20192021 was 4.64%2.79%. Participants in the Deferred Compensation Plan can elect to defer receipt of their eligible compensation until a specified date (an“in-service election”) or until they cease to be employees of Cabot (a “termination/retirement election”). Participants may elect to receive deferred amounts in a lump sum payment, in installments over a period of up to five years in the case of anin-service election or, if the participant’s account balance is at least $50,000, in installments over a period of up to ten years for a termination/retirement election.
401(k) Plan and Supplemental 401(k) Plan
Under the 401(k) Plan, atax-qualified defined contribution plan in which Cabot’s U.S.-based named executive officers and other employees in the U.S. participate, Cabot makes a retirement contribution equal to 4% of a participant’s eligible compensation (consisting of base salary and cash bonuses) and a matching contribution of 100% of a participant’s contribution, up to 6% of the participant’s eligible compensation. These Company contributions are allocated to the participant’s account in accordance with his or her investment elections.
The Supplemental 401(k) Plan is an unfunded,non-qualified defined contribution plan under which we provide credits to our U.S.-based named executive officers and certain other employees in the U.S. that cannot be made under the 401(k) Plan due to limitations imposed by the Internal Revenue Code. Credits to the Supplemental 401(k) Plan are made at the same percentage of pay that Company contributions would have been made under the 401(k) Plan were it not for the limitations imposed by the Internal Revenue Code. To receive Company contributions equal to the 401(k) Plan retirement contribution under the Supplemental 401(k) Plan, the participant must meet the annual IRS compensation limit. To receive Company contributions equal to the 401(k) Plan matching contribution under the Supplemental 401(k) Plan, the participant is required to have made contributions at the maximum applicable annual IRS contribution limit before they reach the annual IRS compensation limit. Amounts credited to the Supplemental 401(k) Plan are treated as if invested in Cabot common stock. Participants may elect to receive distributions in a lump sum payment after separation from service or, if a participant’s account balance is at least $50,000, in installments over a period of three, five or ten years beginning after separation from service. All distributions are made in shares of Cabot common stock, except that for certain grandfathered accounts distributions, which are made in cash. None of our named executive officers have grandfathered accounts.
Under both the 401(k) Plan and Supplemental 401(k) Plan, participants are immediately vested in the matching contributions and vested in other Cabot retirement contributions after two years of employment with Cabot. All of our named executive officers are fully vested in their account balances under these plans.
China Supplemental Pension Plan
All full-time Cabot China employees are eligible to participate in the China Supplemental Pension Plan, which has been in place since January 1, 2011. The China Supplemental Pension Plan is a funded noncontributory plan under which Cabot China makes a taxable contribution equal to 5%-11% of a participant’s monthly base salary (excluding overtime pay, where applicable, and allowances and subsidies) based on years of service and job level. These contributions are allocated to the participant’s account into investment options selected by Cabot China and managed by external managers appointed by Cabot China. Participants are immediately vested in these contributions after five years of employment. Mr. Zhu is our only named executive officer eligible to participate in the China Supplemental Pension Plan. Mr. Zhu currently receives a company contribution in an amount equal to 7% of his base salary. He is fully vested in his account balance, and will receive a lump sum distribution in cash upon his retirement or separation from service without cause.
CABOT CORPORATION 5359
|
Executive Compensation(continued)
Nonqualified Deferred Compensation Table
The following table provides information with respect to the Supplemental 401(k) Plan and the Deferred Compensation Plan for fiscal 2019.2021. As noted above, all of our named executive officers other than Mr. Zhu are eligible to participate in these plans. This table also provides information with respect to the China Supplemental Pension Plan.
Name
|
Executive
|
Registrant
|
Aggregate ($)(3)
|
Aggregate Distributions ($)
|
Aggregate Balance ($)(4)
| ||||||||||||||||||||
Sean D. Keohane Supplemental 401(k) Plan |
|
—
|
|
|
167,158
|
|
|
(275,414
|
)
|
|
—
|
|
|
1,178,988
|
| ||||||||||
Erica McLaughlin Supplemental 401(k) Plan |
|
—
|
|
|
41,471
|
|
|
(10,309
|
)
|
|
—
|
|
|
109,893
|
| ||||||||||
Karen A. Kalita Deferred Compensation Plan Supplemental 401(k) Plan
|
|
— —
|
|
|
— 9,181
|
|
|
4,751 (155
|
)
|
|
— —
|
|
|
111,574 24,015
|
| ||||||||||
Hobart C. Kalkstein Deferred Compensation Plan Supplemental 401(k) Plan
|
|
70,000 —
|
|
|
7,000 33,983
|
|
|
15,345 (51,189
|
)
|
|
— —
|
|
|
377,724 237,507
|
| ||||||||||
Brian A. Berube Deferred Compensation Plan Supplemental 401(k) Plan
|
|
— —
|
|
|
— 10,338
|
|
|
32,448 (267,503
|
)
|
|
291,621 155,350
|
|
|
582,781 710,164
|
| ||||||||||
John R. Doubman Deferred Compensation Plan Supplemental 401(k) Plan
|
|
— —
|
|
|
— 11,487
|
|
|
6,390 (45,370
|
)
|
|
— —
|
|
|
150,194 182,448
|
|
Name
|
Executive Contributions in Last FY ($)(1)
|
Registrant Contributions in Last FY ($)(2)
|
Aggregate Earnings in Last FY ($)(3)
|
Aggregate Withdrawals/ Distributions in Last FY ($)
|
Aggregate Balance at Last FYE ($)(4)
| |||||||||||||||
Sean D. Keohane Deferred Compensation Plan Supplemental 401(k) Plan |
|
1,059,426 — |
|
|
105,943 179,514 |
|
|
24,234 441,472 |
|
|
— — |
|
|
1,189,603 1,674,008 |
| |||||
Erica McLaughlin Deferred Compensation Plan Supplemental 401(k) Plan |
|
— —
|
|
|
— 90,546
|
|
|
— 49,193
|
|
|
— —
|
|
|
— 258,292
|
| |||||
Karen A. Kalita Deferred Compensation Plan Supplemental 401(k) Plan |
|
— —
|
|
|
— 52,215
|
|
|
3,974 9,872
|
|
|
— —
|
|
|
138,599 85,174
|
| |||||
Hobart C. Kalkstein Deferred Compensation Plan Supplemental 401(k) Plan |
|
80,000 —
|
|
|
8,000 65,091
|
|
|
15,730 89,772
|
|
|
— —
|
|
|
574,592 362,802
|
| |||||
Jeff Zhu China Supplemental Pension Plan |
|
—
|
|
|
27,775
|
|
|
13,318
|
|
|
—
|
|
|
263,389
|
|
1. | The amounts contributed by Mr. Keohane and Mr. Kalkstein to the Deferred Compensation Plan |
2. | These amounts represent credits made by Cabot that are accrued under the Deferred Compensation Plan and the Supplemental 401(k) Plan and the contributions to the China Supplemental Pension Plan, and are reported in the Summary Compensation Table on page |
3. | For the Deferred Compensation Plan, earnings represent the amount credited based on the Moody’s interest rate for the year. For the Supplemental 401(k) Plan, earnings represent the value of dividends earned and investment gains or losses as if the account balance had been invested in Cabot common stock. For the China Supplemental Pension Plan, earnings represent the value of dividends earned and investment gains and losses, converted from China RMB to U.S. Dollars. The portion of the earnings that represents above-market interest (the portion exceeding 120% of the applicable federal long-term rate) under Cabot’s Deferred Compensation Plan is reported in the Summary Compensation Table on page |
4. | The aggregate balance amounts under the Deferred Compensation Plan and the China Supplemental Pension Plan include deferrals or contributions, as the case may be, made for prior fiscal years. For individuals who were named executive officers in the fiscal years in which the deferrals were made, the amount of the deferred compensation under the Deferred Compensation Plan was included in such individuals’ compensation as reported in the Summary Compensation Table included in the proxy statement for each such fiscal year. |
Potential Payments Upon Termination or Change in Control
Our named executive officers are eligible to receive certain benefits upon a change in control or if their employment is terminated, including following a change in control. This section describes various change in control and termination of employment scenarios and the payments and benefits payable under those scenarios. A table quantifying the estimated payments and benefits assuming a termination of employment and/or a change in control, as applicable, occurred on September 30, 20192021 follows this narrative description. The account balances under the Supplemental Cash Balance Plan, 401(k) Plan and Supplemental 401(k) Plan immediately vest and become payable upon a change in control of Cabot. All of our named executive officers who participate in these plans are vested in their account balances under these plans. There are no other single trigger benefits provided by Cabot to the named executive officers.
60 CABOT CORPORATION
2022 PROXY STATEMENT |
Executive Compensation (continued)
Potential Payments Following a Change in Control
Severance Plan
Participants in our Senior Management Severance Protection Plan (the “Severance Plan”) are determined by our Compensation Committee and, as of September 30, 20192021, consisted of thirteeneleven of our senior managers, including all of our currently employed named executive officers.
54 CABOT CORPORATION
|
Executive Compensation(continued)
Under the Severance Plan, participants are entitled to severance payments if their employment with Cabot terminates within two years following a change in control (for any reason other than cause, disability, death, or a termination initiated by the participant without good reason). Under the Severance Plan, Mr. Keohane is entitled to a lump sum payment equal to three times the sum of his base salary and bonus (each, as determined below) and continued health and welfare benefits for a period of three years (i.e., medical and dental benefits, long-term disability coverage, and life insurance) and Mses. McLaughlin and Kalita and Mr.Messrs. Kalkstein and Zhu are each entitled to a lump sum payment equal to two times the sum of their base salary and bonus (each, as determined below) and continued health and welfare benefits for a period of two years. Prior to their terminations of employment, Messrs. Berube and Doubman were each entitled to these same severance benefits. In addition, under the Severance Plan, each participant is entitled to receive apro-rated bonus with respect to the fiscal year in which the termination occurs and outplacement services in an amount up to 15% of his or her base salary.
Base salary under the Severance Plan is calculated at the greater of the rate in effect (i) immediately before the change in control or (ii) as of the participant’s employment termination date. The bonus is calculated at the greater of (i) the participant’s target annual incentive bonus for the fiscal year in which the change in control occurs or the fiscal year in which the participant’s employment is terminated, whichever was greater, or (ii) the highest annual incentive bonus amount paid or payable to the participant for any of the three fiscal years preceding the fiscal year in which the change in control occurs.
The Severance Plan also includes a “better of” provision. Under this provision, a participant will be entitled to receive either the full amount of payments (and pay any applicable excise tax imposed by Section 4999 of the Internal Revenue Code) or such lesser amount that is not subject to the excise tax, whichever results in the greaterafter-tax benefit to him or her.
The provision of severance benefits under any other plan or program provided by Cabot or its affiliates, or pursuant to any agreement with Cabot or its affiliates, or by law, counts toward our obligation to provide the benefits under the Severance Plan so that the benefits are not duplicative.
Retirement and Equity Incentive Plans
The accrued account balances under the Cash Balance Plan, Supplemental Cash Balance Plan, 401(k) Plan, and Supplemental 401(k) Plan immediately vest and become payable upon a change in control of Cabot. All of our named executive officers are vested in their account balances under these plans.the plans in which they participate.
Upon a change in control of Cabot, the Compensation Committee, as administrator of our 2017 Long-Term Incentive PlanAmended and our 2009Restated 2017 Long-Term Incentive Plan, will have discretion to provide for the assumption or continuation of some or all outstanding awards or any portion of an award, the grant of new awards in substitution by the acquirer or survivor, or thecash-out of some or all awards. Further, the Compensation Committee retains authority to accelerate the vesting of awards. The Compensation Committee has provided, and intends to continue to provide, for “double trigger” vesting upon a change in control. This means that if an award remains outstanding following a change in control, such as if the acquiring company assumes the award, vesting would be accelerated only if the participant’s employment was involuntarily terminated without cause or by the participant for good reason within two years following the change in control.
Termination of Employment Upon Disability or Death
For Cabot’s full-time employees based in the U.S., including our currently employedU.S.-based named executive officers, a termination of employment upon disability is determined under the terms of Cabot’s long-term disability plan and is deemed to occur one year following the date of disability. A U.S.-based employee who becomes disabled would receive (i) benefits under our long-term disability plan, and (ii) continued participation in our medical, dental, and life insurance plans in accordance with the terms of those plans if the employee has completed ten years of service with Cabot. We have not included
CABOT CORPORATION 61
2022 PROXY STATEMENT |
Executive Compensation (continued)
a value for these benefits in the table on pages 57-5863-64 because the plans do not discriminate in scope, terms, or operation in favor of our named executive officers compared to the benefits offered to all salaried U.S. employees. Under the terms of our disability plan for employees on an international assignment, in the event Mr. Zhu becomes disabled, he is entitled to a monthly benefit of up to $12,000 while he remains disabled, until he reaches age 65. In addition, the accrued account balances under the Cash Balance Plan, Supplemental Cash Balance Plan, 401(k) Plan, and Supplemental 401(k) Plan and China Supplemental Pension Plan immediately vest and become payable upon termination of employment by reason of death or disability.
CABOT CORPORATION 55
|
Executive Compensation(continued)
All of our named executive officers are vested in their account balances under the plans in which they participate.
Under the terms of Cabot’s 2017 Long-Term Incentive PlanAmended and 2009Restated 2017 Long-Term Incentive Plan if any participant (including a named executive officer) ceases to be an employee because of disability or death, his or her unvested stock options and unvested TSUs would immediately vest. In the case of PSUs, the total number of units that vests is the sum of the units that have been earned based upon performance as of the date of the termination of employment.
We provide each of our currently employedU.S.-based named executive officers with a death benefit under our Death Benefit Protection Plan equal to three times their base salary up to a maximum benefit of $3,000,000, which is payable to their beneficiary at the time of their death. PriorMr. Zhu is provided with life insurance coverage under the life insurance plan for international assignees that provides a benefit equal to their terminationstwo times base salary up to a maximum benefit of employment, Messrs. Berube and Doubman were each entitled$300,000, which is payable to these same death and disability benefits.his designated beneficiary in a lump sum in the event of his death.
Termination of Employment Upon Retirement
Upon retirement, participants in the Cash Balance Plan and Supplemental Cash Balance Plan are entitled to receive benefit payments, and participants in the 401(k) Plan, and the Supplemental 401(k) Plan and China Supplemental Pension Plan may receive a distribution of their account balances. Participants in the U.S. retirement plans are eligible for early retirement upon attaining age 55 and completing at least 10 years of service. As of September 30, 2019,2021, none of our currently employed named executive officers met the eligibility criteria for early retirement under these plans. Prior to his termination of employment, Mr. Berube was eligible for early retirement under these plans.
Under our current arrangements, a named executive officer may also be eligible to receive retiree welfare benefits. These retiree welfare benefits are not included in the table on pages 57-58 because these benefit plans do not discriminate in scope, terms or operation in favor of our named executive officers compared to the benefits offered to all U.S. salaried employees.
Termination for Cause or Voluntarily Without Good Reason
As described above, no severance payments under the terms of the Severance Plan are payable if a participant’s employment is terminated for cause or if he or she terminates employment without good reason. In addition, no benefits are payable under the terms of our Supplemental 401(k) Plan or Supplemental Cash Balance Plan or the China Supplemental Pension Plan if a participant’s employment is terminated for cause.
5662 CABOT CORPORATION
|
Executive Compensation(continued)
Potential Payments Upon Termination or Change in Control Table
The following table and footnotes present potential payments to each of our currently employed named executive officerofficers under various circumstances as if the named executive officer’s employment had been terminated on September 30, 2019,2021, the last day of fiscal 20192021, and/or if a change in control had occurred on such date. For Mr. Doubman, the disclosure in the table below shows only the payments made or to be made to him under the terms of his transition and separation agreement. Mr. Berube did not receive any severance payments or benefits in connection with his termination of employment, other than the extended exercise period for his vested stock options as described in the Compensation Discussion and Analysis section above. The incremental fair value associated with such extension for accounting purposes is included in the Summary Compensation Table above.
Severance Pay(1)($) | Accelerated Unvested Equity(2)($) | Benefits and Perquisites(3)($) | Total($)(4) | ||||||||||||||||||||||||||||||||||||||
Severance Pay(1)($)
| Accelerated Unvested Equity(2)($)
| Pension Plan Benefits not reported in Pension Plan Table(3)($)
| Benefits and Perquisites(4)($)
| Total($)(5)
| |||||||||||||||||||||||||||||||||||||
Sean D. Keohane
| |||||||||||||||||||||||||||||||||||||||||
Death
|
|
—
|
|
|
5,898,217
|
|
|
25,361
|
|
|
3,000,000
|
|
|
8,923,578
|
| — | 9,310,473 | 3,000,000 | 12,310,473 | ||||||||||||||||||||||
Disability
|
|
—
|
|
|
5,898,217
|
|
|
25,361
|
|
|
—
|
|
|
5,923,578
|
| — | 9,310,473 | — | 9,310,473 | ||||||||||||||||||||||
Voluntary Termination/Involuntary
|
|
—
|
|
|
—
|
|
|
25,361
|
|
|
—
|
|
|
25,361
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination (for cause)
|
|
—
|
|
|
—
|
|
|
25,361
|
|
|
—
|
|
|
25,361
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
7,701,000
|
|
|
7,189,746
|
|
|
25,361
|
|
|
227,229
|
|
|
15,143,336
|
| 7,807,500 | 11,190,173 | 246,122 | 19,243,795 | ||||||||||||||||||||||
Change in Control
|
|
—
|
|
|
—
|
|
|
25,361
|
|
|
—
|
|
|
25,361
|
| ||||||||||||||||||||||||||
Erica McLaughlin
| |||||||||||||||||||||||||||||||||||||||||
Death
|
|
—
|
|
|
735,770
|
|
|
31,392
|
|
|
1,380,000
|
|
|
2,147,162
|
| — | 1,807,009 | 1,589,698 | 3,396,707 | ||||||||||||||||||||||
Disability
|
|
—
|
|
|
735,770
|
|
|
31,392
|
|
|
—
|
|
|
767,162
|
| — | 1,807,009 | — | 1,807,009 | ||||||||||||||||||||||
Voluntary Termination/Involuntary
|
|
—
|
|
|
—
|
|
|
31,392
|
|
|
—
|
|
|
31,392
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination (for cause)
|
|
—
|
|
|
—
|
|
|
31,392
|
|
|
—
|
|
|
31,392
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
1,564,000
|
|
|
947,641
|
|
|
31,392
|
|
|
117,654
|
|
|
2,660,687
|
| 1,854,648 | 2,188,473 | 137,412 | 4,180,533 | ||||||||||||||||||||||
Change in Control
|
|
—
|
|
|
—
|
|
|
31,392
|
|
|
—
|
|
|
31,392
|
| ||||||||||||||||||||||||||
Karen A. Kalita
| |||||||||||||||||||||||||||||||||||||||||
Death
|
|
—
|
|
|
331,376
|
|
|
15,224
|
|
|
1,005,000
|
|
|
1,351,600
|
| — | 1,182,123 | 1,281,496 | 2,463,619 | ||||||||||||||||||||||
Disability
|
|
—
|
|
|
331,376
|
|
|
15,224
|
|
|
—
|
|
|
346,600
|
| — | 1,182,123 | — | 1,182,123 | ||||||||||||||||||||||
Voluntary Termination/Involuntary
|
|
—
|
|
|
—
|
|
|
15,224
|
|
|
—
|
|
|
15,224
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination (for cause)
|
|
—
|
|
|
—
|
|
|
15,224
|
|
|
—
|
|
|
15,224
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
889,626
|
|
|
421,427
|
|
|
15,224
|
|
|
52,699
|
|
|
1,378,976
|
| 1,409,645 | 1,430,417 | 68,722 | 2,908,784 | ||||||||||||||||||||||
Change in Control
|
|
—
|
|
|
—
|
|
|
15,224
|
|
|
—
|
|
|
15,224
|
| ||||||||||||||||||||||||||
Hobart C. Kalkstein
| |||||||||||||||||||||||||||||||||||||||||
Death
|
|
—
|
|
|
1,146,641
|
|
|
23,032
|
|
|
1,392,600
|
|
|
2,562,273
|
| — | 1,709,692 | 1,518,640 | 3,228,332 | ||||||||||||||||||||||
Disability
|
|
—
|
|
|
1,146,641
|
|
|
23,032
|
|
|
—
|
|
|
1,169,673
|
| — | 1,709,692 | — | 1,709,692 | ||||||||||||||||||||||
Voluntary Termination/Involuntary
|
|
—
|
|
|
—
|
|
|
23,032
|
|
|
—
|
|
|
23,032
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination (for cause)
|
|
—
|
|
|
—
|
|
|
23,032
|
|
|
—
|
|
|
23,032
|
| — | — | — | — | ||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason)
|
|
1,809,536
|
|
|
1,379,586
|
|
|
23,032
|
|
|
118,733
|
|
|
3,330,887
|
| 1,893,563 | 2,059,731 | 133,281 | 4,086,575 | ||||||||||||||||||||||
Change in Control
|
|
—
|
|
|
—
|
|
|
23,032
|
|
|
—
|
|
|
23,032
|
| ||||||||||||||||||||||||||
John R. Doubman
|
|
592,500
|
|
|
—
|
|
|
20,911
|
|
|
108,009
|
|
|
721,420
|
| ||||||||||||||||||||||||||
Jeff Zhu | |||||||||||||||||||||||||||||||||||||||||
Death | — | 1,709,692 | 300,000 | 2,009,692 | |||||||||||||||||||||||||||||||||||||
Disability | — | 1,709,692 | 144,000 | 1,853,692 | |||||||||||||||||||||||||||||||||||||
Voluntary Termination/Involuntary | — | — | — | ||||||||||||||||||||||||||||||||||||||
Involuntary Termination (for cause) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Involuntary Termination within 2 years following a Change in Control (without cause or for good reason) | 1,906,121 | 2,059,731 | 152,358 | 4,118,210 |
CABOT CORPORATION 5763
|
Executive Compensation(continued)
1. |
|
For Mr. Keohane, severance pay is equal to three times the sum of (x) base salary and (y) the greater of (i) his highest bonus in the three fiscal years preceding fiscal |
2. | The amounts for accelerated unvested equity include the following: (i) in the case of death or disability, the value of unvested TSUs, unvested PSUs that have been earned based upon performance as of September 30, |
3. |
|
Continued perquisites and benefits include only those benefits provided to a named executive officer that are not generally provided to all employees |
The amount reported in the event of death, with the exception of Mr. Zhu, represents an amount equal to three times base salary up to a maximum benefit of $3,000,000, which is payable in a lump sum to the named executive officer’s designated beneficiary under our Death Benefit Protection Plan, which is an insured benefit applicable to all |
Payments do not take into account the “better of” provision in the Severance Plan described above on page |
5864 CABOT CORPORATION
|
Executive Compensation(continued)
As required by the Item 402(u) of RegulationS-K, we are required to report on the relationship between the annual total compensation of our CEO, Mr. Keohane, and the median of the annual total compensation of our employees. In accordance with SEC requirements, the median-paid employee may be identified once every three years if there has been no change to our employee population or compensation arrangements that we reasonably believe would result in a significant change to our pay ratio disclosure. Because there were changes to the median-paid employee’s compensation arrangements in fiscal 2021 that we believe would significantly affect our pay ratio disclosure, we have identified a new employee representing the median-paid employee for purposes of this pay ratio analysis.
To identify the median of the annual compensation of all our employees as well as to determine the annual total compensation of our median employee we took the following steps:
We determined that, as of September 30, 2021, the last day of our most recent fiscal year, our employee population consisted of 4,570 full-time and part-time employees in the U.S. and foreign jurisdictions. We did not exclude any non-U.S. employees from our worldwide employee population under any of the permitted exclusions.
To identify the median employee, we used annual base salary or base wages as our consistently applied compensation measure. We first determined each employee’s annual base salary or base wages reported in our global system of record for the twelve-month period ending on September 30, 2021. For any employees who were employed on September 30, 2021 but not for this full twelve-month period, we annualized their base salary or base wages. We converted all salaries and wages paid in foreign currency to U.S. dollars using the September 2021 month-end currency conversion rate.
After identifying our median employee, we calculated the annual total compensation of the median employee and our CEO in the following manner:
The median employee’s annual total compensation represents the amount of such employee’s compensation for fiscal 2021 that would have been reported in the Summary Compensation Table in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K if the employee were a named executive officer for fiscal 2021.
The annual total compensation of the CEO represents the amount reported in the “Total” column of our 2021 Summary Compensation Table included on page 52 of this proxy statement.
For fiscal 2019,2021, our CEO’s annual total compensation was $6,679,379$8,242,487 and the median of the annual total compensation of all employees of Cabot (excluding our CEO) was $68,660.$71,871. Based on this information, our pay ratio is approximately 97115 to 1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K.
In calculating the pay ratio, the SEC allows companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions reflecting their unique employee populations. Therefore, our reported pay ratio may not be comparable to that reported by other companies due to differences in industries and geographical dispersion, as well as the different estimates, assumptions, and methodologies applied by other companies in calculating their pay ratios.
To identify the median of the annual compensation of all our employees as well as to determine the annual total compensation of our median employee we took the following steps:
We determined that, as of September 30, 2019, the last day of our most recent fiscal year, our employee population consisted of 4,552 full-time and part-time employees in the U.S. and foreign jurisdictions. We did not exclude anynon-U.S. employees from our worldwide employee population under any of the permitted exclusions.
To identify the median employee, we used annual base salary or base wages as our consistently applied compensation measure. We first determined each employee’s annual base salary or base wages reported in our global system of record for the twelve-month period ending on September 30, 2019. For any employees who were employed on September 30, 2019 but not for this full twelve-month period, we annualized their base salary or base wages. We converted all salaries and wages paid in a foreign currency to U.S. dollars using the currency conversion rate in effect on September 30, 2019.
After identifying our median employee, we calculated the annual total compensation of the median employee and our CEO in the following manner:
The median employee’s annual total compensation represents the amount of such employee’s compensation for fiscal 2019 that would have been reported in the Summary Compensation Table in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K if the employee was a named executive officer for fiscal 2019.
The annual total compensation of the CEO represents the amount reported in the “Total” column of our 2019 Summary Compensation Table included on page 45 of this proxy statement.
CABOT CORPORATION 5965
|
Proposal 2 — Advisory Approval of Executive Compensation
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, we are providing stockholders the opportunity to vote on anon-binding, advisory resolution to approve the compensation of our named executive officers as disclosed on pages 25-5931-64 of this proxy statement (commonly referred to as“say-on-pay”).
We had a very successful fiscal 2021 in terms of both financial performance and the progress we made in advancing our strategic objectives and sustainability goals. Our business recovered from the challenges we experienced in fiscal 2020 as a result of the COVID-19 pandemic that severely and negatively impacted demand from our key tire and automotive customers, and, during fiscal 2021, we experienced strong volume demand and we were able to elevate our earnings to a higher level of profitability.
We believe that the compensation received by our named executive officers in respect offor fiscal year 20192021 appropriately aligned executive pay with our outstanding corporate performance. The portion of the STI awards earned on the basis of our corporate performance paid out at 74.1%188% of target awards, reflecting solid results despite weakening macroeconomic and key sector indicators we experienced during fiscal 2019.awards. The PSU awards grantedissued under our LTI program are designed to produce the greatest rewards when strong results are sustained over time. Specifically, the number of shares issuable upon their vesting depends on the degree of achievement of financial performance metrics for each year within a three-year performance cycle. On the basis of our level of achievement in fiscal 20192021 against the adjusted EPS and adjusted RONA goals applicable to the PSU awards that were granted in fiscal 20172019 and vested in 2019,2021, our named executive officers who remained employees through the vesting date of these awards earned 134%123% of their target awards. Our fiscal 20192021 performance is summarized in the Executive Summary of our Compensation Discussion and Analysis.
The types of performance goals that we use for establishing the metrics for our executive compensation programs are the same as the ones we use when setting the strategic objectives of the Company. The use of these metrics is intended to motivate behavior and executive decisions that will lead to the successful execution of our strategy. Our executive compensation programs also align the interests of our stockholders and executives by tying compensation to the Company’s short- and long-term financial and strategic growth objectives. We believe this will create value for our stockholders over time.
For these reasons, the Board is asking stockholders to approve, on an advisory basis, the compensation of our named executive officers.
The text of the resolution is as follows:
“VOTED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and the narrative discussion, is hereby APPROVED.”
Vote Required
Because the vote we are asking you to cast isnon-binding, there is no minimum vote required for approval. Our Board and the Compensation Committee value the views of our stockholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers. We believe that Cabot benefits from constructive dialog with our stockholders. We will continue to reach out to our stockholders on these and other important issues and we encourage our stockholders to contact us. Stockholders who wish to communicate with our Board should refer to “Communications with the Board” in this proxy statement for additional information on how to do so.
Recommendation
The Board of Directors believes that the compensation of our named executive officers is appropriate and recommends a vote “FOR” the approval of the compensation of our named executive officers.
6066 CABOT CORPORATION
|
The Audit Committee of the Board of Directors is comprised of threenon-employee directors. The Board has determined that all of the members of the Audit Committee satisfy the requirements of the New York Stock Exchange (“NYSE”) as to independence and financial literacy. In addition, the Board has determined that Mr. Morrow, Mr. Del Grosso and Mr. Wilson are audit committee financial experts as defined by SEC rules. Our responsibilities are set forth in our written charter and are described above under the heading “Board Composition — How ourOur Board Operates — Audit Committee” on page 14.13.
We have sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm. At least annually, we review the performance and qualifications of our independent registered public accounting firm to determine whether to retain such firm on behalf of the Company. Deloitte & Touche LLP (“D&T”) has been Cabot’s independent registered public accounting firm since 2007. During its tenure as Cabot’s independent registered public accounting firm, D&T has gained significant depth of understanding of Cabot’s global businesses, operations and systems, accounting policies and practices, and internal control over financial reporting. In accordance with SEC rules and D&T’s policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide services to us. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. In fiscal 2016,2021, the Audit Committee, after consultation with management, approved the appointment of a new lead audit partner pursuant to this policy.
One of our primary responsibilities is to assist the Board in its oversight of the quality and integrity of Cabot’s financial statements. We met nineeleven times and acted by written consent once during fiscal 2019.2021. A number of those meetings included executive sessions with D&T and with Cabot’s Chief Financial Officer, Corporate Controller, Vice President of Internal Audit, and General Counsel. We took numerous actions to discharge our oversight responsibility with respect to the audit process, which are summarized in this report.
As described in more detail under the heading “Board Composition — Our Board’s Role in Risk Oversight”Oversight and in Overseeing our Progression on Environmental, Social and Governance (“ESG”) Matters and Activities” on page 16,9, we focus on Cabot’s financial risk exposures and the actions management has taken to monitor and mitigate such risks, and oversee Cabot’s enterprise risk management processes.
Review of Audited Financial Statements with Management
We reviewed and discussed with management Cabot’s audited consolidated financial statements for the fiscal year ended September 30, 2019.2021.
Review of Financial Statements and Other Matters with Independent Registered Public Accounting Firm
We discussed with D&T Cabot’s audited consolidated financial statements for the fiscal year ended September 30, 2019,2021, including the matters required to be communicated by the standards of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. This included a discussion of accounting policies and practices critical to our financial statements. We also received the written disclosures and the letter from D&T required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, which requires auditors to annually disclose in writing all relationships that in the auditor’s professional opinion may reasonably be thought to bear on independence and to confirm their independence, and discussed with D&T its independence from Cabot. In addition, we discussed Cabot’s internal controls over financial reporting and management’s assessment of the effectiveness of those controls with management, Cabot’s internal auditors and D&T. We reviewed with both D&T and Cabot’s internal auditors their audit plans, audit scope and identification of audit risks. We also discussed the results of the internal audit examinations with and without management present. In addition, any reports or concerns the Company receives relating to financial matters are communicated directly to the Chair of the Audit Committee.
CABOT CORPORATION 6167
|
Audit Committee Matters(continued)
Recommendation that Financial Statements be Included in Annual Report
Based on the reviews and discussions referred to above, we recommended to the Board of Directors that the audited financial statements be included in Cabot’s Annual Report on Form10-K for the fiscal year ended September 30, 20192021 for filing with the SEC, and appointed D&T as the Company’s independent registered public accounting firm for fiscal 2020.2021.
Michael M. Morrow (Chair)
Juan EnriquezDouglas Del Grosso
Frank A. Wilson
Fees for professional services rendered by D&T for fiscal 20192021 and 20182020 were as follows:
Fiscal 2021 | Fiscal 2020 | |||||||||||||||
Fiscal 2019
| Fiscal 2018
| |||||||||||||||
Audit Fees
| $
| 4,861,000
|
| $
| 5,469,000
|
| $ | 4,817,000 | $ | 4,833,000 | ||||||
Audit-Related Fees
| $
| 110,000
|
| $
| 460,000
|
| $ | 447,000 | $ | 149,000 | ||||||
Tax Fees
| $
| 0
|
| $
| 8,000
|
| $ | 0 | $ | 0 | ||||||
All Other Fees
| $
| 0
|
| $
| 0
|
| $ | 32,000 | $ | 0 |
The audit services for each of fiscal 20192021 and 20182020 include professional services for the audit of Cabot’s consolidated financial statements included in the Annual Report on Form10-K (including audit of internal control over financial reporting) and review of financial statements included in Cabot’s Quarterly Reports on Form10-Q, consultations regardingon-going financial accounting matters, and services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. The decrease in audit fees in fiscal 2019 is primarily attributable to additional services in fiscal 2018 in connection with the asset impairment charge in the Purification Solutions segment the Company recorded, the impact of U.S. tax reform in fiscal year 2018 that did not recur in fiscal 2019, and certain statutory audit engagements that were not required in fiscal 2019. Statutory audit fees in foreign jurisdictions are billed in local currency.
The audit-related services for fiscal 20192021 consisted primarily of fees for:associated with audit activities related to the sale of the Purification Solutions business, as well as fees for (i) certain agreed upon procedures performed and related to regulatory compliance matters; (ii) comfort letter procedures;diligence and other strategic activities; and (iii) other attest services. During fiscal 2018,2020, audit-related services consisted of fees for: (i) certain agreed upon procedures performed and related to regulatory compliance matters; (ii) diligence and other strategic activities; and (iii) other attest services.
The tax services All Other Fees for fiscal 2018 consisted of2021 include fees for tax compliancecertain training materials and preparation services and tax advisory services.technical library subscription fees.
Audit CommitteePre-Approval Policy
The Audit Committee has adopted a policy requiring thepre-approval of audit andnon-audit services to be provided by Cabot’s independent registered public accounting firm. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the auditor’s independence is not impaired; describes the audit, audit-related, tax and other services that may be provided and thenon-audit services that are prohibited; and sets forthpre-approval requirements for all permitted services. In some cases,pre-approval is provided by the full Audit Committee for the applicable fiscal year for a particular category or group of services, subject to an authorized amount. In other cases, the Audit Committee specificallypre-approves services. To ensure compliance with the policy, the Audit Committee requires the independent registered public accounting firm to report on actual fees charged for each category of services at least quarterly. The Audit Committee has delegated authority to the Chair of the Committee topre-approve additional services that need to be approved between scheduled Audit Committee meetings, provided that the estimated fee for any such services does not exceed $100,000, and any suchpre-approvals must then be communicated to the full Audit Committee.
All of the services described above for fiscal 20192021 and 20182020 werepre-approved by the Audit Committee or Committee Chair.
6268 CABOT CORPORATION
|
Proposal 3 — Ratification of Appointment of Independent Registered Public Accounting Firm
Introduction
The Audit Committee has appointed Deloitte & Touche LLP (“D&T”) to serve as Cabot’s independent registered public accounting firm for its fiscal year ending September 30, 2020.2022. The Sarbanes-Oxley Act of 2002 requires the Audit Committee to be directly responsible for the appointment, compensation and oversight of the audit work of the independent registered public accounting firm. However, the Board of Directors is submitting the appointment of D&T to the stockholders for ratification as a matter of good corporate practice. Should the stockholders fail to ratify the appointment of D&T, the Audit Committee may reconsider the appointment and may retain D&T or another accounting firm without resubmitting the matter to stockholders. Even if the stockholders ratify the appointment of D&T, the Audit Committee may select another firm if it determines such selection to be in the best interest of Cabot and its stockholders.
Representatives from D&T are expected to be present at the 20202022 Annual Meeting. The representatives will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from Cabot’s stockholders.
Vote Required
Approval of this proposal requires the affirmative vote of a majority of the votes properly cast on the proposal. Abstentions and broker non-votes will have no effect on the results of this vote.
Recommendation
The Board of Directors recommends that you vote “FOR” the ratification of the Audit Committee’s appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for fiscal 2020.2022.
CABOT CORPORATION 6369
|
Future Stockholder Proposals and Director Nominations
A stockholder who intends to present a proposal at the 20212023 Annual Meeting of Stockholders and who wishes the proposal to be included in our proxy materials for that meeting must submit the proposal in writing to us so that we receive it no later than September 26, 2020.29, 2022. A stockholder who intends to present a proposal at the 20212023 Annual Meeting of Stockholders but does not wish the proposal to be included in our proxy materials for that meeting must provide written notice of the proposal to us no earlier than December 12, 202010, 2022 and no later than January 11, 2021.9, 2023. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements. Ourby-laws, which are available on our website, describe the requirements for submitting proposals at the Annual Meeting. A stockholder who wishes to nominate a director at the 20212023 Annual Meeting of Stockholders must notify us in writing no earlier than December 12, 202010, 2022 and no later than January 11, 2021.9, 2023. The notice must be given in the manner and must include the information and representations required by ourby-laws.
A copy of our 20192021 Annual Report, including the financial statements and schedules, is available at http://www.edocumentview.com/cbt. To request an additional copy of the 20192021 Annual Report without charge, please write to Secretary, Cabot Corporation, Two Seaport Lane, Suite 1400, Boston, MA 02210-2019.
The cost of soliciting proxies will be borne by Cabot. Officers and other employees of Cabot may solicit proxies personally, by mail, by telephone and by facsimile. Cabot may request banks and brokers or other similar agents or fiduciaries to transmit the proxy material to the beneficial owners for their voting instructions and will reimburse them for their expenses in so doing. D.F. King & Co., Inc., New York, New York, has been retained to assist Cabot in the solicitation of proxies for a fee of $13,500.$14,000.
Management does not know of any matters to be presented at the 20202022 Annual Meeting other than those set forth in the Notice of Annual Meeting of Stockholders. However, if any other matters properly come before the 20202022 Annual Meeting that require a vote, the persons named in the proxy delivered to stockholders intend to vote the shares to which the proxy relates on such matters in accordance with their best judgment unless otherwise specified in the proxy.
By order of the Board of Directors,
Jane A. Bell
Secretary
Boston, Massachusetts
January 24, 202027, 2022
6470 CABOT CORPORATION
|
NON-GAAP MEASURES
Adjusted EPS, adjusted RONA, adjustedTotal Segment EBIT, and free cash flowDiscretionary Free Cash Flow are not measures of financial performance under U.S. generally accepted accounting principles (GAAP) and should not be considered substitutes for measures of performance reported under GAAP. Management believes these non-GAAP measures provide investors with greater transparency to the information used by Cabot management in its financial and operational decision-making, allow investors to see Cabot’s results through the eyes of management, and better enable Cabot’s investors to understand Cabot’s operating performance and financial condition. Management also uses Adjusted EPS and Discretionary Free Cash Flow as key measures in evaluating management performance for incentive compensation purposes.
Adjusted EPS. Adjusted EPS excludes “certain items”, which are items of expense or income that management does not consider representative of our fundamental ongoing performance. These certain items are described in detail in Note U of our consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended September 30, 2019.2021. Management believes excluding these items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis and evaluates the Company’s operating performance without the impact of these costs or benefits.
The following table reconciles adjusted EPS to earnings per share from continuing operations.
|
| |||
|
|
| ||
|
|
|
| |
|
|
|
Fiscal Year | 2021 | |||
Net income (loss) per share attributable to Cabot Corporation | $ | 4.34 | ||
Less: Certain items per share and dilutive impact of shares | $ | (0.68 | ) | |
Adjusted earnings per share | $ | 5.02 |
Total Segment EBIT. Total Segment EBIT is our income (loss) before income taxes and equity in earnings of affiliated companies, less “certain items” and other unallocated items. Please refer to Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 filed with the SEC on November 29, 2021 for a discussion of Total Segment EBIT that explains in more detail how we calculate this measure, why management believes this measure is useful and the purposes for which management uses this measure.
The following table reconciles Total Segment EBIT to income (loss) before income taxes and equity in earnings of affiliated companies.
($M)/Fiscal Year | 2021 | |||
Income (loss) before income taxes and equity in earnings of affiliated companies | $ | 406 | ||
Less: Certain items | $ | (34 | ) | |
Less: Other unallocated items | $ | (110 | ) | |
Total Segment EBIT | $ | 550 |
Discretionary Free Cash Flow. We calculate discretionary free cash flow by excludingdeducting changes in our net working capital and sustaining and compliance capital expenditures from our cash flow from operating activities additions to property, plant and equipment.activities.
The following table reconciles discretionary free cash flow with cash flow from operating activities.
($M)/Fiscal Year | 2021 | ||||
|
| ||||
Cash flow from operating activities | $ |
|
| ||
|
|
| |||
|
|
|
Adjusted EBIT. We calculate adjusted EBIT by excluding from our income (loss) from continuing operations before income taxes and equity in earnings of affiliated companies, certain items, interest expense, general unallocated income (expense) and equity in earnings of affiliated companies
The following table reconciles adjusted EBIT to income from continuing operations.
Less: Changes in net working capital |
| (222) | ||||||
compliance capital expenditures | $ |
|
| |||||
Discretionary Free Cash Flow | $ |
|
| |||||
|
|
| ||||||
|
|
|
| |||||
|
|
| ||||||
|
|
|
Adjusted RONA.We calculate adjusted RONA by dividing the most recent twelve months’ adjusted net income (loss) (anon-GAAP numerator) by adjusted net assets (anon-GAAP denominator). In the numerator, we exclude certain items, net of tax, from income (loss) from continuing operations as calculated under GAAP. The denominator consists of our operating assets, which are: net property, plant and equipment; adjusted net working capital; assets held for rent; and investments in equity affiliates. We calculate the items in adjusted net assets using the most recent five quarters’ average to normalize the impact of large intra-period movements.
CABOT CORPORATION A-1
| ||||||
| ||||||
|
002CSNC8D8
qYour vote matters – here’s how to vote! IF
You may vote online or by phone instead of mailing this card.
If you are a participant in one of the employee benefit plans your vote must be submitted electronically by 9:00 a.m., Eastern Time on March 8, 2022.
Online
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Annual Meeting Proxy Card
qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3. 1. Election of Directors: + For Against Abstain For Against Abstain For Against Abstain 01 - Michael M. Morrow* 02 - Sue H. Rataj* 03 - Frank A. Wilson* 04 - Matthias L. Wolfgruber* * Each to be elected to the class of Directors whose term expires in 2025. For Against Abstain For Against Abstain 2. To approve, in an advisory vote, Cabot’s executive compensation. 3. To ratify the appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for the fiscal year ending September 30, 2022. 4. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
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2. | To approve, in an advisory vote, Cabot’s executive compensation. | ☐ | ☐ | ☐ | 3. | To ratify the appointment of Deloitte & Touche LLP as Cabot’s independent registered public accounting firm for the fiscal year ending September 30, 2020. | ☐ | ☐ | ☐ | |||||||||||
4. | To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. | . |
While we encourage voting using the electronic voting instructions above to ensure immediate receipt of your vote, registered shareholdersstockholders wishing to vote by mail must complete, sign and date this proxy card and return it for receipt by no later than Wednesday, March 11, 2020.9, 2022. Participants in the Cabot employee benefit plans voting by mail must complete, sign and date this proxy card and return it for receipt by no later than Monday, March 9, 2020.
7, 2022. B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. 42BM + 03K6ID |
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qThe 2022 Annual Meeting of Stockholders of Cabot Corporation will be held on IF
Thursday, March 10, 2022 at 4:00 p.m., Eastern Time, virtually via the internet at meetnow.global/MLNW2AY.
To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form.
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Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/CBT
qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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Proxy — Cabot Corporation + Annual Meeting of Stockholders –— March 12, 2020
10, 2022
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Karen A. Kalita, Jane A. Bell and Jacqueline A.Y. Zane, and each of them, proxies, with power of substitution, to vote the shares of stock of Cabot Corporation that the undersigned is entitled to vote, as specified on the reverse side of this card, and, if applicable, hereby directs the trustees of the employee benefit plans to vote the shares of stock of Cabot Corporation allocated to the account(s) of the undersigned or otherwise that the undersigned is entitled to vote pursuant to such employee benefit plans, at the Annual Meeting of Stockholders of Cabot Corporation to be held on March 12, 202010, 2022 at 4:00 p.m., Eastern Time, at the Corporate Headquarters of Cabot Corporation, Two Seaport Lane, Suite 1300, Boston, Massachusetts,virtually, and at any adjournment or postponement thereof.
When this proxy is properly executed the shares to which this proxy relates will be voted as specified and, if no specification is made, will be voted “for” all nominees in proposal 1 AND “for” proposals 2 and 3 AND it authorizes the above designated proxies to vote in accordance with their judgment on such other business as may properly come before the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
C Non-Voting Items
Change of Address — Please print new address below. Comments — Please print your comments below.
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